Quantcast
Last updated on April 18, 2014 at 1:21 EDT

Lakeland Industries, Inc. Reports Fiscal 2014 Third Quarter Financial Results

December 12, 2013

Reports Consolidated Operating loss of $1.0 million in Q3 and an operating profit of $0.9 million, excluding Brazil

RONKONKOMA, N.Y., Dec. 12, 2013 /PRNewswire/ — Lakeland Industries, Inc. (NASDAQ: LAKE), a leading global manufacturer of industrial protective clothing for industry, municipalities, healthcare and to first responders on the federal, state and local levels, today announced financial results for its third quarter of fiscal year 2014 ended October 31, 2013.

(Logo: http://photos.prnewswire.com/prnh/20120611/NY21959LOGO )

Excluding operations in Brazil and the inventory adjustments in the US, the Company is reporting the best quarter in over three years other than its second quarter for adjusted EBITDA.

Financial Results Highlights-third quarter of fiscal 2014, and Recent Company Developments:

    --  The Company has earned operating income before corporate overhead in the
        US of $1.1 million in Q3 of the fiscal year ending January 31, 2014,
        compared $0.4 million in Q3 of last year.
    --  Reflected in the operating income in the US are two inventory charges:
        $353,000 for overhead rate revisions and a $375,000 reserve for a
        discontinued product line in disposables.
    --  Brazil operations in Q3 this year included inventory adjustments of
        $1,158,000. Further, Brazil incurred a loss of $213,000 on sales of raw
        material from inventory in order to raise cash in Brazil.
    --  In Q3 of this year, sales of Lakeland worldwide decreased 6.0% and,
        excluding Brazil, increased 4.6% year over year.  Net sales (including
        Brazil) of $22.8 million in Q3FY14 compared with $24.2 million in
        Q3FY13. Net sales, however, excluding Brazil, increased 4.6% from $19.95
        million last year to $20.87 million this year.

    --  Sales were weak in Q3 due to:
        --  Overall sales increased in the US by $1.6 million, or 16.7%.
            Excluding direct shipment billing in US numbers this year, net
            disposables were down $0.5 million, due largely to lower sales of
            Tyvek as remaining stock has depleted, absence of last October's
            Hurricane Sandy and large shipments to the USDA, softness in the
            wind energy market, and lower sales of disposable FR coveralls due
            to lower cost FR SMS competition, which we expect to reverse by
            publicizing its adverse protection data.  Fire sales were up $.6
            million, reflective sales up $0.2 million, chemical sales were flat,
            and wovens were down $0.3 million due to continued deferred refinery
            turnarounds.
        --  China external sales in Q2 included a major sale to a Chinese auto
            company and also a number of Q3 deliveries to an Asia Pacific
            distributor were delayed until Q4.
        --  Argentina:  we resolved our internal working capital shortages
            immediately following our financing in late Q2, however,
            governmental restrictions on imports in Argentina caused shortfalls
            in sales in Q3. Coordination of customs import issues remains an
            issue. Management is pursuing all possible remedies. We believe we
            will have at least partial success which should be reflected in
            greater sales in Q4.

        --  Chile:  in Q3 last year Chile had large sales to Peru and Ecuador.
            Bids for both are being processed and management expects some sales
            in Q1 of FY15 for these customers.
    --  In Q3 of this year, gross margin for Lakeland worldwide was 22.1%,
        compared to 30.1% last year. Excluding Brazil, gross margin decreased
        from 30.7% last year to 28.4% this year. However, excluding Brazil and
        excluding the inventory charges in the US described above, gross margin
        increased to 31.9% as compared with 30.7% for Q3 last year.
    --  Operating expenses worldwide decreased by $947,000 and decreased as a
        percent of sales to 26.7% from 29.0% last year. Operating expenses for
        Lakeland worldwide, excluding Brazil, decreased by $448,000.  SGA as a
        percent of sales, excluding Brazil, decreased from 27.5% to 24.1%.
    --  Adjusted EBITDA increased to $1.6 million this year from $1,001,000 last
        year. Adjusted EBITDA for Lakeland worldwide, excluding Brazil,
        increased from $1,289,000 last year to $2,102,000 this year.
    --  Most of the improvement in adjusted EBITDA was generated in the United
        States and China.
    --  Net loss of $1.8 million ($(0.31) per share) this year vs. $0.3 million
        profit ($0.05 per share) last year.
    --  The Company completed its refinancing with BDC in Canada for US $1.06
        million and closed a new loan in China for $0.8 million.
    --  During the Quarter ending October 31, 2013, Lakeland terminated the
        previous management in Brazil and hired a new CEO specializing in
        turnaround situations. We adopted a new strategy emphasizing industrial
        and smaller governmental agency orders, de-emphasizing large bid
        contracts. Accordingly, throughout the current fiscal year, there has
        been major cost cutting in Brazil to "right size" the operation to
        appropriate levels for the new lower volume strategy.
    --  Net book value per share, counting shares underlying warrant with a
        nominal exercise price, is $8.24.
    --  Next to Q2, the third quarter, excluding Brazil and inventory charges
        was the best quarter in respect to adjusted EBITDA in over three years.


