Full Press Release Details
Lakeland Industries, Inc. Reports Fiscal 2020 Third Quarter
Quarterly Net Sales Increase 14% as Net Income Inclusive
Non-cash Income Tax Expense Jumps 129%
NY December 9, 2019 -- 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 2020 third
quarter ended October 31, 2019.
Fiscal 2020 Third Quarter Financial Results Highlights and Recent
Q3FY20 of $27.5 million, compared with Q3FY19 of $24.0
Q3FY20 of $9.3 million, compared with Q3FY19 of $8.3
percentage of net sales in Q3FY20 was 33.9%, compared to 34.6% in
of $7.5 million in Q3FY20, compared with $7.3 million in
$1.8 million in Q3FY20, compared with $1.0 million in
million in Q3FY20, compared with net income of $0.5 million in
includes non-cash income tax expense of approximately $0.3 million
due to the re-measurement and reassessment of the GILTI tax; this
amount was approximately $0.6 million for the 9 months ended
interest, taxes, depreciation and amortization (EBITDA)* of $1.9
million, compared with $1.4 million in Q3FY19
expenditures for fiscal 2020 third quarter were approximately $0.1
million as compared with approximately $1.0 million in the fiscal
million at end of Q3FY20, up 4% from $9.1 million at end of
million at end of Q3FY20, down 24% from $1.6 million at end of
EBITDA is a non-GAAP financial measure. A reconciliation is
provided in the tables of this press release.
Lakeland's fiscal 2020 third quarter financial results as
reported on a U.S. GAAP basis was subject to non-cash income tax
expense pertaining to Global Intangible Low-Taxed Income
( GILTI ) accounting policies. GILTI relates to income
earned by foreign affiliates of U.S. companies in excess of
allowable returns from intangible assets associated with such
operations, which went into effect in 2018 following the passage of
the 2017 Tax Cuts and Jobs Act. The 2017 Act, among other things, lowered the U.S. federal
corporate income tax rate from 35% to 21%, and requires companies
to pay a one-time transition tax on earnings of certain foreign
subsidiaries that were previously tax deferred and creates the
GILTI tax applicable to certain foreign sourced earnings. A
minimum tax for GILTI of 10.5% was implemented to discourage U.S.
multinational corporations from shifting domestic profits to lower
taxed foreign operations. The GILTI tax provisions are being
reviewed for companies with a net operating loss
( NOL ) carryforward asset which are typically used to
shield taxable consolidated U.S. corporate income from income taxes
paid in cash. Current GILTI rules allow a deduction of 50% of GILTI
income to the extent the U.S. parent company has net taxable income
after NOLs. Additionally, a foreign tax credit can offset U.S.
cash tax calculated on the GILTI income. However,
since Lakeland has enough NOL's to completely offset U.S.
income tax on GILTI income, there is no net U.S. taxable income or
tax liability to claim the deduction or foreign tax credits.
Lakeland recorded the GILTI non-cash income tax expense based upon
the tax regulations as they exist today. There are proposed changes
to the GILTI regulations that may reduce future non-cash tax
charges. Any impact due to this change will be recognized in the
period in which the change is enacted.
this new US anti-deferral tax provision uses the words
Intangible Low-Taxed Income in its' title,
based on current regulations, the result is an inclusion of income
from all of Lakeland's controlled foreign corporations (CFCs)
into its consolidated corporate income tax return, regardless of
the type of income or the tax rate in the foreign country. Final
regulations have been issued regarding the mechanics of calculating
GILTI, although there are Proposed Regulations that,
if adopted, would cause the calculation to include only the income
from Lakeland CFCs that are taxed at a rate lower than 90% of the
current US tax rate of 21% (18.9%). This proposed High-Tax
Exception rule, if approved, would then align the actual
income inclusion with the actual title to only include CFC income
that is taxed at a low rate in its home country. The proposed
regulations, however, specifically forbid application of these
proposed regulations until US Treasury issues them in
Final form. The Company awaits the final tax
regulations regarding the High-Tax Exception to
determine how this GILTI tax will be recorded in the
Management's Comments
J. Ryan, President and Chief Executive Officer of Lakeland
Industries, stated, For the second consecutive quarter our
revenues exceeded $27 million which puts us on the highest
trajectory for annual top line results in the Company's
history. The diversification of our global operations and
initiatives to drive efficiencies and cash flow growth are
beginning to deliver their intended results as we reported an
increase in net income of over 129% on revenue growth of 14% over
the prior year period.
operating leverage in our business on the higher sales volume has
enabled us to drive outsized relative returns, and we believe there
remains additional areas for improvement. These results are even
more impressive when you factor in the strength of the U.S. dollar
against foreign currencies where we derive approximately 48% of our
revenues which mutes the sales performance of our non-US
subsidiaries as reported on a consolidated basis and new GILTI
income tax accounting rules which required us to record a large
non-cash income tax expense in the third quarter.
our fiscal 2020 third quarter, the effect of non-cash GILTI taxes
on earnings resulted in a reduction of approximately $300,000 or
nearly 25% of reported net income of $1.1 million. While our third
quarter net income as reported increased by 129% from last year,
our net income before the non-cash GILTI income tax expense and