Full Press Release Details
| 701-7 Koehler Avenue, Suite 7 - Ronkonkoma, NY 11779 | |
| (631) 981-9700 - www.lakeland.com |
Lakeland Industries, Inc. Reports
Fiscal 2012 Fourth Quarter
and Full Year Financial Results
Significant Developments in
Global Transformation Resulting in Accelerated Turnaround
RONKONKOMA, NY -- April 18,
2012 -- 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 fourth quarter and full fiscal year 2012 ended January 31, 2012. For all periods, the financial results
have been restated to reflect the Company's India glove manufacturing subsidiary as a discontinued operation.
Financial Results Highlights
and Recent Company Developments
Commenting on the financial results
and recent developments, Lakeland Industries President and Chief Executive Officer Christopher J. Ryan said, "We are pleased
to have emerged from fiscal 2012 with a strengthened global platform and to no longer be dragged down by a deteriorating, low margin
licensed product line domestically. This turnaround will not truly be complete until we have regained our presence in the U.S.
and increased our consolidated global sales to a point where we take advantage of the leverage in our business model. As we disclosed
earlier this month, important developments were recently completed that are expected to deliver an improvement in the Company's
cost structure, reduce our overhead, and accelerate our top line growth such that we now expect a recovery in our consolidated
revenues and profits sooner than we had previously announced."
Year 2012 Financial Results
| For the Year Ended January 31, | ||||||||
| 2012 | 2011 | |||||||
| Net sales from continuing operations | 100.00% | 100.00% | ||||||
| Gross profit from continuing operations | 29.88% | 30.23% | ||||||
| Operating expenses from continuing operations | 28.39% | 26.10% | ||||||
| Operating profit from continuing operations | 1.49% | 4.13% | ||||||
| Income before tax from continuing operations | 0.87% | 2.30% | ||||||
| Net income from continuing operations | 1.13% | 1.40% |
Net Sales. Net sales
from continuing operations decreased $3.2 million, or 3.2%, to $96.3 million for the year ended January 31, 2012, compared to $99.5
million for the year ended January 31, 2011. The net decrease was mainly due to a $9.0 million decrease in domestic sales, partially
offset by a $5.8 million increase in foreign sales. The net decrease in the U.S. was comprised mainly of a decrease in U.S. disposables
sales resulting from the loss of the Tyvek license from DuPont. This decrease in U.S. sales was offset by significant increases
in foreign sales, including a $2.2 million increase in sales in Brazil, a $1.4 million increase in European sales, or 27.6%, and
$1.0 million growth in combined Chile and Argentina sales. External sales from China were flat for the full year but were up 32.2%
in the fourth quarter of fiscal 2012 over the fourth quarter of the prior year.
The sales in Brazil in second
through fourth quarters of fiscal 2012 had no large bid sales, while the fourth quarter of last year had large bid sales. In
the fourth quarter of fiscal 2011, operations reflected disposables division year-end reversal of rebates accrued earlier in the
year due to many customers not meeting their year-end targets for rebates. In the fourth quarter of fiscal 2012, disposables issued
a new rebate program which impacted operations in the period by approximately $0.1 million.
profit from continuing operations decreased $1.3 million, or 4.3%, to $28.8 million for the year ended January 31, 2012, from $30.1
million for the year ended January 31, 2011. Gross profit as a percentage of net sales decreased to 29.88% for the year ended January
31, 2012 from 30.23% for the year ended January 31, 2011. The major factors driving the changes in gross margins were:
Operating expenses from continuing operations increased $1.3 million, or 5.3%, to $27.3 million for the year ended January 31,
2012, from $26.0 million for the year ended January 31, 2011. As a percentage of net sales, operating expenses increased to 28.3%
for the year ended January 31, 2012, from 26.10% for the year ended January 31, 2011. The increase in operating expenses in the
year ended January 31, 2012, as compared to the year ended January 31, 2011, included:
| $0.6 million in increased foreign exchange costs, mainly in Brazil where $0.3 million in foreign exchange losses in the current year were incurred as compared with gains of $0.2 million in the prior year. | ||
| $0.4 million increase in sales travel and trade shows expenses, mainly in Canada, Russia, the UK and Argentina. | ||
| $0.3 million increase in administrative payroll, resulting from a $0.6 million increase in Brazil, offset by a $0.2 million reduction in Canada from severance pay in the prior year and other reductions. | ||
| $0.3 million increase in U.S. sales salaries due to hiring of additional sales people. | ||
| $0.2 million increase in rent, mainly due to new facilities in the UK and sales and warehousing space in Brazil. | ||
| $0.2 million increase in R&D expenses for new product development. | ||
| $0.1 million increase in bad debt expenses resulting from one account in Chile. | ||
| $(0.1) million decrease in equity compensation resulting from the cumulative change in the performance level designated by the Board of Directors, which in turn resulted in a cumulative change for the 2009 Restricted Stock Plan in the prior year. | ||
| $(0.1) million decrease in medical insurance resulting from several employees with serious illnesses in the prior year. | ||
| $(0.2) million freight out decreased, mainly resulting from higher volume and use of air freight and more frequent partial shipments resulting from stock-out conditions prevailing during much of fiscal 2011. |
| $(0.2) million reduction in bank charges, mainly from fewer credit card payments from customers. | ||
| $(0.2) million in professional fees decreased from the prior year for management terminations in Brazil. |
Operating Profit. Operating
profit from continuing operations decreased by $2.7 million, or 65%, to $1.4 million from $4.1 million for the prior year. Operating
profit as a percentage of net sales decreased to 1.5% for the year ended January 31, 2012, from 4.1% for the year ended
January 31, 2011, primarily due to sharply lower volumes and margins in disposables in the U.S. due to the termination of the Company's
Tyvek and Tychem supply agreement by DuPont, and weak volume in Brazil, mainly due to lack of large bid contracts.
