NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Lakeland
Industries, Inc. and Subsidiaries (“Lakeland,” the
“Company,” “we,” “our” or
“us”), a Delaware corporation organized in April 1986,
manufactures and sells a comprehensive line of safety garments and
accessories for the industrial protective clothing
market.
The
unaudited condensed consolidated financial statements included
herein have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission, and reflect all adjustments
(consisting of only normal and recurring adjustments) which are, in
the opinion of management, necessary to present fairly the
unaudited condensed consolidated financial information required
herein. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
(“US GAAP”) have been condensed or omitted pursuant to
such rules and regulations. While we believe that the disclosures
are adequate to make the information presented not misleading, it
is suggested that these unaudited condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended January 31, 2019.
The
results of operations for the three and six month periods ended
July 31, 2019 are not necessarily indicative of the results to be
expected for the full year.
In this
Form 10-Q, (a) “FY means fiscal year; thus for example, FY20
refers to the fiscal year ending January 31, 2020, (b)
“Q” refers to quarter; thus, for example, Q2 FY20
refers to the second quarter of the fiscal year ending January 31,
2020, (c) “Balance Sheet” refers to the unaudited
condensed consolidated balance sheet and (d) “Statement of
Operations” refers to unaudited condensed consolidated
statement of operations.
3.
Summary of Significant Accounting Policies
Principles of Consolidation
The
accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates and Assumptions
The preparation of unaudited condensed
consolidated financial statements in
conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the balance sheet date, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates. It is reasonably possible that events could
occur during the upcoming year that could change such
estimates.
Accounts Receivable,
Net. Trade accounts receivable are stated at the amount
the Company expects to collect. The Company maintains allowances
for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. The Company
recognizes losses when information available indicates that it is
probable that a receivable has been impaired based on criteria
noted below at the date of the unaudited condensed
consolidated financial statements, and
the amount of the loss can be reasonably estimated. Management
considers the following factors when determining the collectability
of specific customer accounts: Customer creditworthiness, past
transaction history with the customers, current economic industry
trends and changes in customer payment terms. Past due balances
over 90 days and other less creditworthy accounts are reviewed
individually for collectability. If the financial condition of the
Company’s customers were to deteriorate, adversely affecting
their ability to make payments, additional allowances would be
required. Based on management’s assessment, the Company
provides for estimated uncollectible amounts through a charge to
earnings and a credit to a valuation allowance. Balances that
remain outstanding after the Company has used reasonable collection
efforts are written off through a charge to the valuation allowance
and a credit to accounts receivable.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Inventories
Inventories include
freight-in, materials, labor and overhead costs and are stated at
the lower of cost (on a first-in, first-out basis) or estimated net
realizable value.
Impairment of Long-Lived Assets
The
Company evaluates the carrying value of long-lived assets to be
held and used when events or changes in circumstances indicate the
carrying value may not be recoverable. The Company measures any
potential impairment on a projected undiscounted cash flow method.
Estimating future cash flows requires the Company’s
management to make projections that can differ materially from
actual results. The carrying value of a long-lived asset is
considered impaired when the total projected undiscounted cash
flows from the asset is less than its carrying value. In that
event, a loss is recognized based on the amount by which the
carrying value exceeds the fair value of the long-lived
asset.
Revenue Recognition
Substantially all
the Company’s revenue is derived from product sales, which
consist of sales of the Company’s personal protective wear
products to distributors. The Company considers purchase orders to
be a contract with a customer. Contracts with customers are
considered to be short-term when the time between order
confirmation and satisfaction of the performance obligations is
equal to or less than one year, and virtually all of the
Company’s contracts are short-term. The Company recognizes
revenue for the transfer of promised goods to customers in an
amount that reflects the consideration to which the Company expects
to be entitled in exchange for those goods. The Company typically
satisfies its performance obligations in contracts with customers
upon shipment of the goods. Generally, payment is due from
customers within 30 to 90 days of the invoice date, and the
contracts do not have significant financing components. The Company
elected to account for shipping and handling activities as a
fulfillment cost rather than a separate performance obligation.
Shipping and handling costs associated with outbound freight are
included in operating expenses, and for the three months ended July
31, 2019 and 2018 aggregated approximately $0.8 million and $0.8
million and $1.6 million and $1.4 million for the six months ended
July 31, 2019 and 2018, respectively. Taxes collected from
customers relating to product sales and remitted to governmental
authorities are excluded from revenue.
The
transaction price includes estimates of variable consideration,
related to rebates, allowances, and discounts that are reductions
in revenue. All estimates are based on the Company's historical
experience, anticipated performance, and the Company's best
judgment at the time the estimate is made. Estimates for variable
consideration are reassessed each reporting period and are included
in the transaction price to the extent it is probable that a
significant reversal of cumulative revenue recognized will not
occur upon resolution of uncertainty associated with the variable
consideration. All the Company’s contracts have a single
performance obligation satisfied at a point in time and the
transaction price is stated in the contract, usually as quantity
times price per unit.
The
Company has seven revenue generating reportable geographic segments
under ASC Topic 280 “Segment Reporting” and derives its
sales primarily from its limited use/disposable protective clothing
and secondarily from its sales of reflective clothing, high-end
chemical protective suits, firefighting and heat protective
apparel, reusable woven garments and gloves and arm guards. The
Company believes disaggregation of revenue by geographic region
best depicts the nature, amount, timing, and uncertainty of its
revenue and cash flows (see table below). Net sales by geographic
region and by product line are included below:
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
Three Months Ended
July 31,
(in millions of dollars)
|
Six Months Ended
July 31,
(in millions of dollars)
|
|
|
|
|
|
External
Sales by region:
|
|
|
|
|
USA
|
$14.44
|
$13.36
|
$27.31
|
$25.71
|
Other
foreign
|
0.92
|
0.66
|
1.68
|
1.49
|
Europe
(UK)
|
2.48
|
2.56
|
4.87
|
5.13
|
Mexico
|
0.59
|
0.82
|
1.20
|
1.93
|
Asia
|
4.04
|
4.13
|
7.87
|
8.08
|
Canada
|
2.37
|
2.10
|
4.87
|
4.30
|
Latin
America
|
2.63
|
1.99
|
4.36
|
3.32
|
Consolidated
external sales
|
$27.47
|
$25.62
|
$52.16
|
$49.96
|
|
Three Months Ended
July 31,
(in millions of dollars)
|
Six Months Ended
July 31,
(in millions of dollars)
|
|
|
|
|
|
External
Sales by product lines:
|
|
|
|
|
Disposables
|
$14.30
|
$13.11
|
$26.66
|
$25.96
|
Chemical
|
5.56
|
4.72
|
10.62
|
9.15
|
Fire
|
2.43
|
1.70
|
3.83
|
3.36
|
Gloves
|
0.84
|
0.85
|
1.59
|
1.65
|
Hi-Vis
|
2.62
|
1.97
|
5.61
|
3.64
|
Wovens
|
1.72
|
3.27
|
3.85
|
6.20
|
Consolidated
external sales
|
$27.47
|
$25.62
|
$52.16
|
$49.96
|
Income Taxes
The
Company is required to estimate its income taxes in each of the
jurisdictions in which it operates as part of preparing the
unaudited condensed consolidated financial statements. This
involves estimating the actual current tax in addition to assessing
temporary differences resulting from differing treatments for tax
and financial accounting purposes. These differences, together with
net operating loss carryforwards and tax credits, are recorded as
deferred tax assets or liabilities on the Company’s unaudited
condensed consolidated balance sheet. A judgment must then be made
of the likelihood that any deferred tax assets will be recovered
from future taxable income. A valuation allowance may be required
to reduce deferred tax assets to the amount that is more likely
than not to be realized. In the event the Company determines that
it may not be able to realize all or part of its deferred tax asset
in the future, or that new estimates indicate that a previously
recorded valuation allowance is no longer required, an adjustment
to the deferred tax asset is charged or credited to income in the
period of such determination.
