RONKONKOMA, N.Y., Dec. 15, 2017 /PRNewswire/ -- Lakeland
Industries, Inc. (NASDAQ: LAKE) (the "Company" or "Lakeland"), a
leading global manufacturer of protective clothing for industry,
healthcare and to first responders on the federal, state and local
levels, today announced financial results for its fiscal 2018 third
quarter ended October 31, 2017.
Fiscal 2018 Third Quarter Financial Results Highlights and
Recent Developments
- Net sales for 3Q18 of $24.0
million increased from $23.2
million in 3Q17
- Sales growth in all major operating regions
- Gross profit for 3Q18 of $9.1
million increased from $8.5
million in 3Q17
- Gross margin as a percentage of net sales in 3Q18 was 37.8%, up
from 36.7% in 3Q17
- Net income increased to $1.8
million in 3Q18, up 19% from $1.5
million in 3Q17
- Basic and diluted earnings per share (EPS) of $0.23 in 3Q18, up from $0.21 in 3Q17; EPS growth diminished by issuance
of shares during 3Q18
- Completed a public offering of approximately 809,000 shares of
common stock at a price of $13.80 per
share for net proceeds of approximately $10.1 million
- Free cash flow increased to $2.6
million, up 24.5% from $2.0
million in 3Q17
- Cash at end of quarter increased to $21.5 million from $10.4
million at beginning of the fiscal year
- Total debt reduced by 61% to $2.3
million at the end of the quarter from $5.8 million at the beginning of the fiscal
year.
- Stockholders' equity increased by 22% to $87.1 million at the end of 3Q18 from the
beginning of the fiscal year
Management's Comments
Christopher J. Ryan, President
and Chief Executive Officer of Lakeland Industries, stated, "We are
very pleased with our performance in the third quarter of fiscal
2018, which demonstrates the momentum of our core business while we
gear up for continued growth and market share attainment.
Similar to the second quarter, we showed effective management in
all facets of our operations, and improved our profitability in the
third quarter as compared to the prior year.
"Among the more mature markets for personal protective
equipment, our sales in the US continue to grow which suggests we
are attaining market share, and growth in the UK and Europe have finally seen a post-Brexit
rebound. Overall, our international markets, while down in
revenues from the year ago quarter, are picking up as former
laggard operating regions in South
America and Russia are
beginning to take off. In faster growing and less competitive
regions, our sales in Canada
continue to reach new record levels and China revenues have been expanding. We
are very excited by the high level of interest in Lakeland products
in South America, Russia, Kazakhstan, Australia and other Asian markets.
Across the board, we are experiencing increased demand from a
resurgence of the oil and gas sector."
"With this backdrop of favorable trends, during the third
quarter we took decisive action to capitalize on the appreciation
of our share price by raising over $10
million in net proceeds from the issuance of common
stock. The offering proceeds along with our operating
performance have enabled us to substantially bolster our financial
position. More importantly, while our cash balance increased
by over 100% since the beginning of the fiscal year, we are making
investments to increase manufacturing capacity, lower our cost
structure and accelerate our entry into in some very attractive
markets around the world."
"From a manufacturing standpoint, we have begun the process of
adding facilities in India and
Vietnam which we believe will
provide us with years of lower labor costs and favorable tariffs
that will enhance our gross margins while bringing products closer
to the new markets we are now entering throughout Asia and the Pacific Rim. From a
distribution standpoint, we have made considerable progress with
Amazon in the US which required investment in our fulfilment
capabilities. In short order, our revenues from this new
distribution channel have grown rapidly, although still
representing less than 1% of our consolidated revenues. We
intend to replicate this model in other countries."
"Following three quarters of fiscal 2018 where our financial
performance has continued to improve, we look excitedly toward next
year. Lakeland is essentially debt free and has a strong cash
position, a deep management team, world-class manufacturing, a
respected global brand, and is well diversified in both established
and developing markets."
