Lakeland Industries, Inc. Reports Fiscal 2014 Third Quarter Financial Results

Lakeland Industries, Inc. Reports Fiscal 2014 Third Quarter Financial Results

Reports Consolidated Operating loss of $1.0 million in Q3 and an operating
profit of $0.9 million, excluding Brazil

Sales down 6.0% consolidated and up 4.6%, excluding Brazil, over Q3 last year

PR Newswire

RONKONKOMA, N.Y., Dec. 12, 2013

RONKONKOMA, N.Y., Dec. 12, 2013 /PRNewswire/ --Lakeland Industries, Inc.
(NASDAQ: LAKE), a leading global manufacturer of industrial protective
clothing for industry, municipalities, healthcare and to first responders on
the federal, state and local levels, today announced financial results for
its third quarter of fiscal year 2014 ended October 31, 2013.

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

Excluding operations in Brazil and the inventory adjustments in the US, the
Company is reporting the best quarter in over three years other than its
second quarter for adjusted EBITDA.

Financial Results Highlights-third quarter of fiscal 2014, and Recent Company
Developments:

  oThe Company has earned operating income before corporate overhead in the
    US of $1.1 million in Q3 of the fiscal year ending January 31, 2014,
    compared $0.4 million in Q3 of last year.
  oReflected in the operating income in the US are two inventory charges:
    $353,000 for overhead rate revisions and a $375,000 reserve for a
    discontinued product line in disposables.
  oBrazil operations in Q3 this year included inventory adjustments of
    $1,158,000. Further, Brazil incurred a loss of $213,000 on sales of raw
    material from inventory in order to raise cash in Brazil.
  oIn Q3 of this year, sales of Lakeland worldwide decreased 6.0% and,
    excluding Brazil, increased 4.6% year over year. Net sales (including
    Brazil) of $22.8 million in Q3FY14 compared with $24.2 million in Q3FY13.
    Net sales, however, excluding Brazil, increased 4.6% from $19.95 million
    last year to $20.87 million this year.
  oSales were weak in Q3 due to:

       oOverall sales increased in the US by $1.6 million, or 16.7%.
         Excluding direct shipment billing in US numbers this year, net
         disposables were down $0.5 million, due largely tolower sales of
         Tyvek as remaining stock has depleted, absence of last October's
         Hurricane Sandy and large shipments to the USDA, softness in the wind
         energy market, and lower sales of disposable FR coverallsdue to
         lower cost FR SMS competition, which we expect to reverse by
         publicizing its adverse protection data. Fire sales were up $.6
         million, reflective sales up $0.2 million, chemical sales were flat,
         and wovens were down $0.3 million due to continued deferred refinery
         turnarounds.
       oChina external sales in Q2 included a major sale to a Chinese auto
         company and also a number of Q3 deliveries to an Asia Pacific
         distributor were delayed until Q4.
       oArgentina: we resolved our internal working capital shortages
         immediately following our financing in late Q2, however, governmental
         restrictions on imports in Argentina caused shortfalls in sales in
         Q3. Coordination of customs import issues remains an issue.
         Management is pursuing all possible remedies. We believe we will have
         at least partial success which should be reflected in greater sales
         in Q4.
       oChile: in Q3 last year Chile had large sales to Peru and Ecuador.
         Bids for both are being processed and management expects some sales
         in Q1 of FY15 for these customers.