                                                                                      Operating Earnings and Adjusted EBITDA - Lakeland Consolidated with and without Brazil  ($000) *
                                                                                      -----------------------------------------------------------------------------------------------

                                                                              Quarter Ended October 31 2013                            Quarter Ended October 31 2012
                                                                              -----------------------------                            -----------------------------

                                                                                         Lakeland                    Brazil **                    Lakeland                               Lakeland             Brazil **          Lakeland

                                                                                       consolidated                                              worldwide                             consolidated                             worldwide

                                                                                                                                                 excluding                                                                      excluding

                                                                                                                                                   Brazil                                                                         Brazil

    Sales                                                                                            $22,787                   $1,914                        $20,873                                 $24,239            $4,285            $19,954

    Year over year growth (decline)                                                                    (6.0)%                  (55.3)%                           4.6%                                    ---               ---            ---

    Gross profit (loss)                                                                                5,042                     (895)                         5,937                                   7,287             1,161              6,126

    Gross margin                                                                                        22.1%                  (46.7)%                          28.3%                                   30.1%             27.1%              30.7%

    Operating expenses                                                                                 6,073                    1,037                          5,036                                   7,020             1,536              5,484

        Operating expense as % of                                                                       26.7%                    54.2%                          24.1%                                   29.0%             35.8%              27.5%

        sales

    Operating income (loss)                                                                           (1,030)                  (1,932)                           902                                     267              (375)               642

    Less other expenses                                                                                  116                      116                            ---                                     (62)              (62)           (62)

    Add other income                                                                                      57                      ---                             57                                      52               ---                 52

    Add depreciation and                                                                                 449                       87                            362                                     383                77                306

    amortization

       EBITDA                                                                                           (408)                  (1,729)                         1,321                                     640              (360)             1,000
                                                                                                        ----                   ------                          -----                                     ---              ----              -----

    Equity compensation                                                                                   20                      ---                             20                                     189               ---                189

    Brazil severance and executive                                                                        74                       42                             32                                     ---               ---            ---

    recruiter fee

    Brazil additional foreign                                                                           (116)                    (116)                           ---                                      62                62             62

    exchange losses

    Brazil additional VAT tax charge                                                                     153                      153                            ---                                     ---               ---            ---

    Brazil additional inventory                                                                        1,159                    1,159                            ---                                     ---               ---            ---

    reserve charge

    Change in accounting estimate-                                                                       354                      ---                            354                                     ---               ---            ---

    OH rates revised

    Inventory reserve in USA- discontinued product line                                                  375                      ---                            375                                     ---               ---            ---

    Severance charges in USA                                                 Severance charges in USA                                                                     ---                       ---                          110               --- 110

    Brazil CEO termination                                                   Brazil CEO termination                                                                       ---                       ---                          ---               --- ---

    settlement

       ADJUSTED EBITDA                                                                                $1,611                    $(491)                        $2,102                                  $1,001             $(288)            $1,289

    *This table is a reconciliation of GAAP to non-GAAP Financial Measures.

    **Brazil numbers, as presented in this table, include immaterial intercompany transactions.


                                                                                            Operating Earnings and Adjusted EBITDA - Lakeland Consolidated with and without Brazil  ($000) *
                                                                                            -----------------------------------------------------------------------------------------------

                                                                               Nine months Ended October 31 2013                              Nine months Ended October 31 2012
                                                                               ---------------------------------                              ---------------------------------

                                                                                           Lakeland                        Brazil**                        Lakeland                            Lakeland              Brazil**               Lakeland

                                                                                         consolidated                                                      worldwide                         consolidated                                   worldwide

                                                                                                                                                           excluding                                                                        excluding

                                                                                                                                                            Brazil                                                                           Brazil

    Sales                                                                                                $69,163                      $5,398                            $63,765                             $71,719           $14,173                  $57,546

    Year over year growth                                                                                  (3.6)%                     (61.9)%                              10.8%                             (21.8)%            263.7%                  (31.7)%

    Gross profit                                                                                          18,584                        (478)                            19,063                              21,729             4,772                   16,956

    Gross margin                                                                                            26.9%                      (8.9)%                              29.9%                               30.3%             33.7%                    29.5%

    Operating expenses                                                                                    18,555                       3,264                             15,291                              21,285             5,017                   16,268