Fiscal 2018 Third Quarter Financial Results
Net sales increased to $24.0
million for the three months ended October 31, 2017 compared to $23.2 million for the three months ended
October 31, 2016, an increase of
3.1%. On a consolidated basis for the third quarter of fiscal
2018, domestic sales were $12.9
million or 54% of total revenues and international sales
were $11.1 million or 46% of total
revenues. This compares with domestic sales of $11.3 million or 48% of the total, and
internationals sales of $12.0 million
or 52% of the total in the same period of fiscal 2017.
Sales in the US increased $1.6
million or 12%, primarily due to increased sales of
disposables products to national accounts and in response to
hurricane clean-up efforts. Additionally, there was an
increase in sales of chemical line products into the oil field
services and refinery sectors along with demand from other
industrial sectors as the US economy continues to improve.
Among the Company's larger international operations, sales in
China and to the Asia Pacific Rim
increased $3.1 million or 29% as
compared to the prior year period. This growth is
attributable to improving industrial activity and several larger
customers beginning to replace depleted inventories as the Company
worked through a large backlog. Canada sales increased
$0.4 million as that country
continues to experience an oil and gas turnaround requiring
protective wear and as some customers replenished their stock in
response to higher than forecasted demand. UK sales increased
by $0.3 million or 18% as new
distributors placed stocking orders. Russia and
Kazakhstan sales combined for an increase in sales of
$0.3 million or 102.6%. Amid
continuously improving economies within Latin America, sales remain strong at
$1.8 million, although the region as
a whole reported lower sales due to a single large order in
Ecuador during the prior year
period.
Gross profit increased $0.5
million or 6.3% to $9.1
million for the three months ended October 31, 2017, from $8.5 million for the three months October 31, 2016. Gross profit as a
percentage of net sales increased to 37.8% for the three-month
period ended October 31, 2017, from
36.6% for the three months ended October
31, 2016. Gross margin increases were somewhat offset
by labor increases in our manufacturing facilities due to wage
increases and overtime associated with relieving the stress in the
Company's internal supply chain Major factors driving gross margins
were:
- Disposables gross margins increased 4.6 percentage points due
to product mix and increased volume.
- Chemical gross margin increased by 7.5 percentage points
primarily due to a reduction in force in the US as production was
moved to more cost effective facilities in Mexico and China.
- Fire protection gross margin decreased 2.5 percentage points as
the Company prepares for the upcoming change to the National Fire
Protection Agency ("NFPA") standards by discounting products
produced under the old standard and due to product mix.
- Wovens gross margins increased 18.0 percentage points due to
market price increases on contractor FR coveralls.
- Reflective gross margins increased 14.3 percentage points as a
result of increased pricing on some products and the product
mix.
Operating expense increased 3.1% from $6.3 million for the three months ended
October 31, 2016 to $6.4 million for the three months ended
October 31, 2017. Operating
expense as a percentage of net sales was 26.7% for the three months
ended October 31, 2017 and
2016. The main factors for the higher operating expenses are
increases in salaries for additional sales personnel as the Company
expands internationally, freight costs, and accounts receivable
allowances for several slow paying customers partially offset by
lower commission fees due to a large international order in the
prior year period and a decrease in officer salaries resulting from
the reduction of one officer due to retirement.
Operating income increased to $2.7
million for the three months ended October 31, 2017, from $2.3 million for the three months ended
October 31, 2016, as most operating
expenses are fixed in nature other than commissions and freight out
and sale volume increased as compared to the third quarter of
fiscal 2017. Operating margins were 11.1% for the three
months ended October 31, 2017,
compared to 9.7% for the three months ended October 31, 2016.
Net income increased to $1.8
million for the three months ended October 31, 2017 from $1.5
million for the three months ended October 31, 2016. The results for three months
ended October 31, 2017 are primarily
due to continuing cost containment efforts and increases in sales
volume as the industrial sector showed marked performance
improvements and the global economy improved.
