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 April 30, 2000
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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 it's charter)
Delaware 13-3115216
------------------------ ------------------------------------
(State of incorporation) (IRS Employer Identification Number)
711-2 Koehler Avenue, Ronkonkoma, New York 11779
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(Address of principal executive offices)
(631) 981-9700
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(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 June 12, 2000 - 2,644,000
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 -
April 30, 2000 and January 31, 2000 ....................... 2
Condensed Consolidated Statements of Income for the
Three Months Ended April 30, 2000 and 1999................... 3
Condensed Consolidated Statement of Stockholders'
Equity for the Three Months Ended April 30, 2000 .......... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended April 30, 2000 and 1999................. 5
Notes to Condensed Consolidated Financial Statements......... 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 8
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K ............................. None
Signatures.............................................................. 10
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 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 make the information presented not misleading. It is suggested that
these condensed consolidated 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, 2000.
The results of operations for the three month periods ended April 30, 2000
and 1999 are not necessarily indicative of the results to be expected for the
full year.
CAUTIONARY STATEMENTS
This report may include "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are all statements other than
statements of historical fact included in this report, including, without
limitation, the statements under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position and liquidity, the Company's strategic
alternatives, future capital needs, development and capital expenditures
(including the amount and nature thereof), future net revenues, business
strategies, and other plans and objectives of management of the Company for
future operations and activities. Forward-looking statements are based on
certain assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate under the
circumstances. These statements are subject to a number of assumptions, risks
and uncertainties, and factors in the Company's other filings with the
Securities and Exchange Commission (the "Commission"), general economic and
business conditions, the business opportunities that may be presented to and
pursued by the Company, changes in law or regulations and other factors, many of
which are beyond the control of the Company. Readers are cautioned that these
statements are not guarantees of future performance, and the actual results or
developments may differ materially from those projected in any forward-looking
statements. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by these cautionary statements.
1
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, January 31,
ASSETS 2000 2000
(Unaudited) (Derived from audited
financial statements)
Current Assets:
Cash and cash equivalents.................................. $615,655 $650,541
Accounts receivable, net of allowance for
doubtful accounts of $200,000 at April 30, 2000 and
January 31, 2000......................................... 10,425,316 8,379,477
Inventories ............................................... 19,762,704 22,467,395
Deferred income taxes ..................................... 661,000 661,000
Other current assets ...................................... 472,398 301,698
---------- -----------
Total current assets.............................. 31,937,073 32,460,111
Property and equipment, net of accumulated
depreciation of $3,225,000 at April 30, 2000
and $3,064,000 January 31, 2000.......................... 1,961,854 1,851,964
Excess of cost over fair value of net assets acquired,
net of accumulated amortization
of $261,000 at April 30, 2000 and
$256,000 at January 31, 2000............................. 283,813 288,810
Other assets............................................... 390,180 169,365
----------- -----------
$34,572,920 $34,770,250
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................... $3,228,609 $4,242,874
Current portion of long-term liabilities................... 12,008,127 11,719,681
Accrued expenses and other current liabilities............. 643,733 638,668
----------- -----------
Total current liabilities............................. 15,880,469 16,601,223
Long-term liabilities ..................................... 2,571,144 2,708,643
Deferred income taxes...................................... 55,000 55,000
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.01 par; authorized
1,500,000 shares (none issued)
Common stock, $.01 par; authorized
10,000,000 shares; issued and outstanding
2,644,000 shares......................................... 26,440 26,440
Additional paid-in capital................................. 6,132,491 6,132,491
Retained earnings.......................................... 9,907,376 9,246,453
----------- -----------
Total stockholders' equity............................ 16,066,307 15,405,384
----------- -----------
$34,572,920 $34,770,250
=========== ===========
See notes to condensed consolidated financial statements.
2
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
April 30,
2000 1999
---- ----
Net Sales............................... $22,106,914 $15,455,662
Cost of Goods Sold...................... 18,752,585 12,863,890
---------- ----------
Gross Profit............................ 3,354,329 2,591,772
Operating Expenses...................... 2,090,581 1,657,767
---------- ----------
Operating Profit........................ 1,263,748 934,005
Other Income, net ...................... 9,991 14,292
Interest Expense........................ (286,241) (169,093)
---------- ----------
Income before income taxes.............. 987,498 779,204
Provision for income taxes.............. 326,575 275,000
---------- ----------
Net Income.............................. $ 660,923 $ 504,204
========== ==========
Net income per common share
Basic.......................... $.25 $.19
========= =========
Diluted........................ $.25 $.19
========= =========
Weighted average common shares outstanding
Basic.......................... 2,644,000 2,660,500
========== ==========
Diluted........................ 2,657,205 2,682,146
========== ==========
See notes to condensed consolidated financial statements.
