SELECTED FINANCIAL DATA
(In thousands, except per share and share amounts)
For the Years Ended January 31,
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
INCOME STATEMENT DATA:
Net sales $ 76,431 $ 76,108 $ 58,644 $ 54,655 $ 47,263
Gross profit 13,137 11,310 10,488 10,374 9,195
Operating expenses 9,549 8,619 7,191 6,451 6,157
Operating profit 3,589 2,691 3,297 3,923 3,038
Income before income taxes 2,816 1,485 2,509 3,222 2,590
Net income 1,970 1,123 1,748 2,080 1,600
Earnings per share - Basic $ .74 $ .42 $ .66 $ .79 $ .63
========== ========== ========== ========== ==========
Earnings per share - Diluted $ .73 $ .42 $ .65 $ .77 $ .61
========== ========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 2,663,600 2,645,446 2,653,950 2,642,170 2,558,541
Diluted 2,683,711 2,667,161 2,673,449 2,690,920 2,627,425
BALANCE SHEET DATA(at end of year):
Working capital $ 16,766 $ 16,047 $ 15,909 $ 12,403 $ 18,903
Total assets 42,417 38,628 34,770 27,160 25,812
Current liabilities 22,778 20,052 16,551 12,915 5,007
Long-term liabilities 609 1,981 2,759 465 9,217
Stockholders' equity $ 18,727 $ 16,537 $ 15,405 $ 13,725 $ 11,518
1
AUTIONARY STATEMENTS
- --------------------------------------------------------------------------------
This report includes "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 headings "Business", "Properties", "Legal
Proceedings", "Market for Registrant's Common Stock and Related Stockholder
Matters", and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" regarding the Company's financial position, liquidity,
capital resources and the Company's strategic alternatives, future capital
needs, development and capital expenditures (including the amount and nature
thereof), future net revenues, business strategies, competitive and supply
relationships between the Company and its primary supplier, new products,
government purchasing patterns and contracts and other plans and objectives of
management of the Company for future operations and activities.
We may use words such as "believe", "anticipate", "expect", "will",
"intend", "estimate" and similar expressions to identify forward looking
statements. 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 that actual results or developments may differ
materially from those projected in the 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations may include forward-looking statements with respect to
the Company's future financial performance. These forward-looking statements are
subject to various risks and uncertainties, including the factors described
elsewhere in this Report, that could cause actual results to differ materially
from historical results or those currently anticipated.
Overview
- --------
The Company derives the majority of its revenues from the sale of its
TyvekTM disposable limited/use garments and secondarily from the sales of its
cut and heat resistant gloves, woven reusable garments, heat and fire protective
clothing, and chemical suits all to safety and mill supply distributors.
The Company generally recognizes revenues when it ships its product to its
customers. Cost of goods sold includes all direct costs to manufacture the
finished product, plus related costs associated with inland or ocean freight on
incoming raw materials, customs duty and warehousing, and manufacturing overhead
expenses. Selling expenses include all salaries for sales and marketing staffs
together with other related expenses such as sales commissions, travel costs,
trade shows, advertising and delivery expenses. General and administrative
expenses include salaries for executives and administrative and MIS staff,
together with related expenses such as travel costs, non-manufacturing
facilities costs and consulting and professional fees.
Result of Operations
- --------------------
The following table sets forth items in the Company's consolidated
statement of operations as a percentage of revenues for the periods indicated.
2
Years Ended January 31,
2002 2001 2000
---- ---- ----
Revenues 100.0% 100.0% 100.0%
Cost of Goods Sold 82.8 85.1 82.1
Selling, general and administrative expenses 12.5 11.3 12.3
Depreciation and amortization expense .8 .9 1.0
Operating profit 4.7 3.5 5.6
Interest expense, net 1.1 1.6 1.4
Income tax expense 1.1 .48 1.3
Net income 2.6 1.5 3.0
EBITDA margin (1) 5.7 4.5 6.7
- -------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization)
margin represents EBITDA expressed as a percentage of revenues.
Fiscal Year Ended January 31, 2002 Compared to Fiscal Year Ended January 31,
2001
- --------------------------------------------------------------------------------
Net Sales.Net sales for the year ended January 31,2002 increased $323,000
or .42% to $76,431,000 from $76,108,000 for the year ended January 31, 2001. The
small increase in sales was principally attributable to recessionary economic
conditions, partially offset by a February 1, 2001 price increase in the
Company's TyvekTM line of products.
Gross Profit. Gross profit for the year ended January 31, 2002 increased by
$1,827,000, or 16.2% to $13,137,000, or 17.2% of net sales, from $11,310,000, or
14.9% of net sales, for the year ended January 31, 2001. Gross profit as a
percentage of sales increased by 2.3% due to increased selling prices, offset by
an increase in the cost of raw materials (from a major supplier and competitor,
DuPont) in February 2001, and a $150,000 reserve for a customs duty dispute
related to the Company's Canadian subsidiary. It is anticipated that the
reserve, set up in October 2001, will be adequate to cover future consulting
charges and duty payments, if any.
Operating Expenses. Operating expenses for the year ended January 31, 2002
increased by $929,000 or 10.8% to $9,548,000, or 12.5% of net sales, from
$8,619,000, or 11.3% of net sales, for the year ended January 31, 2001. This
increase was mainly due to higher freight costs, salaries and sales commissions,
accrued bonus, insurance expense, and research and development expense. The
Company paid $60,000 (during fiscal 2002) in consulting fees for representation
to Canadian officials regarding the customs duty dispute mentioned above.