  oIn Q3 of this year, gross margin for Lakeland worldwide was 22.1%,
    compared to 30.1% last year. Excluding Brazil, gross margin decreased from
    30.7% last year to 28.4% this year. However, excluding Brazil and
    excluding the inventory charges in the US described above, gross margin
    increased to 31.9% as compared with 30.7% for Q3 last year.
  oOperating expenses worldwide decreased by $947,000 and decreased as a
    percent of sales to 26.7% from 29.0% last year. Operating expenses for
    Lakeland worldwide, excluding Brazil, decreased by $448,000. SGA as a
    percent of sales, excluding Brazil, decreased from 27.5% to 24.1%.
  oAdjusted EBITDA increased to $1.6 million this year from $1,001,000 last
    year. Adjusted EBITDA for Lakeland worldwide, excluding Brazil, increased
    from $1,289,000 last year to $2,102,000 this year.
  oMost of the improvement in adjusted EBITDA was generated in the United
    States and China.
  oNet loss of $1.8 million ($(0.31) per share) this year vs. $0.3 million
    profit ($0.05 per share) last year.
  oThe Company completed its refinancing with BDC in Canada for US $1.06
    million and closed a new loan in China for $0.8 million.
  oDuring the Quarter ending October 31, 2013, Lakeland terminated the
    previous management in Brazil and hired a new CEO specializing in
    turnaround situations. We adopted a new strategy emphasizing industrial
    and smaller governmental agency orders, de-emphasizing large bid
    contracts. Accordingly, throughout the current fiscal year, there has been
    major cost cutting in Brazil to "right size" the operation to appropriate
    levels for the new lower volume strategy.
  oNet book value per share, counting shares underlying warrant with a
    nominal exercise price, is $8.24.
  oNext to Q2, the third quarter, excluding Brazil and inventory charges was
    the best quarter in respect to adjusted EBITDA in over three years.



Operating Earnings and Adjusted EBITDA - Lakeland Consolidated with and
without Brazil ($000) *
                 Quarter Ended October 31 2013   Quarter Ended October 31 2012
                                      Lakeland                       Lakeland

                 Lakeland     Brazil  worldwide  Lakeland     Brazil worldwide
                              **                              **
                 consolidated         excluding  consolidated        excluding

                                      Brazil                         Brazil
Sales            $22,787      $1,914  $20,873    $24,239      $4,285 $19,954
Year over year   (6.0)%       (55.3)% 4.6%       -----        -----  -----
growth (decline)
Gross profit     5,042        (895)   5,937      7,287        1,161  6,126
(loss)
Gross margin     22.1%        (46.7)% 28.3%      30.1%        27.1%  30.7%
Operating        6,073        1,037   5,036      7,020        1,536  5,484
expenses
 Operating
expense as % of  26.7%        54.2%   24.1%      29.0%        35.8%  27.5%

 sales
Operating income (1,030)      (1,932) 902        267          (375)  642
(loss)
Less other       116          116     -----      (62)         (62)   -----
expenses
Add other income 57           -----   57         52           -----  52
Add depreciation
and              449          87      362        383          77     306

amortization
 EBITDA        (408)        (1,729) 1,321      640          (360)  1,000
Equity           20           -----   20         189          -----  189
compensation
Brazil severance
and executive    74           42      32         -----        -----  -----

recruiter fee
Brazil
additional
foreign          (116)        (116)   -----      62           62     -----

exchange losses
Brazil
additional VAT   153          153     -----      -----        -----  -----
tax charge
Brazil
additional
inventory        1,159        1,159   -----      -----        -----  -----

reserve charge
Change in
accounting
estimate-        354          -----   354        -----        -----  -----

OH rates revised
Inventory
reserve in USA-  375          -----   375        -----        -----  -----
discontinued
product line
Severance        -----        -----   -----      110          -----  110
charges in USA
Brazil CEO
termination      -----        -----   -----      -----        -----  -----

settlement
 ADJUSTED      $1,611       $(491)  $2,102     $1,001       $(288) $1,289
EBITDA
*This table is a reconciliation of GAAP to non-GAAP Financial Measures.
**Brazil numbers, as presented in this table, include immaterial intercompany
transactions.