        Operating expense as % of                                                                           26.8%                       60.5%                              24.0%                               29.7              35.4%                    28.3%

        sales

    Operating income (loss)                                                                                   30                      (3,742)                             3,772                                 444              (244)                     688

    Less other expenses                                                                                     (271)                       (271)                               ---                              (8,627)           (8,627)                (8,627)

    Add other income                                                                                          20                         ---                                 20                                  85               ---                       85

    Add depreciation and                                                                                   1,226                         276                                950                               1,129               224                      905

    amortization

       EBITDA                                                                                              1,005                      (3,737)                             4,742                              (6,969)           (8,647)                   1,678
                                                                                                           -----                      ------                              -----                              ------            ------                    -----

    Equity compensation                                                                                      179                         ---                                179                                 366               ---                      366

    Brazil arbitration judgment                                                Brazil arbitration judgment                                                                       ---                      ---                          7,874                    7,874 ---

    Brazil severance and executive                                                                           154                         122                                 32                                 ---               ---                    ---

    recruiter fee

    Financing fees in other expenses                                                                          75                         ---                                 75                                 ---               ---                    ---

    (adjustments)

    QD plant shutdown costs and                                                                              480                         ---                                480                                 ---               ---                    ---

    costs of sale

    Brazil additional foreign                                                                                271                         271                                ---                                 840               840                    840

    exchange losses

    Brazil additional VAT tax charge                                                                         153                         153                                ---                                 ---               ---                    ---

    Brazil additional inventory                                                                            1,159                       1,159                                ---                                 ---               ---                    ---

    reserve charge

    Change in accounting estimate-                                                                           354                         ---                                354                                 ---               ---                    ---

    OH rates revised

    Inventory reserve in USA-                                                                                375                         ---                                375                                 ---               ---                    ---

    discontinued product line

    Severance charges in USA                                                   Severance charges in USA                                                                          ---                      ---                            110                      --- 110
                                                                                                                                                                                                                ---                                        ---

       ADJUSTED EBITDA                                                                                    $4,205                     $(2,032)                            $6,237                              $2,205               $67                   $2,139
                                                                                                          ------                     -------                             ------                              ------               ---                   ------

    *This table is a reconciliation of GAAP to non-GAAP Financial Measures.

    **Brazil numbers, as presented in this table, include immaterial intercompany transactions.

Management’s Comments

Christopher J. Ryan stated, “As stated previously, management believes it will have Brazil turned around by the first quarter in 2014. Other than Brazil, all of our other business units are doing well and as projected. Once Brazil is at breakeven, the full earning potential of the rest of the Company will be apparent.

“It is important to note that our current bank covenants and lines of credit are NOT dependent upon operations in Brazil. Thus, management is free to reorganize it, and we have and will continue to follow such a course of action.”

Financial Results Conference Call

Lakeland will host a conference call at 4:30 PM (EST) today to discuss the Company’s third quarter fiscal 2014 financial results. The conference call will be hosted by Christopher J. Ryan, Lakeland’s President and CEO, and Gary Pokrassa, Lakeland’s Chief Financial Officer. Investors can listen to the call by dialing 877-870-4263 (Domestic) 412-317-0790 (International) or 855-669-9657 (Canada), Pass Code 10037639.

A conference call replay will be available by dialing 877-344-7529 (Domestic) or 412-317-0088 (International), Pass Code 10037639.

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 consolidated income, excluding Brazil. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies.

For more information on the non-GAAP financial measures, please see the Reconciliation of GAAP to non-GAAP Financial Measures tables in this press release. These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.


                                                                                                          Lakeland Industries, Inc. and Subsidiaries

                                                                                                            CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                                               (In thousands except share data)

                                                                                                                                                                  October 31, 2013                           January 31, 2013

                                                                                ASSETS                                                                              (Unaudited)

    Current assets

    Cash and cash equivalents                                                                                                                                                           $5,019                                 $6,737

     Accounts receivable, net                                                                                                                                                           15,047                                 13,783

    Inventories                                                                                                                                                                         40,440                                 39,271

    Deferred income tax                                                                                                                                                                  4,594                                  4,594

    Assets of discontinued operations in India                                                                                                                                              20                                    813

    Prepaid income tax                                                                                                                                                                     629                                  1,565

    Other current assets                                                                                                                                                                 2,484                                  1,703
                                                                                                                                                                                         -----                                  -----

    Total current assets                                                                                                                                                                68,233                                 63,872

    Property and equipment, net                                                                                                                                                         12,572                                 14,090

    Prepaid VAT and other taxes, noncurrent                                                                                                                                              2,417                                  2,461

    Security deposits                                                                                                                                                                    1,462                                  1,546

    Other assets, net                                                                                                                                                                    1,782                                    478