The
Company recognizes tax positions that meet a “more likely
than not” minimum recognition threshold. If necessary, the
Company recognizes interest and penalties associated with tax
matters as part of the income tax provision and would include
accrued interest and penalties with the related tax liability in
the unaudited condensed consolidated balance sheets. The Company
does not have any uncertain tax positions at July 31, 2019 or
January 31, 2019.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Foreign Operations and Foreign Currency Translation
The Company maintains manufacturing operations in
Mexico, India, Argentina, Vietnam and the People’s Republic
of China and can access independent contractors in China, Vietnam,
Argentina and Mexico. It also maintains sales and distribution
entities located in India, Canada, the U.K., Chile, China,
Argentina, Russia, Kazakhstan, Uruguay, Australia, and Mexico. The
Company is vulnerable to currency risks in these countries.
The functional currency for the United Kingdom subsidiary is the
Euro; the trading company in China, the RMB; the Russian operation,
the Russian Ruble, and the Kazakhstan operation the Kazakhstan
Tenge. All other operations have the US dollar as its functional
currency.
Pursuant to US GAAP, assets and liabilities of the
Company’s foreign operations with functional currencies,
other than the US dollar, are translated at the exchange rate in
effect at the balance sheet date, while revenues and expenses are
translated at average rates prevailing during the periods.
Translation adjustments are reported in accumulated other
comprehensive loss, a separate component of stockholders’
equity. Cash flows are also translated at average translation rates
for the periods, therefore, amounts reported on the consolidated
statement of cash flows will not necessarily agree with changes in
the corresponding balances on the consolidated balance sheet.
Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than
the functional currency are included in the results of operations
as incurred. Foreign currency
transaction gains (losses) included in net income for the three
months ended July 31, 2019 and 2018 was approximately $0.1 million
and $(0.4) million and for the six months ended July 31, 2019 and
2018 was approximately $0.2 million and $(0.7) million,
respectively.
Fair Value of Financial Instruments
US GAAP
defines fair value, provides guidance for measuring fair value and
requires certain disclosures utilizing a fair value hierarchy which
is categorized into three levels based on the inputs to the
valuation techniques used to measure fair value.
The
following is a brief description of those three
levels:
Level
1: Observable inputs such as quoted prices
(unadjusted) in active markets for identical assets or
liabilities.
Level
2: Inputs other than quoted prices that are
observable for the asset or liability, either directly or
indirectly. These include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or
similar assets or liabilities in markets that are not
active.
Level
3: Unobservable inputs that reflect
management’s own assumptions.
The
financial instruments of the Company classified as current assets
or liabilities, including cash and cash equivalents, accounts
receivable, short-term borrowings, borrowings under revolving
credit facility, accounts payable and accrued expenses, are
recorded at carrying value, which approximates fair value based on
the short-term nature of these instruments.
The
Company believes that the fair values of its long-term debt
approximates its carrying value based on the effective interest
rate compared to the current market rate available to the
Company.
Earnings Per Share
Basic
earnings per share are based on the weighted average number of
common shares outstanding without consideration of common stock
equivalents. Diluted earnings per share are based on the weighted
average number of common shares and common stock equivalents. The
diluted earnings per share calculation takes into account unvested
restricted shares and the shares that may be issued upon exercise
of stock options, reduced by shares that may be repurchased with
the funds received from the exercise, based on the average price
during the fiscal period. Potentially dilutive securities are
excluded from the computation of diluted loss per share since their
effect would be antidilutive.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Reclassifications
Certain
reclassifications have been made to the prior period statement of
cash flows as it relates to accounts payable and other accrued
expenses to conform to the current period presentation. These
reclassifications have no effect on the accompanying unaudited
condensed consolidated financial statements.
Recent Accounting Pronouncements
The
Company considers the applicability and impact of all accounting
standards updates (“ASUs”). Management periodically
reviews new accounting standards that are issued.
New Accounting Pronouncements Recently Adopted
In
February 2016, the Financial Accounting Standards Board
(“FASB”) established Topic 842, Leases, by issuing
Accounting Standards Update (“ASU”) No. 2016-02, which
requires lessees to recognize leases on-balance sheet and disclose
key information about leasing arrangements. Topic 842 was
subsequently amended by ASU No. 2018-01, Land Easement Practical
Expedient for Transition to Topic 842; ASU No. 2018-10,
Codification Improvements to Topic 842, Leases; and ASU No.
2018-11, Targeted Improvements. The new standard establishes a
right-of-use model (“ROU”) that requires a lessee to
recognize a ROU asset and lease liability on the balance sheet for
all leases with a term longer than 12 months. Leases will be
classified as finance or operating, with classification affecting
the pattern and classification of expense recognition in the income
statement. The new standard was effective on February 1, 2019. A
modified retrospective transition approach is required, applying
the new standard to all leases existing at the date of initial
application. An entity may choose to use either (1) its effective
date or (2) the beginning of the earliest comparative period
presented in the financial statements as its date of initial
application. If an entity chooses the second option, the transition
requirements for existing leases also apply to leases entered into
between the date of initial application and the effective date. The
entity must also recast its comparative period financial statements
and provide the disclosures required by the new standard for the
comparative periods. The Company adopted the new standard on
February 1, 2019 and used the effective date as the date of initial
application. Consequently, financial information will not be
updated and the disclosures required under the new standard will
not be provided for dates and periods before February 1, 2019. The
new standard provides a number of optional practical expedients in
transition. The Company elects the ‘package of practical
expedients’, which permits the Company not to reassess under
the new standard prior conclusions about lease identification,
lease classification and initial direct costs. On adoption, the
Company recognized additional operating lease liabilities of
approximately $2.7 million with corresponding ROU assets of the
same amount based on the present value of the remaining minimum
rental payments under the prior leasing standard for existing
operating leases.