Interest Expense. Interest expense for the year ended January 31, 2002
decreased by $366,000, or 29.5% to $882,000 from $1,248,000 for the year ended
January 31, 2001. This decrease was principally due to a decrease in average
borrowings under the Company's credit facility and to decreasing interest rates.
Other Income, Net. Other income, net increased due to the receipt of
$73,400 relating to the partial collection of an outstanding judgment.
Income Tax Expense. The effective tax rate for the year ended January 31,
2002 and 2001 of 30 % and 24.4% respectively, deviates from the Federal
statutory rate of 34%, mainly attributable to differing foreign tax rates and
exemptions as well as to state income taxes.
Net Income. As a result of the foregoing, net income for the year ended
January 31, 2002, increased by $847,000 to $1,970,000 from $1,123,000 for the
year ended January 31, 2001.
3
Fiscal Year Ended January 31, 2001 Compared to Fiscal Year Ended January 31,
2000
- --------------------------------------------------------------------------------
Net Sales. Net sales for the year ended January 31, 2001 increased
$17,464,000 or 29.8% to $76,108,000 from $58,644,000 for the year ended January
31, 2000. The increase in sales was principally attributable to the Company's
ability to increase its production capacity, maintain adequate inventory levels,
and to the withdrawal of a major competitor from the TyvekTM markets, in which
the Company secured certain business. The Company initiated a sales price
increase effective with the commencement of fiscal 2002, which stimulated sales
during the last month of fiscal 2001.
Gross Profit. Gross profit for the year ended January 31, 2001 increased by
$822,000, or 7.8% to $11,310,000, or 14.9% of net sales, from $10,488,000, or
17.9% of net sales, for the year ended January 31, 2000. The gross profit
percentage decreased as a result of an increase in the cost of raw materials
(from a major supplier [and now competitor] in February 2000) without a
corresponding increase in selling prices. This was partially offset by
manufacturing efficiencies (due to the use of automated equipment) and to higher
sales volume. Competition increased during the second half of the year ended
January 31, 2001, most severely in the fourth quarter as the industry's newest
competitor lowered prices to gain market share. In most cases, the Company was
forced to meet the competition. The second half of fiscal 2001 was also
negatively affected by the relocation of manufacturing from an independent
contractor to the company's facility in Missouri.
Operating Expenses. Operating expenses for the year ended January 31, 2001
increased by $1,428,000 or 19.9%, to $8,619,000, or 11.3% of net sales, from
$7,191,000, or 12.3% of net sales, for the year ended January 31, 2000. The
increase in operating expenses is principally as a result of higher cost of
freight, sales commissions, travel and show participation and use of temporary
help due to higher sales volume, and also to increased medical expense, research
and development expense.
Interest Expense. Interest expense for the year ended January 31, 2001
increased by $426,000, or 52% to $1,248,000 from $821,000 for the year ended
January 31, 2000. Interest expense increase was principally due to higher
interest costs reflecting an increase in average borrowings under the Company's
credit facility and to increasing interest rates.
Income Tax Expense. The effective tax rate for the year ended January 31,
2001 and 2000 of 24.4% and 30.3% respectively, deviates from the Federal
statutory rate of 34%, mainly attributable to differing foreign tax rates and
exemptions as well as to state income taxes.
Net Income. As a result of the foregoing, net income for the year ended
January 31, 2001 decreased by $625,000 to $1,123,000 from $1,748,000 for the
year ended January 31, 2000.
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources. The Company's working capital is equal to
$16,766,000 at January 31, 2002. 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 used in operating activities was $970,000 for the year ended
January 31, 2002 and was due primarily to an increase in inventories of
$3,819,000 and a decrease in accounts payable of $1,731,000 and offset by an
increase in accounts receivable of $1,174,000 and net income from operations of
$1,970,000.
Net cash provided by financing activities of $2,778,000 was primarily
attributable to net borrowings during the year in connection with a term loan
and revolving credit facility. The revolving credit facility permits the Company
to borrow up to a maximum of $18 million.
The revolving credit agreement expires on July 31, 2002, and has therefore
been classified as a short-term liability in the accompanying balance sheet at
January 31, 2002. Borrowings under the revolving credit facility amounted to
approximately $15,953,000 at January 31, 2002. The maturity date on the five
year $3 million term-loan agreement entered into in November 1999 has been
accelerated to expire on March 31, 2003.
The Company believes that cash flow from operations and the expected
renewal of the revolving credit facility 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 Mexican Peso, Canadian Dollar and the
Chinese RMB.
4
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
- -----------
The Company is exposed to market risk, including changes in interest rates
and currency exchange rates. To manage the volatility relating to these
exposures, the Company seeks to limit, to the extent possible its non-U.S.
dollar denominated purchases and sales. Foreign exchange risk occurs principally
with regard to Canadian subsidiary sales.
Foreign Exchange Risk Management
- --------------------------------
As a multinational corporation, the Company is exposed to changes in
foreign exchange rates. As the Company's non-denominated U.S. dollar
international sales grow, exposure to volatility in exchange rates could have an
adverse impact on the Company's financial results. The Company's risk from
exchange rate changes is presently related to non-dollar denominated sales in
Canada.
Interest Rate Risk
- ------------------
The Company is exposed to interest rate change market risk with respect to
its credit facility with a financial institution which is priced based upon
LIBOR or 30 day commercial paper interest rates. At January 31, 2002,
$17,207,000 was outstanding under the term-loan and revolving credit facilities.
Changes in the above described interest rates during fiscal 2002 will have a
positive or negative effect on the Company's interest expense. Each 1%
fluctuation in one or both of the above rates will increase or decrease interest
expense for the Company by approximately $172,000. Each 1% fluctuation in
interest rates earned would not increase or decrease interest income on these
deposits by a significant amount.
