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Lakeland Industries, Inc. Reports Fiscal 2013 Fourth Quarter and Full Year Financial Results


Lakeland Industries, Inc. Reports Fiscal 2013 Fourth Quarter and Full Year Financial Results

RONKONKOMA, N.Y., May 21, 2013 /CNW/ - Lakeland Industries, Inc. (NASDAQ: LAKE), a leading global manufacturer of industrial protective clothing for industry, municipalities, healthcare and first responders on the federal, state and local levels, today announced that the Company accepted a commitment letter from a bank for a Senior Credit Facility subject to certain terms and conditions and is currently working towards closing this financing. However, no assurances can be given that this transaction or any transaction will be consummated.

(Logo: http://photos.prnewswire.com/prnh/20120611/NY21959LOGO )

The Company has received a letter from The Nasdaq Stock Market notifying the Company that it is not in compliance with the Nasdaq Listing Rule 5250(c)(1) because it had not filed its Annual Report on Form 10-K for the fiscal year ended January 31, 2013 on a timely basis with the Securities and Exchange Commission. Under Nasdaq rules, the Company has 60 calendar days, or until July 16, 2013, to regain compliance with Nasdaq's filing requirements for continued listing. The Company has filed its 2013 Form 10-K and believes it is now in full compliance.

Declining sales in FY13 led to quarterly losses in Brazil, which led to the necessity of writing off all goodwill, certain intangibles, and deferred tax assets of Brazil. These factors led to a default on the TD Bank loan, which in turn created substantial doubt about our ability to continue as a going concern. Successful completion of the proposed new financing, in management's opinion, would relieve this condition. Thus, we engaged with new lenders and considered other options, such as the sale of the Company, the sale of assets which has occurred, and a refinance of the TD Bank loan. We will continue pursuing all options to maximize stockholder value.

During the course of the year:


    --  The Company recorded a $10 million goodwill and other
        intangibles impairment charge against our Brazil operations as
        a result of poor sales and operating losses in Brazil in the
        fourth quarter of fiscal 2013, which we reported on March 7,
        2013.
    --  The Company recorded a $7.9 charge to settle the adverse
        arbitration award in Brazil.
    --  The Company recorded a valuation allowance of $4.5 million
        against its deferred tax asset.
    --  While the Company sustained a $1.0 million operating loss, this
        includes a $1.6 million operating loss from Brazil, meaning the
        rest of Lakeland worldwide reported operating income of $0.6
        million.
    --  The Company has taken an additional $800,000 markdown on the
        Indian assets held for sale due to the difficulty in disposing
        of this property and the likely realizable value.
    --  Excluding Brazil sales, Lakeland worldwide sales have had
        sequential growth for four consecutive quarters starting with
        Q4 fiscal 2012 as the low point resulting from the termination
        of the Company's supply contract with DuPont.

Lakeland sales with and without Brazil by
quarter ($000)
                 Q4FY12 Q1FY13 Q2FY13 Q3FY13   Q4FY13 Q4 year over year

Lakeland
consolidated     20,165 23,981 23,499 24,239   23,399 3,234 16.0%
sales

Brazil sales     3,036  5,191  4,699  4,285    2,683  (353) (11.6%)

Lakeland
worldwide sales  17,129 18,790 18,800 19,954   20,716 3,587 20.9%
excluding Brazil

Sequential
growth by
quarter                 9.7%   0.1%   6.1%     3.8%
(excluding
Brazil)
    --  The Company has paid a total of $1.6 million against the Brazil
        settlement liability since September 2012 through March 2013,
        all of which came from operating cash flow in the US with no
        additional borrowing needed from its TD facility in the US.
    --  External sales growth in China, UK and Chile remain very
        strong.

Commenting on the financial results and recent developments, Lakeland 
Industries President and Chief Executive Officer Christopher J. Ryan said, "We 
are disappointed about our operations in Brazil affecting the rest of the 
Company in this way. Our other operations are solid, and management is 
currently exploring our options in Brazil."

