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, 1998
OR
[X] 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.
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(Exact name of Registrant as specified in it's charter)
Delaware 13-3115216
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(State of incorporation) (IRS Employer
Identification Number)
711-2 Koehler Avenue, Ronkonkoma, New York 11779
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(Address of principal executive offices)
(516) 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 9, 1998 - 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:
Introduction
Condensed Consolidated Balance Sheets - April 30, 1998 and January
31, 1998
Condensed Consolidated Statements of Income for the Three Months
Ended April 30, 1998 and 1997
Condensed Consolidated Statement of Stockholders' Equity for the
Three Months Ended April 30, 1998
Condensed Consolidated Statements of Cash Flows - Three Months Ended
April 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K None
Signatures
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, 1998.
The results of operations for the three month periods ended April 30, 1998
and 1997 are not necessarily indicative of the results to be expected for the
full year.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, January 31,
ASSETS 1998 1998
----------- -----------
Current Assets:
Cash and cash equivalents ............................ $ 487,606 $ 222,700
Accounts receivable, net of allowance for
doubtful accounts of $203,000 at April 30, 1998 and
January 31, 1998 ................................... 8,381,746 6,953,538
Inventories .......................................... 14,792,919 15,858,052
Deferred income taxes ................................ 511,000 511,000
Other current assets ................................. 388,698 364,697
----------- -----------
Total current assets ........................ 24,561,969 23,909,987
Property and equipment, net of accumulated
depreciation of $2,277,000 at April 30, 1998
and $2,164,000 January 31, 1998 .................... 1,315,316 1,392,346
Excess of cost over fair value of net assets acquired,
net of accumulated amortization
of $223,000 at April 30, 1998 and
$218,000 at January 31, 1998 ....................... 322,123 327,120
Other assets ......................................... 151,915 182,412
----------- -----------
$26,351,323 $25,811,865
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ..................................... $ 2,967,854 $ 4,294,241
Current portion of long-term liabilities ............. 50,000 50,000
Accrued expenses and other current liabilities ....... 798,581 662,330
----------- -----------
Total current liabilities ....................... 3,816,435 5,006,571
Long-term liabilities ................................ 10,144,611 9,216,669
Deferred income taxes ................................ 71,000 71,000
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
2,610,472 shares ................................... 26,105 26,105
Additional paid-in capital ........................... 6,073,358 6,073,358
Retained earnings .................................... 6,219,814 5,418,162
----------- -----------
Total stockholders' equity ...................... 12,319,277 11,517,625
----------- -----------
$26,351,323 $25,811,865
=========== ===========
See notes to condensed consolidated financial statements.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
April 30,
1998 1997
------------ ------------
Net Sales ....................................... $ 16,041,697 $ 12,013,629
Cost of Goods Sold .............................. 12,862,963 9,707,638
------------ ------------
Gross Profit .................................... 3,178,734 2,305,991
Operating Expenses .............................. 1,708,760 1,450,409
------------ ------------
Operating Profit ................................ 1,469,974 855,582
Other Income/(expense), net ..................... 12,833 15,965
Interest Expense ................................ (168,155) (100,855)
------------ ------------
Income before income taxes ...................... 1,314,652 770,692
Provision for income taxes ...................... 513,000 300,000
------------ ------------
Net Income ...................................... $ 801,652 $ 470,692
============ ============
Net income per common share
Basic .................................. $ .31 $ .18
============ ============
Diluted ................................ $ .30 $ .18
============ ============
Weighted average common shares outstanding
Basic .................................. 2,610,472 2,550,000
============ ============
Diluted ................................ 2,686,926 2,602,757
============ ============
See notes to condensed consolidated financial statements.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three months ended April 30, 1998
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
----------- ----------- ----------- ----------- -----------
Balance, January 31, 1998 2,610,472 $ 26,105 $ 6,073,358 $ 5,418,162 $11,517,625
Net income .............. 801,652 801,652
----------- ----------- ----------- ----------- -----------
Balance, April 30, 1998 . 2,610,472 $ 26,105 $ 6,073,358 $ 6,219,814 $12,319,277
=========== =========== =========== =========== ===========
See notes to condensed consolidated financial statements.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
April 30,
1998 1997
----------- -----------
Cash Flows from Operating Activities:
Net Income ................................................ $ 801,652 $ 470,692
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization ............................. 118,188 86,648
Decrease (increase) in accounts receivable ................ (1,428,208) (524,280)
Decrease (increase) in inventories ........................ 1,065,133 647,520
Decrease (increase) in other current assets ............... (24,001) (70,758)
Decrease (increase) in other assets ....................... 30,497 (79,673)
Increase (decrease) in accounts payable, accrued
expenses and other current liabilities .................. (1,190,136) (620,830)
----------- -----------
Net cash used in operating activities ..................... (626,875) (90,681)
Cash Flows from Investing Activities -
Purchases of property and equipment - net ................. (36,161) (120,677)
Cash Flows from Financing Activities:
Net borrowings (reductions) under line of credit agreements 927,942 275,000
----------- -----------
Net increase in cash ...................................... 264,906 63,642
Cash at beginning of period ............................... 222,700 504,940
----------- -----------
Cash at end of period ..................................... $ 487,606 $ 568,582
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ............................................. $ 112,147 $ 100,852
=========== ===========
Income taxes ......................................... $ 241,000 $ 0
=========== ===========
See notes to condensed consolidated financial statements.
