-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MmhCxSyZmvOJmWTTK8TTtSYQU/0E5bjHILY8j92vCNW4mk5QOuDSwzNJtpnGUGWF s8AjpTChpU9ttAI8VSoDqw== 0000914317-99-000249.txt : 19990429 0000914317-99-000249.hdr.sgml : 19990429 ACCESSION NUMBER: 0000914317-99-000249 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAKELAND INDUSTRIES INC CENTRAL INDEX KEY: 0000798081 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 133115216 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15535 FILM NUMBER: 99603526 BUSINESS ADDRESS: STREET 1: 711-2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 BUSINESS PHONE: 5169819700 MAIL ADDRESS: STREET 1: 711- 2 KOEHLER AVENUE STREET 2: 711- 2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 10-K 1 FORM 10-K - ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark one) X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 (Fee Required) For the fiscal year ended January 31, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 (No fee required) For the transition period from _____________ to ______________ Commission File Number: 0 - 15535 LAKELAND INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 13-3115216 - ------------------------- -------------------------------- (State of Incorporation) (I.R.S. Employer Identification Number) 711-2 Koehler Ave., Ronkonkoma, NY 11779 -------------------------------------------- (Address of Principal Executive Offices) (516) 981-9700 -------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: None Common Stock, $.01 Par Value ------------------------------------------------------------- (Title of class) 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S - K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 - K or any amendment to this Form 10 - K _ . The aggregate market value of the Common Stock outstanding and held by nonaffiliates (as defined in Rule 405 under the Securities Exchange Act of 1934) of the Registrant, based upon the average high and low bid price of the Common Stock on NASDAQ on April 14, 1999 was approximately $7,284,947 (based on 1,533,673 shares held by nonaffiliates). The number of shares outstanding of the Registrant's common stock, $.01 par value, on April 29, 1999 was 2,660,500. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended January 31, 1999 are incorporated by reference in Items 5-7A of Part II and certain portions of the Registrant's Definitive Proxy Statement, for the Annual Meeting of Stockholders to be held June 16, 1999, are incorporated by reference in Items 10 - 13 of Part III of this Annual Report on Form 10-K. A-1 PART I ITEM 1. BUSINESS Lakeland Industries, Inc. (the"Company") believes that it is the leading manufacturer of a comprehensive line of safety garments and accessories for the industrial safety and protective clothing industries in the United States. The Company's major product areas include disposable / limited use protective industrial garments, specialty safety and industrial work gloves, reusable woven industrial and medical apparel, fire and heat protective clothing along with protective systems for personnel, and suits for use by toxic waste clean up teams. Products are manufactured both domestically and internationally by the Company and by contract manufacturers. Products are sold by Company personnel and 44 independent sales representatives, primarily to a network of 500 safety and mill supply distributors. The Company's protective garments are used primarily for: (i) safety and hazard protection, to protect the wearer from contaminants or irritants, such as, chemicals, pesticides, fertilizers, paint, grease, and dust and from limited exposure to hazardous waste and toxic chemicals including acids, asbestos, lead, and hydro-carbon's (PCB's) (ii) clean room environments, for the prevention of human contamination of manufacturing processes in clean room environments, (iii) hand and arm protection, to protect the wearer's hand and arms from lacerations, heat and chemical irritants without sacrificing manual dexterity or comfort, (iv) heat and fire protection, to protect municipal fire fighters, military, airport and industrial fire fighting teams and for maintenance of "hot" equipment, such as, coke ovens, kilns, glass furnaces, refinery installations, and smelting plants, (v) protection from viral and bacterial microbiologicals, to protect the wearer from contagious diseases, such as AIDS and hepatitis, at hospitals, clinics and emergency rescue sites, and (vi) protection from highly concentrated and powerful chemical and biological toxins, to protect the wearer from toxic wastes at Super Fund sites, accidental toxic chemical spills or biological discharges, the handling of chemical or biological warfare weapons and the cleaning and maintenance of chemical, petro- chemical and nuclear facilities. These products are manufactured, distributed and sold through five divisions and four wholly owned subsidiaries. The Company was incorporated in New York in 1982 and later reincorporated in Delaware in 1986. A new subsidiary, Fireland Industries, Inc. was formed during fiscal 1994 and to act as Trustee and Sponsor of the Fireland Industries, Inc. Pension Plan. During fiscal 1998, the name of this subsidiary was changed to Laidlaw, Adams & Peck, Inc. Effective February 1, 1999, the China division, Weifang Lakeland Safety Products Co., Ltd., was incorporated in China as a wholly owned subsidiary of the Company. Background and Market The market for disposable industrial garments has increased substantially in the past 20 years. In 1970, Congress enacted the Occupational Safety and Health Act ("OSHA"), which requires employers to supply protective clothing in certain work environments. At about the same time, DuPont developed Tyvek(TM) which, for the first time, allowed for the economical production of lightweight, disposable protective clothing. The attraction of disposable garments grew in the late 1970's with the increases in both labor and material costs of producing cloth garments and the promulgation of federal, state and local regulations requiring that employees wear protective clothing to protect against exposure to certain contaminants, such as asbestos and P.C.B.s. The use of disposable garments avoids the continuing costs of laundering and decontaminating woven cloth work garments and reduces the overhead costs associated with handling, transporting and replacing such garments. As manufacturers have become aware of the advantages of disposable clothing, the demand for such garments has increased. This has allowed for greater production volume and, in turn, has reduced the cost of manufacturing disposable industrial garments. The Company believes that this market will grow due to the extensive government legislation which mandates the clean up of toxic waste sites and the elimination of hazardous materials from the environment as promulgated under prior Congressional Super Fund Acts and the Super Fund Reform Act of 1998 presently awaiting passage. The Environmental Protection Agency ("EPA") designated OSHA to be responsible for the health and safety of workers in and around areas of hazardous materials and contaminated waste. OSHA responded by formulating an all encompassing compendium of safety regulations that prescribe operating standards for all aspects of OSHA projects. Almost 2 million people are affected by OSHA Standards today. Various states have also enacted worker safety laws which are equal to or go beyond OSHA standards and requirements, as it affects the Company's products. In 1990, additional standards proposed and developed by the National Fire Protection Association ("NFPA") and the American Society for Testing and Materials ("ASTM") were accepted by OSHA. NFPA Standard 1991 set performance A-2 requirements for total-encapsulating vapor-proof chemical suits and includes rigid chemical and flame resistance tests and a permeability test against 17 challenge chemicals. The basic OSHA Standards call for 4 levels of protection, A through D, and specify in detail the equipment and clothing required to adequately protect the wearer at corresponding danger levels. A summary of these four levels follows: NFPA 1991 / Level A calls for total encapsulation in a vapor-proof chemical suit with self-contained breathing apparatus ("SCBA") and appropriate accessories. Level B calls for SCBA or positive pressure supplied respirator with escape SCBA, plus hooded chemical resistant clothing (overalls, and long sleeved jacket; coveralls; one or two piece chemical-splash suit; or disposable chemical-resistant overalls). Level C requires hooded chemical-resistant clothing (overalls; two-piece chemical-splash suit; disposable chemical-resistant overalls). Level D is basically a work and/or training situation requiring minimal coverall protection. The growth in the markets for disposable/limited use garments in the industrial safety market has resulted from the following factors: o lower cost of disposable/limited use garments as opposed to reusable woven and cloth garments due to the elimination of costs associated with laundering, decontaminating, handling, transporting and replacing reusable woven or cloth garments; o the promulgation of federal (OSHA) and state regulations requiring that employees wear protective clothing to protect against exposure to certain contaminants, such as, asbestos, PCB(s), lead, acids and other numerous hazardous