Year and Quarter Ended January 31, 2013, Compared to the Year and Quarter 
Ended January 31, 2012
                              For the Year      For the Three Months
                              Ended January 31, Ended January 31,
                              Audited           Unaudited
                              2013     2012     2013     2012

Net sales from continuing     100.00%  100.00%  100.00%  100.00%
operations

Gross profit from continuing  28.73%   29.88%   23.92%   26.35%
operations

Operating expenses from       29.81%   28.07%   30.22%   32.45%
continuing operations

Operating profit (loss) from  (1.08)%  1.81%    (6.30)%  (6.11%)
continuing operations

Income (loss) before tax from (21.80)% 0.87%    (50.72)% (8.27%)
continuing operations

Net income (loss) from        (27.09)% 1.13%    (75.10)% (5.00%)
continuing operations

Net Sales.  Net sales from continuing operations decreased $1.2 million, or 
1.3%, to $95.1 million for the year ended January 31, 2013, compared to $96.3 
million for the year ended January 31, 2012. The net decrease was mainly due 
to a $9.8 million decrease in domestic sales, partially offset by a $8.6 
million increase in foreign sales. The net decrease in the US was comprised 
mainly of a decrease in US disposables sales, resulting from the loss of the 
Tyvek license from DuPont. This decrease in US sales was offset by significant 
increases in foreign sales, including a $1.2 million increase in sales by 
Qualytextil, SA in Brazil, a $3.2 million increase in European sales and a 
$1.8 million growth in combined Chile and Argentina sales. External sales from 
China were flat for the fourth quarter FY13 but were up for the full year 
15.7%. Sales in Brazil have decreased in Q4FY13 and we expect next fiscal 
year's sales to be lower in Brazil.

Net sales from continuing operations in Q4 FY13 increased by $3.2 million, or 
16.0%, to $23.4 million from Q4 of FY12. This increase was due to an increase 
in foreign sales, from $10.6 million in Q4 FY12 to $11.3 million in Q4 FY13. 
Of these amounts, sales in Brazil were $2.7 million and $2.7 million for Q4 of 
FY12 and FY13, respectively.

Gross Profit. Gross profit from continuing operations decreased $1.5 million, 
or 5.1%, to $27.3 million for the year ended January 31, 2013, from $28.8 
million for the year ended January 31, 2012. Gross profit as a percentage of 
net sales decreased to 28.7% for the year ended January 31, 2013, from 29.9% 
for the year ended January 31, 2012. The major factors driving the changes in 
gross margins were:
    --  Disposables gross margin increased by 4.0 percentage points in
        FY13 compared with FY12. This increase was mainly due to
        changes in the sales mix to primarily Lakeland branded products
        this year, while last year had more than 50% of North American
        disposable sales were DuPont products at a lower margin. This
        year's margin was lower than it otherwise would be as a result
        of lower volume and an increase in inventory reserves against
        Tyvek items remaining.
    --  Brazil gross margin was 31.1% for this year compared with 42.8%
        last year, primarily due to issues with a contract with the
        Brazilian Navy. The Brazilian currency weakened significantly
        earlier in the year, thereby greatly increasing the cost of
        material purchased from a USA supplier. Further, due to the
        length of time elapsed since the bid was submitted in respect
        of the Navy contract, there were increases in the material
        cost, along with a need to change certain components at a
        higher cost. There were also similar issues with several
        utility contracts.
    --  Glove margins increased 5.0 percentage points primarily from
        improved product mix.
    --  Chemical margins were decreased by 8.5 percentage points due to
        different sales mix.
    --  Canada gross margin decreased by 1.9 percentage points
        primarily due to discounting remaining Tyvek inventory.
    --  UK margins decreased by 1.5 percentage points primarily from
        higher volume from larger sales at lower margins.
    --  Argentina margins decreased by 9.2 percentage points due to
        lack of capital.
    --  Chile margins increased by 8.1 percentage points as a result of
        stronger sales mix.