In
February 2018, the FASB issued ASU 2018-02, Income Statement
– Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects From Accumulated Other
Comprehensive Income,” which allows institutions to elect to
reclassify the stranded tax effects from AOCI to retained earnings,
limited only to amounts in AOCI that are affected by the tax reform
law. For public entities, the amendments are effective for annual
reporting periods beginning after December 15, 2018, including
interim reporting periods within that reporting period. For all
other entities, the amendments in this Update are effective for
annual reporting periods beginning after December 15, 2019,
including interim reporting periods within that reporting period.
The Company has adopted this guidance, which had no material impact
on its unaudited condensed consolidated financial statements and
related disclosures.
New Accounting Pronouncements Not Yet Adopted
In
January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill
and Other (Topic 350), which includes provisions, intended to
simplify the test for goodwill impairment. The standard is
effective for annual periods beginning after December 15, 2019,
with early adoption permitted for interim or annual goodwill
impairment tests performed on testing dates after January 1, 2017.
The Company does not expect the adoption of this standard to have a
significant impact on its financial position and results of
operations.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
No
other recently issued accounting pronouncements had or are expected
to have a material impact on the Company’s unaudited
condensed consolidated financial statements.
Inventories consist
of the following (in $000s):
|
|
|
|
|
|
Raw
materials
|
$17,659
|
$14,986
|
Work-in-process
|
1,576
|
987
|
Finished
goods
|
30,174
|
26,392
|
|
$49,409
|
$42,365
|
We
lease real property, equipment and certain automobiles. The Company
made the accounting policy election to account for short-term
leases as described herein. Leases with an initial term of 12
months or less are not recorded on the balance sheet; we recognize
lease expense for these leases on a straight-line basis over the
lease term.
The
Company determines if a contract contains a lease at inception. US
GAAP requires that the Company’s leases be evaluated and
classified as operating or finance leases for financial reporting
purposes. The classification evaluation begins at the commencement
date and the lease term used in the evaluation includes the
non-cancellable period for which the Company has the right to use
the underlying asset, together with renewal option periods when the
exercise of the renewal option is reasonably certain and failure to
exercise such option would result in an economic penalty. All of
the Company’s real estate leases are classified as operating
leases.
Most of
our real estate leases include one or more options to renew, with
renewal terms that generally can extend the lease term for an
additional four to five years. The exercise of lease renewal
options is at the Company’s discretion. The Company evaluates
renewal options at lease inception and on an ongoing basis, and
includes renewal options that it is reasonably certain to exercise
in its expected lease terms when classifying leases and measuring
lease liabilities. Lease agreements generally do not require
material variable lease payments, residual value guarantees or
restrictive covenants.
Leases
recorded on the unaudited condensed consolidated balance sheet
consist of the following:
Leases
(000’s)
|
Classification
|
|
|
|
|
Assets
|
|
|
Operating lease
assets
|
Operating lease
right-of-use assets
|
$2,670
|
|
|
Liabilities
|
|
|
Current
|
|
|
Operating
|
Current portion of
operating lease liabilities
|
$506
|
Noncurrent
|
|
|
Operating
|
Long-term portion
of operating lease liabilities
|
2,152
|
Total Lease
Obligations
|
|
$2,658
|
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Lease cost
The
components of lease expense are included on the unaudited
condensed consolidated statement of operations as follows (in
000’s):
|
Classification
|
Three Months
Ended
July 31,
2019
|
Six Months
Ended
July 31,
2019
|
Operating lease
cost
|
Cost of goods
sold
|
$144
|
$289
|
|
Operating
expenses
|
$119
|
$238
|
Short-term lease
cost
|
|
$88
|
$124
|
Maturity of Lease Liabilities
Maturity of lease
liabilities as of July 31, 2019 was as follows (in
$000’s):
Year ending
January 31,
|
|
Remainder of fiscal
year 2020
|
506
|
2021
|
910
|
2022
|
752
|
2023
|
606
|
2024
|
16
|
Thereafter
|
173
|
Total lease
payments
|
2,963
|
Less:
Interest
|
305
|
Present value of
lease liability
|
2,658
|
(a)
Operating leases
payments include 257,000 related to options to extend lease terms
that are reasonably certain of being exercised and new leases
entered into during the quarter.
Weighted-average lease terms and discount rates are as
follows:
Weighted-average
remaining lease term (years)
|
|
Operating
leases
|
3.5
|
|
|
Weighted-average
discount rate
|
5.81%
|
Operating
leases
|
|
Supplemental cash
flow information related to leases for the six months ended July
31, 2019 were as follows
(in
000’s):
Cash paid for
amounts included in the measurement of lease
liabilities;
|
Six Months
Ended
July 31,
2019
|
Operating cash
flows from operating leases
|
$527
|
Leased assets
obtained in exchange for new operating lease
liabilities
|
$3,095
|
Disclosures related to periods prior to adoption of ASU
2016-02
The
Company adopted ASU 2016-02 using a modified retrospective adoption
method at February 1, 2019 as noted in Note 3. "Recent Accounting
Pronouncements." As required, the following disclosure is provided
for periods prior to adoption. Minimum lease commitments as of
January 31, 2019 that have initial or remaining lease terms in
excess of one year are as follows:
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Leases
Total
rental costs under all operating leases are summarized as
follows:
Year ended
January 31,
|
|
|
|
2019
|
$1,022,162
|
2018
|
$841,235
|
Minimum
annual rental commitments for the remaining term of the
Company’s noncancelable operating leases relating to
manufacturing facilities, office space and equipment rentals at
January 31, 2019, including lease renewals subsequent to year end,
are summarized as follows:
Year ending
January 31,
|
|
2020
|
$761,350
|
2021
|
446,494
|
2022
|
435,310
|
2023
|
313,633
|
2024
|
8,418
|
and
thereafter
|
8,944
|
Total
|
$1,974,149
|
Revolving Credit Facility
On May
10, 2017, the Company entered into a Loan Agreement (the
“Loan Agreement”) with SunTrust Bank
(“Lender”). The Loan Agreement provides the Company
with a secured (i) $20.0 million revolving credit facility, which
includes a $5.0 million letter of credit sub-facility, and (ii)
$1,575,000 term loan with Lender. The Company may request from time
to time an increase in the revolving credit loan commitment of up
to $10.0 million (for a total commitment of up to $30.0 million).