3
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three months ended April 30, 2000
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
Balance, January 31, 2000 2,644,000 $26,440 $6,132,491 $9,246,453 $15,405,384
Net income 660,923 660,923
--------- ------- ---------- ---------- -----------
Balance, April 30, 2000 2,644,000 $26,440 $6,132,491 $9,907,376 $16,066,307
========= ======= ========== ========== ===========
See notes to condensed consolidated financial statements.
4
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
April 30,
2000 1999
---- ----
Cash Flows from Operating Activities:
Net Income ...................................................... $660,923 $504,204
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization.................................... 173,085 140,540
Increase in accounts receivable.................................. (2,045,839) (756,558)
Decrease in inventories.......................................... 2,704,691 42,474
(Increase) decrease in other current assets...................... (170,700) 189,695
(Increase) decrease in other assets.............................. (220,815) 30,950
(Decrease) increase in accounts payable, accrued
expenses, other current liabilities,
and other liabilities.......................................... (996,699) 1,081,902
----------- ----------
Net cash provided by operating activities........................ 104,646 1,233,207
Cash Flows from Investing Activities -
Purchases of property and equipment - net........................ (277,978) (45,178)
Cash Flows from Financing Activities:
Net borrowings (reductions) under loan agreements................ 138,446 (1,128,846)
----------- -----------
Net (decrease) increase in cash ............................ (34,886) 59,183
Cash and cash equivalents at beginning of period................. 650,541 1,436,083
----------- -----------
Cash and cash equivalents at end of period....................... $615,655 $1,495,266
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.................................................... $193,646 $114,544
=========== ===========
Income taxes................................................ $ 48,500 $33,875
=========== ===========
See notes to condensed consolidated financial statements.
5
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Business
Lakeland Industries, Inc. and Subsidiaries (the "Company"), a Delaware
corporation, organized in April 1982, is engaged primarily in the
manufacture of personal safety protective work clothing. The principal
market for the Company's products is the United States. No customer
accounted for more than 10% of net sales during the three month periods
ended April 30, 2000 and 1999.
B. Principles of Consolidation
The accompanying condensed consolidated financial statements include
the accounts of the Company and its wholly- owned subsidiaries, Laidlaw,
Adams & Peck, Inc., Lakeland Protective Wear, Inc. (a Canadian
corporation), Lakeland de Mexico S.A. de C.V. (a Mexican corporation) and
Weifang Lakeland Safety Products, Co., Ltd. (a Chinese corporation). All
significant inter-company accounts and transactions have been eliminated.
C. Inventories:
Inventories consist of the following:
April 30, January 31,
2000 2000
---- ----
Raw materials.......... $ 3,599,546 $ 3,180,556
Work-in-process........ 5,904,356 5,538,608
Finished goods......... 10,258,802 13,748,231
----------- -----------
$19,762,704 $22,467,395
=========== ===========
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out method.
D. Earnings Per Share:
Basic earnings per share are based on the weighted average number of
common shares outstanding without consideration of potential common shares.
Diluted earnings per share are based on the weighted average number of
common and potential common shares outstanding. The diluted earnings per
share calculation takes into account the shares that may be issued upon
exercise of stock options, reduced by the shares that may be repurchased
with the funds received from the exercise, based on the average price
during the period.
6
The following table sets forth the computation of basic and diluted earnings per
share at April 30.
2000 1999
---- ----
Numerator
Net income $660,923 $504,204
======== ========
Denominator
Denominator for basic earnings per share
(Weighted-average shares) 2,644,000 2,660,500
Effect of dilutive securities:
Stock options 13,205 21,646
--------- ---------
Denominator for diluted earnings per share
(adjusted weighted-average shares) and
assumed conversions 2,657,205 2,682,146
========= =========
Basic earnings per share $.25 $.19
==== ====
Diluted earnings per share $.25 $.19
==== ====
E. Revolving Credit Facility:
At April 30, 2000, the balance outstanding under the Company's secured $13
million revolving credit facility amounted to $11,358,127. This facility is
collateralized by substantially all of the assets of the Company, guaranteed by
certain of the Company's subsidiaries and expires on November 30, 2000.
Borrowings under the facility bear interest at a rate per annum equal to the
one-month LIBOR or the 30-day commercial paper rate, as defined, plus 1.75%. The
Company is presently in the process of negotiating the renewal of the facility.