Income tax expense for the third quarter of fiscal 2018 was
$0.8 million, compared with
$0.6 million in income tax expense
for the prior year period. The increase in tax expense was a
result of significantly higher operating income in the US during
the three months ended October 31,
2017 as well as overall improved profitability. The
Company also has the benefit of the tax credit from the worthless
stock deduction relating to its exit from Brazil, so there should be no cash taxes in
the US for the next 2 years, depending on profitability in these
periods and assuming no changes to the US tax code. The
Company may also be required to pay local taxes on certain country
operations when those operations are profitable on a local
basis.
As of October 31, 2017, Lakeland
had cash and cash equivalents of approximately $21.5 million and working capital of $64.7 million. Cash and cash equivalents
increased $11.1 million or 107% from
the beginning of the fiscal year, while working capital increased
by $17.0 million for an improvement
of nearly 36%. In addition to cash flow from operations, the
Company's cash position increased by $10.1
million from the net proceeds of the common stock offering
in the third quarter of fiscal 2018. The Company's
$15 million revolving credit facility
had a $0 balance as of October 31, 2017. Total debt outstanding at
October 31, 2017 was $2.3 million, down from $5.8 million at January
31, 2017 and $13.4 million at
January 31, 2016.
The Company incurred capital expenditures of approximately
$170,000 during the third quarter of
fiscal year 2018. Capital expenditures for the first three
quarters of the fiscal year was approximately $0.6 million, which includes the cost for a
phased global rollout of a new enterprise resource planning ("ERP")
system. Third quarter capital expenditures principally relate
to additions to equipment in China
and for new manufacturing facilities in India and Vietnam.
No stock was acquired as part of the Company's $2.5 million stock repurchase program which was
approved on July 19, 2016.
During the quarter ended October 31,
2017, the Company completed a public offering of 808,750
shares of common stock (including the initial offering and
overallotment exercise) at a price of $13.80 per share for net proceeds of
approximately $10.1 million.
The Company expects to use the net proceeds from the offering for
building additional overseas manufacturing facilities, payment of
capital expenditures associated with equipment, repayment of debt
and general corporate purposes.
Financial Results Conference Call
Lakeland will host a conference call at 10:30 am eastern today to discuss the Company's
fiscal 2018 third 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 December 22, 2017, dial 877-344-7529 (Domestic)
or 412-317-0088 (International) or 855-669-9658 (Canada), Pass Code 10114798.
About Lakeland Industries, Inc.:
Lakeland Industries,
Inc. (NASDAQ: LAKE) manufactures and sells a comprehensive line of
safety garments and accessories for the industrial protective
clothing market. The Company's products are sold by a direct
sales force and through independent sales representatives to a
network of over 1,200 safety and mill supply distributors. These
distributors in turn supply end user industrial customers such as
chemical/petrochemical, automobile, steel, glass, construction,
smelting, janitorial, pharmaceutical and high technology
electronics manufacturers, as well as hospitals and laboratories.
In addition, Lakeland supplies federal, state, and local government
agencies, fire and police departments, airport crash rescue units,
the Department of Defense, the Centers for Disease Control and
Prevention, and many other federal and state agencies. For
more information concerning Lakeland, please visit the Company
online at www.lakeland.com.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: Forward-looking statements involve risks,
uncertainties and assumptions as described from time to time in
Press Releases and Forms 8-K, registration statements, quarterly
and annual reports and other reports and filings filed with the
Securities and Exchange Commission or made by management. All
statements, other than statements of historical facts, which
address Lakeland's expectations of sources or uses for capital or
which express the Company's expectation for the future with respect
to financial performance or operating strategies can be identified
as forward-looking statements. As a result, there can be no
assurance that Lakeland's future results will not be materially
different from those described herein as "believed," "projected,"
"planned," "intended," "anticipated," "estimated" or "expected," or
other words which reflect the current view of the Company with
respect to future events. We caution readers that these
forward-looking statements speak only as of the date hereof.