chemicals and radioactive materials; o increasing workmens' compensation claims and large class action liability suits instituted by both present and prior employees for failure to be protected against hazardous agents found in the workplace. In general, manufacturers of industrial and safety clothing are considered to be highly fragmented, since they consist of a large number of closely held small family businesses. Accordingly, the Company believes that the industries encompassed by disposable/limited use protective garments, industrial work gloves, reusable woven industrial and medical apparel and fire and heat protective clothing could present attractive acquisition opportunities. There are few, if any, dominant personal protective apparel manufacturers, and the market is witnessing significant ongoing consolidation activity, both at the manufacturing level and more significantly, at the safety distributor customer level. Recently, safety distribution channels have experienced more consolidation than the safety manufacturing segment, due to a number of large distributors with access to capital acquiring smaller distributors. Since 1997, the Company's net sales have increased by 31% to $54.655 million in fiscal 1999 while, during the same period, operating profit has increased by 94% to $3.923 million in fiscal 1999. A-3 Products - General The following table summarizes the principal products manufactured and/or sold by the Company, organized by the respective fabric's principal markets/uses therefore:
Product Raw Material Protection Against User Industry - ------- ------------ ------------------ ------------- o Limited Use/Disposable o Tyvek(TM) and Tyvek(TM) Contaminants, irritants, o Chemical/petrochemical Protective Clothing laminates chemicals, fertilizers, industries pesticides, acids, o Automotive and asbestos, PCB(s), lead pharmaceutical industries and other hazardous o Public utilities chemicals o Janitorial o Gloves o Kevlar(TM) yarns Cuts, lacerations, heat o Chemical plants o Arm guards o Spectra(TM) yarns and chemical irritants o Automotive, glass and metal fabrication industries o Fire fighting apparel o Neoprene Fire, burns and excessive o Municipal, corporate and o Nomex(TM) heat volunteer fire departments o Gortex(TM) o Airport crash rescue o Heat protective o Aluminized Nomex(TM) Fire, burns and excessive Hot equipment maintenance aluminized fire suits o Aluminized Kevlar(TM) heat personnel and industrial fire departments o Protective woven o Cotton Polyester blends o Protects manufactured o Hospital and Industrial reusable garments o Cotton products from human Facilities o Polyester contamination or static o clean room environments o Staticsorb(TM) Carbon electrical charge o Emergency Medical Thread C-3 Polyester o Bacteria, viruses and Ambulance Services blood borne pathogens o High end Chemical o TyChem(TM) Chemical spills o Hazardous material teams protective suits o Teflon(TM) Toxic chemicals used in o Chemical and nuclear o Other Company patented manufacturing processes industries-various uses Co-Polymer Laminates
Limited Use/Disposable Protective Clothing The Company manufactures a complete line of disposable/limited use protective garments at its U.S., Mexican and Chinese assembly facilities. These garments are offered in coveralls, lab-coats, shirts, pants, hoods, aprons, sleeves and smocks. The Company offers these garments in a number of sizes and styles to fit the end users' needs. Limited-use garments can also be coated or laminated to increase splash protection against many inorganic acids, bases, and other liquid chemicals. Limited use garments are made from several non-woven fabrics including Tyvek(TM), TyvekQC(TM), Tyvek/Saranex 23-P(TM), Pyrolon FR(TM), and Polypropylene and Polyethylene materials and derivatives. The Company incorporates many seaming techniques depending on the level of hold-out needed in the end use application. Seam types utilized include standard serge seam, bound seam, and heat sealed seam. Disposable/limited use industrial garments are used in a wide variety of industries and applications. Typical industry users are chemical plants, petro chemical refineries and related installations, automotive manufacturers, pharmaceutical companies, coal and oil power generation utilities and telephone utility companies. There are many smaller industries that use these garments for specific safety applications unique to their situation. The Company's limited use garments range in price from $.06 for disposable/limited use shoe covers to approximately $12.00 A-4 for Tyvek/Saranex 23-P laminated hood and booted coverall. The Company's largest selling item, a standard white limited-use Tyvek coverall, costs the end user approximately $2.75 to $3.25 per garment. By comparison, similar re-usable cloth coveralls range in price from $20.00 to $60.00, exclusive of significant laundering, maintenance and shrinkage expenses. The Company cuts, warehouses and sells its disposable/limited use garments primarily at its Decatur, Alabama facility. The fabric is first cut into required patterns at this plant which is ISO 9002 certified. The cut fabric and any necessary accessories, such as zippers or elastic, are then obtained from the Company's plant by the Company's wholly owned assembly facilities or independent sewing contractors. The Company's assembly facilities in China or Mexico and independent contractors sew and package the finished garments at their own facilities and return them to the Company's plant, normally within one to ten weeks for immediate shipment to the customer. The Company presently utilizes over 15 independent sewing contractors under agreements that are terminable at will by either party. These contractors employ approximately 200 people full-time (both domestically and internationally) and operate and maintain their own industrial sewing machines. The Company believes that it is the only customer of the majority of its independent sewing contractors and considers its relations with such contractors to be excellent. In the year ended January 31, 1999, no independent sewing contractors accounted for more than 5% of the Company's production of disposable/limited use garments. The Company believes that it can obtain adequate alternative production capacity should any of its independent contractors become unavailable. The Company believes that its manufacturing system permits it considerable flexibility. Furthermore, by employing additional sewing contractors, the Company can increase production without substantial additional capital expenditures. While the Company has not experienced reduced demand for its disposable / limited use garments, management believes that by its use of its facilities complemented by the use of independent sewing contractors, the Company is capable of reducing or alternately increasing by 20% its production capacity without incurring large on-going costs typical of many manufacturing operations. This allows the Company to react quickly to changing unit demand for its products. Gloves and Arm Guards The Company manufacturers and sells speciality safety gloves and sleeves made from Kevlar(TM). The Company is one of four companies licensed to sell 100% Kevlar(TM) gloves. Kevlar(TM) is a cut and heat resistant, high-strength lightweight, flexible and durable material produced by Dupont. Kevlar(TM), on an equivalent weight basis, is five times stronger than steel and has increasingly been used in manufacturing such diverse products as airplane fuselage components and bullet-resistant vests. Gloves made of Kevlar(TM) offer a better overall level of protection, lower the injury rate and are more cost effective than work gloves made from such traditional material as leather, canvas and coated gloves. Kevlar(TM) gloves can withstand temperatures of up to 400 degrees F and are sufficiently cut-resistant to allow workers to safely handle sharp or jagged unfinished sheet metal. Kevlar(TM) gloves are used primarily in the automotive, glass and metal fabrication industries. The Company is devoting an increasing portion of its manufacturing capacity to the production of Kevlar(TM) and Spectra(TM) gloves, which carry a higher profit margin than commodity gloves. Spectra(TM) is a cut resistant fiber made by Allied Signal, Inc. In order to maintain a full line of gloves, however, the Company intends to continue to produce or import commodity gloves as are necessary to meet customer demand for its glove products. The Company believes that there are adequate and reliable foreign manufacturers available to meet the Company's import requirements of commodity gloves, if needed. The Company's Kevlar(TM) and Spectra(TM) gloves range in price from $37.00 to $240.00 for a dozen pair. The Company also manufactures gloves at its Somerville, Alabama facility. Computerized robotic knitters are used to weave gloves from both natural and synthetic materials, including Kevlar(TM)and Spectra(TM) on an automatic basis. These robotic knitters are generally in operation 20 hours a day, 5-1/2 days a week. The Company's robotic knitters allow flexibility in production as they can be easily reprogrammed in minutes to produce gloves and sleeves in different sizes, styles, weights, weaves or combinations of materials. Additionally, these robotic knitters can produce gloves and sleeves separately or as a one-piece garment. Gloves and sleeves can