Interest expense increased by $0.3 million for the year ended January 31, 2012, compared to the year ended January 31, 2011, because
of term loan borrowing in 2012 to fund capital expansions in Brazil and Mexico and also borrowing in Brazil at higher rates prevailing
Other Income - Net. The
decrease in other expenses resulted mainly from the $1.6 million charge in 2011 from VAT taxes in Brazil in the prior year.
Income tax expenses from continuing operations consist of federal, state and foreign income taxes. Income tax expense decreased
$1.2 million to $(0.3) million for the year ended January 31, 2012, from $0.9 million for the year ended January 31, 2011. The
Company's effective tax rate was meaningless for the years ended January 31, 2012 and 2011. The effective tax rate varied
from the federal statutory rate of 34% due primarily to the $1.6 million VAT tax charge in Brazil, which did not get a tax benefit,
and a goodwill write-off in Brazil in the prior year. The Company's income taxes in the current year benefited from losses
in the U.S. and a "check-the-box" U.S. tax benefit from the losses in India at a higher rate than most of the foreign
income, a "work opportunity credit" in the U.S. and goodwill write-offs in Brazil.
Net Income from Continuing
Operations. Net income from continuing operations decreased $0.3 million, or 22.0%, to $1.1 million for the year ended January
31, 2012, from $1.4 million for the year ended January 31, 2011. The decrease in net income was primarily a result of reduced operating
profit from the U.S. disposables division offset by the $1.6 million VAT tax charge in Brazil in the prior year and various tax
credits in the current year.
Earnings per share (EPS) from
continuing operations for the year ended January 31, 2012 was $0.21 as compared to EPS of $0.26 for the 2011 fiscal year. The weighted
average shares used in calculating EPS was 5,224,552 for fiscal 2012 and 5,440,364 for fiscal 2011. The Company reduced the number
of shares outstanding during fiscal 2011 through open market purchase of its common stock under a share repurchase program, which
extended into its fiscal 2012 first quarter.
Fourth Quarter Fiscal
Year 2012 Financial Results
| For the Three Months Ended January 31, | ||||||||
| 2012 | 2011 | |||||||
| Net sales from continuing operations | 100.00% | 100.00% | ||||||
| Gross profit from continuing operations | 26.35% | 32.41% | ||||||
| Operating expenses from continuing operations | 33.49% | 25.50% | ||||||
| Operating profit (loss) from continuing operations | (7.15% | ) | 6.91% | |||||
| Income (loss) before tax from continuing operations | (8.27% | ) | 7.42% | |||||
| Net income (loss) from continuing operations | (5.00% | ) | 4.42% |
Net Sales. Net sales from
continuing operations decreased $4.7 million, or 18.8%, to $20.2 million for the fourth quarter ended January 31, 2012 compared
to $24.8 million for the quarter ended January 31, 2011. The decrease was mainly due to a $3.9 million decrease in domestic sales
along with lower sales in Brazil which had been higher in the prior year due to large bid orders in that period, partially offset
by increased sales on an aggregate basis from other foreign operations. The net decrease in the U.S. was comprised mainly of a
decrease in U.S. disposables sales. Low volume of disposables in the U.S. for the fourth quarter of fiscal 2012 reflects a drop
of 49% of sales from the prior year's fourth quarter representing a loss in volume of approximately $4.7 million that was
caused by the termination of the Tyvek and Tychem supply agreement with DuPont.
Increases in foreign sales includes
$0.3 million increase in European sales, or 18.3%, and $0.4 million growth in combined Chile and Argentina sales, offset by a $0.6
million decrease in Canadian sales which was due to the DuPont termination. Brazil sales in the fourth quarter of fiscal 2012 had
no large bids and were down 39% from the prior year. Near the end of the fiscal year, the Company received a record level of large
bid purchase orders for delivery in fiscal 2013, resulting in a marked anticipated rebound for total Brazil sales expected in fiscal
Gross Profit. Gross profit
from continuing operations decreased $2.7 million, or 34.0%, to $5.3 million for the quarter ended January 31, 2012 from $8.0 million
for the quarter ended January 31, 2011. Gross profit as a percentage of net sales decreased to 29.9% for the quarter ended January
31, 2012 from 30.2% for the quarter ended January 31, 2011. The major factors driving the changes in gross margins were lower volume
in Brazil due to no large bid orders and lower volume in the fourth quarter of fiscal 2012 in China which resulted in some of the
Company's plants in China accepting orders at a lower price point to maintain market share, along with a revised domestic
rebate program in 2012.
Operating Expenses. Operating
expenses from continuing operations increased $0.4 million, or 6.7%, to $6.7 million for the quarter ended January 31, 2012 from
$6.3 million for the quarter ended January 31, 2011. As a percentage of net sales, operating expenses increased to 33.5% for the
quarter ended January 31, 2012 from 25.5% for the quarter ended January 31, 2011 due to the following:
Operating Profit. Operating
profit from continuing operations decreased by $3.1 million to a loss of $(1.4) million from $1.7 million for the prior year. Operating