Full Press Release Details
Lakeland Industries, Inc. Reports Fiscal
Reports Net Income for Q3 of $0.05 per
RONKONKOMA, NY - December 13, 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 third quarter
and first nine months of fiscal year 2013 ended October 31, 2012. For all periods, the prior year financial results have been
restated to reflect the Company's India glove manufacturing subsidiary as a discontinued operation. In this press release,
references to "FY" refer to the Company's fiscal year ended January 31; for example, FY13 refers to the fiscal
year ending January 31, 2013.
Financial Results Highlights
and Recent Company Developments
Quarter Fiscal Year 2013 Financial Results
Net Sales. Net sales
from continuing operations decreased $0.5 million, or 2%, to $24.2 million for the three months ended October 31, 2012, from $24.7
million for the three months ended October 31, 2011. The net decrease was due to a $2.9 million decrease in domestic sales offset
in part by a $2.4 million increase in foreign sales. USA domestic sales of disposables decreased by $3.1 million, chemical suit
sales decreased by $0.5 million, gloves decreased by $0.2 million, as reflective sales increased by $0.5 million, wovens sales
increased by $0.1 million and fire product related sales increased by $0.3 million. The decrease in domestic sales was mainly
due to the loss of the DuPont product sales as a result of the termination of the DuPont supply contract in July 2011, and partially
due to a shortage in stock situation that management believes has been resolved (but may have continuing impact resulting from
lost customers), and also to operating inefficiencies resulting from the move from St. Joseph, Missouri to Decatur, Alabama and
Mexico which resulted in additional lost sales. The sales team continues to make progress in converting customers from Tyvek,
previously supplied DuPont product, to Lakeland branded products. Currently, the decreased sales due to the loss of the DuPont
contract have not been offset by such sales of Lakeland branded products; however, the sales achieved from Lakeland branded products
have greater gross profit margins than the DuPont Tyvek products, lessening the impact of the revenue reduction. While the Company's
sales of Lakeland branded products show strong gains over the Lakeland branded product sales from the same period in the prior
year, there can be no assurance that the lost sales volume can be rebuilt. Domestic sales in China and to the Asia Pacific Rim
remain strong. UK sales increased by $1.2 million, or 83.4%. Chile and Argentina sales increased by 91%, Beijing sales increased
by $0.4 million or 33.5% and Mexico sales increased by $0.2 million or 39.9%.
Gross Profit. Gross profit
decreased $0.1 million, or 1.7%, to $7.3 million for the three months ended October 31, 2012, from $7.4 million for the three
months ended October 31, 2011. Gross profit as a percentage of net sales was flat at 30.1% for the three months ended October
31, 2012, from 30% for the three months ended October 31, 2011. Factors driving the changes in gross margins were:
Operating Expenses. Operating
expenses increased by $0.2 million to $7.0 million for the three months ended October 31, 2012, from $6.8 million for the three
months ended October 31, 2011. As a percentage of sales, operating expenses were flat at 28% for the three months ended October
31, 2012 and the three months ended October 31, 2011. Factors affecting operating expenses included:
| $0.2 | million increase in sales salaries resulting from additional sales personnel in China and the USA. |
| $0.1 | million increase in bad debts primarily resulting from one large account in Chile |
| $0.1 | million miscellaneous increases |
| $0.1 | million increase in professional fees due to additional legal matters relating to various banking compliance issues and accrual for several payroll terminations |
| $(0.1) | million decrease in freight out, mainly from lower volume in disposables in the USA |
| $(0.2) | million decrease in payroll administration salaries due to reductions in Brazil |
Operating Profit. Operating
profit decreased 53.3% to $0.3 million for the three months ended October 31, 2012, from $0.6 million for the three months ended
October 31, 2011. Operating margins were 1.1% for the three months ended October 31, 2012, compared to 2.3% for the three months
ended October 31, 2011, due to lower gross profit and higher operating expenses as described above.
Interest Expenses. Interest
expenses increased $0.1 million to $0.3 million for the three months ended October 31, 2012, from $0.2 million for the three months
ended October 31, 2011, due to higher borrowing levels outstanding and higher interest rates in the current year.
Income Tax Expense. Income
tax expenses consist of federal, state and foreign income taxes. There was an income tax benefit of $0.3 million for the three
months ended October 31, 2012, as compared to an income tax benefit of $0.1 million for the three months ended October 31, 2011.
Our effective tax rates were not meaningful for either the third quarter FY13 or the third quarter FY12. Our effective tax rate
for both periods varied from the 34% federal statutory rate primarily due to goodwill amortization in Brazil and tax loss benefits
in the USA at higher rates than China profits were taxed, certain losses in China which are carried forward and the arbitration
Net Income (Loss). Net
income increased by $0.9 million to $0.3 million for the three months ended October 31, 2012, from ($0.6) million for the three
months ended October 31, 2011, reflecting the large foreign exchange charge in Brazil in the prior quarter and the larger income
tax credit this quarter.