Unaudited Quarterly Results of Operations (In thousands, except for per share
amounts):
Fiscal Year Ended January 31, 2002: 1/31/02 10/31/01 7/31/01 4/30/01
Net Sales $ 19,858 $ 19,206 $ 17,932 $ 19,435
Cost of Sales 16,335 16,202 14,719 16,038
-------- -------- -------- --------
Gross Profit $ 3,523 $ 3,004 $ 3,213 $ 3,397
======== ======== ======== ========
Net Income $ 367 $ 384 $ 530 $ 689
======== ======== ======== ========
Basic and Diluted income per
common share:
Basic $ 0.14 $ 0.14 $ 0.20 $ 0.26
======== ======== ======== ========
Diluted $ 0.13 $ 0.14 $ 0.20 $ 0.26
======== ======== ======== ========
Fiscal Year Ended January 31, 2001: 1/31/01 10/31/00 7/31/00 4/30/00
Net Sales $ 20,130 $ 15,762 $ 18,109 $ 22,107
Cost of Sales 17,802 13,353 14,890 18,753
-------- -------- -------- --------
Gross Profit $ 2,328 $ 2,409 $ 3,219 $ 3,354
======== ======== ======== ========
Net Income (loss) $ (64) $ 150 $ 376 $ 661
======== ======== ======== ========
Basic and Diluted income (loss) per
common share:
Basic $ (.03) $ 0.06 $ 0.14 $ 0.25
======== ======== ======== ========
Diluted $ (.03) $ 0.06 $ 0.14 $ 0.25
======== ======== ======== ========
5
MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed on the Nasdaq National Market under the symbol
"LAKE". The following table sets forth for the periods indicated the high and
low sales prices for the Common Stock as reported by the Nasdaq National Market.
The Company has a January 31, fiscal year end.
Price Range
of Common Stock
---------------
High Low
---- ---
Fiscal 2002
First Quarter ended April 30, 2001. . . . . . . . . . . . . $ 5 $3.99
Second Quarter ended July 31, 2001 . . . . . . . . . . . . 6.95 3.937
Third Quarter ended October 31, 2001 . . . . . . . . . . . 13.74 5.75
Fourth Quarter ended January 31, 2002. . . . . . . . . . . 13.10 8.11
First Quarter Fiscal 2003 (through April 19, 2002) . . . . 10.45 8.55
Fiscal 2001
First Quarter ended April 30, 2000. . . . . . . . . . . . . $4.75 $3.75
Second Quarter ended July 31, 2000 . . . . . . . . . . . . 7.50 5.375
Third Quarter ended Oct. 31, 2000 . . . . . . . . . . . . . 6.50 4.75
Fourth Quarter ended January 31, 2001. . . . . . . . . . . 5.25 3.375
As of April 17, 2002, there were approximately 77 record holders of shares
of Common Stock. There are believed to be in excess of 500 beneficial
shareholders in addition to those of record, since over 1.0 million shares are
held in "street" name by Cede & Co., a large financial clearing house.
The Company, on March 5, 2002 announced that it plans to issue a 10% Stock
Dividend payable to holders of record as at July 31, 2002. This policy may
continue on an annual basis, subject to approval by the Company's Board of
Directors. The Company feels that over time that this dividend will increase the
share float and trading activity in the Company's stock. The Company intends to
retain any future earnings, for the operation and expansion of its business. The
payment and rate of future cash dividends, if any, will depend upon the
Company's earnings, financial condition, capital requirements, contractual
restrictions under its agreement with its institutional lender and other
factors.
6
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Lakeland Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Lakeland
Industries, Inc. and Subsidiaries (the "Company") as of January 31, 2002 and
2001, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended January 31, 2002.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of January 31, 2002 and 2001, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended January 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited Schedule II - Valuation and Qualifying Accounts for
each of the three years in the period ended January 31, 2002. In our opinion,
this schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
therein.
GRANT THORNTON LLP
Melville, New York April 15, 2002
7
Lakeland Industries, Inc.
and Subsidiaries
CONSOLIDATED BALANCE SHEETS
January 31,
2002 2001
---- ----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,760,635 $ 784,578
Accounts receivable, net of allowance for doubtful accounts of
$221,000 at January 31, 2002 and 2001 9,600,738 10,858,288
Inventories 26,529,150 22,710,083
Prepaid income taxes 242,029 461,113
Deferred income taxes 888,000 624,000
Other current assets 524,274 660,777
----------- -----------
Total current assets 39,544,826 36,098,839
PROPERTY AND EQUIPMENT, NET 2,218,459 1,978,070
OTHER ASSETS, NET 654,200 551,057
----------- -----------
$42,417,485 $38,627,966
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,759,373 $ 6,490,447
Accrued compensation and benefits 782,168 418,320
Other accrued expenses 208,853 207,795
Current portion of long-term debt 17,028,032 12,935,416
----------- -----------
Total current liabilities 22,778,426 20,051,978
LONG-TERM DEBT 179,104 1,499,207
PENSION LIABILITY 430,001 482,269
DEFERRED INCOME TAXES 303,000 58,000
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;
2,684,600 and 2,646,000 shares issued and outstanding
at January 31, 2002 and 2001, respectively 26,846 26,460
Additional paid-in capital 6,360,741 6,140,221
Retained earnings 12,339,367 10,369,831
----------- -----------
18,726,954 16,536,512
----------- -----------
$42,417,485 $38,627,966
=========== ===========
The accompanying notes are an integral part of these statements.