also be knitted in different weights and combinations of yarns, such as Kevlar(TM) mixed with cotton or polyester. Heat Protective and Fire Fighting Apparel The Company's products protect individuals that must work in high heat environments and the Company has been the creator, innovator and inventor of protective systems for high heat or hazardous occupations for the last 12 years. The brand name FYREPEL(TM) is recognized nationally and internationally. The Company has completed an intensive redesign and engineering A-5 study to address the ergonomic needs of stressful occupations. The Company's protective aluminized fire suits include: Fire entry suit - for total flame entry for industries dealing with volatile and highly flammable products. Kiln Entry suit - to protect kiln maintenance workers from extreme heat. Proximity suits - designed for performance in high heat areas to give protection where exposure to hot liquids, steam or hot vapors is possible. Approach suits - for personnel engaged in maintenance, repair and operational tasks where temperatures do not exceed 200F degrees ambient, with a radiant heat exposure up to 2,000F degrees. The Company also manufactures fire fighters protective apparel for domestic and foreign fire departments and developed the popular Sterling Heights style (short coat and bib pants) bunker gear. Crash Rescue has been a major market for this product division, which was the first to produce and supply military and civilian markets with protection worn at airports, petrochemical plants and in the marine industry. Each of the fire suits range in cost to the end user from $450 for standard fire department turn-out gear to $2,000 for the fire entry suit. Protective Woven Reusable Garments The Company also manufactures and markets a line of reusable and launderable woven cloth protective apparel which supplement the disposable / limited use garments, giving the Company access to the much larger woven industrial and health care related markets. Cloth re-usable garments are more appropriate in certain situations or applications because of worker familiarity with and acceptance of these fabrics and woven cloth's heavier weight, durability and longevity. These products give the Company the flexibility to supply and satisfy a wider range of safety and customer needs. The Company designs and manufactures: o special anti-static apparel, primarily for the automotive industry (perceived as a premium-priced product) o clean room apparel as used in the most sophisticated semiconductor manufacturing facilities o hospital garments for protection against blood borne pathogens o jackets and bib overalls for use by emergency medical rescue teams The Company's reusable wovens range in price from $10.00 to $80.00 per garment. The Company manufactures and sells woven cloth garments at its facility in St. Joseph, Missouri. After the Company receives fabrics from suppliers, principally blends of polyester and cotton, the Company cuts and sews the fabrics at its own facilities to meet customer purchase orders. High-End Chemical Protective Suits The Company manufactures heavy duty fully encapsulated chemical suits (three of which have been developed internally and are patented) using proprietary co-polymer laminates or Viton(TM), butyl rubber, polyvinyl chloride ("PVC") and the Dupont TyChem(TM)and Barricade(TM) fabrics. These suits are worn to protect the user from exposure to hazardous chemicals. Hazardous material teams or individuals use chemical suits for toxic cleanups, chemical spills, or in industrial, chemical and electronic plants. The Company's line of chemical suits range in cost from $80.00 for the Checkmate suits to $3,400 for its Forcefield Teflon suits. The chemical suits can be used in conjunction with a fire protective shell manufactured by the Company which will protect the user from both chemical and flash fire hazards. The Company has also introduced four National Fire Protection Agency ("NFPA") approved garments for varying levels of protection required depending on field conditions: TyChem(TM) - 10,000 is a co-polymer film laminated to a durable spunbonded substrate. It offers the broadest temperature range for limited use garments - -25o F to 225o F. TyChem(TM) 10,000 meets all OSHA Level A requirements. It is available in NFPA 1991-94 certified versions when worn with an aluminized over cover. TyChem(TM) - 9400 meets all OSHA Level B and all NFPA 1993 fabric requirements and offers excellent splash protection against a wide array of chemicals. Forcefield(TM) - A lightweight hazmat suit, totally encapsulized providing greater mobility, visibility, dependability and versatility in dealing safely and effectively with most types of chemical hazards. This product meets NFPA 1991 standards for a fully certified chemical protective suit. When combined with an Aluminized PBI/Kevlar over cover, it provides NFPA 1991 / Level A protection; Interceptor(TM) - Model A meets all OSHA Level A requirements as a vapor-proof suit. Model 1 meets and exceeds NFPA 1991 requirements of certification for vapor-proof suit when used with an Aluminized PBI / Kevlar over cover. A-6 Checkmate(TM) - Is used for lower level chemical protection. This suit is lightweight, tough, versatile, durable and cost effective and can be used for: splash protection, basic clean up, toxic waste dumps and post fire monitoring of toxic residue. It meets all NFPA requirements. The Company manufactures chemical protective clothing at its facility in Somerville, Alabama. After the Company obtains such materials as Barricade (R), TyChem(R), Viton(R), butyl rubber, PVC or its own patented laminates, it designs, cuts, glues and/or sews the materials to meet customer purchase orders. Quality Control To assure quality, Company employees monitor the sewing of disposable / limited use garments at its own Mexican and Chinese facilities and at the facilities of independent sewing contractors and also inspect the garment upon delivery to the Company's facilities. Finished product that is below standard is returned to the contractor for reworking. The Company has been required on a few occasions to return product to its independent sewing contractors. The Company also actively participates in the Industrial Safety Equipment Association's (ISEA) frequent independent quality inspection programs. The Company conducts quality control inspections of its industrial gloves, cloth, fire and chemical garments throughout the manufacturing process. The Company's Decatur, Alabama plant was ISO 9002 certified during fiscal year 1998. ISO standards are internationally recognized quality manufacturing standards established by the International Organization for Standardization based in Geneva, Switzerland. To obtain its ISO registration, the Company's factories were independently audited to ensure compliance with the applicable standards, and to maintain registration, the factories receive regular announced inspections by an independent certification organization. The Company believes that the ISO 9002 registration makes it more competitive in the marketplace, as customers are increasingly recognizing the standard as an indication of product quality. Marketing and Sales The Company's products are sold primarily by over 500 safety and mill supply distributors including four of the five leading North American distributors. Sales of the Company's products are solicited by 16 agencies engaging 44 independent sales representatives. The Company also employs an in-house sales force of nine (9) people. These independent representatives call on over 500 safety and industrial distributors nationwide and promote and sell the Company's products to safety and industrial distributors and provide product information. The distributors buy the Company's products and maintain inventory at the local level in order to assure quick response time and the ability to service accounts properly. The independent representatives maintain regular interaction with end users and decision makers at the distribution level, thereby providing the Company with valuable feedback on market perception of the Company's products, as well as new developments within the industry. During the year ended January 31, 1999, no one distributor accounted for more than 5% of sales. The Company's marketing plan is to maximize the efficiency of its established distribution network by direct promotion at the end-user level. Advertising is primarily through trade publications. Promotional activities include sales catalogs, mailings to end users and a nationwide publicity program. The Company exhibits at both regional and national trade shows and was represented at the National Safety Congress in Los Angeles, CA (Fall of 1998) and at the American Industrial Hygienists Convention (Spring of 1998). Research and Development The Company has a history of new product development and innovation and has recently introduced the Grapolator(TM) and Kut Buster(TM) glove and sleeve lines which combine a stainless steel wire core combined with high strength man made fibers providing the ultimate in cut protection without sacrificing dexterity, and additionally the Thermbar Mock Twist(TM) which provides heat protection for temperatures up to 600o F. The Company has nine patents on various fabrics and production machinery. The Company plans to continue to be an innovator in protective apparel