Full Press Release Details
| 3555 Veterans Memorial Highway, Suite C | |
| Ronkonkoma, NY 11779 | |
| (631) 981-9700 - www.lakeland.com |
Lakeland Industries,
Inc. Reports 19% Increase in Net Income for Fiscal 2018
Third Quarter Financial Results
Company Poised for Continued Growth as
Profit Margins Increase, Capacity Expanded and
Balance Sheet Significantly Strengthened
RONKONKOMA, NY - December 15, 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 2018 third quarter ended October 31, 2017.
Fiscal 2018 Third Quarter Financial Results
Highlights and Recent Developments
Management's Comments
J. Ryan, President and Chief Executive Officer of Lakeland Industries, stated, "We are very pleased with our performance
in the third quarter of fiscal 2018, which demonstrates the momentum of our core business while we gear up for continued growth
and market share attainment. Similar to the second quarter, we showed effective management in all facets of our operations, and
improved our profitability in the third quarter as compared to the prior year.
the more mature markets for personal protective equipment, our sales in the US continue to grow which suggests we are attaining
market share, and growth in the UK and Europe have finally seen a post-Brexit rebound. Overall, our international markets, while
down in revenues from the year ago quarter, are picking up as former laggard operating regions in South America and Russia are
beginning to take off. In faster growing and less competitive regions, our sales in Canada continue to reach new record levels
and China revenues have been expanding. We are very excited by the high level of interest in Lakeland products in South America,
Russia, Kazakhstan, Australia and other Asian markets. Across the board, we are experiencing increased demand from a resurgence
of the oil and gas sector."
this backdrop of favorable trends, during the third quarter we took decisive action to capitalize on the appreciation of our share
price by raising over $10 million in net proceeds from the issuance of common stock. The offering proceeds along with our operating
performance have enabled us to substantially bolster our financial position. More importantly, while our cash balance increased
by over 100% since the beginning of the fiscal year, we are making investments to increase manufacturing capacity, lower our cost
structure and accelerate our entry into in some very attractive markets around the world."
a manufacturing standpoint, we have begun the process of adding facilities in India and Vietnam which we believe will provide us
with years of lower labor costs and favorable tariffs that will enhance our gross margins while bringing products closer to the
new markets we are now entering throughout Asia and the Pacific Rim. From a distribution standpoint, we have made considerable
progress with Amazon in the US which required investment in our fulfilment capabilities. In short order, our revenues from this
new distribution channel have grown rapidly, although still representing less than 1% of our consolidated revenues. We intend to
replicate this model in other countries."
three quarters of fiscal 2018 where our financial performance has continued to improve, we look excitedly toward next year. Lakeland
is essentially debt free and has a strong cash position, a deep management team, world-class manufacturing, a respected global
brand, and is well diversified in both established and developing markets."
Fiscal 2018 Third Quarter Financial Results
Net sales increased to $24.0 million for the
three months ended October 31, 2017 compared to $23.2 million for the three months ended October 31, 2016, an increase of 3.1%.
On a consolidated basis for the third quarter of fiscal 2018, domestic sales were $12.9 million or 54% of total revenues and international
sales were $11.1 million or 46% of total revenues. This compares with domestic sales of $11.3 million or 48% of the total, and
internationals sales of $12.0 million or 52% of the total in the same period of fiscal 2017.
Sales in the US increased $1.6 million or 12%,
primarily due to increased sales of disposables products to national accounts and in response to hurricane clean-up efforts. Additionally,
there was an increase in sales of chemical line products into the oil field services and refinery sectors along with demand from
other industrial sectors as the US economy continues to improve.