8
Lakeland Industries, Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Fiscal year ended January 31,
2002 2001 2000
---- ---- ----
Net sales $ 76,431,245 $ 76,108,038 $ 58,644,181
Cost of goods sold 63,293,922 64,797,943 48,155,753
------------ ------------ ------------
Gross profit 13,137,323 11,310,095 10,488,428
------------ ------------ ------------
Operating expenses
Selling and shipping 5,414,400 4,825,331 4,177,171
General and administrative 4,133,790 3,793,745 3,013,780
------------ ------------ ------------
Total operating expenses 9,548,190 8,619,076 7,190,951
------------ ------------ ------------
Operating profit 3,589,133 2,691,019 3,297,477
------------ ------------ ------------
Other income(expense)
Interest expense (881,948) (1,247,708) (821,333)
Interest income 17,311 26,595 25,716
Other income - net 91,040 15,472 7,346
------------ ------------ ------------
Total other expense (773,597) (1,205,641) (788,271)
------------ ------------ ------------
Income before income taxes 2,815,536 1,485,378 2,509,206
Income tax expense (846,000) (362,000) (761,000)
------------ ------------ ------------
NET INCOME $ 1,969,536 $ 1,123,378 $ 1,748,206
============ ============ ============
Net income per common share
Basic $ .74 $ .42 $ .66
============ ============ ============
Diluted $ .73 $ .42 $ .65
============ ============ ============
Weighted average common shares
outstanding
Basic 2,663,600 2,645,446 2,653,950
============ ============ ============
Diluted 2,683,711 2,667,161 2,673,449
============ ============ ============
The accompanying notes are an integral part of these statements.
9
Lakeland Industries, Inc.
and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Fiscal years ended January 31, 2002, 2001 and 2000
Common stock
------------
Additional
paid-in Retained
Shares Amount capital earnings Total
------ ------ ------- -------- -----
Balance, January 31, 1999 2,660,500 $ 26,605 $ 6,199,656 $ 7,498,247 $ 13,724,508
Net income 1,748,206 1,748,206
Purchase and retirement
of common stock (16,500) (165) (67,165) (67,330)
--------- ------------ ------------ ------------ ------------
Balance, January 31, 2000 2,644,000 26,440 6,132,491 9,246,453 15,405,384
Net income 1,123,378 1,123,378
Exercise of stock options 2,000 20 7,730 7,750
--------- ------------ ------------ ------------ ------------
Balance, January 31, 2001 2,646,000 26,460 6,140,221 10,369,831 16,536,512
Net income 1,969,536 1,969,536
Exercise of stock options 38,600 386 125,864 126,250
Stock option income tax benefit 94,656 94,656
--------- ------------ ------------ ------------ ------------
Balance, January 31, 2002 2,684,600 $ 26,846 $ 6,360,741 $ 12,339,367 $ 18,726,954
========= ============ ============ ============ ============
The accompanying notes are an integral part of this statement.
10
Lakeland Industries, Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal year ended January 31,
2002 2001 2000
---- ---- ----
Cash flows from operating activities
Net income $ 1,969,536 $ 1,123,378 $ 1,748,206
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Deferred income taxes (19,000) 40,000 (95,000)
Depreciation and amortization 689,969 699,304 598,095
Provision for bad debts 83,965 30,176 20,700
Stock option income tax benefit 94,656
(Increase) decrease in operating assets
Accounts receivable 1,173,585 (2,508,987) (1,656,836)
Inventories (3,819,067) (242,688) (6,356,485)
Prepaid income taxes and other
current assets 355,587 (799,556) 159,533
Other assets (80,832) (187,882) (20,823)
Increase (decrease) in operating liabilities
Accounts payable (1,731,074) 2,247,573 2,787,684
Accrued expenses and other liabilities 312,638 11,073 (43,480)
----------- ----------- -----------
Net cash provided by (used in)
operating activities (970,037) 412,391 (2,858,406)
----------- ----------- -----------
Cash flows from investing activities
Purchases of property and equipment (831,919) (751,046) (1,049,124)
----------- ----------- -----------
Net cash used in investing activities (831,919) (751,046) (1,049,124)
----------- ----------- -----------
Cash flows from financing activities
Net borrowings under credit agreements 2,772,513 464,942 3,241,818
Proceeds from exercise of stock options 126,250 7,750
Purchase and retirement of common stock (67,330)
Deferred financing costs (120,750) (52,500)
----------- ----------- -----------
Net cash provided by financing activities 2,778,013 472,692 3,121,988
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 976,057 134,037 (785,542)
Cash and cash equivalents at beginning of year 784,578 650,541 1,436,083
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,760,635 $ 784,578 $ 650,541
=========== =========== ===========
The accompanying notes are an integral part of these statements
11
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2002, 2001 and 2000
NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
1. 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 in the United States. No customer accounted for more than 10% of net
sales during the fiscal years ended January 31, 2002, 2001 and 2000.
2. Principles of Consolidation
- ------------------------------
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Laidlaw, Adams & Peck, Inc. and
Subsidiary (MeiYang Protective Products Co., Ltd. (a Chinese corporation)),
Lakeland Protective Wear, Inc. (a Canadian corporation), Weifang Lakeland Safety
Products Co. Ltd. (a Chinese corporation) and Lakeland de Mexico S.A. de C.V. (a
Mexican corporation). All significant intercompany accounts and transactions
have been eliminated.
3. Revenue Recognition
- ----------------------
Revenue is recognized when title passes to the customer upon shipment of
goods.
4. Inventories
- --------------
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out method.
5. Property and Equipment
- -------------------------
Property and equipment are stated at cost. Depreciation and amortization
are provided for in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives, on a straight-line basis.
Leasehold improvements and leasehold costs are amortized over the term of the
lease or service lives of the improvements, whichever is shorter. The costs of
additions and improvements which substantially extend the useful life of a
particular asset are capitalized. Repair and maintenance costs are charged to
expense.
