Full Press Release Details
| 3555 Veterans Memorial Highway, Suite C | |
| Ronkonkoma, NY 11779 | |
| (631) 981-9700 - www.lakeland.com |
Lakeland Industries, Inc. Reports Fiscal
Fourth Quarter and Year End Financial
RONKONKOMA, NY - April 26, 2017 --
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 2017 fourth quarter and full year ended January 31, 2017.
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 in July 2015, as described below, 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. The global operations of Lakeland 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 finalized between the two parties as of July 31, 2015, were legally consummated upon approval of Brazil Tax Authorities
in October 2015. Pursuant to the Shares Transfer Agreement, the Transferee has acquired all of the shares of Lakeland Brazil owned
Fiscal 2017 Fourth Quarter Financial
Management's Comments
J. Ryan, President and Chief Executive Officer of Lakeland Industries, stated, "Our performance in the fourth quarter of
fiscal 2017 demonstrates significant traction in the strategic initiatives we've taken to improve our global presence and
competitiveness while executing with operational effectiveness. We have been leveraging the advantages of our unique operating
platform to deliver growth in profitability and cash flow even as global industry conditions remain somewhat stagnant. At the same
time, we have strengthened our balance sheet while investing in future growth opportunities.
a 1% reduction in sales from the prior year period, in the fourth quarter of fiscal 2017 we increased gross profit by 29%. The
gross profit growth is attributable to improvement in our sales mix resulting from our efforts to introduce new, higher margin
products while better managing our costs and supply chain. Meanwhile, we decreased operating expenses by 6%. Productivity has been
bolstered by effective management of overhead expenses and investment in new information systems. We have been working closely
with our operations teams around the world to implement global cost savings, improve inventory management, and other measures to
enhance performance. One of the favorable outcomes from these initiatives has been inventory levels at the end of the fiscal year
declining by $5.3 million, or 13%, since the end of fiscal 2016."
"More important is that we have seen
continued momentum in our business on a consolidated global basis that began at the start of fiscal 2017. This progress was masked
through the first three quarters of fiscal 2017 by the Ebola and bird flu emergency demand for our products in the first nine months
of fiscal 2016 that led to an unusually strong fiscal 2016, without such emerging sales in fiscal 2017. Foreign currency fluctuations
and continued softness in the oil and gas sector also negatively weighed on our results. In turn, we took steps to drive new avenues
of growth, including the addition of higher margin products targeting new vertical or end user applications in our more established
"We have entered into
additional geographic markets and plan to continue our international diversification. In fiscal 2017, we hired three
salespeople targeting Asian markets, including Thailand, Indonesia and Malaysia. Lakeland will be formally entering Germany
this year and adding a new salesperson in Mexico this month. In addition, we have made progress in Russia with new product
licensing, added a new distributor to accelerate activities in The Philippines, and brought on additional manufacturing
capacity to a pilot facility in India which will help in reducing costs and provide time-to-market advantages. Three
salespeople were added in the US during fiscal 2017 to help get our new cleanroom products into the market as well as to
broaden our reach into the utility and fire resistant apparel markets for which we offer higher margin proprietary-designed
garments. These initiatives have been or will likely be modestly incremental to our overhead with minimal contributions to
revenue thus far. We expect more meaningful benefits as the year progresses."
"On the heels of our investments
in future growth, we are pleased to have increased cash flow which has been applied toward the strengthening of our financial position.
Cash flow from operations in fiscal 2017 was $11.5 million, an impressive turnaround from cash used in operations of $0.5 million
in the prior year. All of our debt in China was paid off in fiscal 2017. Total company debt was reduced by $7.6 million, or nearly
57%, during the year. With our cash flow from operations aided by notable contribution of inventory reductions, our cash balance
at the end of the year increased by $3.3 million, or nearly 48%, from the end of the prior year while stockholders' equity
improved by 6%. With a strong balance sheet and an enhanced global position for sales and manufacturing, we are encouraged for
what lies ahead in fiscal 2018."
Fiscal 2017 Fourth Quarter Financial
Net sales from continuing operations was
$20.3 million for the three months ended January 31, 2017 compared to $20.5 million for the three months ended January 31, 2016.
As compared to the year earlier period, overall sales volume was modestly reduced due to global softness in the industrial sector
partially resulting from the continued downturn in the oil and gas industry, as well as currency headwinds in several of the foreign
countries in which the Company has operations, partially offset by increased sales of new products and from entry into new geographic
markets. On a consolidated basis in U.S. currency for the fourth quarter of fiscal 2017, domestic sales were $11.3 million or 55%
of total revenues and international sales were $9.0 million or 45% of total revenues. This compares with domestic sales of $10.6
million or 52% of the total, and internationals sales of $9.9 million or 48% of the total in the same period of fiscal 2016.
Among the Company's larger international
operations, sales in China and to the Asia Pacific Rim were up 1% or $0.1 million, amid increased intercompany sales from its Chinese
factories to sister companies internationally and currency headwinds. Canada sales increased by 6% or $0.06 million, as that country
benefited from the effective implementation of market share attainment strategies, partially offset by softness in the oil and
gas sector. The sales volume in Canada set another company record. UK sales decreased by $0.6 million, or 24%, mostly due to Brexit
uncertainties and continuing currency challenges. Sales in Russia and Kazakhstan increased $0.3 million as unit sales increased
and new products sales gained traction. Latin America sales increased $0.1 million, or 10%, due to improved sales production in
new and existing territories, which was partially offset by a depressed commodities market which curtails agriculture and mining
activities that require personal protective apparel.
Gross profit increased $1.7 million, or
29.0%, to $7.8 million for the three months ended January 31, 2017, from $6.0 million for the three months ended January 31, 2016.
Gross profit as a percentage of net sales increased to 38.2% for the three months ended January 31, 2017 from 29.4% for the same
period of fiscal 2016. Gross margins for disposable products, the Company's largest product line, improved 14.5 percentage
points in spite of the lower year-over-year volume as the Company continues to contain costs and maximize production efficiency.
Further driving gross margins is the introduction of higher value products to new vertical markets.
Operating expenses decreased to $5.9 million
for the three months ended January 31, 2017 from $6.3 million for the three months ended January 31, 2016. Operating expenses as
a percentage of net sales was 29.1% for the fourth quarter of fiscal 2017 as compared with 30.8% for the fourth quarter of fiscal
2016. The main factor for the decrease in operating expenses from the earlier period is the ongoing operational cost containment
initiatives, partially offset by new salespeople and commissions as part of the Company's international and domestic expansions.
Operating profit was $1.8 million for the
three months ended January 31, 2017, up from an operating loss of ($0.3) million for the quarter ended January 31, 2016. The improvement
from the year ago period was mainly a result of higher gross profit and reduced general and administrative expenses. Operating
margins were 9.1% for the three months ended January 31, 2017, compared to (1.5)% for the year ago period.
Net income was $0.9 million for the three
months ended January 31, 2017, up from a net loss of ($0.1) million in the three months ended January 31, 2016. The results for
the three months ended January 31, 2017 as compared with the same period of fiscal 2016 are primarily due to an improved product
mix, manufacturing cost reductions, and effective expense management.
Fiscal 2017 Full Year Financial Results
Net sales from continuing operations was
$86.2 million for the fiscal year ended January 31, 2017 compared to $99.6 million for the fiscal year ended January 31, 2016.
As compared to the year earlier period, overall sales volume was reduced due to the elimination of Ebola and bird flu emergency