Full Press Release Details
Koehler Avenue, Suite 7 - Ronkonkoma, NY 11779
981-9700 - www.lakeland.com
Industries, Inc. Reports First Quarter Fiscal Year 2010 Financial
Profit Amid Global Recession; Strong Financial Position Enhances Worldwide
NY -- June 9, 2009 -- Lakeland Industries, Inc. (NASDAQ: LAKE) today announced
financial results for its first quarter fiscal year 2010 ended April 30,
Financial Results Highlights
and Recent Company Developments
First Quarter Fiscal Year
2010 Financial Results
Net Sales. Net sales
decreased $3.3 million, or 12.1%, to $24.0 million for the three months ended
April 30, 2009 from $27.3 million for the three months ended April 30,
2008. The net decrease was mainly due to lower domestic sales and the
global economic recession along with severe business conditions affecting
automakers and the related supply chain. External sales from China
increased by $0.1 million or 7.0% driven by sales to the Company's new
Australian distributor. Canada sales decreased by $0.1
million or 7.4%; UK sales decreased by $0.5 million or 38%; Chile
sales decreased by $0.1 million or 22%; and sales in India increased by $0.1
million or 215%. In the US, sales of disposables decreased by $5.2
million, chemical suit sales decreased by $0.1 million, wovens decreased by $0.4
million, reflective sales increased by $0.3 million and glove sales decreased by
$0.5 million. Sales in Brazil were $2.6 million for Q1FY10, but were
not included in operations for Q1 FY09 as this business had been acquired in May
Gross Profit. Gross profit
decreased $0.7 million, or 10%, to $6.0 million for the three months ended April
30, 2009 from $6.7 million for the three months ended April 30,
2008. Gross profit as a percentage of net sales increased to 25.1%
for the three months ended April 30, 2009 from 24.5% for the three months ended
April 30, 2008. Despite gross margins for US disposable products
declining by 450 basis points due to higher priced raw material and a very
competitive pricing environment coupled with lower volumes, the overall
improvement in quarterly gross margin reflects an improved international sales
mix and other cost management initiatives. Major factors contributing
to the increased quarterly gross margin include:
Operating Expenses. Operating
expenses increased $0.1 million, or 1.9%, to $5.3 million for the three months
ended April 30, 2009 from $5.2 million for the three months ended April 30,
2008. As a percentage of sales, operating expenses increased to 22.2%
for the three months ended April 30, 2009 from 19.2% for the three months ended
April 30, 2008. The $0.1 million increase in operating expenses in
the three months ended April 30, 2009 as compared to the three months ended
April 30, 2008 were comprised of:
Operating profit. Operating
profit decreased 53.1% to $0.7 million for the three months ended April 30, 2009
from $1.4 million for the three months ended April 30,
2008. Operating margins were 2.8% for the three months ended April
30, 2009 compared to 5.3% for the three months ended April 30,
2008. The reduction in operating profit and margin reflect the lower
level of consolidated sales and the modest increase in operating expenses
partially offset by higher gross margin as a percentage of revenue.
Expenses. Interest expenses increased by $0.1 million for the
three months ended April 30, 2009 as compared to the three months ended April
30, 2008 due to higher borrowing levels outstanding mainly due to the purchase
price paid for the Brazil acquisition, partially offset by lower interest
Expense. Income tax expenses consist of federal, state, and
foreign income taxes. Income tax expenses decreased $0.1 million, or
12%, to $0.4 million for the three months April 30, 2009 from $0.5 million for
the three months ended April 30, 2008. The Company's effective tax
rates were 81.5% and 35.2% for the three months ended April 30, 2009 and 2008,
respectively. The effective tax rate in Q1FY10 was affected by a $350,000
reserve against deferred taxes resulting from the India restructuring, losses in
India and UK with no tax benefit, tax benefits in Brazil resulting from
government incentives and goodwill write-offs, and credits to prior year taxes
in the US not previously recorded. The $350,000 reserve is a
one-time, non-cash expense.
income decreased $0.8 million, or 89%, to $0.1 million for the three months
ended April 30, 2009 from $0.8 million for the three months ended April 30,
2008. The decrease in net income primarily resulted from a decrease in sales and
substantial increase in provision for income taxes resulting from the one-time,
non-cash reserve of $350,000, partially offset by effective expense management
on the financial results, Lakeland Industries President and Chief Executive
Officer Christopher J. Ryan said, "Lakeland, like most companies,
experienced ever challenging business conditions in the calendar year
to date. Our international diversification strategy which commenced a
few years ago had anticipated a slowdown in economic activity in the US, where
most of our business had been derived, although we had not foreseen its severity
or the global reach it would have. We are very pleased to report that
international revenues represented over 28% of total revenues in the first
quarter of fiscal 2010, which is an increase from 15.1% in the same period of
the prior year. While this positions us favorably with
diversification and the ability to expand our market share, the strong US dollar
against many foreign currencies masks our true organic
growth. Nevertheless, while we have grown in many of our markets, we
have experienced a slowdown in orders in other markets that mirror the local
economic activity. There has been a noticeable effort among
distributors and end user customers to allow their inventory levels to reduce so
that they may better cope with global liquidity concerns or until there is a
resumption in business activity.
response to this operating climate in our first fiscal quarter, we vigorously
took all of our costs and expenses under review. A key initiative
relied on our ability to leverage our global manufacturing facilities such that
we may benefit from lower cost operations and faster delivery to our growing
base of global customers. This has produced one of the intended
results in the improvement of gross margin percentage on lower sales volume in
the first fiscal quarter. Our status as low cost manufacturer along
with favorable geographic proximity to customers has positioned us well,
particularly in taking advantage of the immediate term increase in orders for
products relating to the swine flu outbreak. Swine flu-related orders