Blueprint
Lakeland
Industries, Inc. Reports Fiscal 2020 First Quarter Financial
Results
RONKONKOMA,
NY – June 10, 2019 -- 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 2020 first
quarter ended April 30, 2019.
Fiscal 2020 First Quarter Financial Results Highlights and Recent
Developments
●
Net sales for
Q1FY20 of $24.7 million, compared with Q1FY19 of $24.3 million and
Q4FY19 of $25.0 million
●
Gross profit for
Q1FY20 of $7.6 million, compared with Q1FY19 of $9.5 million and
Q4FY19 of $6.9 million
●
Gross margin as a
percentage of net sales in Q1FY20 was 30.6%, compared to 39.0% in
Q1FY19 and 27.7% in Q4FY19
●
Operating expenses
of $7.9 million in Q1FY20, up from $7.1 million in Q1FY19 but down
from $8.4 million in Q4FY19
●
Q1FY20 sales, gross
profit/margin and operating expenses were negatively impacted by
enterprise resource planning (“ERP”) implementation and
reflect substantial build-out of new manufacturing and fulfillment
facilities in Vietnam and India during trailing 12-month
period
●
Net loss of
$(465,000) or $(0.06) per basic share for Q1FY20, compared with net
income of $1.9 million or $0.23 per basic share in Q1FY19 and net
loss of $(1.9) million or $(0.24) per basic share in
Q4FY19
●
Adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA)* of
$269,000, as compared to $2.7 million in Q1FY19 and a loss of
$(932,000) in Q4FY19
●
Capital
expenditures for fiscal 2020 first quarter were $200,000 as
compared with approximately $300,000 in the fiscal 2019
period
●
Cash of $14.3
million at end of Q1FY20, up from $12.8 million at end of fiscal
2019
●
Total debt was
$1,279,000 at end of Q1FY20, down from $1,319,000 at end of fiscal
2019
●
No shares were
repurchased during the three-month period ended April 30,
2019
*
Adjusted EBITDA is a non-GAAP financial measure. A reconciliation
is provided in the tables of this press release.
Management’s Comments
Christopher
J. Ryan, President and Chief Executive Officer of Lakeland
Industries, stated, “Our first quarter fiscal 2020 results
show important progress from the fourth quarter of last year. Most
notable on a sequential basis, we delivered an improvement in gross
margin, a reduction of operating expenses, lower operating and net
losses, and a return to Adjusted EBITDA profitability. With the
sequential performance measures providing perspective on the
headway we have been making, we believe we are now past a major
part of the challenging aspects of our initiatives, although
significant work remains to be done to fully capitalize on the many
opportunities available in the markets in which we
operate.
“We
are now on our way toward the completion of the ERP system
installation for our domestic operations – more than half of
our total business -- that ultimately should drive meaningful
benefits throughout our global organization. However, the
challenges for optimizing the system let alone conduct business as
usual have led to significantly greater than anticipated costs in
freight and labor, delivery delays and disruption in our finance
department which had been leading this process. In May we engaged a
specialist to spearhead the ERP implementation program and are
conducting a search for a highly experienced Chief Financial
Officer. As a result, we now anticipate roll out of our ERP system
to foreign entities to begin in the first quarter of fiscal
2021.
“Similar
to the fourth quarter, the ERP system in the US led to lower
domestic sales and gross margins due to order processing issues
and, particularly in the first quarter, the significant expense
incurred to ensure to the extent possible that our customers
received their shipments on time. That our gross margin increased
from the fourth quarter amid these challenges as well as pricing
pressure in select markets and other macroeconomic concerns
demonstrates the potential for revenue growth and profitability
expansion once conditions normalize. In hindsight it would have
been preferable to have delayed our ERP implementation. We cannot
rewrite history and are doing our utmost to bring operations back
to normal.
“The
other critical change to our business has been the ramping of our
Vietnam manufacturing and associated operations along with our new
facility in India. We have been investing in these facilities for
more than a year, while adding in-country sales and warehousing
capabilities. Capital expenditures for equipment peaked last year,
so we are now spending less in fiscal 2020. Staffing in Vietnam has
been elevated to near capacity and we are training the staff while
transitioning some of the production headcount from China to the
new facility. Following a training regimen to yield more efficient
output over the next few quarters, we expect a much lower cost
tariff-free manufacturing platform to further bolster our financial
performance. Sales within Vietnam and India are also gaining
traction.
“Our
efforts to strengthen our global marketing channels and
manufacturing capabilities and improve our overall financial
performance are gaining ground. At the same time, in the first
quarter of fiscal 2020, we increased our cash position and modestly
reduced the little debt that remains on our balance sheet. We are
encouraged by the Company’s direction and
progress.”