fabrics, manufacturing equipment, and intends to introduce new products to the market place in the future. Specifically, the Company plans to develop new anti-static reusable gowns for the automotive industry made of specially knit polyester with carbon threads and will continue to dedicate resources to research and development. Suppliers and Materials The Company does not have long-term, formal agreements with unaffiliated suppliers of non-woven fabric raw materials used by the Company in the production of its product lines. Tyvek(TM) and Kevlar(TM), however, are purchased from Dupont under A-7 licensing agreements. Polypropylene, Polyethylene, Polyvinyle Chloride and their derivatives are available from thirty or more major mills, while flame retardant fabrics are also available from a number of both domestic and international mills. The accessories used in the production of the Company's disposable garments such as zippers, snaps and elastics are obtained from unaffiliated suppliers. The Company has not experienced difficulty in obtaining its requirements for these commodity component items. The Company also has not experienced difficulty in obtaining materials, including cotton, polyester and nylon, used in the production of reusable non-wovens and commodity gloves. Kevlar(TM), used in the production of the Company's specialty safety gloves, is obtained from independent mills that purchase the fiber from Dupont. The Company has not experienced difficulty in obtaining its requirements for its raw materials, fabrics or components on any of the above described products. The Company obtains the Spectra(TM) yarn used in its Dextra Guard(TM) gloves from mills that purchase the fiber from Allied Signal Company, Inc. ("Allied"). The Company believes that Allied will be able to meet the Company's needs for Spectra(TM). In manufacturing its fire and heat protective suits, the Company uses glass fabric, aluminized glass, Nomex(TM), aluminized Nomex(TM), Kevlar(TM), aluminized Kevlar(TM), polybenzimidazole (PBI) and Gortex(TM), as well as combinations utilizing neoprene coatings. The chemical protective suits are made of Viton(TM), butyl rubber, PVC (available from multiple sources), proprietary and Company patented laminates and Teflon(TM), Saranex(TM) Tyvek QC(TM), TyChem(TM) and Barricade(TM) from Dupont. The Company has not experienced difficulty obtaining any of the aforementioned materials. Competition The Company's business is in a highly competitive industry. The Company believes that the barriers to entry in each of the fields in which it operates are relatively low, except in Tyvek(TM) disposable limited use clothing because of the limited number of Tyvek(TM) licensees. The Company faces competition in some of its other product markets from large established companies that have greater financial, managerial, sales and technical resources than the Company. Where larger competitors offer products that are directly competitive with the Company's products, particularly as part of an established line of products, there can be no assurance that the Company can successfully compete for sales and customers. Larger competitors also may be able to benefit from economics of scale or to introduce new products that compete with the Company's products. Seasonality The Company's quarterly operating results have varied and are expected to continue to vary in the future. These fluctuations may be caused by many factors, including seasonal buying patterns, demand for the Company's sales cycle, competitive pricing and services, the size and timing of individual sales, the lengthening of the Company's sales cycle, competitive pricing pressures, customer order deferrals in anticipation of new products, changes in the mix of products and services sold, the timing of introductions and enhancements of products by the Company or its competitors, market acceptance of new products, technological changes in fabrics or production equipment used to make the Company's products, changes in the Company's operating expenses, changes in the mix of domestic and international revenues, the Company's ability to complete fixed price government or private long-term contracts within a budget, personnel changes, expansion of international operations, changes in the Company's strategies, and general industry and economic conditions. The Company's business has experienced, and is expected to continue to experience, seasonal fluctuations due in large part to the cyclical nature of certain industrial customers' businesses. Historically, more disposable garments are sold in the spring and summer months due to moderate weather and construction starts. Sales are lowest in the third quarter as use of the Company's disposable garments decrease during the warm summer months. Patents and Trademarks At this time, there are no patents or trademarks which are significant to the Company's operations; however, the Company has one exclusive ten (10) year licensing arrangement covering seven patents in the Company's name, two Company developed patents, two additional patents in the application and approval process with the U.S. Patent and Trademark office, and has one non-exclusive agreement with Dupont regarding patented materials used in the manufacture of chemical suits. Employees As of April 15, 1999, the Company had approximately 923 full-time employees (735 or 79.6% of whom were international and 188 or 20.4% of whom were domestic) and in fiscal 1999 met its manpower requirements at one division through an employee leasing agreement with Madison Manpower and Mobile Storage, Inc., the president and principal stockholder of which A-8 is also an officer of the Company. This arrangement has been discontinued and these people are now employees of the Company. The Company has experienced a low turnover rate among its employees. The Company believes its employee relations to be excellent. ITEM 2 Properties The Company leases three domestic manufacturing facilities, three foreign manufacturing facilities, one foreign sales office, one Canadian warehouse facility and a corporate office headquarters. The Company's 90,308 square foot facility in Decatur, Alabama, is used in the production of disposable / limited use garments. The Alabama facility is leased entirely by the Company from a partnership consisting primarily of certain stockholders of the Company, pursuant to two lease agreements expiring on August 31, 1999. The glove and chemical suit product divisions lease 12,000 sq. ft. of manufacturing space, each, on a month to month basis in Somerville, Alabama. This Somerville facility is owned by an officer of the Company. The Company leases 44,000 square feet of manufacturing space in St. Joseph, Missouri, from a third party, which is used in the manufacturing of woven cloth garments and other cloth products. This lease expires on October 31, 1999, and has been renewed to October 31, 2001. The Company's Mexican subsidiary leases two manufacturing facilities from third parties totaling 33,816 square feet under one lease expiring on December 31, 2000 and the second smaller facility is leased on a month to month basis. The Company also leases a 46,920 square foot manufacturing facility in China. This lease agreement is with a partnership of American and Chinese individuals (which include certain officers, employees and directors of the Company) who own the buildings and who have leased the underlying real property for 50 years. The partnership in turn leases the buildings and real property to the Company's Chinese subsidiary as a sales, distribution and manufacturing facility. In fiscal 1999, the lease was on a month to month basis at an annual rental of $39,020. The rent was increased by $6,960 as 7,100 additional square feet was added to the building in fiscal 1999. A formal long term lease is expected upon completion of the buildings at an annual rental of $45,980. A small 2,000 sq. ft. sales office is also leased from a third party at an annual rental of $8,000. The Company leases a 5,600 square foot warehouse in Canada from a third party under a lease expiring on November 30, 2002. The Company leases 4,362 square feet of office space in Ronkonkoma, New York, from a third party, in which its corporate, executive and sales offices are located. This lease expires on June 30, 1999, and has been renewed to June 30, 2002. For the years ended January 31, 1999, 1998 and 1997, the Company paid total rent on property and all leased equipment of approximately $643,000, $621,000 and $581,000, respectively. The Company believes that these facilities are adequate for its present operations. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are involved as plaintiffs in certain receivable collection actions and claims arising in the ordinary course of business, none of which are of a material nature. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of security holders of the Company. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Reference is made to Page 5 ("Market for the Registrant's Common Stock and Related Stockholder Matters") of the Registrant's 1999 Annual Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 6. SELECTED FINANCIAL DATA Reference is made to Page 1 ("Selected Financial Data") of the Registrant's 1999 Annual Report to Shareholders filed as ---- A-9 Exhibit 13 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Reference is made to Page 2 ("Management's Discussion and Analysis of Financial Condition and Results of Operations") of the Registrant's 1999 Annual Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Page 5 ("Quantitative and Qualitative Disclosures about Market Risk") of the Registrant's 1999 Annual Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following Consolidated Financial Statements are incorporated herein by reference to Pages 7 to 24 of the Registrant's Annual Report to Shareholders for the year ended January 31, 1999: Report of Independent Certified Public Accountants Consolidated Balance Sheets - January 31, 1999 and 1998 Consolidated Statements of Income for the years ended January 31, 1999, 1998 and 1997 Consolidated Statement of Stockholders' Equity for the years ended January 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows for the years ended January 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT See the information under the caption "Election of Directors" in the Company's Proxy Statement relating to the 1999 Annual Meeting of Stockholders ("Proxy Statement"), which information is included in Exhibit 20 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) The following table sets forth the names and ages of all executive officers of the Company, and all positions and offices within the Company presently held by such executive officers. None of the directors, executive officers or nominees for director has any family relationship with any other director, executive officer or nominee for director of the Company.
Name Age Position Held - ---- --- ------------- Raymond J. Smith 60 Chairman of the Board, President and Director Christopher J. Ryan 47 Executive Vice President - Finance & Secretary and Director Harvey Pride, Jr. 52 Vice President - Manufacturing James M. McCormick 51 Vice President and Treasurer
Mr. Smith, a co-founder of the Company, has been Chairman of the Board and President since its incorporation. Prior to 1982, he was employed for 16 years by Disposables, Inc., a manufacturer of disposable garments, first as sales manager, then as Executive Vice President and subsequently as President and Director. A-10 Mr. Christopher J. Ryan has served as Executive Vice President- Finance and director since May, 1986 and Secretary since April 1991. From October 1989 until February 1991 Mr. Ryan was employed by Sands Brothers & Co. Ltd. and Rodman & Renshaw, Inc., both investment banking firms. Prior to that, he was an independent consultant with Laidlaw Holding Co., Inc., an investment banking firm, from January 1989 until September 1989. From February, 1987 to January, 1989 he was employed as the Managing Director of Corporate Finance for Brean Murray, Foster Securities, Inc. Mr. Pride has been Vice President of the Company since May 1986. He was Vice President of Ryland (the Company's former subsidiary) from May 1982 to June 1986, and President of Ryland until its merger into Lakeland on January 31, 1990. Mr. McCormick has been Vice President and Treasurer since May 1986. Between January 1986 and May 1986 he was the Company's Controller. ITEM 11. EXECUTIVE COMPENSATION See information under the caption "Compensation of Executive Officers" in the Company's Proxy Statement, which information is included in Exhibit 20 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See the information under the caption "Voting Securities and Stock Ownership of Officers, Directors and Principal Stockholders" in the Company's Proxy Statement, which information is included in Exhibit 20 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the information under the caption "Certain Relationships and Related Transactions" in the Company's Proxy Statement, which information is incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8 - K (a) Index to Consolidated Financial Statements and Schedule: 1. Financial Statements: The following Consolidated Financial Statements of the Registrant are incorporated herein by reference to the Registrant's Annual Report to Shareholders for the year ended January 31, 1999, as noted in Item 8 hereof: Report of Independent Certified Public Accountants Consolidated Balance Sheets - January 31, 1999 and 1998 Consolidated Statements of Income for the years ended January 31, 1999, 1998 and 1997 Consolidated tatement of Stockholders' Equity for the years ended January 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows for the years ended January 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements 2. Financial Statement Schedules The following consolidated financial statement schedule is included in Part IV of this report: Schedule II - Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. (b) Reports on Form 8 - K. No report on Form 8 - K has been filed for the quarter ended January 31, 1999. A-11 (c) Exhibits: 3 (a) Restated Certificate of Incorporation* 3 (b) By-Laws, as amended* 10 (a) Lease agreements between POMS Holding Co., as lessor, and the Company, as lessee, dated January 1, 1995 10 (b) Lease agreement between Southwest Parkway, Inc., as lessor, and the Company, as lessee, dated June 11, 1996. 10 (c) The Company's Stock Option Plan* 10 (d) Asset Purchase Agreement, dated as of December 26, 1986, by and among the Company, Fireland, Fyrepel Products, Inc. and John H. Weaver, James R. Gauerke and Vernon W. Lenz** 10 (e) Asset Purchase Agreement, dated as of December 26, 1986, by and among the Company, Chemland, Siena Industries, Inc. and John H. Weaver, James R. Gauerke, Eugene R. Weir, John E. Oberfield and Frank 10 (f) Asset Purchase Agreement, dated September 30, 1987 by and among the Company and Walter H. Mayer & Co. (Incorporated by reference to the report on Form 8-K filed by the Company on October 14, 1987.) 10 (g) Employment agreement between the Company and Raymond J. Smith, dated January 23, 1998. 10 (h) Employment agreement between the Company and Harvey Pride, Jr., dated January 31, 1998. 10 (i) Lease between Lakeland Industries, Inc. and JBJ Realty, dated April 16, 1999. 10 (j) Asset Purchase Agreement, dated November 19, 1990 by and among the Company, Mayer and WHM Acquisition Corp. (Incorporated by reference to the report on Form 10 - Q for the quarter ended October 31, 1990, filed by the Company on December 14, 1990). 10 (k) Employment agreement between the Company and Christopher J. Ryan, dated February 14, 1997. 10 (l) Loan agreement dated December 12, 1997 between the Company and Merrill Lynch. 10 (m) Consulting and License Agreements between the Company and W. Novis Smith dated December 10, 1991. 10 (n) Agreement dated June 17, 1993 between the Company and Madison Manpower and Mobile Storage, Inc. 11 Consent of Grant Thornton LLP dated April 7,1999*** 13 Annual Report to Shareholders for the year ended January 31, 1999 20 Proxy Statement of the Registrant for Annual Meeting of Stockholders - June 16, 1999 A-12 22 Subsidiaries of the Company (wholly-owned): Lakeland Protective Wear, Inc. Lakeland de Mexico S.A. de C.V. Laidlaw, Adams & Peck, Inc. Weifang Lakeland Safety Products Co. Ltd. (effective February 1, 1999) 27 Financial Data Schedule All other exhibits are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. - ----------------------- * Incorporated by reference to Registration Statement on Form S - 18 on file with the Securities and Exchange Commission No.33-7512-NY. ** Incorporated by reference to report on Form 8 - K filed by the Company on January 9, 1987. *** Incorporated by reference to Registration Statement on Form S-8 on file with the Securities & Exchange Commission No. 33-92564 - NY. The Exhibits listed above (with the exception of the Annual Report to Shareholders) have been filed separately with the Securities and Exchange Commission in conjunction with this Annual Report on Form 10-K. On request, Lakeland Industries, Inc. will furnish to each of its shareholders a copy of any such Exhibit for a fee equal to Lakeland's cost in furnishing such Exhibit. Requests should be addressed to the Office of the Secretary, Lakeland Industries, Inc., 711-2 Koehler Avenue, Ronkonkoma, New York 11779. A-13 _________________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. Dated: April 30, 1999 LAKELAND INDUSTRIES, INC. By: /s/ Raymond J. Smith ---------------------------------------- Raymond J. Smith , Chairman of the Board and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Name Title Date - ---- ----- ---- /s/ Raymond J. Smith Chairman of the Board, - --------------------------- President and Director Raymond J. Smith (Principal Executive Officer) April 30, 1999 /s/ Christopher J. Ryan Executive V. P.- Finance April 30, 1999 - --------------------------- & Secretary and Director Christopher J. Ryan /s/ James M. McCormick Vice President and Treasurer April 30, 1999 - --------------------------- (Principal Financial and James M. McCormick Accounting Officer) /s/ Eric O. Hallman Director April 30, 1999 - --------------------------- Eric O. Hallman /s/ John J. Collins Director April 30, 1999 - --------------------------- John J. Collins,Jr. /s/ Walter J. Raleigh Director April 30, 1999 - --------------------------- Walter J. Raleigh A-14 EX-10 2 Julius Blumberg, Inc. Publisher, NYC 10013 This Agreement between JBJ Realty 376 Fulton Street Farmingdale, NY 11735 and LAKELAND INDUSTRIES, INC. as Landlord as Tenant Witnesseth: The Landlord hereby leases to the Tenant the following premises: Approximately 4362.5 sf. of space known as 711-2 Koehler Avenue Ronkonkoma, NY 11779 for the term of Three (3) Years with Two (2) Year Options to renew at 4% increased to commerce for the First day of July, 1999 and the end on the Last day of June, 2002 to be used and occupied only for Light Industrial upon the conditions and covenants following: 1st That the Tenant shall pay the annual rent of 1st. yr.