Full Press Release Details
3555 Veterans Memorial Highway, Suite C
Ronkonkoma, NY 11779
981-9700 - www.lakeland.com
Lakeland Industries, Inc. Reports Fiscal
2016 Fourth Quarter and Year End Financial Results
RONKONKOMA, NY - April 21, 2016 --
Lakeland Industries, Inc. (NASDAQ: LAKE) (the "Company"), 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 2016 fourth quarter and full year ended January 31, 2016.
For financial reporting presentation purposes,
the operating results in Brazil are excluded from many of the statements in this announcement because the Company's transfer
of the stock of its Brazilian subsidiary has resulted in discontinued operations accounting. Commencing with its first fiscal quarter
2016 ended April 30, 2015, historical and future financial results from the Brazilian operations are reflected as discontinued
operations in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Discontinued
operations accounting entails the reclassification of all of the financial results of the Brazil operations within the consolidated
financial results of the Company, and a restatement of prior periods to reflect the same treatment. The global operations of Lakeland
Industries, Inc. excluding Brazil are shown in financial reports as continuing operations. All statements and information in this
announcement have been presented or are restated to exclude Brazil, except where noted. On July 31, 2015, the Company completed
a conditional closing of the transfer of all of the stock of its then wholly-owned Brazilian subsidiary ("Lakeland Brazil"),
to Zap Com rcio de Brindes Corporativos Ltda (the "Transferee"),
a company owned by a then existing Lakeland Brazil manager. This transfer is pursuant to a Shares Transfer Agreement entered into
on June 19, 2015. The transactions contemplated by the Shares Transfer Agreement, which were deemed to have been consummated as
of July 31, 2015, were completed in October 2015. Pursuant to the Shares
Transfer Agreement, the Transferee has acquired all of the shares of Lakeland Brazil owned by the Company.
Fiscal 2016 Financial Results Highlights
Continuing Operations, unless otherwise noted"
*Includes non-GAAP measures - see
table included herein for reconciliation to GAAP measures
Management's Comments
Christopher J. Ryan, President and Chief
Executive Officer of Lakeland Industries, stated, "We are pleased to have delivered our third consecutive year of revenue
growth, which is notable in light of a very challenging end to fiscal 2016. Although we were profitable in fiscal year 2015 and
the first three quarters of fiscal 2016, we suffered a loss of ($0.1) million for continuing operations in the fourth quarter of
the latter year due to the global sharp economic slowdown in the energy sector affecting our sales in the USA, Mexico, Russia and
Kazakhstan, the strengthening of the US dollar against the foreign currencies for the countries in which we operate, and the apparent
working down of inventories throughout the supply chain and end customers. This scenario as well as the absence of Ebola and bird
flu-related demand in the fiscal 2016 fourth quarter made our year-over-year comparable for the period quite uneven. Lastly, the
US manufacturing sector has declined for the last six months due to what we believe is a response to the high US dollar.
"Considerable progress has been made
at several of our country operations despite the challenging economic and currency conditions. Domestic sales increased to $56.5
million from $50.1 million, driven by organic growth in the first three quarters of fiscal 2016 and emergency demand earlier in
the year. In the UK, sales rebounded in the fourth quarter from a lower level in the third quarter as end user inventories from
earlier in the year were wound down. In China, however, the declining economic growth has led to reduced revenues overall with
pockets of strength for specialized FR product and cold weather suits, a relatively new line.
"The Company's performance
improvements have been driven in large part by the increased sales of Lakeland branded products and, more noticeably in early fiscal
2016, of Ebola and bird flu-related sales of chemical and disposables products which we view as non-recurring in nature. Current
economic challenges notwithstanding, we are gaining traction globally for our branded products, particularly for our expanding
disposable, chemical and flame retardant garment lines. Regardless of the overall market's growth and any continued economic
uncertainties, we see a substantial opportunity in converting customers to Lakeland products.
