Full Press Release Details
Lakeland Industries,
Inc. Reports Fiscal 2018 Fourth Quarter and Year End Financial Results
Strategic Growth Investments and Improvements
in Global Economy, Oil/Gas Sector, Currencies Deliver 24% Increase in Fourth Quarter Revenue; Advancements in Profitability and
RONKONKOMA, NY - April 16, 2018 --
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 fourth quarter and year ended January 31, 2018.
Fiscal 2018 Fourth Quarter Financial
Results Highlights and Recent Developments
see reconciliations of Non-GAAP financial measures in the tables of this press release.
see reconciliations of Non-GAAP financial measures in the tables of this press release.
Management's Comments
J. Ryan, President and Chief Executive Officer of Lakeland Industries, stated, "At the end of our fiscal year 2017, I spoke
about the traction we had begun to experience for the strategic initiatives taken to improve our global presence and competitiveness
while executing with operational effectiveness. Our financial results in fiscal 2018 demonstrate significant execution of our plans
as we have made considerable progress across the board. Having served the Company for nearly 32 years, I can say with complete
confidence that we have never been in a better position."
the course of fiscal 2018, our share price reached valuations which were at the high end of our historical range. We capitalized
on that opportunity by issuing common stock to raise over $10 million, which solidified our ability to put in place a series of
additional strategies to extend our brand globally while creating an even more profitable enterprise."
were a lot of developments taking place in our fiscal 2018 fourth quarter as well as the entire year. While certain of these matters
may cloud the analysis of our performance, we reported adjusted figures that allow greater transparency of the improvements in
our operations and cash flow. Sales were up by more than 11% for the year, as momentum in the fourth quarter led to 24% growth
in the period. Through the course of the year, we focused on expansion into new and existing territories, while all along benefiting
from global industrial growth, a return of activity in the oil field services sector, and favorable foreign currency trends."
the fourth quarter, we delivered our fourth consecutive quarter of revenue growth to achieve the highest level of fourth quarter
sales in 3 years. Although the fourth quarter is seasonally our slowest period of the year, our fiscal 2018 fourth quarter revenue
on an annualized basis surpasses the $100 million mark, the first time at this level since fiscal 2015. We experienced solid sales
growth in all of our major as well as emerging market operations."
an emphasis on effective management in all facets of our business, we are pleased to have gone beyond the top line to deliver improvements
in our profitability. The fiscal 2018 fourth quarter gross margin of 39.4% reached the highest level in recent memory except for
our fiscal 2016 second quarter when we had very high margins in connection with exigent demand from the Ebola outbreak."
expenses increased in the fourth quarter and full year as we invested in our future growth, including the hiring of new sales associates,
developing new higher margin products and rolling out our Amazon distribution platform in the US which already is delivering significant
growth on a small scale. Distribution on the Amazon platform will be rolling out in Australia, Canada and the UK in fiscal 2019.
Another important investment is the build out, currently in progress, of new production facilities in India and Vietnam, which
will provide for lower cost manufacturing as compared with the majority of our products made in China and Mexico, and represents
a regional presence to focus on local and international sales with accommodating trade regulations to reduce shipping and related
costs. While spending more, particularly in the fourth quarter, our operating expenses as a percentage of revenues for all of fiscal
2018 remained essentially flat as compared with 2017."
cash balance at the end of fiscal 2018 increased by 52% to $15.8 million since the beginning of the year. This includes free cash
flow generated during the year and the proceeds from the equity raise in the third quarter, partially offset by cash used for debt
reduction and inventory ramping. Total debt was reduced by 71% to $1.7 million at year end. Cash used for inventory was necessitated
in many of our international operations to address current demand and in anticipation of continued growth."
2018 was a year of considerable progress which truly was a team effort. I'd like to acknowledge the dedication of our global
workforce, our executive management and our Board of Directors who collectively have led us to this point, and express our appreciation
for the support of our expanded shareholder base. As we look toward the year ahead, we are very encouraged by our solid financial
position and the growth prospects that are within reach given our diversified business lines, our optimized supply chain, and indications
of continued global economic strength."
Fiscal 2018 Fourth Quarter Financial
Net sales increased to $25.2 million for
the three months ended January 31, 2018 compared to $20.3 million for the three months ended January 31, 2017, an increase of 23.9%.