-Thirty Seven Thousand One hundred Sixteen Dollars ($37,116.00) 2nd yr.-Thirty Eight Thousand Five Hundred Ninety Two Dollars ($38,592.00) 3rd yr. -Forty Thousand One Hundred Twenty Eight Dollars ($40,128.00) pt. 1 -Forty One Thousand Seven Hundred Thirty Three and 12/100 ($41,733.12) pt. 2 -Forty Three Thousand Four Hundred Two and 44/100 ($43,402.44) said rent to be paid in equal monthly payments in advance on the FIRST day of each and every month during the term aforesaid, as follows: 1st. yr.-Three Thousand Ninety Three Dollars and 00/100 ($3,093.00) 2nd yr.-Three Thousand Two Hundred Sixteen Dollars and 001/100 ($3,216.00) 3rd yr.-Three Thousand Three Hundred Forty Four Dollars and 00/100 ($3,344.00) pt. 1-Three Thousand Four Hundred Seventy Seven Dollars and 76/100 ($3,477.76) pt. 2-Three Thousand Six Hundred Sixteen Dollars and 87/100 ($3,616.87) 2nd. That the Tenant shall take good care of the premises and shall, at the Tenant's own cost and expense make all repairs not to exceed ten (10%) percent of the annual lease payments, balance of costs to be paid by Landlord. Except Structural and at the end or other expiration of the term, shall deliver up the demised premises in good order or condition, damages by the elements excepted. 3rd. That the Tenant shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations, and requirements of the Federal, State and Local Governments and of any and all their Departments and Bureaus applicable to said premises, for the correction, prevention, and abatement of nuisances or other grievances, in , upon or connected with said premises during said term; and shall also promptly comply with and execute all rules, orders and regulations of the New York Board of Fire Underwriters, or any other similar body, at the Tenant's own cost and expense. 4th. That the Tenant, successors, heirs, executors or administrators shall not assign this agreement, or underlet or under lease the premises, or any part thereof, or make any alterations on the premises, without the Landlord's consent in writing; or occupy, or permit or suffer the same to be occupied for any business or purpose deemed disreputable or extra-hazardous on account of fire, under the penalty of damages and forfeiture, and in the event of a breach thereof, the term herein shall immediately cease and determine at the option of the Landlord as if it were the expiration of the original term. 5th. Tenant must give Landlord prompt notice of fire, accident, damage or dangerous or defective condition. If the Premises can not be used because of fire or other casualty, Tenant is not required to pay rent for the time the Premises are unusable. If part of the Premises can not be used, Tenant must pay rent for usable part. Landlord shall have the right to decide which part of the premises is usable. Landlord need only repair the damaged structural parts of the Premises. Landlord is not required to repair or replace any equipment, fixtures, furnishings or decorations unless originally installed by Landlord. Landlord is not responsible for delays due to settling insurance claims, obtaining estimates, labor and supply problems or any other cause not fully under Landlord's control. If the fire or other casualty is caused by and act or neglect of Tenant, Tenant's employees or invitees, or at the time of the fire or casualty Tenant is in default in any term of the Lease, then all repairs will be made at the Tenant's expense and Tenant must pay the full rent with no adjustment. The cost of the repairs will be added rent. Landlord has the right to demolish or rebuild the Building if there is substantial damage by fire or other casualty. Landlord may cancel this lease within 30 days after the substantial fire or casualty by giving Tenant notice of Landlord's intention to demolish or rebuild. The Lease will end 30 days after Landlord's cancellation notice to Tenant. Tenant must deliver the Premises to Landlord on or before the cancellation date in the notice and pay all rent due to the date of the fire or casualty. If the Lease is canceled Landlord is not required to repair the Premises of Building. The cancellation does not release Tenant of liability in connection with the fire or casualty. This Section is intended to replace the terms of New York Real Property Law Section 227. 6th. The said Tenant agrees that the said Landlord and the Landlord's agents and other representatives shall have the right to enter into and upon said premises, or any part thereof, at all reasonable hours for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. 7th. The Tenant also agrees to permit the Landlord or the Landlord's agents to show the premises to persons wishing to hire or purchase the same; and the Tenant further agrees that on and after the sixth month, next preceding the expiration of the term hereby granted, the Landlord or the Landlord's agents shall have the right to place notices on the front of said premises, or any party thereof, offering the premises " To Let " or "For Sale", and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation. 8th. That if the said premises, or any part thereof shall be deserted or become vacant during said term, or if any default be made in the payment of the said rent or any part thereof, or if any default be made in the performance of any of the covenants herein contained, the Landlord or representatives may re-enter the said premises by force, summary proceedings or otherwise, and remove all persons therefrom, without being liable to prosecution therefore, and the Tenant hereby expressly waives the service of any notice in writing of intention to re-enter, and the Tenant shall pay at the same time as the rent becomes payable under the terms hereof a sum equivalent to the rent reserved herein, and the Landlord may rent the premises on behalf of the Tenant, reserving the right to rent the premises for a longer period of time that fixed in the original lease without releasing the original Tenant form any liability, applying any moneys collected, first to the expense of resuming or obtaining possession, second to restoring the premises to a rentable condition, and then to the payment of the rent and all other charges due and to grow due to the Landlord, any surplus to be paid to the Tenant, who shall remain liable for any deficiency. 9th. Landlord may replace, at the expense of Tenant, any and all broken glass in and about the demised premises. Landlord may insure and keep insured, all plate glass in the demised premises for and in the name of Landlord. Bills, for the premiums therefor shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due from, and payable by Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, additional rental. Damage and injury to the said premises, caused by the carelessness, negligence or improper conduct on the part of the said Tenant or the Tenant's agents or employees shall be repaired as speedily as possible by the Tenant at the Tenant's own cost and expense. 10th. That the Tenant shall neither encumber nor obstruct the sidewalk in front of, entrance to, or halls and stairs of said premises, nor allow the same to be obstructed or encumbered in any manner. 11th. The Tenant shall neither place, or cause or allow to be placed, any sign or signs of any kind whatsoever at, in or about the entrance to said premises or any other part of same, except in or at such place or places as may be indicated by the Landlord and consented to by the Landlord in writing. And in case the Landlord or Landlord's representatives shall deem it necessary to remove any such sign or signs in order to paint the said premises or the building wherein same is situated or make any other repairs, alterations or improvements in our upon said premises or building or any part thereof, the Landlord shall have the right to do so providing the same be removed and replaced at the Land lord's expense, whenever the said repairs, alterations or improvements shall be completed. 12th. That the Landlord is exempt for any and all liability for any damage or injury to person or property caused by or resulting form steam, electricity, gas, water, rain, ice or snow, or any leak or flow form or into any part of said building or from any damage or injury resulting or arising from any other cause or happening whatsoever unless said damage or injury be caused by or be due to the negligence of the Landlord. 13th. That if default be made in any of the covenants herein contained, then it shall be lawful for the said Landlord to re-enter the said premises an the same to have again, re-possess and enjoy. The said Tenant hereby expressly waives the service of any notice in writing of intention to re-enter. 