UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _______________
Commission File Number: 0-15535
LAKELAND INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3115216
(State of incorporation)(IRS Employer Identification Number)
711-2 Koehler Ave., Ronkonkoma, New York 11779
(Address of principal executive offices)
(516) 981-9700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13
or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the
latest practicable date:
Common Stock, $.01 par value, outstanding at December 5,
1997 - 2,610,472 shares.
LAKELAND INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-Q
The following information of the Registrant and its
subsidiaries is submitted herewith:
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements Page
Introduction 1
Condensed Consolidated Balance Sheets
- - October 31, 1997
and January 31, 1997 2
Condensed Consolidated Statements
of Income and Retained Earnings -
Three Months and Nine Months Ended
October 31, 1997 and 1996 3
Condensed Consolidated Statements
of Cash Flows - Nine Months Ended
October 31, 1997 and 1996 4
Notes to Condensed Consolidated
Financial Statement 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II - OTHER INFORMATION:
Item 6 Exhibits and Reports on Form 8-K 6
Signatures 7
LAKELAND INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Introduction
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission and reflect all adjustments which are,
in the opinion of management, necessary to present fairly
the consolidated financial information required therein.
Certain information and note disclosures normally included
in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are
adequate to makethe information presented not misleading.
It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and
the notes thereto included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission
for the year ended January 31, 1997.
The results of operations for the three month and nine
month periods ended October 31, 1997 and 1996 are not
necessarily indicative of the results to be expected for the
full year.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited)
October 31, January 31,
ASSETS 1997 1997
Current Assets:
Cash $672,958 $504,940
Accounts receivable, net
of allowance for
doubtful accounts of
$204,000 at October 31,
1997 and $150,000 at
January 31, 1997 6,235,609 5,893,594
Inventories 14,278,091 9,894,156
Deferred income taxes 469,000 469,000
Other current assets 395,902 176,901
Total current assets 22,051,560 16,938,591
Property and equipment,
net of accumulated
depreciation of $2,045,000
at October 31, 1997
and $1,763,000 at
January 31, 1997 1,363,343 989,667
Excess of cost over fair
value of net assets
acquired, net of accumulated
amortization of $213,000 at
October 31, 1997 and
$198,000 at January 31, 1997 332,126 347,116
Other assets 122,505 297,742
--------------------------
$23,869,534 $18,573,116
=============================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $4,286,693 $2,534,999
Current portion of long-term
liabilities 50,000 50,000
Accrued expenses and other
current liabilities 611,260 335,314
---------------------------
Total current liabilities 4,947,953 2,920,313
---------------------------
Long-term liabilities 7,623,289 5,745,789
---------------------------
Deferred income taxes 82,000 82,000
---------------------------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.01 par;
1,500,000 shares authorized;
none issued Common stock,
$.01 par; 10,000,000 shares
authorized; 2,610,472 and
2,550,000 shares issued
and outstanding at
October 31, 1997 and
January 31, 1997, respectively 26,105 25,500
Additional paid in capital 6,073,359 5,981,226
Retained earnings 5,116,828 3,818,288
------------------------------
Total stockholders' equity 11,216,292 9,825,014
------------------------------
$23,869,534 $18,573,116
===============================
See notes to condensed consolidated financial statements.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS (unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
October 31 October 31
1997 1996 1997 1996
Net Sales $11,092,427 $9,884,564 $35,041,304 $30,555,478
Cost of Goods
Sold 8,754,242 8,154,953 27,867,073 24,972,890
Gross Profit 2,338,185 1,729,611 7,174,231 5,582,588
Operating
expenses 1,635,451 1,368,192 4,708,270 3,997,700
---------------------------------------------
Income from
Operations 702,734 361,419 2,465,961 1,584,888
Other Income/
(Expense) 8,053 11,699 36,495 38,679
Interest Expense (127,374) (135,330) (333,574) (390,256)
----------------------------------------------
Income before
income taxes 583,413 237,788 2,168,882 1,233,311
Provision for
income taxes 225,999 92,000 870,342 480,000
---------------------------------------------
Net Income 357,414 145,788 1,298,540 753,311
Retained Earnings
at Beginning
of Period 4,759,414 3,362,515 3,818,288 2,754,992
-----------------------------------------------
Retained Earnings
at End of Period $5,116,828 $3,508,303 $5,116,828 $3,508,303
================================================
Net income per
common share $.13 $.06 $.49 $.29
===========================================
Average number
of common
shares outstanding 2,671,309 2,609,845 2,653,457 2,611,116
================================================
See notes to condensed consolidated financial statements.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
October 31,
1997 1996
Cash Flows from Operating Activities:
Net Income $1,298,540 $753,311
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 276,505 252,443
Decrease (increase)
in accounts receivable (342,015) (26,875)
Decrease (increase) in
inventories (4,383,935) 754,258
Decrease (increase) in
other current assets (219,001) 210,788
Decrease (increase) in
other assets 175,237 -
Increase (decrease) in
accounts payable, accrued
expenses and other current
liabilities 2,105,140 (1,765,135)
--------------------------------------
Net cash provided by
(used in) operating
activities (1,089,529) 178,790
Cash Flows from Investing Activities:
Purchases of property
and equipment (635,191) (252,578)
Cash Flows from Financing Activities:
Proceeds from exercise
of options 92,738 -
Net borrowings under
line of credit agreement 1,800,000 357,701
-----------------------------------
Net increase in cash 168,018 283,913
Cash at beginning of period 504,940 364,640
-----------------------------------
Cash at end of period $672,958 $648,553
==============================
See notes to condensed consolidated financial statements.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Inventories:
Inventories consist of the following:
October 31, January 31,
1997 1997
Raw materials $2,455,886 $2,669,254
Work in process 3,497,771 3,124,141
Finished goods 8,324,434 4,100,761
------------------------------
$14,278,091 $9,894,156
==============================
Inventories are stated at the lower of cost or
market. Cost is determined generally on the first-in, first-
out method.