Operating Earnings and Adjusted EBITDA - Lakeland Consolidated with and
without Brazil ($000) *
              Nine months Ended October 31     Nine months Ended October 31
              2013                             2012
                                    Lakeland                         Lakeland

              Lakeland              worldwide  Lakeland              worldwide
                           Brazil**                         Brazil**
              consolidated          excluding  consolidated          excluding

                                    Brazil                           Brazil
Sales         $69,163      $5,398   $63,765    $71,719      $14,173  $57,546
Year over     (3.6)%       (61.9)%  10.8%      (21.8)%      263.7%   (31.7)%
year growth
Gross profit  18,584       (478)    19,063     21,729       4,772    16,956
Gross margin  26.9%        (8.9)%   29.9%      30.3%        33.7%    29.5%
Operating     18,555       3,264    15,291     21,285       5,017    16,268
expenses
 Operating
expense as %
of            26.8%        60.5%    24.0%      29.7         35.4%    28.3%

 sales
Operating     30           (3,742)  3,772      444          (244)    688
income (loss)
Less other    (271)        (271)    -----      (8,627)      (8,627)  -----
expenses
Add other     20           -----    20         85           -----    85
income
Add
depreciation
and           1,226        276      950        1,129        224      905

amortization
 EBITDA     1,005        (3,737)  4,742      (6,969)      (8,647)  1,678
Equity        179          -----    179        366          -----    366
compensation
Brazil
arbitration   -----        -----    -----      7,874        7,874    -----
judgment
Brazil
severance and
executive     154          122      32         -----        -----    -----

recruiter fee
Financing
fees in other
expenses      75           -----    75         -----        -----    -----

(adjustments)
QD plant
shutdown
costs and     480          -----    480        -----        -----    -----

costs of sale
Brazil
additional
foreign       271          271      -----      840          840      -----

exchange
losses
Brazil
additional    153          153      -----      -----        -----    -----
VAT tax
charge
Brazil
additional
inventory     1,159        1,159    -----      -----        -----    -----

reserve
charge
Change in
accounting
estimate-     354          -----    354        -----        -----    -----

OH rates
revised
Inventory
reserve in
USA-          375          -----    375        -----        -----    -----

discontinued
product line
Severance
charges in    -----        -----    -----      110          -----    110
USA
 ADJUSTED   $4,205       $(2,032) $6,237     $2,205       $67      $2,139
EBITDA
*This table is a reconciliation of GAAP to non-GAAP Financial Measures.
**Brazil numbers, as presented in this table, include immaterial intercompany
transactions.



Management's Comments

Christopher J. Ryan stated, "As stated previously, management believes it will
have Brazil turned around by the first quarter in 2014. Other than Brazil, all
of our other business units are doing well and as projected. Once Brazil is at
breakeven, the full earning potential of the rest of the Company will be
apparent.

"It is important to note that our current bank covenants and lines of credit
are NOT dependent upon operations in Brazil. Thus, management is free to
reorganize it, and we have and will continue to follow such a course of
action."

Financial Results Conference Call

Lakeland will host a conference call at 4:30 PM (EST) today to discuss the
Company's third quarter fiscal 2014 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 877-870-4263 (Domestic) 412-317-0790 (International) or
855-669-9657 (Canada), Pass Code 10037639.

A conference call replay will be available by dialing 877-344-7529 (Domestic)
or 412-317-0088 (International), Pass Code 10037639.

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 Forms 8-K, registration
statements, quarterly and annual reports and other 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.

Non-GAAP Financial Measures

  To supplement its consolidated financial statements, which are prepared and
  presented in accordance with Generally Accepted Accounting Principles
  (GAAP), the Company uses the following non-GAAP financial measures: EBITDA,
  Adjusted EBITDA and consolidated income, excluding Brazil. The presentation
  of this financial information is not intended to be considered in isolation
  or as a substitute for, or superior to, the financial information prepared
  and presented in accordance with GAAP. The Company uses these non-GAAP
  financial measures for financial and operational decision making and as a
  means to evaluate period-to-period comparisons. The Company believes that
  they provide useful information about operating results, enhance the overall
  understanding of past financial performance and future prospects, and allow
  for greater transparency with respect to key metrics used by management in
  its financial and operational decision making. The non-GAAP financial
  measures used by the Company in this press release may be different from the
  methods used by other companies.

