Full Press Release Details
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Industries, Inc. Reports Fiscal 2019 First Quarter Financial Results
Net Income Increases Over 9% From
Prior Year on Higher Sales and Gross Margin
RONKONKOMA, NY - June 8, 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 2019 first quarter ended April 30, 2018.
Fiscal 2019 First Quarter Financial
Results Highlights and Recent Developments
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, "We are off to a very solid start to fiscal
2019. The Company reported an increase in net income of over 9% while consolidated net sales grew by 6%. Our increased net income
primarily reflects an improvement in our international sales and higher overall gross margin, partially offset by increased operating
expenses for the implementation of our long term growth strategy that includes the addition of sales and marketing personnel globally."
achieved the second consecutive year of revenue growth for the first quarter and nearly eclipsed the level of sales in the first
quarter of fiscal 2016 when we had significantly heightened demand resulting from a devastating viral outbreak. In the first quarter
of fiscal 2019, we once again experienced sales growth in all of our major international operating regions as well as in our emerging
market operations. Sales in the US were lower due to inventory work downs from large fourth quarter shipments and a concerted
effort to focus on higher margin product lines. Overall, the key components of our global growth strategy that are being well
implemented include expansion into new and existing territories while improving the quality of our earnings where we can deliver
sustainable and strong results. To this end, our performance in the first quarter delivered as planned."
reporting an increase in our top line, we have made great strides to position the Company for longer term gains and a parallel
improvement in our gross margins. Traction is being gained in our efforts to penetrate international markets which are growing
at a faster rate than the more competitive US market. In the US, we are leaning toward the introduction of new, higher margin products
that showcase our leading global design and manufacturing capabilities. We are particularly excited by our new CleanMax product
which will be marketed into the cleanroom market for sale to the pharmaceutical supply chain. This is a large market that spans
domestic and international sales opportunities. We began booking orders in the first quarter, with sales to be recorded beginning
in the second quarter."
profit as a percentage of sales increased to the highest first quarter level in recent history. At 39.0% in the first quarter of
fiscal 2019, we have seen a significant increase from 37.3% last year and 33.3% for fiscal 2017. The key components of our ongoing
effort to improve gross margins include: 1) entry into faster growing international markets with limited competition; 2) introduction
of new specialty products which benefit from our materials and manufacturing expertise; 3) the lowering of our cost of manufacturing;
4) improving our operational effectiveness through investments in technology; and, 5) leveraging of alternative distribution channels
principally with Amazon for retail sales."
expenses increased in the first quarter to aid in the implementation of our growth and profitability enhancements. At the same
time, we are effectively managing our spending. Operating expenses as a percentage of revenues remained consistent from the fourth
quarter at approximately 29%, while we increased spending by $1 million from the first quarter of last year with continued investment
to support our expanded global presence. Along with this increased spending, we continued to grow our cash balance and reduce debt."
increased by more than 3% to $16.3 million during the first quarter while total debt outstanding at April 30, 2018 was reduced
by nearly 4.3% in the period. We now have over $16 million of net cash and no borrowings on a $20 million revolving credit facility.
We remain very encouraged by our strong financial condition and our continued ability to further improve the Company's top
and bottom line performance."
Fiscal 2019 First Quarter Financial
Net sales increased to $24.3 million for
the three months ended April 30, 2018 compared to $23.0 million for the three months ended April 30, 2017, an increase of 6.0%.
On a consolidated basis for the first quarter of fiscal 2019, domestic sales were $12.3 million or 51% of total revenues and international
sales were $12.0 million or 49% of total revenues. This compares with domestic sales of $12.7 million or 55% of the total, and
internationals sales of $10.3 million or 45% of the total in the same period of fiscal 2018.
Sales in the US modestly decreased from
the prior year period primarily due to strategic revenue mix adjustments with selective fulfillment of lower margin disposable
product orders and renewals. Of the Company's six major product lines marketed in the US, disposables represent approximately
51% of total domestic sales. In addition, the Company allocated certain production capacity to international orders over domestic
orders given the mandate to focus on higher margin sales. Additional production capacity is being brought online in new manufacturing
facilities in India and Vietnam, which positions the Company to increase sales globally.