Borrowing pursuant to the revolving credit facility is subject to a
borrowing base amount calculated as (a) 85% of eligible accounts
receivable, as defined, plus (b) an inventory formula amount, as
defined, minus (c) an amount equal to the greater of (i) $1,500,000
or (ii) 7.5% of the then current revolver commitment amount, minus
(d) certain reserves as determined by the Loan Agreement. The
credit facility matures on May 10, 2020 (subject to earlier
termination upon the occurrence of certain events of default as set
forth in the Loan Agreement).
Borrowings under
the term loan and the revolving credit facility bear interest at an
interest rate determined by reference whether the loan is a base
rate loan or Eurodollar loan, with the rate election made by the
Company at the time of the borrowing or at any time the Company
elects pursuant to the terms of the Loan Agreement. The term loan
is payable in equal monthly principal installments of $13,125 each,
beginning on June 1, 2017, and on the first day of each succeeding
month, with a final payment of the remaining principal and interest
on May 10, 2020 (subject to earlier termination as provided in the
Loan Agreement). For that portion of the term loan that consists of
Eurodollar loans, the term loan shall bear interest at the LIBOR
Market Index Rate (“LIBOR”) plus 2.0% per annum, and
for that portion of the term loan that consists of base rate loans,
the term loan shall bear interest at the base rate then in effect
plus 1.0% per annum. All principal and unpaid accrued interest
under the revolving credit facility shall be due and payable on the
maturity date of the revolver. For that portion of the revolver
loan that consists of Eurodollar loans, the revolver shall bear
interest at LIBOR plus a margin rate of 1.75% per annum for the
first six months and thereafter between 1.5% and 2.0%, depending on
the Company’s “availability calculation” (as
defined in the Loan Agreement) and, for that portion of the
revolver that consists of base rate loans, the revolver shall bear
interest at the base rate then in effect plus a margin rate of
0.75% per annum for the first six months and thereafter between
0.50% and 1.0%, depending on the availability calculation. As of
the closing, the Company elected all borrowings under the Loan
Agreement to accrue interest at LIBOR which, as of that date, was
0.99500%. As such, the initial rate of interest for the revolver
was 2.745% per annum and the initial rate of interest for the term
loan was 2.995% per annum. At July 31, 2019, the rate of interest
on the revolver was 3.9% per annum and the rate of interest on the
term loan was 4.4% per annum. The Loan Agreement provides for
payment of an unused line fee of between 0.25% and 0.50%, depending
on the amount by which the revolving credit loan commitment exceeds
the amount of the revolving credit loans outstanding (including
letters of credit), which shall be payable monthly in arrears on
the average daily unused portion of the revolver.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
Company agreed to maintain a minimum “fixed charge coverage
ratio” (as defined in the Loan Agreement) as of the end of
each fiscal quarter, commencing with the fiscal quarter ended July
31, 2017, of not less than 1.10 to 1.00 during the applicable
fiscal quarter, and agreed to certain negative covenants that are
customary for credit arrangements of this type, including
restrictions on the Company’s ability to enter into mergers,
acquisitions or other business combination transactions, conduct
its business, grant liens, make certain investments, incur
additional indebtedness, and make stock repurchases.
As of
July 31, 2019, the Company had $0 outstanding on the letter of
credit sub-facility, $0.3 million outstanding under the revolving
credit facility, and $1.2 million outstanding on the term loan. On
June 7, 2019 the Company received a Waiver for certain compliance
provisions in the Loan Agreement. Pursuant to the Waiver,
compliance with the “fixed charge coverage ratio” is
waived for the fiscal quarters ending April 30, 2019, July 31, 2019
and October 31, 2019 and testing of the “fixed charge
coverage ratio” will commence again for the fiscal quarter
ending January 31, 2020. Pursuant to the Waiver, the Company has
agreed to maintain “Availability” (as defined in the
Loan Agreement) of at least $10,000,000 for the period from May 31,
2019 through December 31, 2019.
In
connection with the Loan Agreement, the Company entered into a
security agreement, dated May 10, 2017, with Lender pursuant to
which the Company granted to Lender a first priority perfected
security interest in substantially all real and personal property
of the Company.
Borrowings in UK
On
December 31, 2014, the Company and Lakeland Industries Europe, Ltd,
(“Lakeland UK”), a wholly owned subsidiary of the
Company, amended the terms of its existing line of credit facility
with HSBC Bank to provide for (i) a one-year extension of the
maturity date of the existing financing facility to December 19,
2016, (ii) an increase in the facility limit from £1,250,000
(approximately USD $1.9 million, based on exchange rates at time of
closing) to £1,500,000 (approximately USD $2.3 million, based
on exchange rates at time of closing), and (iii) a decrease in the
annual interest rate margin from 3.46% to 3.0%. In addition,
pursuant to a letter agreement dated December 5, 2014, the Company
agreed that £400,000 (approximately USD $0.6 million, based on
exchange rates at time of closing) of the note payable by the UK
subsidiary to the Company shall be subordinated in priority of
payment to the subsidiary’s obligations to HSBC under the
financing facility. On December 31, 2016, Lakeland UK entered into
an extension of the maturity date of its existing facility with
HSBC Invoice Finance (UK) Ltd. to December 19, 2017. Other than the
extension of the maturity date and a small reduction of the service
charge from 0.9% to 0.85%, all other terms of the facility remained
the same. On September 4, 2017 the facility was amended to include
Algeria as an approved country. On December 4, 2017 the facility
was extended to March 30, 2018 for the next review period and, as
of March 9, 2019 the facility was extended to mature on March 30,
2020 with no additional changes to the terms. The balance under
this loan outstanding at July 31, 2019 and January 31, 2019 was USD
$0.5 million and USD $0.0 million, respectively, and is included in
other accrued expenses on the accompanying unaudited condensed
consolidated balance sheets. The amount of $0.4 million due from
HSBC as of January 31, 2019 is included in Other Current Assets on
the accompanying unaudited condensed consolidated balance
sheet.
Argentina Loan
In
April 2015, Lakeland Argentina S.R.L. (“Lakeland
Argentina”), the Company’s Argentina subsidiary, was
granted a $300,000 line of credit denominated in Argentine pesos,
pursuant to a standby letter of credit granted by the parent
company.
The
following loans were made under the $300,000 facility stated
above:
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On
February 26, 2018 Lakeland Argentina and BNA entered into an
agreement for Lakeland Argentina to obtain a loan in the amount of
ARS $4.3 million (approximately USD $215,000, based on exchange
rates at time of closing); such loan is for a term of one year at
an interest rate of 32.0% per annum. This agreement was paid in
full in January 2019.