  For more information on the non-GAAP financial measures, please see the
  Reconciliation of GAAP to non-GAAP Financial Measures tables in this press
  release. These accompanying tables include details on the GAAP financial
  measures that are most directly comparable to non-GAAP financial measures
  and the related reconciliations between these financial measures.



Lakeland Industries, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands except share data)
                                             October 31, 2013 January 31, 2013
ASSETS                                       (Unaudited)
Current assets
Cash and cash equivalents                    $5,019           $6,737
Accounts receivable, net                    15,047           13,783
Inventories                                  40,440           39,271
Deferred income tax                          4,594            -----
Assets of discontinued operations in India   20               813
Prepaid income tax                           629              1,565
Other current assets                         2,484            1,703
Total current assets                         68,233           63,872
Property and equipment, net                  12,572           14,090
Prepaid VAT and other taxes, noncurrent      2,417            2,461
Security deposits                            1,462            1,546
Other assets, net                            1,782            478
Goodwill                                     872              871
Total assets                                 $87,338          $83,318
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable                             $9,242           $6,704
Accrued compensation and benefits            1,300            976
Other accrued expenses                       2,509            2,409
Liabilities of discontinued operations in    -------          25
India
Current maturity of long-term debt           50               100
Current maturity of arbitration settlement   1,000            1,000
Short-term borrowing                   2,701            7,129
Borrowings under revolving credit facility   11,791           9,559
Total current liabilities                    28,593           27,902
Accrued arbitration award in Brazil (net of  4,008            4,711
current maturities)
Canadian loan                                1,012            1,298
Subordinated debt, net of OID                1,539            -----
Other liabilities - accrued legal fees in    78               87
Brazil
VAT taxes payable long-term                  3,330            3,329
Total liabilities                            38,560           37,327
Stockholders' equity:
Preferred stock, $.01 par; authorized        --------         --------
1,500,000 shares - (none issued)
Common stock, $.01 par; authorized
10,000,000 shares, issued 5,711,727 and

5,688,600; outstanding 5,355,286 and         57               57
5,332,159 at October 31, 2013 and

January 31, 2013, respectively
Treasury stock, at cost; 356,441 shares at
October 31, 2013 and January 31,             (3,352)          (3,352)

2013, respectively
Additional paid-in capital                   53,347           50,973
Retained earnings (deficit)                  1,019            (473)
Accumulated other comprehensive loss         (2,293)          (1,214)
Total stockholders' equity                   48,778           45,991
Total liabilities and stockholders' equity   $87,338          $83,318



LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three months and nine months ended October 31, 2013 and 2012
                                    THREE MONTHS ENDED  NINE MONTHS ENDED
                                    October 31,         October 31,
                                    2013      2012      2013      2012
Net sales                           $22,787   $24,239   $69,163   $71,719
Cost of goods sold                  17,745    16,952    50,579    49,989
Gross profit                        5,042     7,287     18,584    21,730
Operating expenses                  6,072     7,020     18,554    21,285
Operating profit (loss)             (1,030)   267       30        444
Foreign exchange gain (loss) Brazil 116       (62)      (272)     (840)
Arbitration judgment in Brazil      -------   -----     --------  (7,874)
Other income, net                   57        52        21        172
Interest expense                    (649)     (270)     (1,391)   (766)
Income (loss) before taxes          (1,506)   (13)      (1,612)   (8,864)
Income tax expense (benefit)        329       (295)     (3,103)   (669)
Net income (loss)                   $(1,835)  $283      $1,491    $(8,195)
Net income (loss) per common share
Basic                               $(0.31)   $0.05     $0.27     $(1.55)
Diluted                             $(0.31)   $0.05     $0.26     $(1.55)
Weighted average common shares

outstanding:
Basic                               5,919,253 5,330,286 5,607,654 5,276,288
Diluted                             5,919,253 5,367,243 5,715,151 5,276,288



SOURCE Lakeland Industries, Inc.

Website: http://www.lakeland.com
Contact: Lakeland Industries, 631-981-9700, Christopher Ryan,
CJRyan@lakeland.com, Gary Pokrassa, GAPokrassa@lakeland.com
 
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