Fiscal 2020 First Quarter Financial Results
Net
sales were $24.7 million for the three months ended April 30, 2019,
as compared to $24.3 million for the three months ended April 30,
2018 and $25.0 million for the three months ended January 31, 2019.
On a consolidated basis for the first quarter of fiscal 2020,
domestic sales were $12.9 million or 52% of total revenues and
international sales were $11.8 million or 48% of total revenues.
This compares with domestic sales of $12.3 million or 51% of the
total, and internationals sales of $12.0 million or 49% of the
total in the same period of fiscal 2019.
The
Company experienced sales growth domestically, despite delivery
challenges associated with the ERP implementation, as well as in
all operating regions in the Americas excluding Mexico. Sales in
Mexico were lower due to a large, recurring customer bid for FR
garments that was previously won and filled but has not been
republished yet this year. Pricing pressure, from two of our major
competitors and unfavorable foreign exchange currency translations
negatively impacted sales in the UK and Europe as reported on a
consolidated basis in US dollars. One of our major customers in the
Asia Pacific Region has made the decision to exit the protective
clothing market in the region resulting in a modest reduction in
sales in Asia/Pacific Rim.
Gross
profit of $7.6 million for fiscal 2020 first quarter declined from
$9.5 million for the same period of the prior year but increased
from $6.9 million in the fourth quarter of fiscal 2019. Gross
profit as a percentage of net sales was 30.6% for fiscal 2020 first
quarter, down from 39.0% a year ago and higher than 27.7% reported
in the fourth quarter of fiscal 2019.
Gross
margin in dollars and as a percentage of sales for the first
quarter of fiscal 2020 as compared to the prior year period
decreased primarily because of a decline of 10 percentage points
for products sold in the US which results from increased
manufacturing expenses in China due to increased labor costs and
Vietnam start-up expenses, coupled with increased expenses across
distribution and supply chain management associated with the
implementation of the new ERP system. A more competitive pricing
environment as compared to a year ago and product mix variations
also contributed to the financial performance. As compared to the
fourth quarter of fiscal 2019 on a sequential basis, the
improvements in both gross margin in dollars and as a percentage of
sales reflects progress in reducing costs from their more recent
elevated levels and higher consolidated global sales.
Operating
expenses increased 11.0% from $7.1 million for the three months
ended April 30, 2018 to $7.9 million for the three months ended
April 30, 2019, and declined 6.0% from $8.4 million for the fourth
quarter of fiscal 2019. Operating expenses as a percentage of net
sales was 31.9% for the three months ended April 30, 2019, compared
to 29.1% for the three months ended April 30, 2018 and 33.6% for
the three months ended January 31, 2019. The main factors for the
increase in operating expenses on a year-over-year basis are higher
expenses for increased business activities as the Company has
expanded its global operations and production capacity, added staff
and grew its customer list and revenue base along with continued
professional and labor expenses relating to matters surrounding the
ERP conversion.
Lakeland
reported an operating loss of $(0.3) million for the three months
ended April 30, 2019, down from operating profit of $2.4 million
for the three months ended April 30, 2018 and an improvement from
an operating loss of $(1.5) million for the three months ended
January 31, 2019. Operating margins were (1.3%) for the three
months ended April 30, 2019, 9.9% for the three months ended April
30, 2018 and (6.0)% for the three months ended January 31,
2019.
Income
tax expense consists of federal, state and foreign income taxes.
Income tax expense was $0.1 million for the three months ended
April 30, 2019, compared to $0.5 million for the three months ended
April 30, 2018.
The
Company reported a net loss of $(0.5) million or $(0.06) per basic
share for the three months ended April 30, 2019, compared to net
income of $1.9 million or $0.23 per basic share for the three
months ended April 30, 2018 and a net loss of $(1.9) million or
$(0.24) per basic share for the three months ended January 31,
2019. The results for three months ended April 30, 2019 as compared
to the prior year period are primarily due to the reduction in
gross profit and the increase of operating expenses. Sequentially
from the fourth quarter of fiscal 2019, Lakeland reduced its net
loss but continue to reflect higher spending on growth initiatives
and challenges relating to the continued ERP implementation as
noted above.
As of
April 30, 2019, Lakeland had cash and cash equivalents of
approximately $14.3 million and working capital of $64.1 million.
Cash and cash equivalents increased nearly $1.5 million from the
beginning of the fiscal year, while working capital modestly
decreased by $1.0 million. The Company’s $20 million
revolving credit facility had a $0 balance as of April 30, 2019,
unchanged from the end of the prior fiscal year. Total debt
outstanding at April 30, 2019 was less than $1.3 million, down
$40,000 from over $1.3 million at January 31, 2019.