6. Excess of Cost Over the Fair Value of Net Assets Acquired
- ------------------------------------------------------------
The excess of cost over the fair value of net assets acquired (goodwill) is
amortized on a straight-line basis over a 30-year period. On an ongoing basis,
management reviews the valuation and amortization of goodwill to determine
possible impairment by considering current operating results and comparing the
carrying value to the anticipated undiscounted future cash flows of the related
assets. Included in other assets in the accompanying consolidated balance sheets
is goodwill aggregating $249,000 and $269,000, net of accumulated amortization
of $296,000 and $276,000 at January 31, 2002 and 2001, respectively.
7. Shipping and Handling Costs
- ------------------------------
The Company includes shipping and handling fees billed to customers in net
sales. Shipping and handling costs associated with inbound freight are included
in cost of sales. Shipping and handling costs associated with outbound freight
are included in selling and shipping expenses and aggregated approximately
$1,532,000, $1,381,000 and $1,182,000 in the fiscal years ended January 31,
2002, 2001 and 2000, respectively.
12
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE A(continued)
- -----------------
8. Research and Development Costs
- ---------------------------------
Research and development costs are expensed as incurred and included in
general and administrative expenses. Research and development expenses
aggregated approximately $378,000, $160,000 and $22,000 in the fiscal years
ended January 31, 2002, 2001 and 2000, respectively.
9. Income Taxes
- ---------------
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities and loss
carryforwards and tax credit carryforwards for which income tax benefits are
expected to be realized in future years. A valuation allowance would be
established to reduce deferred tax assets if it is more likely than not that
all, or some portion of, such deferred tax assets will not be realized. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
10. 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 potential common shares for the years
ended January 31, 2002, 2001 and 2000 were 20,111, 21,715, and 19,499,
respectively, representing the dilutive effect of stock options. 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
fiscal year. Options to purchase 1,000, 5,000, and 3,000 shares of the Company's
common stock have been excluded from the computation of diluted earnings per
share in 2002, 2001 and 2000, respectively, as their inclusion would have been
antidilutive.
11. Statement of Cash Flows
- ---------------------------
The Company considers highly liquid temporary cash investments with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist of money market funds. The market value of the cash
equivalents approximates cost. Foreign denominated cash and cash equivalents
were approximately $1,371,000 and $334,000 at January 31, 2002 and 2001,
respectively.
Supplemental cash flow information for the fiscal years ended January 31 is
as follows:
2002 2001 2000
---- ---- ----
Interest paid $881,934 $1,238,448 $783,664
Income taxes paid 606,700 688,412 693,456
12. Concentration of Credit Risk
- --------------------------------
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of trade receivables.
Concentration of credit risk with respect to these receivables is generally
diversified due to the large number of entities comprising the Company's
customer base and their dispersion across geographic areas principally within
the United States. The Company routinely addresses the financial strength of its
customers and, as a consequence, believes that it's receivable credit risk
exposure is limited.
13
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE A(continued)
- -----------------
13. Foreign Operations and Foreign Currency Translation
- -------------------------------------------------------
The Company maintains manufacturing operations and uses independent
contractors in Mexico and the People's Republic of China. It also maintains a
sales and distribution entity located in Canada. The Company is vulnerable to
currency risks in these countries.
The monetary assets and liabilities of the Company's foreign operations are
translated into U.S. dollars at current exchange rates, while nonmonetary items
are translated at historical rates. Revenues and expenses are generally
translated at average exchange rates for the year. Transaction gains and losses
that arise from exchange rate fluctuations on transactions denominated in a
currency other than the functional currency are included in the results of
operations as incurred and aggregated approximately $129,000, $107,000 and
$60,000 for the fiscal years ended January 31, 2002, 2001 and 2000,
respectively.
14. Use of Estimates
- --------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
year-end and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The significant
estimates include the allowance for doubtful accounts and inventory reserves. It
is reasonably possible that events could occur during the upcoming year that
could change such estimates.
15.Reclassifications
- --------------------
Certain prior year amounts have been reclassified to conform with the 2002
presentation.
16. Effects of Recent Accounting Pronouncements
- -----------------------------------------------
On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." The new
standards require that all business combinations initiated after June 30, 2001
be accounted for under the purchase method. In addition, all intangible assets
acquired that are obtained through contractual or legal right, or are capable of
being separately sold, transferred, licensed, rented or exchanged shall be
recognized as an asset apart from goodwill. Goodwill and intangibles with
indefinite lives will no longer be subject to amortization, but will be subject
to at least an annual assessment for impairment by applying a fair value based
test. The impact of adopting these statements is not expected to be material to
the Company's financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement is effective for fiscal years
beginning after December 15, 2001. SFAS No. 144 clarifies accounting and
reporting for assets held for sale, scheduled for abandonment or other disposal
and recognition of impairment loss related to the carrying value of long-lived
assets. The impact of adopting this statement is not expected to be material to
the Company's financial position or results of operations.
NOTE B - INVENTORIES
- --------------------
Inventories consist of the following at January 31:
2002 2001
---- ----
Raw materials $ 6,248,990 $ 4,088,498
Work-in-process 3,997,470 6,467,779
Finished goods 16,282,690 12,153,806
----------- -----------
$26,529,150 $22,710,083
=========== ===========
14
Lakeland Industries, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE C - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment consist of the following at January 31:
Useful life
in years 2002 2001
-------- ---- ----
Machinery and equipment 3 - 10 $4,484,416 $4,701,148
Furniture and fixtures 3 - 10 175,016 261,737
Leasehold improvements Lease term 671,694 703,958
------- -------
5,331,126 5,666,843
Less accumulated depreciation and amortization (3,112,667) (3,688,773)
---------- ----------
$2,218,459 $1,978,070
========== ==========
NOTE D - FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------
The Company's principal financial instrument consists of its outstanding
revolving credit facility and term loan. The Company believes that the carrying
amount of such debt approximates the fair value as the variable interest rates
approximate the current prevailing interest rate.