Operating Expenses. Operating expenses from continuing operations increased 
$1.3 million, or 4.9%, to $28.3 million for the year ended January 31, 2013, 
from $27.0 million for the year ended January 31, 2012.  As a percentage of 
net sales, operating expenses increased to 29.8% for the year ended January 
31, 2013, from 28.1% for the year ended January 31, 2012. The increase in 
operating expenses in the year ended January 31, 2013, as compared to the year 
ended January 31, 2012, included:
    --  $0.7 million increase in sales salaries due to the hiring of
        additional sales people to support growth in the US, Asia, and
        South America.
    --  $0.6 million increase in commissions, of which 0.5 million was
        in Brazil, relating to higher commissions on large bid
        contracts delivered in Q1-Q3 of FY13.
    --  $0.1 million increase in sales administrative salaries due to
        increase in customer service capacity in Alabama.
    --  $0.1 million increase in insurance due to increased claims
        experience.
    --  $0.1 million increase in employee benefits due to increase in
        unemployment expense.
    --  $0.1 million increase in bad debt resulting from one large
        account in Chile.
    --  $0.2 million increase in professional fees as a result of the
        issues in Brazil.
    --  (0.1) million decrease in administrative salaries, which
        includes a $0.6 million accrual for the contract termination of
        the President of the Brazilian subsidiary offset against $(0.7)
        million reduction in administrative salaries in Brazil,
        throughout the year, which is the result of our efforts to
        reduce costs. 10 employees in administration and sales were
        terminated in Brazil in FY13. A new law was passed in Brazil
        resulting in lower payroll taxes, officers in Brazil took a 10%
        payroll cut for two quarters, and the depreciated currency
        resulted in lower payroll expense in Brazil.
    --  $(0.2) million decrease in research and development due to
        large R&D expenses in FY12.
    --  $(0.3) million in decreased freight out expense due to more
        consolidated shipping and better management oversight.

Operating Profit/(Loss).  Operating profit/(loss) from continuing operations 
decreased by $2.7 million to $(1.0) million from $1.7 million for the prior 
year. Operating profit as a percentage of net sales decreased to (1.1)% for 
the year ended January 31, 2013, from 1.8% for the year ended January 31, 
2012, primarily due to sharply lower volume in disposables in the US due to 
the termination of the Company's Tyvek and Tychem supply agreement by DuPont, 
a $0.6 million charge for contract termination of the President of the 
Brazilian subsidiary, issues in Brazil with the Navy and other contracts 
caused by a currency devaluation earlier in the year and weak volume in 
Brazil, mainly due to lack of large bid contracts in Q4 of FY13. Without 
Brazil's FY13 operating loss of $1.6 million, the Company would have had 
operating income of $0.6 million.

Interest Expense.  Interest expense increased by $0.2 million for the year 
ended January 31, 2013, compared to the year ended January 31, 2012, because 
of term loan borrowing in 2012 to fund capital expansion in Brazil and Mexico 
outstanding throughout FY13 and also borrowing in Brazil at higher rates 
prevailing in Brazil and the US. Further, the Company paid higher interest 
rates on its TD facility in FY13 as a result of several amendments during FY13.

Other Expenses - Net.  The increase in other expenses resulted mainly from the 
$10.0 million write down of goodwill in Brazil and the $7.9 million 
arbitration settlement, with two of the former owners of the Company's 
subsidiary in Brazil.

Income Tax Expense.  Income tax expenses from continuing operations consist of 
federal, state and foreign income taxes. Income tax expense increased $5.3 
million to $5.0 million for the year ended January 31, 2013, from $(0.3) 
million for the year ended January 31, 2012.  Our effective tax rate was 
meaningless for the fiscal years ended January 31, 2013 and 2012. Our 
effective tax rate varied from the federal statutory rate of 34% due primarily 
to the $7.9 million arbitration settlement in Brazil, which did not get a tax 
benefit, $10.0 million goodwill and other intangibles write-off in Brazil and 
the establishment of a $4.5 million valuation allowance for deferred tax 
assets. Our income taxes in the current year were benefited by losses in the 
US and a "check-the-box" US tax benefit from the losses in India at a higher 
rate than most of the foreign income. Further, there was a $4.5 million 
valuation allowance charged to tax expense this year relating to the deferred 
tax asset.