Among the Company's larger international
operations, sales to external customers in China and to the Asia Pacific Rim increased to $13.8 million from $10.5 million in the
prior year period. This growth is attributable to higher overall volume which increased inter-company sales (eliminated in consolidation)
and increased industrial activity in the region. Canada sales increased $0.4 million or 19.4% to $2.2 million from $1.8 million
in the prior year period as that country continues to experience an oil and gas turnaround along with demand for turnout gear and
other safety apparel. UK/Europe sales increased by $0.4 million or 21% to $2.6 million from $2.2 million in the fiscal 2018 first
quarter as new distributors placed stocking orders, particularly for new partners in Germany. Russia and Kazakhstan sales combined
for an increase in sales of $0.5 million.
Gross profit increased $0.9 million or
11.1% to $9.5 million for the three months ended April 30, 2018, from $8.6 million for the three months ended April 30, 2017. Gross
profit as a percentage of net sales increased to 39.0% for the three-month period ended April 30, 2018, from 37.3% for the three
months ended April 30, 2017. The gross margin increase benefited from a mix of sales of higher margin products, including
chemical suits and other woven products, and higher pricing implemented in the US and select international markets for key product
lines as the quarter progressed.
Operating expense increased 16.5% from
$6.1 million for the three months ended April 30, 2017 to $7.1 million for the three months ended April 30, 2018. Operating expense
as a percentage of net sales was 29.1% for the three months ended April 30, 2018, essentially flat as compared to 29.0% for the
fourth quarter of fiscal 2018 and up from 26.5% for the first quarter of fiscal 2018. The main factors for the higher operating
expenses are the currency fluctuations in Latin America, Russia, and China, increases in salaries for additional sales personnel
as the Company expands internationally and domestically, and increased expenses for freight costs and commissions based on higher
sales volumes and new product development costs.
Operating income decreased to $2.4 million
for the three months ended April 30, 2018 from $2.5 million for the three months ended April 30, 2017 Operating margins were 9.9%
for the three months ended April 30, 2018, compared to 10.8% for the three months ended April 30, 2017.
Income tax expense for the first quarter
of fiscal 2019 was $0.5 million, compared with $0.7 million in income tax expense for the prior year period. The decrease in income
tax expense reflects the impact of the 2017 Tax Cuts and Jobs Act and the associated lower corporate income tax rate, partially
offset by foreign income taxes. Lakeland subsidiaries may be required to pay local taxes on certain country operations where those
operations were profitable on a local basis. Cash paid for foreign subsidiary taxes in the first quarter of fiscal 2019 was $0.3
million, compared to $0.4 million for the first quarter of fiscal 2018.
for the three months ended April 30, 2018 was $1.9 million or $0.23 per basic and diluted share, as compared to net income of $1.7
million or $0.24 per basic share and $0.23 per diluted share in the same period of fiscal 2018. The 9.1% increase in net income
is primarily attributable to higher sales and gross margin, partially offset by increased operating expenses for the Company's
global growth initiatives that included additional sales and marketing spending.
As of April 30, 2018, Lakeland had cash
and cash equivalents of approximately $16.3 million and working capital of $68.0 million. To accommodate continued global growth
and the seasonally strong fiscal second quarter, inventories increased to $44.4 million at April 30, 2018 from $42.9 million at
the end of fiscal 2018. Cash and cash equivalents increased $0.5 million or 3.1% from the beginning of the fiscal year, while working
capital increased by $1.9 million for an improvement of 2.9%. The Company's $20 million revolving credit facility had a $0
balance as of April 30, 2018. Total debt outstanding at April 30, 2018 was $1.6 million, down nearly 4.3% from $1.7 million at
The Company incurred capital expenditures
of approximately $0.3 million during the first quarter of fiscal year 2019, compared to $0.3 million in the fourth quarter of fiscal
2018 and over $0.1 million in the first quarter of the prior fiscal year. The increased level of capital expenditures includes