NOTE E - LONG-TERM DEBT
- -----------------------
Long-term debt consist of the following at January 31:
2002 2001
---- ----
Revolving credit facility $15,953,432 $12,335,416
Term loan 1,253,704 2,099,207
----------- ----------
17,207,136 14,434,623
Less current portion 17,028,032 12,935,416
----------- ----------
Long-term debt $ 179,104 $1,499,207
=========== ==========
Revolving Credit Facility
The Company's agreement with its lending institution, as amended, provides
the Company with a revolving line of credit facility of $18 million. This credit
facility, which is based on a percentage of eligible accounts receivable and
inventory as defined, bears interest at LIBOR plus 2% (3.83% at January 31,
2002). The agreement was amended on March 9, 2001 to (i) extend the maturity
date to October 31, 2001, (ii) modify the interest rate, and (iii) modify
certain financial covenants. The agreement was amended on July 12, 2001 to (i)
extend the maturity date to July 31, 2002, (ii) increase the amount available
under the revolving line of credit from $14 million to a percentage of eligible
accounts receivable and inventory as defined, up to a maximum of $18 million,
(iii) modify the interest rate, and (iv) modify a certain financial covenant.
The agreement was amended on December 31, 2001 to modify a certain financial
covenant.
The maximum amounts borrowed under the credit facility during the fiscal
years ended January 31, 2002 and 2001 were $17,700,000 and $14,000,000,
respectively, and the average interest rates during the periods were 5.93% and
8.1%, respectively. At January 31, 2002, the Company had approximately
$2,047,000 in availability under the agreement.
15
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE E(continued)
- -----------------
Term Loan
In November 1999, the Company entered into a $3,000,000, five-year term
loan. On March 9, 2001, the Company accelerated the term loan to expire on March
31, 2003. The term loan is payable in monthly installments of $89,550, plus
interest payable at the 30-day commercial paper rate plus 2.45% (4.18% at
January 31, 2002).
The credit facility and term loan are collateralized by substantially all
of the assets of the Company and guaranteed by certain of the Company's
subsidiaries. The credit facility and term loan contain financial covenants,
including, but not limited to, minimum levels of earnings and maintenance of
minimum tangible net worth and other certain ratios at all times.
NOTE F - STOCKHOLDERS' EQUITY AND STOCK OPTIONS
- -----------------------------------------------
The Nonemployee Directors' Option Plan (the "Directors' Plan") provides for
an automatic one-time grant of options to purchase 5,000 shares of common stock
to each nonemployee director elected or appointed to the Board of Directors.
Under the Directors' Plan, 60,000 shares of common stock have been authorized
for issuance. Options are granted at not less than fair market value, become
exercisable commencing six months from the date of grant and expire six years
from the date of grant. In addition, all nonemployee directors re-elected to the
Company's Board of Directors at any annual meeting of the stockholders will
automatically be granted additional options to purchase 1,000 shares of common
stock on each of such dates. In April 1997, the Company extended the term on
5,000 expiring options for an additional six years.
The Company's 1986 Incentive and Nonstatutory Stock Option Plan (the
"Plan") provides for the granting of incentive stock options and nonstatutory
options. The Plan provides for the grant of options to key employees and
independent sales representatives to purchase up to 400,000 shares of the
Company's common stock, upon terms and conditions determined by a committee of
the Board of Directors, which administers the plan. Options are granted at not
less than fair market value (110 percent of fair market value as to incentive
stock options granted to ten percent stockholders) and are exercisable over a
period not to exceed ten years (five years as to incentive stock options granted
to ten percent stockholders).
The Company has adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). The Company applies APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its plans and does not recognize compensation
expense for its employee stock-based compensation plans. If the Company had
elected to recognize compensation expense based upon the fair value at the date
of grant for awards under these plans, consistent with the methodology
prescribed by SFAS 123, the effect on the Company's net income and earnings per
share as reported would be reduced for the years ended January 31, 2002 and 2001
to the pro forma amounts indicated below:
2002 2001
---- ----
Net income
As reported $1,969,536 $1,123,378
Pro forma 1,965,606 1,116,338
Basic earnings per common share
As reported $.74 $.42
Pro forma .74 .42
Diluted earnings per common share
As reported $.73 $.42
Pro forma .73 .42
16
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE F(continued)
- -----------------
The fair value of these options was estimated at the date of grant using
the Black-Scholes option-pricing model with the following assumptions for the
years ended January 31, 2002 and 2001: expected volatility of 57% and 55%,
respectively; risk-free interest rate of 5.0% and 6.3%, respectively; expected
dividend yield of 0.0%; and expected life of six years. No options were granted
or vested during the year ended January 31, 2000.