On a consolidated basis for the fourth quarter of fiscal 2018, domestic sales were $12.3 million or 49% of total revenues and international
sales were $12.9 million or 51% of total revenues. This compares with domestic sales of $11.3 million or 56% of the total, and
internationals sales of $9.0 million or 44% of the total in the same period of fiscal 2017.
Sales in the US increased $1.6 million
or 14%, primarily due to increased sales of disposables products to national accounts and oil field services companies. 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, including woven and fire retardant markets, as the US economy continues to improve.
Among the Company's larger international
operations, sales in China and to the Asia Pacific Rim increased $5.5 million or 54% as compared to the prior year period. This
growth is attributable to higher overall volume which increased inter-company sales (eliminated in consolidation), increased industrial
activity and several larger customers beginning to replace depleted inventories as the Company worked through a large backlog.
Canada sales increased $0.7 million or 58% as that country continues to experience an oil and gas turnaround. UK sales increased
by $0.6 million or 31% as new distributors placed stocking orders. Russia and Kazakhstan sales combined for an increase in sales
of $0.2 million. Amid continuously improving economies within Latin America, sales of $1.3 million increased by 27% from the prior
year. Favorable foreign exchange currency translations for sales in China, Canada, Mexico, the UK and Chile as reported in US dollars
also contributed to the Company's consolidated revenue growth
Gross profit increased $2.1 million or
28% to $9.9 million for the three months ended January 31, 2018, from $7.8 million for the three months ended January 31, 2017.
Gross profit as a percentage of net sales increased to 39.4% for the three-month period ended January 31, 2018, from 38.2% for
the three months ended January 31, 2017. Gross margin increases benefited from a mix of sales of higher margin products,
including chemical suits, fire retardant apparel and other woven products, which was partially offset by labor cost increases in
the Company's manufacturing facilities in China.
Operating expense increased 48.1% from
$5.9 million for the three months ended January 31, 2017 to $8.7 million for the three months ended January 31, 2018. Operating
expense as a percentage of net sales was 34.8% for the three months ended January 31, 2017 as compared with 29.1% for the prior
year period. The main factors for the higher operating expenses are the costs associated with the addition of new manufacturing
facilities in India and Vietnam, increases in salaries for additional sales personnel as the Company expands internationally and
domestically, the Amazon distribution strategy implementation, one- time non-cash charges associated with the assets held for sale
in Brazil, increased expenses for freight costs and commissions based on higher sales volumes, and new product development costs.
During fiscal 2018, conditions in the Brazilian
economy caused Lakeland management to believe that the Company's assets held for sale in that country should be analyzed
for impairment. The analysis resulted in an impairment write-down of $0.8 million for assets that have been identified as held-for-sale
by the Company. The write-down is included in operating expenses in the Company's fiscal 2018 fourth quarter. The estimated
fair value less costs to sell the assets written down, consisting primarily of buildings and land, was approximately $0.2
million at the end of fiscal 2018.
Operating income of $1.2 million for the
three months ended January 31, 2018 compares to $1.9 million for the three months ended January 31, 2017. Operating margins were
4.8% for the three months ended January 31, 2018, compared to 9.1% for the three months ended January 31, 2017.
22, 2017, the United States passed the 2017 Tax Cuts and Jobs Act (the "Tax Act"), effective January 1, 2018. The Tax
Act requires Lakeland to recognize the effect of the tax law changes in the period of enactment, such as determining the transition
tax, re-measuring any US deferred tax assets as well as reassessing the net realizability of deferred tax assets. The Company completed
this re-measurement and reassessment in the recently completed fiscal year. The corporate income tax rate change, along with certain
immaterial changes in tax basis resulting from the 2017 Tax Act, resulted in a reduction of the Company's net deferred tax
asset to $7.6 million with a corresponding deferred income tax expense of $5.1 million in fiscal year 2018. Though this one-time,
non-cash adjustment had a materially negative impact on fiscal 2018 earnings, the Tax Act also changes the taxation of foreign
earnings, and companies generally will not be subject to United States federal income taxes upon the receipt of dividends from
foreign subsidiaries.