The Company hereby expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
such statements to reflect any change in the Company's expectations
or any change in events conditions or circumstances on which such
statement is based.
Non-GAAP Financial Measures
To supplement its
consolidated financial statements, which are prepared and presented
in accordance with Generally Accepted Accounting Principles (GAAP),
the Company uses the following non-GAAP financial measures: EBITDA,
Adjusted EBITDA and Free Cash Flow. The presentation of this
financial information is not intended to be considered in isolation
or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. The Company uses
these non-GAAP financial measures for financial and operational
decision making and as a means to evaluate period-to-period
comparisons. The Company believes that they provide useful
information about operating results, enhance the overall
understanding of past financial performance and future prospects,
and allow for greater transparency with respect to key metrics used
by management in its financial and operational decision making. The
non-GAAP financial measures used by the Company in this press
release may be different from the methods used by other
companies.
For more information on the non-GAAP financial measures, please
see the Reconciliation of GAAP to non-GAAP Financial Measures
tables in this press release. These accompanying tables
include details on the GAAP financial measures that are most
directly comparable to non-GAAP financial measures and the related
reconciliations between these financial measures.
Operating Results
($000)
|
Reconciliation to
GAAP Results
|
|
Three months
ended
October
31,
|
Nine month
ended
October
31,
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Net sales
|
$23,960
|
$23,243
|
$70,831
|
$65,881
|
Year over year
growth
|
3.1%
|
-----
|
7.5%
|
-----
|
Gross
profit
|
9,053
|
8,519
|
26,301
|
23,882
|
Gross profit
%
|
37.8%
|
36.7%
|
37.1%
|
36.3%
|
Operating
expenses
|
6,388
|
6,271
|
18,981
|
18,886
|
Operating expenses as
a percentage of sales
|
26.7%
|
27.0%
|
26.8%
|
28.7%
|
|
|
|
|
|
Operating
income
|
2,665
|
2,248
|
7,320
|
4,996
|
Operating income as a
percentage of sales
|
11.1%
|
9.7%
|
10.3%
|
7.6%
|
Interest
expense
|
(35)
|
(150)
|
(147)
|
(522)
|
Other income (loss),
net
|
7
|
(2)
|
13
|
20
|
Pretax
income
|
2,637
|
2,096
|
7,186
|
4,494
|
Income tax
expense
|
831
|
583
|
1,828
|
1,548
|
Net income
|
$1,806
|
$1,513
|
$5,358
|
$2,946
|
|
|
|
|
|
Weighted average
shares for EPS-Basic
|
7,894,582
|
7,258,697
|
7,477,202
|
7,255,966
|
Net income per
share
|
$0.23
|
$0.21
|
$0.72
|
$0.41
|
|
|
|
|
|
Operating
income
|
$2,665
|
$2,248
|
$7,320
|
$4,996
|
Depreciation and
amortization
|
197
|
359
|
582
|
963
|
EBITDA
|
2,862
|
2,607
|
7,902
|
5,959
|
Equity
Compensation
|
93
|
99
|
291
|
177
|
USA Severance
Associated with Restructure
|
-----
|
-----
|
-
|
461
|
Adjusted
EBITDA
|
2,955
|
2,706
|
8,193
|
6,597
|
Cash paid for taxes
(foreign)
|
217
|
534
|
928
|
1,126
|
Capital
expenditures
|
171
|
70
|
619
|
116
|
|
|
|
|
|
Free cash
flow
|
$2,567
|
$2,102
|
$6,646
|
$5,355
|
|
|
|
|
|
TTM Adjusted
EBITDA
|
$10,428
|
$7,675