Additional information with respect to the Company's plans for the fiscal
years ended January 31, 2002, 2001 and 2000 is summarized as follows:
2002
--------------------------------------------------
Directors' Plan Plan
----------------------- ---------------------
Weighted- Weighted-
Number average Number average
of exercise of exercise
shares price shares price
----------------------- ---------------------
Shares under option
Outstanding at beginning of year 8,000 $ 5.53 52,500 $ 3.06
Granted 1,000 6.69
Exercised (38,600) 3.27
----- -------
Outstanding and exercisable at end of year 9,000 5.48 13,900 2.70
===== =======
Weighted-average remaining contractual
life of options outstanding 2.7 years 2.5 years
Weighted-average fair value per shares of
options granted during 2002 $ 6.69
2001
--------------------------------------------------
Directors' Plan Plan
---------------------- ----------------------
Weighted- Weighted-
Number average Number average
of exercise of exercise
shares price shares price
---------------------- ----------------------
Shares under option
Outstanding at beginning of year 8,000 $4.81 52,500 $3.06
Granted 2,000 5.94
Exercised (2,000) 3.88
----- -------
Outstanding and exercisable at end of year 8,000 5.33 52,500 3.06
===== ======
Weighted-average remaining contractual
life of options outstanding 3.3 years 4 years
Weighted-average fair value per shares of
options granted during 2001 $5.94
17
Lakeland Industries, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31,2002, 2001 and 2000
NOTE F(continued)
- -----------------
2000
-------------------------------------------------------
Directors' Plan Plan
------------------------ -----------------------
Weighted- Weighted-
Number average Number average
of exercise of exercise
shares price shares price
------ ----- ------ -----
Shares under option
Outstanding at beginning of year 8,000 $4.81 52,500 $3.06
----- ----- ------ -----
Outstanding and exercisable at end of year 8,000 4.81 52,500 3.06
===== ==== ====== =====
Weighted-average remaining contractual
life of options outstanding 2.6 years 5 years
Summarized information about stock options outstanding under the two plans
at January 31, 2002 is as follows:
Options outstanding and exercisable
-----------------------------------
Weighted-
Number average
Outstanding remaining Weighted-
at contractual average
Range of January life in exercise
exercise prices 31, 2002 years price
- --------------- -------- ----- -----
$2.25 - 3.38 11,900 1.83 $ 2.50
3.39 - 5.13 7,000 2.93 3.96
5.14 - 6.69 3,000 4.83 6.19
10.75 1,000 2.50 10.75
$2.25 - 10.75 22,900 2.59 3.79
NOTE G - INCOME TAXES
- ---------------------
The provision for income taxes is summarized as follows:
Year ended January 31,
-------------------------------------------------
2002 2001 2000
---- ---- ----
Current
Federal $ 719,000 $ 189,000 $ 756,000
State 78,000 27,000 100,000
Foreign 68,000 106,000
--------- ------- ----------
865,000 322,000 856,000
Deferred (19,000) 40,000 (95,000)
--------- ------- ----------
$ 846,000 $ 362,000 $ 761,000
========= ========= =========
18
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE G(continued)
- -----------------
The following is a reconciliation of the effective income tax rate to the
Federal statutory rate:
Year ended January 31,
--------------------------
2002 2001 2000
---- ---- ----
Statutory rate 34.0% 34.0% 34.0%
State income taxes, net of Federal tax benefit 1.6 1.2 2.7
Nondeductible expenses .6 1.1 .8
Taxes on foreign income which differ from
the statutory rate (5.6) (12.5) (2.4)
Change in deferred assets (3.8)
Other (.6) .6 (1.0)
---- ---- ----
Effective rate 30.0% 24.4% 30.3%
==== ==== ====
The tax effects of temporary differences which give rise to deferred tax
assets at January 31, 2002 and 2001 are summarized as follows:
January 31,
---------------------
2001 2002
-------- --------
Deferred tax assets
Inventories $418,000 $391,000
Net operating loss carryforward - foreign subsidiary 106,000 29,000
Accounts receivable 84,000 84,000
Accrued compensation and other 280,000 120,000
-------- --------
Gross deferred tax assets 888,000 624,000
-------- --------
Deferred tax liabilities
Depreciation and other 303,000 58,000
-------- --------
Gross deferred tax liabilities 303,000 58,000
-------- --------
Net deferred tax asset $585,000 $566,000
======== ========
Net operating loss carryforwards of $177,000 attributable to its foreign
subsidiary in Canada will expire in fiscal 2003 through 2009. Net operating loss
carryforwards of $128,000 attributable to its foreign subsidiary in Mexico will
expire in fiscal 2007.
NOTE H - BENEFIT PLANS
- ----------------------
Defined Benefit Plan
The Company has a frozen defined benefit pension plan that covers former
employees of an acquired entity. The Company's funding policy is to contribute
annually the recommended amount based on computations made by its consulting
actuary.
The following table sets forth the plan's funded status for the fiscal
years ended January 31:
19
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE H(continued)
- -----------------
2002 2001
Change in benefit obligation
- ----------------------------
Projected benefit obligation at beginning of year $ 991,162 $ 961,492
Interest cost 75,889 70,546
Actuarial (gain) loss (27,602) 874
Benefits paid (41,391) (41,750)
------- --------
Projected benefit obligation at end of year 998,058 991,162
------- --------
Change in plan assets
- ---------------------
Fair value of plan assets at beginning of year 508,893 502,849
Actual return on plan assets 89,707 46,194
Employer contributions 10,848 1,600
Benefits paid (41,391) (41,750)
------- --------
Fair value of plan assets at end of year 568,057 508,893
------- --------
Funded status
- -------------
Pension liability $430,001 $482,269
======== =========
The components of net periodic pension cost for the fiscal years ended
January 31 are summarized as follows:
2002 2001 2000
---- ---- ----
Service cost $ 1,613
Interest cost $75,889 $ 70,546 70,579
Actual return on plan assets (89,707) (46,194) (87,626)
Net amortization and deferral 61,230 17,451 62,896
------ ------ ------
Net periodic pension cost $47,412 $41,803 $47,462
======= ======= =======
An assumed discount rate of 7.5% was used in determining the actuarial
present value of benefit obligations for all periods presented. The expected
long-term rate of return on plan assets was 8% for all periods presented. At
January 31, 2002, approximately 60% of the plan's assets was held in mutual
funds invested primarily in equity securities, 37% was invested in equity
securities and debt instruments and 3% was invested in money market and other
instruments.