The
Company incurred capital expenditures of approximately $0.2 million
during the first quarter of fiscal 2020, down from $0.3 million in
the first quarter of the prior year. Capital expenditures for all
of fiscal 2019 were $3.1 million and are expected to decline to
approximately $2.0 million for fiscal 2020, with the majority of
spending in the current year allocated toward the phased global
rollout of the ERP system and additional manufacturing capacity in
Vietnam and India.
No
shares were repurchased during the three-month period ended April
30, 2019 as part of the Company’s $2.5 million stock
repurchase program approved on July 19, 2016. To date, $1.2 million
was spent to repurchase 105,648 shares.
Financial Results Conference Call
Lakeland
will host a conference call at 4:30 pm eastern time today to
discuss the Company's fiscal 2020 first quarter financial results.
The call will be hosted by Christopher J. Ryan, Lakeland's
President and CEO. Investors can listen to the call by dialing
844-602-0380 (Domestic)
or 862-298-0970 (International). For a replay of this call through
June 17, 2019, dial 877-481-4010, Pass Code 49475.
About Lakeland Industries, Inc.:
We
manufacture and sell a comprehensive line of industrial protective
clothing and accessories for the industrial and public protective
clothing market. Our products are sold globally by our in-house
sales teams, our customer service group, and authorized independent
sales representatives to a network of over 1,600 global safety and
industrial supply distributors. Our authorized distributors supply
end users, such as integrated oil, chemical/petrochemical,
automobile, steel, glass, construction, smelting, cleanroom,
janitorial, pharmaceutical, and high technology electronics
manufacturers, as well as scientific, medical laboratories and the
utilities industry. In addition, we supply federal, state and local
governmental agencies and departments, such as fire and law
enforcement, airport crash rescue units, the Department of Defense,
the Department of Homeland Security and the Centers for Disease
Control. Internationally, we sell to a mixture of end users
directly, and to industrial distributors depending on the
particular country and market. Sales are made to more than 50
countries, the majority of which were into the United States,
China, the European Economic Community ("EEC"), Canada, Chile,
Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India,
Uruguay and Southeast Asia.
For
more information concerning Lakeland, please visit the Company
online at www.lakeland.com.
Contacts:
Lakeland
Industries, Inc.
Darrow
Associates
631-981-9700
512-551-9296
Christopher Ryan,
CJRyan@lakeland.com
Jordan Darrow,
jdarrow@darrowir.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 Free Cash
Flow. 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.
(tables
follow)
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000’s) Except Share Information
ASSETS
|
|
|
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$14,282
|
$12,831
|
Accounts
receivable, net of allowance for doubtful accounts of $539 and $434
at April 30, 2019 and January 31, 2019, respectively
|
15,167
|
16,477
|
Inventories
|
46,761
|
42,365
|
Prepaid VAT tax and
other taxes
|
1,351
|
1,478
|
Other current
assets
|
2,558
|
2,319
|
Total current
assets
|
80,119
|
75,470
|
Property and
equipment, net
|
10,596
|
10,781
|
Operating leases
right-of-use assets
|
2,234
|
-----
|
Deferred tax
assets
|
7,425
|
7,267
|
Prepaid VAT and
other taxes
|
176
|
176
|
Other
assets
|
144
|
158
|
Goodwill
|
871
|
871
|
Total
assets
|
$101,565
|
$94,723
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$10,440
|
$6,214
|
Accrued
compensation and benefits
|
1,655
|
1,137
|
Other accrued
expenses
|
3,061
|
2,825
|
Current maturity of
long-term debt
|
158
|
158
|
Current portion of