Net Income/(Loss).  Net income/(loss) from continuing operations decreased 
$26.9 million to a loss of $(25.8) million for the year ended January 31, 
2013, from $1.1 million for the year ended January 31, 2012. The decrease in 
net income was primarily a result of arbitration settlement and goodwill and 
other intangibles impairment charge in Brazil (see Notes 4 and 5 for full 
discussion).

Fourth Quarter Results

Continuing Operations.  The sales in Brazil in Q4 of FY13 and FY12 had no 
large bid sales and were $353,000 lower than the prior year. The increase in 
sales in other foreign jurisdictions is primarily due to the introduction of 
new products and new marketing material targeting specific markets.

Factors effecting 4QFY13 results included:
    --  A goodwill and other intangibles impairment charge of $10.0
        million in Brazil.
    --  $0.6 million separation accrual in Brazil for a departing
        executive.
    --  A loss of $0.2 million on foreign exchange in Brazil.
    --  A valuation allowance for deferred tax in the amount of $4.5
        million.
    --  We continue to see price increases in our Chinese manufacturing
        operations with labor source availability a concern.
    --  As a result of general elections in the fourth quarter, the
        public tenders were very weak in Brazil across all markets
        throughout the quarter resulting in weaker sales.
    --  In Q4 we began initiatives to "right size" the Brazilian
        operation. This initiative is expected to be complete in Q2
        FY14. About 70% of the severance and labor reductions costs
        were recognized in November and January of Q4.
    --  Lakeland Europe and Lakeland China both experienced strong Q4
        sales closing FY13 with record sales for each division.

Discontinued Operations.  In Q4FY12, the Company commenced its efforts to 
market its property in India. Based on the difficulty in marketing this 
property in Q4FY13, the Company determined carrying value exceeded projected 
undiscounted cash flows and recorded a loss of $800,000 to reduce carrying 
value to future value.

Management's Comments

Mr. Ryan continued, "Lakeland will continue to seek to reduce operating costs, 
dispose of low ROI assets and increase sales. We hope to completely stabilize 
the Company by the end of the third quarter with more restructuring and 
reduction in both debt and operating costs."

Financial Results Conference Call

Lakeland will host a conference call at 4:30 PM (EDT) today to discuss the 
Company's fourth quarter and full fiscal year 2013 financial results. The 
conference call will be hosted by Christopher J. Ryan, Lakeland's President 
and CEO, and Gary Pokrassa, Lakeland's Chief Financial Officer.  Investors can 
listen to the call by dialing 800-860-2442 (Domestic) or 412-858-4600 
(International), Pass Code 10029101.

A conference call replay will be available by dialing 877-344-7529 (Domestic) 
or 412-317-0088 (International), Pass Code 10029101.