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 disposable and reusable 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, 1998 and 1997.
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. (formerly Fireland Industries, Inc.), Lakeland Protective
Wear, Inc. (a Canadian corporation) and Lakeland de Mexico S.A. de C.V. (a
Mexican corporation). All significant intercompany accounts and transaction
have been eliminated.
C. Inventories:
Inventories consist of the following:
April 30, January 31,
1998 1998
---------- ---------
Raw materials................. $2,496,870 $2,672,719
Work-in-process............... 4,121,543 4,168,376
Finished goods................ 8,174,506 9,016,957
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$14,792,919 $15,858,052
=========== ============
Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out method.
D. Earnings Per Share:
In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share", which requires public
companies to present basic earnings per share and , if applicable, diluted
earnings per share. In accordance with SFAS No. 128, all comparative
periods have been restated. Basic earnings per share are based on the
weighted average number of common shares outstanding without consideration
of potential common stock. Diluted earnings per share are based on the
weighted average number of common and potential common shares outstanding.
The 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.
The following table sets forth the computation of basic and diluted
earnings per share at April 30.
1998 1997
---------- ----------
Numerator
Net income ............................. $ 801,652 $ 470,692
========== ==========
Denominator
Denominator for basic earnings per share
(Weighted-average shares) .......... 2,610,472 2,550,000
Effect of dilutive securities:
Stock options ...................... 76,454 52,757
---------- ----------
Denominator for diluted earnings per share
(adjusted weighted-average shares) and
assumed conversions .................... 2,686,926 2,602,757
========== ==========
Basic earnings per share ........................ $ .31 $ .18
========== ==========
Diluted earnings per share ...................... $ .30 $ .18
========== ==========
E. Revolving Credit Facility:
At April 30, 1998, the balance outstanding under the Company's secured
revolving credit facility amounted to $9,743,592. On May 1, 1998, the facility
credit line was increased from $10 million to $13 million. 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, 1999.
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
facility requires the Company to maintain a minimum tangible net worth, at all
times.
F. Major Supplier
The Company purchased approximately 75.4% of its raw materials from one
supplier under licensing agreements during the three month period ended April
30, 1998. The Company expects this relationship to continue for the foreseeable
future. If required, similar raw materials could be purchased from other
sources.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three months ended April 30, 1998 compared to the three months ended April 30,
1997:
Net sales for the three months ended April 30, 1998 increased $4,028,000 or
33.5% to $16,042,000 from $12,014,000 reported for the three months ended April
30, 1997. Unit shipments and increased prices of various protective garment
products are the principal reasons for this upward movement in sales. This
industry, however, continues to be highly competitive. Net sales increased 31.3%
during the quarter ended April 30, 1998, as compared to the immediate preceding
quarter, principally as the result of a price increase effective March 1, 1998
and the Company's ability to maintain inventory levels to meet sales demand.
Gross profit as a percentage of net sales increased to 19.8% for the three
months ended April 30, 1998 from 19.2% reported for the prior year, principally
due to price increases instituted at the beginning of the 1999 fiscal year and
continued market price stabilization. Gross profit increased by 16.5% during the
three months ended April 30, 1998 as compared to the immediate preceding quarter
due to sales price increases, partially offset by an increase in the cost of raw
materials from a major supplier on February 1, 1998.
Operating expenses as a percentage of net sales decreased to 10.7% for
three months ended April 30, 1998 from 12.1% for the prior year, as sales
increased by 33.5%, with only a 17.8% increase in operating expenses.
Interest expense increased consistent with an increase in outstanding
borrowings.
The effective tax rate remained constant at 39%, primarily attributable to
the federal statutory rate of 34% increased by state income taxes and certain
operating losses generating no current tax benefit.
As a result of the foregoing, operating results increased to net income of
$802,000 (up 70.3%) for the three months ended April 30, 1998 from net income of
$471,000 for the three months ended April 30, 1998.
LIQUIDITY and CAPITAL RESOURCES
Lakeland has historically met its cash requirements through funds generated
from operations and borrowings under a revolving credit facility. On December
12, 1997, the Company entered into a new $13 million facility (as amended on May
1, 1998) with a financial institution. This facility matures on November 30,
1999. Interest charges under this credit facility are calculated on various
optional formulas using LIBOR or the 30-day commercial paper rates, as defined.
The Company's April 30, 1998 balance sheet shows a strong current ratio and
working capital position and management believes that its positive financial
position, together with its new two-year credit facility 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 April 30, 1998
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 12, 1998 Raymond J. Smith
----------------
Raymond J. Smith,
President and Chief Executive Officer
Date: June 12, 1998 James M. McCormick
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James M. McCormick,
Vice President and Treasurer
(Principal Accounting Officer)