|
$10,428
|
$7,675
|
TTM cash paid for
taxes (foreign)
|
1,401
|
1,575
|
1,401
|
1,575
|
TTM capital
expenditures
|
916
|
291
|
916
|
291
|
TTM free cash
flow
|
$8,111
|
$5,809
|
$8,111
|
$5,809
|
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED)
|
|
|
|
ASSETS
|
October
31,
|
January
31,
|
|
2017
|
2017
|
Current
assets
|
($000's)
|
Cash and cash
equivalents
|
$21,493
|
$10,365
|
Accounts receivable,
net of allowance for doubtful accounts of $375 and $417 at October
31,
2017
and January 31, 2017, respectively
|
13,032
|
10,704
|
Inventories, net of
allowance of $2,439 and $2,305 at October 31, 2017 and January 31,
2017,
respectively
|
38,453
|
35,535
|
Prepaid VAT
tax
|
1,824
|
1,361
|
Other current
assets
|
1,843
|
2,121
|
Total current
assets
|
76,645
|
60,086
|
Property and
equipment, net
|
8,624
|
8,527
|
Assets held for
sale
|
901
|
901
|
Deferred income
tax
|
12,764
|
13,515
|
Prepaid VAT and other
taxes
|
319
|
478
|
Other
assets
|
239
|
176
|
Goodwill
|
871
|
871
|
Total
assets
|
$100,363
|
$84,554
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$8,547
|
$4,928
|
Accrued compensation
and benefits
|
1,216
|
1,311
|
Other accrued
expenses
|
1,244
|
1,024
|
Current maturity of
long-term debt
|
158
|
50
|
Short-term
borrowings
|
754
|
153
|
Borrowings under
revolving credit facility
|
-----
|
4,865
|
Total current
liabilities
|
11,919
|
12,331
|
Long-term portion of
debt
|
1,351
|
716
|
Total
liabilities
|
13,270
|
13,047
|
Commitments and
contingencies
|
|
|
Stockholders'
equity
|
|
|
Preferred stock, $0.01
par; authorized 1,500,000 shares (none issued)
|
-----
|
-----
|
Common stock, $.01
par; authorized 10,000,000 shares,
Issued 8,472,640 and 7,620,215; outstanding 8,116,199
and 7,263,774 at October 31, 2017
and January 31, 2017,
respectively
|
85
|
76
|
Treasury stock, at
cost; 356,441 shares at October 31, 2017 and January 31,
2017
|
(3,352)
|
(3,352)
|
Additional paid-in
capital
|
74,771
|
64,764
|
Retained
earnings
|
17,759
|
12,401
|
Accumulated other
comprehensive loss
|
(2,170)
|
(2,382)
|
Total stockholders'
equity
|
87,093
|
71,507
|
Total liabilities and
stockholders' equity
|
$100,363
|
$84,554
|
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
October
31,
|
October
31,
|
|
($000's except for
share information)
|
|
2017
|
2016
|
2017
|
2016
|
Net sales
|
$23,960
|
$23,243
|
$70,831
|
$65,881
|
Cost of goods
sold
|
14,907
|
14,724
|
44,530
|
41,999
|
Gross
profit
|
9,053
|
8,519
|
26,301
|
23,882
|
Operating
expenses
|
6,388
|
6,271
|
18,981
|
18,886
|
Operating
profit
|
2,665
|
2,248
|
7,320
|
4,996
|
Other income (loss),
net
|
7
|
(2)
|
13
|
20
|
Interest
expense
|
(35)
|
(150)
|
(147)
|
(522)
|
Income before
taxes
|
2,637
|
2,096
|
7,186
|
4,494
|
Income tax
expense
|
831
|
583
|
1,828
|
1,548
|
Net income
|
$1,806
|
$1,513
|
$5,358
|
$2,946
|
Net income per common
share:
|
|
|
|
|
Basic
|
$0.23
|
$0.21
|
$0.72
|
$0.41
|
Diluted
|
$0.23
|
$0.21
|
$0.71
|
$0.40
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic
|
7,894,582
|
7,258,697
|
7,477,202
|
7,255,966
|
Diluted
|
7,922,397
|
7,332,997
|
7,530,637
|
7,321,587
|
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SOURCE Lakeland Industries, Inc.