Below
is a table to summarize the debt amounts above (in
000’s):
|
|
|
Current Maturity of
Long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA
|
$332
|
$-----
|
$1,076
|
$1,161
|
$158
|
$158
|
UK
|
544
|
-----
|
-----
|
-----
|
-----
|
-----
|
Totals
|
$876
|
$-----
|
$1,076
|
$1,161
|
$158
|
$158
|
Five-year
Debt Payout Schedule
This
schedule reflects the liabilities as of July 31, 2019, and does not
reflect any subsequent event (in 000’s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings in
USA
|
$1,566
|
$490
|
$1,076
|
$-----
|
$-----
|
$-----
|
$-----
|
Borrowing in the
UK
|
544
|
544
|
-----
|
-----
|
-----
|
-----
|
-----
|
Total
|
$2,110
|
$1,034
|
$1,076
|
$-----
|
$-----
|
$-----
|
$-----
|
Credit
Risk
Financial
instruments, which potentially subject the Company to concentration
of credit risk, consist principally of cash and cash equivalents,
and trade receivables. Concentration of credit risk with respect to
trade receivables is generally diversified due to the large number
of entities comprising the Company’s customer base and their
dispersion across geographic areas principally within the United
States. The Company routinely addresses the financial strength of
its customers and, as a consequence, believes that its receivable
credit risk exposure is limited. The Company does not require
customers to post collateral.
The
Company’s foreign financial depositories are Bank of America;
China Construction Bank; Bank of China; China Industrial and
Commercial Bank; HSBC (UK); Rural Credit Cooperative of Shandong;
Postal Savings Bank of China; Punjab National Bank; HSBC in India,
Argentina and UK; Raymond James in Argentina; TD Canada Trust;
Banco Itaú S.A., Banco Credito Inversione in Chile; Banco
Mercantil Del Norte SA in Mexico; ZAO KB Citibank Moscow in Russia,
and JSC Bank Centercredit in Kazakhstan. The Company monitors its
financial depositories by their credit rating which varies by
country. In addition, cash balances in banks in the United States
of America are insured by the Federal Deposit Insurance Corporation
subject to certain limitations. There is approximately $0 million
total included in the US bank accounts and approximately $9.1
million total in foreign bank accounts as of July 31,
2019.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Major Customer
No
customer accounted for more than 10% of net sales during the three
and six month periods ended July 31, 2019 and 2018.
Major Supplier
No
supplier accounted for more than 10% of purchases during the three
and six month periods ended July 31, 2019 and 2018.
The
2017 Stock Plan
On June
21, 2017, the stockholders of the Company approved the Lakeland
Industries, Inc. 2017 Equity Incentive Plan (the “2017
Plan”) at the Annual Meeting of Stockholders. The executive
officers and all other employees and directors of the Company,
including its subsidiaries, are eligible to participate in the 2017
Plan. The 2017 Plan is administered by the Compensation Committee
of the Board of Directors (the “Committee”), except
that with respect to all non-employee directors, the Committee
shall be deemed to include the full Board. The 2017 Plan provides
for the grant of equity-based compensation in the form of stock
options, restricted stock, restricted stock units, performance
shares, performance units, or stock appreciation rights
(“SARS”).
The
Committee has the authority to determine the type of award, as well
as the amount, terms and conditions of each award, under the 2017
Plan, subject to the limitations and other provisions of the 2017
Plan. An aggregate of 360,000 shares of the Company’s common
stock are authorized for issuance under the 2017 Plan, subject to
adjustment as provided in the 2017 Plan for stock splits,
dividends, distributions, recapitalizations and other similar
transactions or events. If any shares subject to an award are
forfeited, expire, lapse or otherwise terminate without issuance of
such shares, such shares shall, to the extent of such forfeiture,
expiration, lapse or termination, again be available for issuance
under the 2017 Plan. The following table summarizes the unvested
shares granted on September 12, 2017 and June 7, 2018, which have
been made under the 2017 Plan.
|
Number of shares
awarded total
|
|
|
|
|
|
Employees
|
35,863
|
53,796
|
71,728
|
86,125
|
Non-employee
Directors
|
14,414
|
21,622
|
28,829
|
34,595
|
Total
|
50,277
|
75,418
|
100,557
|
120,720
|
|
Value at grant
date (numbers below are rounded to the nearest $100)
|
|
|
|
|
|
Employees
|
$497,600
|
$746,400
|
$995,200
|
$1,194,900
|
Non-employee
Directors
|
200,000
|
300,000
|
400,000
|
480,000
|
Total
|
$697,600
|
$1,046,400
|
$1,395,200
|
$1,674,900
|
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
actual number of shares of common stock of the Company, if any, to
be earned by the award recipients is determined over a full three
fiscal year performance period commencing on February 1, 2017 and
ending on January 31, 2020 in the case of the 2017 grants, and
commencing on February 1, 2018 and ending on January 31, 2021, in
the case of the 2018 grants, based on the level of earnings before
interest, taxes, depreciation and amortization
(“EBITDA”) achieved by the Company over this period.
The EBITDA targets have been set for each of the Minimum, Target,
Maximum and Cap levels, at higher amounts for each of the higher
levels. The actual EBITDA amount achieved is determined by the
Committee and may be adjusted for items determined to be unusual in
nature or infrequent in occurrence, which items may include,
without limitation, the charges or costs associated with
restructurings of the Company or any subsidiary, discontinued
operations, and the cumulative effects of accounting
changes.
Under
the 2017 Plan, as described above, the Company awarded
performance-based restricted stock and stock appreciation rights to
eligible employees and directors. Such awards were at either
Minimum, Target, Maximum or Cap levels, based on three year EBITDA
targets.
The
Company recognizes expense related to performance-based restricted
share awards over the requisite performance period using the
straight-line attribution method based on the most probable outcome
(Minimum, Target, Maximum, Cap or Zero) at the end of the
performance period and the price of the Company’s common
stock price at the date of grant. The Company is recognizing
expense, except as set forth below, related to awards under the
2017 Plan at Maximum, including SARS. As of July 31, 2019, the
Company revised its estimate of the 2017 grants that will be earned
for the designated performance period. Based on actual EBITDA
achieved by the Company to date, it was deemed improbable that such
performance would meet even the Minimum level required for such
grants to vest, including SARS. As a result, stock-based
compensation expense has been adjusted to account for the change in
estimate. The total amount of previously recognized
stock-based compensation attributable to the 2017 grants that has
been reversed is approximately $447,000.