For the quarter ended October
31, 2011, there was a net $722,270 charge for loss from discontinued operations in relation to the discontinued India glove manufacturing
facility; there was no such charge in the more recent quarter.
Earnings per share (EPS) from
continuing operations on a fully diluted basis for the three months ended October 31, 2012 was $0.05 as compared to EPS of $0.03
for the three months ended October 31, 2011. The weighted average shares used in calculating fully diluted EPS was 5,367,243 for
the three months ended October 31, 2012 and 5,356,835 for the three months ended October 31, 2011.
Fiscal Nine Months Fiscal Year 2013 Financial
Net Sales. Net sales
from continuing operations decreased $4.5 million, or 5.8%, to $71.7 million for the nine months ended October 31, 2012, from
$76.2 million for the nine months ended October 31, 2011. The net decrease was due to a $12.3 million decrease in domestic sales,
offset in part by a $7.8 million increase in foreign sales. USA domestic sales of disposables decreased by $11.9 million, chemical
suite sales decreased by $0.5 million, as wovens increased by $0.5 million, and glove sales increased by $0.1 million. The decrease
in domestic sales is due primarily to the loss of the DuPont Tyvek sales, to a shortage in stock situation that management believes
has been resolved (but may have continuing impact resulting from lost customers), and also to operating inefficiencies resulting
from the move from St. Joseph, MO to Decatur, AL and Mexico which resulted in additional lost sales. External sales from China
were up $4.5 million from the year ago period. In addition, domestic sales in China and to the Asia Pacific Rim remain strong
recording a $1.5 million increase for the nine months ended October 31, 2012. UK sales increased by $2.7 million, or 57.2%, and
Chile and Argentina sales increased by 67.4%. Sales in Brazil increased by $1.2 million or 9.4%. The increase in foreign sales
is primarily due to introduction of new products and new marketing material targeting specific markets.
Gross Profit. Gross profit
from continuing operations decreased $1.8 million, or 7.4%, to $21.7 million for the nine months ended October 31, 2012, from
$23.5 million for the nine months ended October 31, 2011. Gross profit as a percentage of net sales decreased to 30.3% for the
nine months ended October 31, 2012, from 30.8% for the nine months ended October 31, 2011. Factors driving the changes in gross
Operating Expenses. Operating
expenses from continuing operations increased $0.8 million, or 3.8%, to $21.3 million for the nine months ended October 31, 2012,
from $20.5 million for the nine months ended October 31, 2011. As a percentage of sales, operating expenses increased to 29.7
% for the nine months ended October 31, 2012, from 26.9% for the nine months ended October 31, 2011. The $0.8 million increase
in operating expenses in the nine months ended October 31, 2012, as compared to the nine months ended October 31, 2011, was comprised
| $0.7 | million increase in sales salaries resulting from new hires in China and the USA |
| $0.6 | million increase in sales commissions mainly resulting from large bid contracts in Brazil |
| $0.2 | million increase in professional fees primarily due to additional legal matters relating to various banking compliance issues and several payroll terminations |
| $0.1 | million increase in employee benefits primarily due to unemployment compensation insurance premiums resulting from reductions in force |
| $0.1 | million increase in entertainment and auto expense due to increased sales staff in the USA |
| $0.1 | million increase in computer expense primarily due to USA hardware upgrades |
| $0.1 | million increase in bad debt due to one account in Chile |
| $(0.2) | million reduction in equity compensation mainly resulting from differences in the new 2012 plan compared with the previous plan |
| $(0.2) | million decrease in currency fluctuation due to major weakness in the Euro in the prior year |
| $(0.3) | million reduction in freight out resulting from lower volume in disposables in the USA. |
| $(0.4) | million decrease in payroll administrative expense due to reductions in Brazil and the USA |
Operating Profit. Operating
profit from continuing operations decreased to $0.4 million for the nine months ended October 31, 2012 from $3.0 million for the
nine months ended October 31, 2011. Operating margins were 0.6% for the nine months ended October 31, 2012, compared to 3.9% for
the nine months ended October 31, 2011.
Arbitration Judgment in
Brazil. As a result of the decision of the arbitration matter and the subsequent settlement thereof, the Company recorded
a $7.9 million charge, inclusive of expenses, for the nine months ended October 31, 2012.
Interest Expenses. Interest
expenses from continuing operations increased by $0.3 million for the nine months ended October 31, 2012, as compared to the nine
months ended October 31, 2011, due to higher borrowing levels outstanding.
Income Tax Expense. Income
tax expenses from continuing operations consist of federal, state and foreign income taxes. There was an income tax benefit of
$0.3 million for the nine months ended October 31, 2012, as compared to an expense of $0.1 million for the nine months ended October
31, 2011. Our effective tax rates were not meaningful for either the first nine months of FY13 or the first nine months of FY12.
Our effective tax rate for the third quarter of FY13 varied from the 34% federal statutory rate primarily due to goodwill amortization