    Goodwill                                                                                                                                                                               872                                    871
                                                                                                                                                                                           ---                                    ---

    Total assets                                                                                                                                                                       $87,338                                $83,318
                                                                                                                                                                                       =======                                =======

                                                                                     LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities

    Accounts payable                                                                                                                                                                    $9,242                                 $6,704

    Accrued compensation and benefits                                                                                                                                                    1,300                                    976

    Other accrued expenses                                                                                                                                                               2,509                                  2,409

    Liabilities of discontinued operations in India                                                                                                  Liabilities of discontinued operations in India                                    25

    Current maturity of long-term debt                                                                                                                                                      50                                    100

    Current maturity of arbitration settlement                                                                                                                                           1,000                                  1,000

    Short-term borrowing                                                                                                                                                                 2,701                                  7,129

    Borrowings under revolving credit facility                                                                                                                                          11,791                                  9,559
                                                                                                                                                                                        ------                                  -----

    Total current liabilities                                                                                                                                                           28,593                                 27,902

    Accrued arbitration award in Brazil (net of current maturities)                                                                                                                      4,008                                  4,711

    Canadian loan                                                                                                                                                                        1,012                                  1,298

    Subordinated debt, net of OID                                                                                                                                                        1,539                                  1,539

    Other liabilities - accrued legal fees in Brazil                                                                                                                                        78                                     87

    VAT taxes payable long-term                                                                                                                                                          3,330                                  3,329
                                                                                                                                                                                         -----                                  -----

    Total liabilities                                                                                                                                                                   38,560                                 37,327

    Stockholders' equity:

    Preferred stock, $.01 par; authorized 1,500,000 shares - (none issued)                                                                           Preferred stock, $.01 par; authorized 1,500,000 shares - (none issued)            ---

    Common stock, $.01 par; authorized 10,000,000 shares, issued 5,711,727 and                                                                                                              57                                     57

    5,688,600; outstanding 5,355,286 and 5,332,159 at October 31, 2013 and

    January 31, 2013, respectively

    Treasury stock, at cost; 356,441 shares at October 31, 2013 and January 31,                                                                                                         (3,352)                                (3,352)

    2013, respectively

    Additional paid-in capital                                                                                                                                                          53,347                                 50,973

    Retained earnings (deficit)                                                                                                                                                          1,019                                   (473)

    Accumulated other comprehensive loss                                                                                                                                                (2,293)                                (1,214)
                                                                                                                                                                                        ------                                 ------

    Total stockholders' equity                                                                                                                                                          48,778                                 45,991
                                                                                                                                                                                        ------                                 ------

    Total liabilities and stockholders' equity                                                                                                                                         $87,338                                $83,318
                                                                                                                                                                                       =======                                =======


                   LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)

          Three months and nine months ended October 31, 2013 and 2012

                                            THREE MONTHS ENDED           NINE MONTHS ENDED

                                              October 31,              October 31,

                                               2013         2012         2013         2012

    Net sales                               $22,787      $24,239      $69,163      $71,719

    Cost of
     goods sold                              17,745       16,952       50,579       49,989
                                             ------       ------       ------       ------

    Gross profit                              5,042        7,287       18,584       21,730

    Operating
     expenses                                 6,072        7,020       18,554       21,285
                                              -----        -----       ------       ------

    Operating
     profit
     (loss)                                  (1,030)         267           30          444

    Foreign
     exchange
     gain (loss)
     Brazil                                     116          (62)        (272)        (840)

    Arbitration
     judgment in
     Brazil                                     ---          ---          ---       (7,874)

    Other
     income, net                                 57           52           21          172

    Interest
     expense                                   (649)        (270)      (1,391)        (766)
                                               ----         ----       ------         ----

    Income
     (loss)
     before
     taxes                                   (1,506)         (13)      (1,612)      (8,864)

    Income tax
     expense
     (benefit)                                  329         (295)      (3,103)        (669)
                                                ---         ----       ------         ----

    Net income
     (loss)                                 $(1,835)        $283       $1,491      $(8,195)
                                            =======         ====       ======      =======

    Net income (loss) per common share

    Basic                                    $(0.31)       $0.05        $0.27       $(1.55)
                                             ======        =====        =====       ======

    Diluted                                  $(0.31)       $0.05        $0.26       $(1.55)
                                             ======        =====        =====       ======

    Weighted average common shares

    outstanding:

    Basic                                 5,919,253    5,330,286    5,607,654    5,276,288
                                          ---------    ---------    ---------    ---------

    Diluted                               5,919,253    5,367,243    5,715,151    5,276,288
                                          ---------    ---------    ---------    ---------

SOURCE Lakeland Industries, Inc.


Source: PR Newswire