As of
July 31, 2019, unrecognized stock-based compensation expense
totaled $364,302 pursuant to the 2017 Plan based on the maximum
performance award level. Such unrecognized stock-based compensation
expense totaled $182,143 for the 2017 Plan at the minimum
performance award level. The cost of these non-vested awards is
expected to be recognized over a weighted-average period of three
years for the 2017 Plan.
The
Company recognized total stock-based compensation costs, net of the
above change in estimate, which are reflected in operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
2017
Plan
|
$(452)
|
$183
|
$(251)
|
$304
|
Total stock-based
compensation
|
$(452)
|
$183
|
$(251)
|
$304
|
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Shares issued
under
2017 Stock
Plan
|
Outstanding
Unvested Grants at Maximum at Beginning of FY20
|
|
Becoming Vested
during FY20
|
|
Outstanding
Unvested Grants at Maximum at End of
July 31,
2019
|
Restricted stock
grants – employees
|
84,126
|
-----
|
-----
|
12,397
|
71,729
|
Restricted stock
grants – non-employee directors
|
28,829
|
-----
|
-----
|
-----
|
28,829
|
Retainer in stock
– non-employee directors
|
25,044
|
7,292
|
-----
|
-----
|
32,336
|
Total
restricted stock
|
137,999
|
7,292
|
-----
|
12,397
|
132,894
|
|
|
|
|
|
|
Weighted average
grant date fair value
|
$13.77
|
$11.63
|
$-----
|
$13.87
|
$13.65
|
Other Compensation Plans/Programs
Pursuant to the
Company’s restrictive stock program, all directors are
eligible to elect to receive any director fees in shares of
restricted stock in lieu of cash. Such restricted shares are
subject to a two-year vesting period. The valuation is based on the
stock price at the grant date and is amortized to expense over the
two-year period, which approximates the performance period. Since
the director is giving up cash for unvested shares, and is subject
to a vesting requirement, the amount of shares awarded is 133% of
the cash amount based on the grant date stock price. As of July 31,
2019, unrecognized stock-based compensation expense related to
these restricted stock awards totaled $54,760 for the 2017 Plan.
The cost of these non-vested awards is expected to be recognized
over a two-year weighted-average period. In addition, as of July
31, 2019, the Company granted awards for up to an aggregate of
32,336 shares from the 2017 Plan.
Stock Repurchase Program
On July
19, 2016, the Company’s board of directors approved a stock
repurchase program under which the Company may repurchase up to
$2,500,000 of its outstanding common stock. The Company has
repurchased 114,848 shares of stock under this program as of the
date of this filing which amounted to $1,261,656, inclusive of
commissions. During the three month period ended July 31, 2019 the
Company repurchased 9,200 shares which amounted to $96,729,
inclusive of commissions. At July 31, 2019, the dollar value of
remaining shares that may by repurchased under the share repurchase
program was $1,238,344.
Warrant
In
October 2014, the Company issued a five-year warrant that is
immediately exercisable to purchase up to 55,500 shares of the
Company’s common stock at an exercise price of $11.00 per
share. As of July 31, 2019 and January 31, 2019, the warrant to
purchase up to 55,500 shares remains outstanding.
Authorized Shares
On
June 27, 2018, the Company filed with the Secretary of State of the
State of Delaware a Certificate of Amendment to the Company’s
Restated Certificate of Incorporation, increasing the number of
authorized shares from 11,500,000 to 21,500,000, of which
20,000,000 shares are of the Company’s common stock and
1,500,000 shares are of the Company’s preferred stock. The
Certificate of Amendment was deemed effective as of June 25, 2018.
The increase effected solely the number of authorized shares of
common stock.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Change in Valuation Allowance
The
Company records net deferred tax assets to the extent the Company
believes these assets will more likely than not be realized. The
valuation allowance was $1.3 million at July 31, 2019 and January
31, 2019. The valuation allowance stayed the same for the three and
six months ended July 31, 2019 and 2018, respectively.
Income Tax Expense
Income
tax expenses consist of federal, state and foreign income taxes.
The statutory rate is the US rate. Reconciling items to the
effective rate are foreign income subject to US tax, tax deductions
for restricted stock vesting, company borrowing structures, and
other permanent tax differences.
Tax Reform
On
December 22, 2017, new federal tax reform legislation was enacted
in the United States, resulting in significant changes from
previous tax law. The 2017 Tax Cuts and Jobs Act (the Tax
Act) reduced the federal corporate income tax rate to 21% from 35%
effective January 1, 2018. The Tax Act requires us to
recognize the effect of the tax law changes in the period of
enactment, such as determining the transition tax, re-measuring our
US deferred tax assets as well as reassessing the net realizability
of our deferred tax assets. The Company completed this
re-measurement and reassessment in FY18. While the Tax Act
provides for a modified territorial tax system, beginning
in 2018, it includes two new U.S. tax base
erosion provisions, the global intangible low-taxed income
(“GILTI”) provisions and the base-erosion and
anti-abuse tax (“BEAT”) provisions. The GILTI
provisions require the Company to include in its U.S. income tax
return foreign subsidiary earnings in excess of an allowable return
on the foreign subsidiary’s tangible assets. The proposed
regulations which were not finalized as of January 31, 2019. The
regulations were finalized as of June 14, 2019. Re-measurement and reassessment
of the GILTI tax as it is currently written resulted in a charge to
tax expense of $0.2 million and $0.3 million for the three and six
months ended July 31, 2019. The Company intends to account for the
GILTI tax in the period in which it is incurred. Though this
non-cash expense had a materially negative impact on FY19 earnings,
the Tax Act also changes the taxation of foreign earnings, and
companies generally will not be subject to United States federal
income taxes upon the receipt of dividends from foreign
subsidiaries.
The
following table sets forth the computation of basic and diluted
earnings per share at July 31, 2019 and 2018 as
follows:
|
Three Months
Ended
July
31,
|
Six Months
Ended
July
31,
|
|
(in $000s except
share and per share information)
|
|
|
|
|
|
Numerator:
|
$1,395
|
$1,017
|
$930
|
$2,885
|
Net
income
|
|
|
|
|
Denominator:
|
|
|
|
|
Denominator for
basic earnings per share (weighted-average shares which reflect
shares in the treasury, 471,289 and 356,441 for July 31, 2019 and
2018, respectively)
|
8,012,475
|
8,116,199
|
8,013,150
|
8,116,199
|
Effect of dilutive
securities from restricted stock plan and from dilutive effect of
warrants
|
89,867
|
60,936
|
83,077
|
52,559
|
Denominator for
diluted earnings per share (adjusted weighted average
shares)
|
8,102,342
|
8,177,135
|
8,096,227
|
8,168,758
|
Basic earnings per
share
|
$0.17
|
$0.13
|
$0.12
|
$0.36
|
Diluted earnings
per share
|
|
|
|
|
Warrants and
restricted stock awards excluded from the computation of diluted
earnings per share because the effect of inclusion would have been
anti-dilutive.
|
$0.17
|
$0.12
|
$0.11
|
$0.35
|
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Labor and other contingencies in Brazil
As
disclosed in our periodic filings with the SEC, we agreed to make
certain payments in connection with ongoing labor litigation
involving our former Brazilian subsidiary (“Lakeland
Brazil”). While the vast majority of these labor suits
have been resolved, there are two (2) labor cases that remain
active, and in which Lakeland was named as a
co-defendant.