About Lakeland Industries, Inc.: Lakeland Industries, Inc. (NASDAQ: LAKE) 
manufactures and sells a comprehensive line of safety garments and accessories 
for the industrial protective clothing market.  The Company's products are 
sold by a direct sales force and through independent sales representatives to 
a network of over 1,200 safety and mill supply distributors. These 
distributors in turn supply end user industrial customers such as 
chemical/petrochemical, automobile, steel, glass, construction, smelting, 
janitorial, pharmaceutical and high technology electronics manufacturers, as 
well as hospitals and laboratories. In addition, Lakeland supplies federal, 
state, and local government agencies, fire and police departments, airport 
crash rescue units, the Department of Defense, the Centers for Disease Control 
and Prevention, and many other federal and state agencies.  For more 
information concerning Lakeland, please visit the Company online at 
www.lakeland.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 
1995:  Forward-looking statements involve risks, uncertainties and assumptions 
as described from time to time in Press Releases and 8-K(s), registration 
statements, annual reports and other periodic reports and filings filed with 
the Securities and Exchange Commission or made by management.  All statements, 
other than statements of historical facts, which address Lakeland's 
expectations of sources or uses for capital or which express the Company's 
expectation for the future with respect to financial performance or operating 
strategies can be identified as forward-looking statements.  As a result, 
there can be no assurance that Lakeland's future results will not be 
materially different from those described herein as "believed," "projected," 
"planned," "intended," "anticipated," "estimated" or "expected," or other 
words which reflect the current view of the Company with respect to future 
events.  We caution readers that these forward-looking statements speak only 
as of the date hereof.  The Company hereby expressly disclaims any obligation 
or undertaking to release publicly any updates or revisions to any such 
statements to reflect any change in the Company's expectations or any change 
in events conditions or circumstances on which such statement is based.

____________________________________________________________________ |Lakeland Industries, Inc. and Subsidiaries | | | |CONSOLIDATED BALANCE SHEETS | | | |January 31, 2013 and 2012 | | | |(in $000's) | |____________________________________________________________________| | | | |___________________________________________________|________________| | |January 31, | |___________________________________________________|________________| | |2013 |2012 | |___________________________________________________|_______|________| |ASSETS | | | |___________________________________________________|_______|________| |Current assets | | | |___________________________________________________|_______|________| |Cash and cash equivalents |$6,737 |$5,711 | |___________________________________________________|_______|________| |Accounts receivable, net |13,783 |12,576 | |___________________________________________________|_______|________| |Inventories |39,271 |45,668 | |___________________________________________________|_______|________| |Deferred income taxes |----- |3,988 | |___________________________________________________|_______|________| |Assets of discontinued operations in India |813 |1,999 | |___________________________________________________|_______|________| |Prepaid income tax |1,565 |1,773 | |___________________________________________________|_______|________| |Other current assets |1,703 |1,993 | |___________________________________________________|_______|________| |Total current assets |63,872 |73,708 | |___________________________________________________|_______|________| |Property and equipment, net |14,090 |13,915 | |___________________________________________________|_______|________| |Prepaid VAT and other taxes, noncurrent |2,461 |2,791 | |___________________________________________________|_______|________| |Security deposits |1,546 |1,331 | |___________________________________________________|_______|________| |Intangibles and other assets, net |478 |4,527 | |___________________________________________________|_______|________| |Goodwill |871 |6,133 | |___________________________________________________|_______|________| |Total assets |$83,318|$102,405| |___________________________________________________|_______|________| |LIABILITIES AND STOCKHOLDERS' EQUITY | | | |___________________________________________________|_______|________| |Current liabilities | | | |___________________________________________________|_______|________| |Accounts payable |$6,704 |$4,600 | |___________________________________________________|_______|________| |Accrued compensation and benefits |976 |1,305 | |___________________________________________________|_______|________| |Other accrued expenses |2,409 |1,585 | |___________________________________________________|_______|________| |Liabilities of discontinued operations in India |25 |65 | |___________________________________________________|_______|________| |Current maturity of long-term debt |100 |1,898 | |___________________________________________________|_______|________| |Current maturity of arbitration settlement |1,000 |----- | |___________________________________________________|_______|________| |Short-term borrowing |1,579 |----- | |___________________________________________________|_______|________| |Term loans to TD Bank |5,550 |----- | |___________________________________________________|_______|________| |Borrowings under revolving credit facility |9,559 |----- | |___________________________________________________|_______|________| |Total current liabilities |27,902 |9,453 | |___________________________________________________|_______|________| |Accrued arbitration award in Brazil (net of current|4,710 |----- | |maturities) | | | |___________________________________________________|_______|________| |Borrowings under revolving credit facility |------ |11,458 | |___________________________________________________|_______|________| |Other long-term debt |1,298 |4,815 | |___________________________________________________|_______|________| |Other liabilities - accrued legal fees in Brazil |88 |99 | |___________________________________________________|_______|________| |VAT taxes payable long-term |3,329 |3,313 | |___________________________________________________|_______|________| |Total liabilities |37,327 |29,138 | |___________________________________________________|_______|________| | | | | |___________________________________________________|_______|________| |Stockholders' equity | | | |___________________________________________________|_______|________| |Preferred stock, $.01 par; authorized 1,500,000 | | | |shares |------ |----- | | | | | |(none issued) | | | |___________________________________________________|_______|________| |Common stock, $.01 par; authorized 10,000,000 | | | |shares, | | | | | | | |issued 5,688,600 and 5,581,919; outstanding, |57 |56 | |5,332,159 | | | |and 5,225,478 at January 31, 2013 and 2012, | | | |respectively | | | |___________________________________________________|_______|________| |Treasury stock, at cost; 356,441 shares at January | | | |31, 2013 |(3,352)|(3,352) | |and January 31, 2012 | | | |___________________________________________________|_______|________| |Additional paid-in capital |50,973 |50,772 | |___________________________________________________|_______|________| |Retained earnings (deficit) |(472) |25,816 | |___________________________________________________|_______|________| |Accumulated other comprehensive loss |(1,215)|(25) | |___________________________________________________|_______|________| |Total stockholders' equity |45,991 |73,267 | |___________________________________________________|_______|________| |Total liabilities and stockholders' equity |$83,318|$102,405| |___________________________________________________|_______|________|