B. Earnings Per Common and Common Equivalent Share:
Earnings per share for the three and nine
month periods ended October 31, 1997 and 1996 is based on
the weighted average number of common shares outstanding and
common share equivalents.
C. Revolving Credit Facility:
At October 31, 1997, the balance outstanding under the Company's
$8,000,000 secured revolving credit facility
amounted to $7,250,000. The Company was in compliance with
all loan covenants at October 31, 1997. This Facility is
collateralized by the Company's inventories and accounts
receivable, expires on February 28, 1999 and interest charges
are calculated on various optional formulas using the prime
rate, LIBOR, banker's acceptance and letters of credit. The
facility contains restrictive covenants including minimum
tangible net worth, capital expenditures, current ratio and
interest coverage.
D. New Accounting Pronouncement:
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
128, "Earnings Per Share", which is effective for financial
statements for both interim and annual periods ending after
December 15, 1997. Early adoption of the new standard is not
permitted. The new standard eliminates primary and fully
diluted earnings per share and requires presentation of basic
and diluted earnings per share together with disclosure of
how the per share amounts were computed. Basic earnings per
share exclude dilution and are computed by dividing income
available to common shareholders by the weighted-average
common shares outstanding for the period. Diluted earnings
per share reflect the weighted-average common shares outstanding, plus
the potential dilutive effect of options
which are convertible to common shares. The effect of
adopting this new standard has not been determined.
E. Stock Options:
During the nine months ended October 31, 1997, an
aggregate of 10,000 shares were exercised under the
Company's Non-Employee Directors Option Plan by directors and
an aggregate of 50,472 shares were exercised under the
Company's Incentive and Non-Statutory Stock Option Plan by
employees for total cash proceeds $92,738.
ITEM 2.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine months ended October 31, 1997 compared to the nine
months ended October 31, 1996.
Net sales for the nine month period ended October 31,
1997 increased $4,486,000 or 14.7% to $35,041,000
from $30,555,000 reported for the nine month period ended
October 31, 1996. Increased unit shipments of various
protective garment products is the principle reason for this
upward movement in sales. This industry, however, continues
to be highly competitive.
Gross profit as a percentage of net sales increased to
20.5% for the nine month period ended October 31, 1997
from 18.3% reported for the corresponding period of the prior
year, principally due to increased sales volume.
Operating expenses as a percentage of net sales remained
constant at 13.4% for the nine month period ended October 31,
1997 from 13.1% for the corresponding period of the prior
year, as the increase in operating expenses was consistent
with the increase in sales.
Interest expense decreased as aggregate borrowings
decreased during the first nine months of the current period.
As a result of the foregoing, operating results
increased to a net income of $1,299,000 for the nine month
period ended October 31, 1997 from net income of $753,000 for
the nine month period ended October 31, 1996 or an increase
of 72.5%.
Three months ended October 31, 1997 compared to the three
months ended October 31, 1996.
Net sales for the three month period ended October 31,
1997 increased $1,207,000 or 12.2% to $11,092,000
from $9,885,000 reported for the three month period ended
October 31, 1996. Increased unit shipments of various
protective garment products is the principle reason for this
upward movement in sales. This industry, however, continues
to be highly competitive. Net sales decreased 7% during the
quarter ended October 31, 1997 as compared to the immediate
preceding quarter. The third quarter of each fiscal year has
historically been the weakest in sales volume, due to the
effect that worker vacations and high summer temperatures
have on the use of garments during the late summer.
Gross profit as a percentage of net sales increased to
21.1% for the three month period ended October 31, 1997
from 17.5% reported for the corresponding period of the prior
year, principally due to not having to meet competitive
pricing on the most popular disposable products and market
price stabilization.
Operating expenses as a percentage of net sales
increased modestly to 14.7% for the three month period ended
October 31, 1997 from 13.8% for the corresponding period of
the prior year, as operating expenses increased at a slightly
higher rate than the sales volume increase.
Interest expense decreased as aggregate daily borrowings
were higher during the prior year three month period.
As a result of the foregoing, operating results
increased to a net income of $357,000 or 145% increase for
the three month period ended October 31, 1997 from net income
of $146,000 for the three month period ended October 31,
1996.
LIQUIDITY and CAPITAL RESOURCES
Lakeland has historically met its cash requirements
through funds generated from operations and borrowings
under a revolving credit facility. On August 30, 1995, the
Company entered into an $8 million facility with its Bank.
This facility matures on February 28, 1999. Interest charges
under this credit facility are calculated on various
optional formulas using the prime rate, LIBOR, banker's
acceptance and letters of credit. The Company's October
31, 1997 balance sheet shows a strong current ratio and
working capital position and management believes that its
positive financial position, together with this credit
agreement, will provide sufficient funds for operating
purposes for the next twelve months.
Item 6. Exhibits and Reports on Form 8-K:
a - None
b - No reports on Form 8-K were filed during
the three month period ended October 31, 1997.
_________________SIGNATURES_________________
Pursuant to the requirements of Section 13 or 15 (d)
of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LAKELAND INDUSTRIES, INC.
(Registrant)
Date: December 5, 1997 Raymond J. Smith
------------------
Raymond J. Smith,
President and Chief
Executive Officer
Date: December 5, 1997 James M. McCormick
-------------------
James M. McCormick
(Principal Accounting Officer)