The
first case filed against Lakeland by a former officer of Lakeland
Brazil, was filed in Labor court in 2014 claiming Lakeland owed USD
$300,000. The Labor court ruled that the claimant’s case
was outside of the scope of the Labor Court and the case was
dismissed. The claimant is appealing within the Labor Court system.
We believe that the chances of success are high in favor of
Lakeland.
The
second case filed by a former Lakeland Brazil manager, in 2014, was
ruled upon in Labor Court and awarded the claimant USD $100,000.
Lakeland was removed by the cour from the case in February 2017 and
no appeals were filed in respect to such removal. Both the claimant
and Lakeland Brazil have appealed the award. The Labor Court of
Appeal recently ruled in favor of Lakeland Brazil to re-open the
case to potentially lower the $100,000 amount.
A
former
officer of Lakeland Brazil also filed a civil claim seeking
approximately USD $700,000 that he alleges is due to him against an
unpaid promissory note. While Lakeland may be sought as a party,
Lakeland has not been served with process and no decision on the
merits has been issued in this case yet. Management firmly believes
these claims to be without any merit and does not anticipate a
negative outcome resulting in significant expense to
us.
Lakeland Brazil may
face new labor lawsuits in the short term as a result of the
reduction of its operations in our first quarter. In order to
mitigate this risk, the management of Lakeland Brazil has been
proposing settlement agreements to employees dismissed due to
shutdown and to the extent possible seeking confirmation of Labor
Courts. The Company has no obligation under the 2015 Shares
Transfer Agreement (pursuant to which Agreement, the Company
eliminated its interest in Lakeland Brazil) to make any additional
payments in connection with these potential new labor lawsuits. The
Company also understands that under the labor laws of Brazil, a
parent company may be held liable for the labor liabilities of a
former Brazilian subsidiary in the case of fraud, misconduct, or
under various theories.
Although the
Company would have the right of adversary system, full defense and
due process in case of a potential litigation, there can be no
assurance as to the findings of the courts of
Brazil.
There
are additional cases in Labor and Civil courts against Lakeland
Brazil in which Lakeland is not a party, and other outstanding
monetary allegations of Lakeland Brazil.
In
FY19, the Company recorded an accrual of $1.2 million for
professional fees and litigation reserves associated with labor
claims in Brazil. During the three months ending July 31, 2019 the
Company recorded an additional accrual in the amount of $0.4
million and paid $1.3 million in professional fees and labor
claims. The accrual on the balance sheet at July 31, 2019 and
January 31, 2019 is $0.2 million and $1.2 million,
respectively.
Officer
severance payment
The
Company entered into a separation agreement with a former officer
effective July 22, 2019 and recorded a severance charge of
$260,000 in connection with this arrangement. The
severance amount will be paid through June 5, 2020 pursuant to the
terms of the separation agreement.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
General litigation contingencies:
The
Company is involved in various litigation proceedings arising
during the normal course of business which, in the opinion of the
management of the Company, will not have a material effect on the
Company’s financial position, results of operations or cash
flows; however, there can be no assurance as to the ultimate
outcome of these matters. As of July 31, 2019, to the best of the
Company’s knowledge, there were no outstanding claims or
litigation, except for the labor contingencies in Brazil described
above.
|
Three Months
Ended
July
31,
|
Six Months
Ended
July
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
$14.44
|
52.57%
|
$13.36
|
52.16%
|
$27.31
|
52.36%
|
$25.71
|
51.47%
|
International
|
13.03
|
47.43%
|
12.26
|
47.84%
|
24.85
|
47.64%
|
24.25
|
48.53%
|
Total
|
$27.47
|
100.00%
|
$25.62
|
100.00%
|
$52.16
|
100.00%
|
$49.96
|
100.00%
|
Domestic and
international sales from continuing operations are as follows in
millions of dollars:
The
Company manages its operations by evaluating each of its geographic
locations. The US operations include a facility in Alabama
(primarily the distribution to customers of the bulk of our
products and the light manufacturing of our chemical, wovens,
reflective, and fire products). The Company also maintains one
manufacturing company in China (primarily disposable and chemical
suit production), a manufacturing facility in Mexico (primarily
disposable, reflective, fire and chemical suit production), a
manufacturing facility in Vietnam (primarily disposable products),
a manufacturing facility in Argentina and a small manufacturing
facility in India. The China facilities produce the majority of the
Company’s products and China generates a significant portion
of the Company’s international revenues. The Company
evaluates the performance of these entities based on operating
profit, which is defined as income before income taxes, interest
expense and other income and expenses. The Company maintains sales
forces in the USA, Canada, Mexico, Europe, Latin America, India,
Russia, Kazakhstan, Uruguay, Australia and China, which sell and
distribute products shipped from the United States, China, Mexico,
India or Vietnam.