Defined Contribution Plan
Pursuant to the terms of the Company's 401(k) plan, substantially all U.S.
employees over 21 years of age with a minimum period of service are eligible to
participate. The 401(k) plan is administered by the Company and provides for
voluntary employee contributions ranging from 1% to 15% of the employee's
compensation. The Company made discretionary contributions of $81,225, $83,947
and $57,642 in the fiscal years ended January 31, 2002, 2001 and 2000,
respectively.
NOTE I - MAJOR SUPPLIER
- -----------------------
The Company purchased approximately 81%, 77% and 74% of its raw materials
from one supplier under licensing agreements for the fiscal years ended January
31, 2002, 2001 and 2000, respectively. 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.
20
Lakeland Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
January 31, 2002, 2001 and 2000
NOTE J - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
1. Employment Contracts
The Company has employment contracts with four principal officers expiring
through January 2004. Such contracts are automatically renewable for two-year
terms unless 30 to 120 days' notice is given by either party. Pursuant to such
contracts, the Company is committed to aggregate annual base remuneration of
$747,500 and $397,500 for the fiscal years ended January 31, 2003 and 2004,
respectively.
2. Leases
The Company leases the majority of its premises under various operating
leases expiring through fiscal 2005. The leases for the manufacturing facilities
(located in Decatur, Alabama) are with two partnerships whose partners are
principal officers and stockholders of the Company. One lease expires on August
31, 2004 and requires annual payments of approximately $365,000 plus certain
operating expenses and the second lease expires on May 31, 2004 and requires
annual payments of approximately $199,000 plus certain operating expenses. The
Company also leases one customer service facility pursuant to a one-year lease
which expires on March 31, 2002 (renewable at the Company's option for two
additional one-year terms), from an officer of the Company. Monthly payments are
$1,500. In addition, the Company has several operating leases for machinery and
equipment.
The Company has a one-year lease with a related partnership for a
manufacturing facility in the People's Republic of China. The related lessor is
a partnership in which the Company's directors, one officer and three employees
hold partnership interests. In addition, during the fiscal year ended January
31, 2002, the Company obtained a 28% interest in this partnership. Rent paid
under this agreement aggregated $14,433 for the fiscal year ended January 31,
2002.
Total rental expense under all operating leases is summarized as follows:
Total Rentals
Gross sublease paid to
rental rental related
expense income parties
------- ------ -------
Year ended January 31,
2002 $858,429 $596,437
2001 890,818 $ 2,144 630,990
2000 833,274 10,578 545,136
Minimum annual rental commitments for the remaining term of the Company's
noncancellable operating leases relating to manufacturing facilities, office
space and equipment rentals at January 31, 2002 are summarized as follows:
Year ended January 31,
2003 $730,136
2004 682,910
2005 333,796
----------
$1,746,842
==========
Certain leases require additional payments based upon increases in property
taxes and other expenses.
3. Litigation
The Company is involved in various litigation arising during the normal
course of business which, in the opinion of the management of the Company, will
not have a material adverse effect on the Company's financial position or
results of operations.
4. Self-insurance
The Company maintains a self-insurance program for that portion of health
care costs not covered by insurance. The Company is liable for claims up to
defined limits. Self-insurance costs are based upon the aggregate of the
liability for reported claims and an estimated liability for claims incurred but
not reported.
21
Directors: Officers: Transfer Agent:
Raymond J. Smith, Chairman Raymond J. Smith, President Registrar and Transfer Company
Christopher J. Ryan Christopher J. Ryan 10 Commerce Drive
John J. Collins, Jr. Executive Vice President, Cranford, NJ 07016
Eric O. Hallman Secretary and General Counsel NASDAQ symbol: LAKE
Walter J. Raleigh James M. McCormick
Executive Offices:
Vice President and Treasurer
Harvey Pride, Jr.
711-2 Koehler Ave.
Vice President, Manufacturing
Ronkonkoma, NY 11779
(631) 981-9700
Auditors:
Subsidiaries:
Grant Thornton LLP
Suite 3S01
Lakeland Protective Wear, Inc.
One Huntington Quadrangle
Lakeland de Mexico S.A. de C.V.
Melville, NY 11747-4464
Laidlaw, Adams & Peck, Inc.
Weifang Lakeland Safety
Products, Co. Ltd.
Exhibits to Lakeland Industries, Inc.'s fiscal 2002 Form 10-K are available
to shareholders for a fee equal to Lakeland's cost in furnishing such exhibits,
on written request to the Secretary, Lakeland Industries, Inc., 711-2 Koehler
Avenue, Ronkonkoma, New York 11779.
ThermbarTM, Kut BusterTM, Grapolator Mock TwistTM, Safegard "76"TM, Body
GardTM, Zone GardTM, RyTexTM, TomTexTM, DextraGardTM, ForcefieldTM,
InterceptorTM, CheckmateTM, HeatexTM, PyrolonTM, Sterling HeightsTM, FyrepelTM,
HighlandTM, ChemlandTM and UnilandTM are trademarks of Lakeland Industries, Inc.
TyvekTM, VitonTM, BarricadeTM, NomexTM, KevlarTM, DelrinTM, TyChem SL, TK and
BRTM and TeflonTM are registered trademarks of E.I.DuPont de Nemours and
Company. SaranexTM is a registered trademark of Dow Chemical. SpectraTM is a
registered trademark of Honeywell.
22