At April 30, 2000, the balance outstanding under the Company's five year term
loan is $2,750,000. The term loan is payable in monthly installments of $50,000,
plus interest payable at the 30-day commercial paper rate, plus 2.45%. The
credit facility and term loan are collateralized by substantially all the assets
of the Company and guaranteed by certain of the Company's subsidiaries. The
credit facility and term loan require the Company to maintain a minimum tangible
net worth, at all times.
F. Major Supplier
The Company purchased approximately 75% of its raw materials from one
supplier under licensing agreements during the three month period ended April
30, 2000. The Company expects this relationship to continue for the foreseeable
future. If required, similar raw materials could be purchased from other
sources; although, the Company's competitive position in the marketplace could
be affected.
7
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three months ended April 30, 2000 compared to the three months ended April 30,
1999:
Net Sales. Net sales for the three months ended April 30, 2000 increased
$6,651,000 or 43.03% to $22,107,000 from $15,456,000 reported for the three
months ended April 30, 1999. The increase in sales was, principally attributable
to the Company's ability to increase its production capacity, maintain higher
inventory levels, and the withdrawal of a major competitor from the Tyvek
markets. This industry continues to be highly competitive.
Gross Profit. Gross profit for the quarter ended April 30, 2000 increased
by $763,000 or 29.4% to $3,354,000 from $2,592,000 for the quarter ended April
30, 1999. Gross profit as a percentage of net sales decreased to 15.2% for the
three months ended April 30, 2000 from 16.8% reported for the prior year,
principally due to the increase in the cost of raw materials (from a major
supplier) without a corresponding increase in selling prices.
Operating Expenses. Operating expenses for the quarter ended April 30, 2000
increased by $433,000 or 26% to $2,091,000 or 9.5% of net sales, from $1,658,000
or 10.7% of net sales, for the quarter ended April 30, 1999. Operating expenses
increased principally as a result of increased sales commissions, consulting
expense, R&D expense, insurance expense and currency fluctuation expense.
Interest Expense. Interest expense increased primarily due to higher
interest costs reflecting an increase in average borrowings under the Company's
credit facilities and increasing interest rates.
Income Tax Expense. The effective tax rate for the three months ended April
30, 2000 and 1999 of 33% and 35%, respectively, deviates from the Federal
statutory rate of 34%, which is primarily attributable to differing foreign tax
rates and state income taxes.
Net Income. As a result of the foregoing, net income increased to $661,000
or 31.1% for the three months ended April 30, 2000 from net income of $504,000
for the three months ended April 30, 1999.
LIQUIDITY and CAPITAL RESOURCES
Liquidity and Capital Resources. The Company's working capital is equal to
$16,057,000 at April 30, 2000. The Company's primary sources of funds for
conducting its business activities have been from cash flow provided by
operations and borrowings under its credit facilities. The Company requires
liquidity and working capital primarily to fund increases in inventories and
accounts receivable associated with sales growth and, to a lesser extent, for
capital expenditures.
Net cash provided by operating activities was $105,000 for the quarter
ended April 30, 2000 and was due primarily to an increase in accounts receivable
of $2,046,000, offset by a decrease in inventories of $2,705,000 and the
decrease in accounts payable and net income from operations of $661,000.
Net cash used in financing activities of $35,000 was primarily attributable
to net borrowings of $138,000 during the quarter in connection with the term
loan and revolving credit facility.
The revolving credit facility permits the Company to borrow up to a maximum
of $13 million. The revolving credit agreement expires on November 30, 2000 and
has therefore been classified as a short-term liability in the accompanying
balance sheet at April 30, 2000. Borrowings under the revolving credit facility
amounted to approximately $11,358,000 at April 30, 2000. The five year $3
million term-loan agreement entered into in November 1999 has an outstanding
balance of $2,750,000 and expires on October 31, 2004.
The Company believes that cash flow from operations and the revolving
credit facility (upon renewal) will be sufficient to meet its currently
anticipated operating, capital expenditures and debt service requirements for at
least the next 12 months.
Foreign Currency Activity
The Company's foreign exchange exposure is principally limited to the
relationship of the U.S. Dollar to the Canadian Dollar.
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 April 30, 2000
8
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: June 13, 2000 /s/ Raymond J. Smith
--------------------------------------
Raymond J. Smith,
President and Chief Executive Officer
Date: June 13, 2000 /s/ James M. McCormick
--------------------------------------
James M. McCormick,
Vice President and Treasurer
(Principal Accounting Officer)
9