"Over the past few years, we delivered
impressively on the execution of turnaround strategy to regain domestic market share as distributors and end users were transitioned
to our own branded products which were manufactured using independently sourced materials. These results are expected to continue
domestically, particularly given the industry capacity constraints in the market. This experience and sharpened acumen will aid
us as we deploy a similar approach internationally. We have aggressively been applying those lessons learned and successes to the
broader international market in order to fully leverage our market diversification, minimize the effects of lagging markets and
invest in additional marketing, operational, and technical resources to markets that present the greatest growth potential. The
harmonization of systems and services globally are expected to improve Lakeland's agility so that we can fully realize the benefit
of our market and product diversity. We have made key additions to our international management team and are beginning to
benefit from their impact. Key examples include the creation of a new head of country operations for Australia and New Zealand,
two markets where we have had a limited presence to date, who is off to a great start, and the sales rebound in the UK, one of
our more established regions, that followed the implementation of organizational improvements modeled after our domestic turnaround.
lines and geographic markets, our competitive presence is being felt by the industry. Lakeland has proven time and again that we
can ramp production, produce high quality garments at multiple price points, and deliver products globally as needed. In turn,
our reputation has positioned us a beneficiary for when emergency quantities of protective apparel are needed during times of crisis.
While we can't predict when these orders will materialize, we have seen a significant positive contribution to our sales
and profits when a crisis occurs, which seems to happen about every two to three years.
top line growth strategies, we have ardently been managing our expenses and investing in ways to drive future costs lower and otherwise
maximize our profitability. As a result and inclusive of the fourth quarter in which we were negatively impacted by issues outside
of our control, our consolidated operating income for continuing operations for the year was $11.8 million as compared to $7.0
million in the prior year. This reflects a one percentage point decrease in annual operating expenses even though we continue to
make select investments in our global platform. In light of current economic conditions and steps taken to increase our productivity
and further leverage our global workforce, in the first quarter of fiscal 2017 ending April 30, 2016 we reduced US payroll by over
$1.0 million on an annualized basis.
"We view our business
over the long term and have been investing to deliver improved performance across the board. In addition to additional spending
on information technology and systems for improved business decision making for sales forecasting and inventory management, in
the fourth quarter of fiscal 2016 we felt comfortable with our business outlook and strengthened balance sheet to remove future
risks associated with our exit from Brazil. We spent approximately $6 million, in cash, to satisfy the payoff of the arbitration
settlement and resolve a VAT tax liability. With the benefit of our full year results and solid cash flow generation, we ended
the year with cash and equivalents increasing by 4% from the end of the prior year, and reduced our debt and total liabilities
for the third consecutive year. It has been another productive year for Lakeland Industries and we look forward to the many opportunities
Lakeland Brazil Update for Developments During the Fourth
Quarter of Fiscal 2016
As previously disclosed, in November 2015
the Company's former Brazilian subsidiary ("Lakeland Brazil") settled a labor case (the "Lana dos Santos
case") for R$1 million or approximately US$272,000 which approximated the reserves on the books of the Company. Several other
smaller cases also were settled for immaterial amounts. The Company does not anticipate any significant further charges
for Brazilian labor issues beyond what has been accrued.
The State of Bahia in Brazil declared an
amnesty beginning November 1, 2015 and expiring December 18, 2015. As previously disclosed, the Company may be exposed to certain
liabilities in connection with the prior operations of Lakeland Brazil, including, without limitation, from lawsuits pending in
the labor courts of Brazil and VAT taxes. The Company entered into a loan agreement on December 11, 2015 with Lakeland Brazil for
the amount of nearly R$8.6 million (approximately US$2.3 million), for the purpose of providing funds necessary for Lakeland Brazil
settling the two largest outstanding VAT claims with the State of Bahia. Settlement of the VAT claims under amnesty would
benefit the Company in that it eliminates these large VAT claims, which the Company believes will render the continued viability
of Lakeland Brazil immaterial to Lakeland Industries. It should also eliminate the possibility of the transfer of the shares
of Lakeland Brazil being found fraudulent on the basis of evading VAT claims and would subsequently eliminate the possibility of
future encumbrance of the Lakeland owned real estate by the State of Bahia in connection with any VAT claims. Lakeland Brazil completed
the amnesty agreement with the State of Bahia on December 18, 2015. US$250,000 in continuing business incentives provided by the