Among the Company's larger international
operations, sales in China and to the Asia Pacific Rim increased $3.1 million or 29% as compared to the prior year period. This
growth is attributable to improving industrial activity and several larger customers beginning to replace depleted inventories
as the Company worked through a large backlog. Canada sales increased $0.4 million as that country continues to experience an oil
and gas turnaround requiring protective wear and as some customers replenished their stock in response to higher than forecasted
demand. UK sales increased by $0.3 million or 18% as new distributors placed stocking orders. Russia and Kazakhstan sales combined
for an increase in sales of $0.3 million or 102.6%. Amid continuously improving economies within Latin America, sales remain strong
at $1.8 million, although the region as a whole reported lower sales due to a single large order in Ecuador during the prior year
Gross profit increased $0.5 million or 6.3%
to $9.1 million for the three months ended October 31, 2017, from $8.5 million for the three months October 31, 2016. Gross profit
as a percentage of net sales increased to 37.8% for the three-month period ended October 31, 2017, from 36.6% for the three months
ended October 31, 2016. Gross margin increases were somewhat offset by labor increases in our manufacturing facilities due
to wage increases and overtime associated with relieving the stress in the Company's internal supply chain Major factors
driving gross margins were:
Operating expense increased 3.1% from $6.3
million for the three months ended October 31, 2016 to $6.4 million for the three months ended October 31, 2017. Operating expense
as a percentage of net sales was 26.7% for the three months ended October 31, 2017 and 2016. The main factors for the higher operating
expenses are increases in salaries for additional sales personnel as the Company expands internationally, freight costs, and accounts
receivable allowances for several slow paying customers partially offset by lower commission fees due to a large international
order in the prior year period and a decrease in officer salaries resulting from the reduction of one officer due to retirement.
Operating income increased to $2.7 million
for the three months ended October 31, 2017, from $2.3 million for the three months ended October 31, 2016, as most operating expenses
are fixed in nature other than commissions and freight out and sale volume increased as compared to the third quarter of fiscal
2017. Operating margins were 11.1% for the three months ended October 31, 2017, compared to 9.7% for the three months ended October
Net income increased to $1.8 million for the
three months ended October 31, 2017 from $1.5 million for the three months ended October 31, 2016. The results for three months
ended October 31, 2017 are primarily due to continuing cost containment efforts and increases in sales volume as the industrial
sector showed marked performance improvements and the global economy improved.
Income tax expense for the third quarter of
fiscal 2018 was $0.8 million, compared with $0.6 million in income tax expense for the prior year period. The increase in tax expense
was a result of significantly higher operating income in the US during the three months ended October 31, 2017 as well as overall
improved profitability. The Company also has the benefit of the tax credit from the worthless stock deduction relating to its exit
from Brazil, so there should be no cash taxes in the US for the next 2 years, depending on profitability in these periods and assuming
no changes to the US tax code. The Company may also be required to pay local taxes on certain country operations when those operations
are profitable on a local basis.
As of October 31, 2017, Lakeland had cash and
cash equivalents of approximately $21.5 million and working capital of $64.7 million. Cash and cash equivalents increased $11.1
million or 107% from the beginning of the fiscal year, while working capital increased by $17.0 million for an improvement of nearly
36%. In addition to cash flow from operations, the Company's cash position increased by $10.1 million from the net proceeds
of the common stock offering in the third quarter of fiscal 2018. The Company's $15 million revolving credit facility had
a $0 balance as of October 31, 2017. Total debt outstanding at October 31, 2017 was $2.3 million, down from $5.8 million at January
31, 2017 and $13.4 million at January 31, 2016.
The Company incurred capital expenditures of
approximately $170,000 during the third quarter of fiscal year 2018. Capital expenditures for the first three quarters of the fiscal
year was approximately $0.6 million, which includes the cost for a phased global rollout of a new enterprise resource planning
("ERP") system. Third quarter capital expenditures principally relate to additions to equipment in China and for new
manufacturing facilities in India and Vietnam.
No stock was acquired as part of the Company's
$2.5 million stock repurchase program which was approved on July 19, 2016.
quarter ended October 31, 2017, the Company completed a public offering of 808,750 shares of common stock (including the initial
offering and overallotment exercise) at a price of $13.80 per share for net proceeds of approximately $10.1 million. The Company