14th. That this instrument shall not be a lien against said premises in respect to any mortgages that are now on or that here after may be placed against said premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this lease, irrespective of the date of recording and the Tenant agrees to execute without cost, any such instrument which may be deemed necessary or desirable to further effect the subordination of this lease to any such mortgage or mortgages, and a refusal to execute such instrument shall entitle the Landlord, or the Landlord's assigns and legal representatives to the option of canceling this lease without incurring any expense or damage and the term hereby granted is expressly limited accordingly. 15th. The Tenant has on deposited with the Landlord the sum of $ 5,089.58 as security for the full and faithful performance by the Tenant of all the terms, covenants and conditions of this lease upon the Tenants part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of the said terms, covenants and conditions on Tenant's part to be performed. In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer, or assignment made of the security to a new Landlord. 16th. That the security deposited under this lease shall not be mortgaged, assigned or encumbered by either party without the written consent of the other party. 17th. It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part as herein specified, or if, without the consent of the Landlord, the Tenant shall sell, assign, or mortgage this lease or if default be made in the performance of any of the covenants and agreements in this lease contained on the part of the Tenant to be kept and performed, or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders, regulations, and requirements of the Federal, State and Local Governments or of any and all their Departments and Bureaus, applicable to said premises, or if the Tenant shall file or there be filed against Tenant a petition of bankruptcy or arrangements, or Tenant be adjudicated a bankrupt or make an assignment for the benefit of creditors or take advantage of any insolvency act, the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days' notice in writing of the Landlord's intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises. 18th. Tenant shall pay to Landlord the rent or charge, which may, during the demised term, be assessed or imposed for the water used or consumed in or in the said premises, whether determined by meter or otherwise, as soon as and when the same may be assessed or imposed, and will also pay the expenses for the setting of a water meter in the said premises should the latter be required. Tenant shall pay Tenant's proportionate part of the sewer rent or charge imposed upon the building. All such rents or charges or expenses shall be paid as additional rent and shall be added to the next month's rent thereafter to become due. 19th. That the Tenant will not nor will the Tenant permit undertenants or other persons to do anything in said premises, or bring anything into said premises, or permit anything to be brought into said premises or to be kept therein, which will in any way increase the rate of fire insurance on said demised premises, nor use the demised premises or any part thereof, nor suffer or permit their use for any business or purpose which would cause an increase in the rate of fire insurance on said building, and the Tenant agrees to pay on demand any such increase. 20th. The failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein, shall not ne deemed a waiver of any rights or remedies that the Landlord may have, and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained. This instrument may not be changed, modified, discharged or terminated orally. 21st. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim against Landlord for the value of any unexpired term of said lease. No part of any award shall belong to the Tenant. 22nd. If after default in payment of rent or violation of any other provisions of this lease, or upon the expiration of this lease, the Tenant moves out or is dispossessed and fails to remove any trade fixtures or other property prior ro such said default, removal, expiration of lease, or prior to the issuance of the final order or execution of warrant, then and in that event, the said fixtures and property shall be deemed abandoned by the said Tenant and shall become the property of the Landlord. 23rd . In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord, and the Tenant expressly agrees to pay as damages for the breach of the covenants herein contained the difference between the rent reserved and the rent collected and received, if any, by the Landlord during the remainder of the unexpired term, such difference or deficiency between the rent herein reserved and the rent collected if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained; and it is mutually agreed between Landlord and Tenant that the respective parties hereto shall and hereby do waive trial by jury in any action, proceeding or counterclaim brought by either parties against the other on any matters whatsoever arising out of or in any way connected with this lease, the Tenant's use or occupancy of said premises, and /or any claim of injury or damage. 24th. The Tenant waives all rights to redeem under any law of the State of New York. 25th. This lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in nowise be affected, impaired or excused because Landlord is delayed in making any repairs, additions, alterations, or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with a National Emergency or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the condition of supply and demand which have been or are affected by war or other emergency. 26th. No diminution or abatement of rent, or other compensation, shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the building or to its appliances, not for any space taken to comply with any law , ordinance or order of a governmental authority. In respect to the various "services," if any herein expressly or impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed that there shall be no diminution or abatement of the rent, or any other compensations, for interruption or curtailment of such "service" when such interruption or curtailment shall be due to accident, alterations or repairs desirable or necessary to be made or to inability or difficulty in securing supplies or labor for the maintenance of such "service" or to some other cause, not gross negligence on the part of the Landlord. No such interruption or curtailment of any such "service" shall be deemed a constructive eviction. The Landlord shall not be required to furnish, and the Tenant shall not be entitled to receive, any of such "services" during any period wherein the Tenant shall be in default in respect to the payment of rent. Neither shall there be any abatement or diminution of rent because of making repairs, improvements or decorations to the demised premises after the date above fixed the commencement of the term, it being understood that rent shall, in any event, commerce to run at such sate so above fixed. 27th. Landlord shall not be liable for failure to give possession of the premises upon commencement date by reason of the fact that premises are not ready for occupancy or because a prior Tenant or any other person is wrongfully holding over or is in the wrongful possession, or for any other reason. The rent shall not commence until possession is given or is available , but the term herein shall not be extended. SEE RIDERS ANNEXED HERETO AND MADE A PART HEREEOF And the said Landlord doth covenant that the said Tenant on paying the said yearly rent, and performing the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid, provided however, that this covenant shall be conditioned upon the retention of title to the premises by the Landlord. And it is mutually understood and agreed that the covenants and agreements contained in the within lease shall be binding upon the parties hereto and upon their respective successors, heirs, executors and administrators. In Witness Whereof, the parties have interchangeably set their hands and seals (or caused these presents to be signed by their proper corporate officers and caused their proper corporate seal to be hereto affixed) this day of April 14, 1999. Signed, sealed and delivered in the presence of ---------------------------------------------------L.S. JBJ ---------------------------------------------------L.S. ---------------------------------------------------L.S. LAKELAND INDUSTRIES, INC. RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 28th The Tenant agrees to keep in force and provide during the term of this lease for the benefit of the Landlord general liability policy of insurance in standard from protecting the Landlord against any liability whatsoever, occasioned by accident in or about the demised premises in which the Landlord shall be named as additional insured and shall be protected against all liability occasioned by any occurrence insured against. Such policies shall cover and leased premises and shall provide for at least five days' notice to the Landlord before cancellation. A certification thereof shall be delivered to their Landlord. Said policies shall provide for the following minimum coverage's; $300,000.00 for injury or death of one person; $500,000.00 for injury or death arising out of one accident; and $25,000.00 for property damage. In the event the Tenant fails to effect such insurance, the Landlord may do so, and add the cost thereof to the rent for the month next ensuing, and the amount thereof shall be deemed to be, paid as additional rent. 29th. If any mechanic's liens shall be filed against the premises for work done or materials furnished to the Tenant, the Tenant shall within thirty days thereafter, and its own cost and expense cause such lien or liens to be discharged by filing the bond or bonds required for that purpose by law. In the event the Tenant fails to have such liens discharged, the Landlord may do so at the Tenant's expense. 