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
table below represents information about reported segments for the
years noted therein:
|
Three Months
Ended
July
31,
(in millions of
dollars)
|
Six Months
Ended
July
31,
(in millions of
dollars)
|
|
|
|
|
|
Net
Sales:
|
|
|
|
|
USA
|
$15.62
|
$14.76
|
$29.51
|
$28.07
|
Other
foreign
|
1.81
|
1.55
|
3.17
|
3.04
|
Europe
(UK)
|
2.48
|
2.56
|
4.87
|
5.13
|
Mexico
|
0.96
|
1.21
|
1.87
|
2.68
|
Asia
|
17.45
|
13.75
|
30.63
|
27.59
|
Canada
|
2.40
|
2.10
|
4.90
|
4.31
|
Latin
America
|
2.69
|
2.12
|
4.44
|
3.53
|
Corporate
|
-----
|
0.39
|
-----
|
0.75
|
Less intersegment
sales
|
(15.94)
|
(12.82)
|
(27.23)
|
(25.14)
|
Consolidated
sales
|
$27.47
|
$25.62
|
$52.16
|
$49.96
|
External
Sales:
|
|
|
|
|
USA
|
$14.44
|
$13.36
|
$27.31
|
$25.71
|
Other
foreign
|
0.92
|
0.66
|
1.68
|
1.49
|
Europe
(UK)
|
2.48
|
2.56
|
4.87
|
5.13
|
Mexico
|
0.59
|
0.82
|
1.20
|
1.93
|
Asia
|
4.04
|
4.13
|
7.87
|
8.08
|
Canada
|
2.37
|
2.10
|
4.87
|
4.30
|
Latin
America
|
2.63
|
1.99
|
4.36
|
3.32
|
Consolidated
external sales
|
$27.47
|
$25.62
|
$52.16
|
$49.96
|
Intersegment
Sales:
|
|
|
|
|
USA
|
$1.18
|
$1.40
|
$2.21
|
$2.36
|
Other
foreign
|
0.89
|
0.89
|
1.47
|
1.55
|
Mexico
|
0.37
|
0.39
|
0.67
|
0.75
|
Asia
|
13.41
|
9.62
|
22.77
|
19.51
|
Canada
|
0.03
|
-----
|
0.03
|
0.01
|
Latin
America
|
0.06
|
0.13
|
0.08
|
0.21
|
Corporate
|
-----
|
0.39
|
-----
|
0.75
|
Consolidated
intersegment sales
|
$15.94
|
$12.82
|
$27.23
|
$25.14
|
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
Three Months
Ended
July
31,
(in millions of
dollars)
|
Six Months
Ended
July
31,
(in millions of
dollars)
|
|
|
|
|
|
Operating Profit
(Loss):
|
|
|
|
|
USA
|
$2.62
|
$2.15
|
$3.43
|
$4.78
|
Other
foreign
|
0.31
|
0.14
|
0.53
|
0.18
|
Europe
(UK)
|
(0.05)
|
0.09
|
(0.04)
|
0.18
|
Mexico
|
(0.23)
|
0.08
|
(0.41)
|
0.21
|
Asia
|
1.59
|
0.57
|
1.82
|
1.15
|
Canada
|
0.27
|
0.06
|
0.52
|
0.44
|
Latin
America
|
0.07
|
0.22
|
0.24
|
0.36
|
Corporate
|
(1.93)
|
(1.56)
|
(3.87)
|
(3.35)
|
Less intersegment
profit (loss)
|
(0.01)
|
(0.10)
|
0.10
|
0.11
|
Consolidated
operating profit (loss)
|
$2.64
|
$1.65
|
$2.32
|
$4.06
|
Depreciation and
Amortization Expense:
|
|
|
|
|
USA
|
$0.04
|
$0.03
|
$0.17
|
$0.06
|
Other
foreign
|
0.02
|
0.01
|
0.02
|
0.03
|
Europe
(UK)
|
-----
|
-----
|
0.01
|
0.01
|
Mexico
|
0.04
|
0.03
|
0.08
|
0.06
|
Asia
|
0.12
|
0.10
|
0.25
|
0.15
|
Canada
|
0.05
|
0.02
|
0.05
|
0.03
|
Latin
America
|
0.01
|
0.01
|
0.02
|
0.02
|
Corporate
|
0.18
|
0.05
|
0.25
|
0.10
|
Less
intersegment
|
(0.01)
|
(0.01)
|
(0.01)
|
(0.03)
|
Consolidated
depreciation & amortization expense
|
$0.45
|
$0.24
|
$0.84
|
$0.43
|
Interest
Expense:
|
|
|
|
|
Latin
America
|
$0.02
|
$0.02
|
$0.03
|
$0.03
|
Corporate
|
0.02
|
0.02
|
0.04
|
0.04
|
Consolidated
interest expense
|
$0.04
|
$0.04
|
$0.07
|
$0.07
|
Income Tax
Expense:
|
|
|
|
|
Europe
(UK)
|
$0.01
|
$0.02
|
$0.01
|
$0.04
|
Asia
|
0.36
|
0.36
|
0.50
|
0.51
|
Canada
|
0.17
|
0.07
|
0.22
|
0.15
|
Latin
America
|
0.11
|
0.04
|
0.13
|
0.06
|
Corporate
|
0.57
|
0.15
|
0.44
|
0.34
|
Less
intersegment
|
(0.01)
|
(0.02)
|
-----
|
0.04
|
Consolidated income
tax expense
|
$1.21
|
$0.62
|
$1.30
|
$1.14
|
Capital
Expenditures:
|
|
|
|
|
USA (including
Corporate)
|
$0.26
|
$0.34
|
$0.32
|
$0.31
|
Other
foreign
|
0.01
|
0.73
|
0.01
|
0.77
|
Mexico
|
(0.01)
|
0.03
|
0.05
|
0.11
|
Asia
|
0.14
|
(0.15)
|
0.19
|
0.03
|
Latin
America
|
0.01
|
-----
|
0.01
|
-----
|
Consolidated
capital expenditure
|
$0.41
|
$0.95
|
$0.58
|
$1.22
|
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
July
31,
2019
(in millions of
dollars)
|
January
31,
2019
(in millions of
dollars)
|
Total Assets:
*
|
|
|
USA
Operations
|
$69.46
|
$67.26
|
Other
foreign
|
1.53
|
1.54
|
Europe
(UK)
|
5.44
|
4.37
|
Mexico
|
5.13
|
5.00
|
Asia
|
43.38
|
39.52
|
Canada
|
6.11
|
7.47
|
Latin
America
|
5.94
|
7.42
|
Corporate
|
20.25
|
25.07
|
Less
intersegment
|
(55.85)
|
(62.93)
|
Consolidated
assets
|
$101.39
|
$94.72
|
Total Assets Less
Intersegment:*
|
|
|
USA
Operations
|
$32.33
|
$29.76
|
Other
foreign
|
3.45
|
2.85
|
Europe
(UK)
|
5.44
|
4.36
|
Mexico
|
5.21
|
5.13
|
Asia
|
23.32
|
20.97
|
Canada
|
6.09
|
6.64
|
Latin
America
|
5.97
|
5.27
|
Corporate
|
19.58
|
19.74
|
Consolidated
assets
|
$101.39
|
$94.72
|
Property and
Equipment
|
|
|
USA (including
Corporate)
|
$3.80
|
$3.87
|
Other
foreign
|
0.19
|
0.19
|
Europe
(UK)
|
0.01
|
0.01
|
Mexico
|
2.12
|
2.14
|
Asia
|
3.12
|
3.17
|
Canada
|
1.20
|
1.26
|
Latin
America
|
0.06
|
0.07
|
Less
intersegment
|
0.07
|
0.07
|
Consolidated
long-lived assets
|
$10.57
|
$10.78
|
Goodwill:
|
|
|
USA
Operations
|
$0.87
|
$0.87
|
Consolidated
goodwill
|
$0.87
|
$0.87
|
*
Negative assets reflect intersegment amounts eliminated in
consolidation