Lakeland Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended January 31, 2013 and 2012

(In $000's)


                                                   Years Ended
                                                   January 31,
                                                   2013      2012

Net sales from continuing operations               $95,118   $96,327

Cost of goods sold from continuing operations      67,790    67,541

Gross profit from continuing operations            27,328    28,786

Operating expenses from continuing operations

Selling and shipping                               13,148    11,980

General and administrative                         15,209    15,064

Total operating expense from continuing operations 28,357    27,044

Operating profit (loss) from continuing operations (1,030)   1,742

Foreign Exchange loss Brazil                       (741)     (305)

Arbitration judgment in Brazil                     (7,874)   ------

Goodwill and other intangible impairment in Brazil (9,954)   ------

Other income (loss)                                (82)      81

Additional VAT tax charge in Brazil                (137)     -----

Interest expense                                   (913)     (679)

Income (loss) from continuing operations before    (20,731)  839
income taxes

Provision (benefit) for income taxes on continuing 5,036     (254)
operations

Income (loss) from continuing operations           (25,767)  1,093

Discontinued operations:

Loss from operations of discontinued India glove
manufacturing facility (including loss on disposal (800)     (2,315)
of
$800,000 in assets in 2013 and $1,734,000 in 2012)

Benefit from income taxes                          (278)     (845)

Loss on discontinued operations                    (522)     (1,470)

Net loss                                           $(26,289) $(377)

Basic earnings per share:

Income (loss) from continuing operations           $(4.87)   $0.21

Discontinued operations                            (0.10)    (0.28)

Basic loss per share                               $(4.97)   $(0.07)

Diluted earnings per share:

Income (loss) from continuing operations           $(4.87)   $0.20

Discontinued operations                            (0.10)    (0.27)

Diluted loss per share                             $(4.97)   $(0.07)

Weighted average common shares outstanding:

Basic                                              5,290,332 5,224,552

Diluted                                            5,290,332 5,356,114

Lakeland Industries, 631-981-9700, Christopher Ryan, CJRyan@lakeland.com, or 
Gary Pokrassa, GAPokrassa@lakeland.com

http://www.lakeland.com

http://photos.prnewswire.com/prnh/20120611/NY21959LOGO

SOURCE: Lakeland Industries, Inc.

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/May2013/21/c8762.html

CO: Lakeland Industries, Inc.
ST: New York
NI: TEX HEA ERN CONF LOAN MNA 

-0- May/21/2013 20:01 GMT

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