operating lease liabilities
|
676
|
-----
|
Total current
liabilities
|
15,990
|
10,334
|
Long-term
portion of debt
|
1,121
|
1,161
|
Long-term
portion of operating lease liabilities
|
1,559
|
-----
|
Total noncurrent
liabilities
|
2,680
|
1,161
|
Total
liabilities
|
18,670
|
11,495
|
Commitments and
contingencies
|
|
|
Stockholders’
equity
|
|
|
Preferred stock,
$0.01 par; authorized 1,500,000 shares (none issued)
|
-----
|
-----
|
Common stock, $0.01
par; authorized 20,000,000 shares
Issued
8,475,929 shares; outstanding 8,013,840 shares at April 30, 2019
and January 31, 2019, respectively
|
85
|
85
|
Treasury stock, at
cost; 462,089 shares
|
(4,517)
|
(4,517)
|
Additional paid-in
capital
|
75,813
|
75,612
|
Retained
earnings
|
13,835
|
14,300
|
Accumulated other
comprehensive loss
|
(2,321)
|
(2,252)
|
Total stockholders'
equity
|
82,895
|
83,228
|
Total liabilities
and stockholders' equity
|
$101,565
|
$94,723
|
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000’s) Except Share Information
|
Three Months
Ended
April
30,
|
|
|
|
Net
sales
|
$24,684
|
$24,344
|
Cost of goods
sold
|
17,130
|
14,840
|
Gross
profit
|
7,554
|
9,504
|
Operating
expenses
|
7,869
|
7,088
|
Operating profit
(loss)
|
(315)
|
2,416
|
Other income
(expense), net
|
(27)
|
(1)
|
Interest
expense
|
(34)
|
(31)
|
Income
(loss) before taxes
|
(376)
|
2,384
|
Income tax
expense
|
89
|
517
|
Net income
(loss)
|
$(465)
|
$1,867
|
Net income (loss)
per common share:
|
|
|
Basic
|
$(0.06)
|
$0.23
|
Diluted
|
$(0.06)
|
$0.23
|
Weighted average
common shares outstanding:
|
|
|
Basic
|
8,013,840
|
8,116,199
|
Diluted
|
8,013,840
|
8,160,380
|
LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES
Operating Results ($000)
|
Reconciliation to GAAP Results
|
|
Three months
ended
April
30,
|
|
|
|
|
|
|
Net
sales
|
$24,684
|
$24,344
|
Year over year
growth
|
1.40%
|
6.0%
|
Gross
profit
|
7,554
|
9,504
|
Gross profit
%
|
30.60%
|
39.0%
|
Operating
expenses
|
7,869
|
7,088
|
Operating expenses
as a percentage of sales
|
31.88%
|
29.1%
|
Operating income
(loss)
|
(315)
|
2,416
|
Operating income
(loss) as a percentage of sales
|
(1.28%)
|
9.9%
|
Interest
expense
|
(34)
|
(31)
|
Other income
(expense), net
|
(27)
|
(1)
|
Pretax income
(loss)
|
(376)
|
2,384
|
Income tax
expense
|
89
|
517
|
Net income
(loss)
|
$(465)
|
$1,867
|
|
|
|
Weighted average
shares for EPS-Basic
|
8,013,840
|
8,116,199
|
Net income (loss)
per share
|
$(0.06)
|
$0.23
|
|
|
|
Operating income
(loss)
|
$(315)
|
$2,416
|
Depreciation and
amortization
|
383
|
187
|
EBITDA
|
68
|
2,603
|
Equity
Compensation
|
201
|
119
|
Adjusted
EBITDA
|
269
|
2,722
|
Cash paid for taxes
(foreign)
|
276
|
303
|
Capital
expenditures
|
168
|
272
|
Free cash
flow
|
$(175)
|
$2,147
|
|
|
|
TTM Adjusted
EBITDA
|
$2,821
|
$9,640
|
TTM cash paid for
taxes (foreign)
|
1,640
|
1,179
|
TTM capital
expenditures
|
2,999
|
1,036
|
TTM free cash
flow
|
$(1,818)
|
$7,425
|
LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
Operating
Results ($000)
|
|
|
Reconciliation
of Non-GAAP Results
|
|
|
|
|
|
|
Three
Months Ended
April
30,
|
|
|
|
Net
Income (loss) to EBITDA
|
|
|
Net
Income (loss)
|
$(465)
|
$1,867
|
Interest
|
34
|
31
|
Taxes
|
89
|
517
|
Depreciation
and amortization
|
383
|
187
|
Less
Other income (expense), net
|
(27)
|
(1)
|
EBITDA
|
68
|
2,603
|
EBITDA
to Adjusted EBITDA (excluding non-cash and one-time
expenses)
|
|
|
EBITDA
|
68
|
2,603
|
Equity
compensation
|
201
|
119
|
|
|
|
Adjusted
EBITDA (excluding non-cash and one-time expenses)
|
269
|
2,722
|
Adjusted
EBITDA to Adjusted Free Cash Flow (excluding non-cash and one-time
expenses)
|
|
|
Adjusted
EBITDA (excluding non-cash and one-time expenses)
|
269
|
2,722
|
Cash
paid for taxes (foreign)
|
276
|
303
|
Capital
expenditures
|
168
|
272
|
Adjusted
Free Cash Flow (excluding non-cash and one-time
expenses)
|
$(175)
|
$2,147
|
|
|
|
|
|
|