30th. All annexations to the freehold made or installed in such a manner that their removal would cause injury to the freehold shall be the property of the Landlord and may not be removed by the Tenant except that all trade fixtures shall be deemed the property of the Tenant, and may be removed by the Tenant provided that all injury to the freehold resulting therefrom shall be repaired at the expense of the Tenant. 31st. There are no representations, warranties, terms, or obligations other than those expressed in this agreement. No variation of this lease shall be valid unless in writing and signed by the party to be charged. Any holding over by the Tenant after the term of this lease shall be unlawful and in no manner constitute a renewal or extension of this lease agreement. In the event , however, Tenant does become a holdover, the use and occupancy charges shall be 125% of the last rental amount. In addition to the provisions of Paragraph 4. Tenant shall before making any alterations, additions, installations, or improvements, obtain at its sole cost and expense all permits, approvals and certificates required by any governmental or quasi-governmental authorities and upon completions of same, certificates of final approval thereof promptly deliver to the Landlord copies of all permits, approvals, and certificates. 32nd. The Landlord shall not be liable for damage or injury to person or property unless written notice of any defect alleged to have caused such damage or injury shall have been given to the Landlord a sufficient time before such occurrence to have reasonable time to enable the Landlord to correct such defect. Nothing herein contained shall impose any additional obligation on the Landlord to make repairs. Should any additional construction be undertaken on the interior of the premises, Tenant must: a) Obtain a Permit; b) Obtain the permission and signature of the Landlord on application; and c) Supply Landlord with copy of plans, specifications, and Certificate of Compliance. RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 33rd. It is mutually covenanted that if the Landlord shall reasonably pay or be compelled to pay sum of money, or shall reasonably perform any act or be compelled to perform any act, which act shall require the payment of any sum of money be reason of the failure of the Tenant after thirty days' notice, to perform any one or more of the covenants herein contained, the sums shall, after the ten days' notice, in writing and demand, be added to the rent installment next due and shall be collectible in the same manner and with the same remedies as if originally reserved as rent hereunder. The failure to pay rent and to make pursuant to this paragraph shall be deemed a material default. JBJ REATY LAKELAND INDUSTRIES, INC. - ---------------- -------------------------------- LANDLORD TENANT RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 34th .Notwithstanding any provisions of this Lease to the contrary, in the event of a breach or default by Landlord, its successors or assigns, of any of its obligations hereunder of any kind or nature whatsoever, or of any provisions of this Lease. Tenant shall look solely to the equity of the Landlord, its successors, or assigns in the demised premises or the building of which they are a part for the satisfaction of Tenant's remedies and no personal judgement shall be sought against the Landlord, its successors or assigns under the terms, covenants, conditions, warranties and obligations of this Lease shall in no event exceed the loss of its equity in the demised premises or the building of which they are a part. 35th . The Tenant agrees as its own cost and expense to pay for all electricity, telephone, gas, fuel, etc., consumed and used by it, it being the understanding and intention of the parties hereto that the Landlord rents, and the Tenant hires, the demised premises without any service of any kind whatsoever. 36th. Anything to the contrary herein notwithstanding, Tenant may assign this Lease as long Tenant is not in default, and the Landlord shall not unreasonably withhold its consent to the assignment and/or sub-lease agreement upon the following conditions. a) Each assignment and/or sublease of this lease shall be accompanied by and agreement, in writing, executed by the assignee for the benefit of the Landlord, wherein the assignee shall assume all the duties and obligations of the Tenant herein. b) Said agreement executed by the assignee shall be deposited with the Landlord within five days of the making of the assignment. c) The assignment and/or sub-lease of this agreement shall in no way operate to release the assignor from the obligation of the Tenant herein. d )An additional security-0- shall be deposited with the Landlord by the assignee to be held by the Landlord in accordance with the provisions of Paragraph "15" herein. e) No further or additional assignments of this lease shall be made except upon compliance with and subject to, the provisions of this paragraph, except that no further security shall be required. 37th. In the event the premium for the Landlord's policy of insurance covering fire and extended coverage with all of the usage and customary endorsements its increased over the basic rate for same as determined by the appropriate insurance underwriting organization as a result of Tenants use or occupancy of the premises then Tenant shall pay such insurance as additional rent. Landlord shall provide Tenant with a copy of pertinent invoices for insurance, and Tenant shall reimburse Landlord. Failure to make such reimbursement shall be deemed a material default hereunder. RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 38th .The Tenant shall pay to the Landlord during each year of the term herein demised as and for additional rent hereunder the amount of any increase of the aggregate of all real estate taxes of every nature and description, including assessments, if any , levied against the demised premises and herein referred to as the basic taxes. The basic tax, as aforementioned, shall be the aggregate of all real estate taxes of each and every nature, including assessments levied against the demised premises after the completion of the building and constituting the first assessment predicated upon a completed building. The amount of any such increase shall be deemed additional rent and shall be paid by the Tenant to the Landlord not later than the first day of the calendar month occurring subsequent to the giving notice to the Tenant of the amount of such increase, and the simultaneous exhibiting to the Tenant of a copy of a tax bill evidencing such increase. Such notice to be given by the Landlord to the Tenant may be given personally, or by certified mail, return receipt requested. The Tenant shall be responsible only for the payment of that portion of increase, if any; as shall be applicable to that portion of the overall premises lease by Tenant. The base tax year will be July 1, 1999 through June 30, 2000. Any additional taxes over and above the base tax year shall be passed on to the Tenant according to their proportionate share. 39th. Notwithstanding the provisions of Paragraph 15, the Landlord shall have the right to deduct from the security deposit, if kept an interest-bearing account, the sum equivalent to one percent (1%) per annum of the security monies so deposited as administrative expenses. With regard to Tenant's security, this money shall be in lieu of all other administrative and custodial expenses. 40th. The parties herein acknowledge that No One is the broker which brought about this leasing agreement, and commissions therefore shall be paid by the Landlord pursuant to separate agreement. JBJ REALTY LAKELAND INDUSTRIES - ----------------- ------------------------------------ LANDLORD TENANT RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 41st. In the event the summary proceeding is commences by the Landlord or its successors and assigns, for non-payment of rent during any part of the term hereunder; then the Landlord shall be entitled to reasonable costs and attorney's fees incurred during the summary proceeding as added rent in default and such costs and attorney's fees may be added to the amount demanded in any such summary proceeding. A summary proceeding shall be deemed to have been commenced hereunder upon service of a three day Notice. 42nd. Landlord will put all heating, cooling, electric, and plumbing systems in good working order for new Tenant. It is the responsibility of all tenants to maintain the systems in like condition and to provide service and maintenance for heating system. Minimal heat must be provided by Tenant at all times during the winter months. To prevent frozen pipes and heating damage. Should this not be done, any repairs necessary will be at the sole cost of the Tenant. Tenant shall pay for all electricity, gas, fuel, telephone, garbage, disposal, snow removal, etc. Should the septic systems and/ or pools become contaminated and in need of service, the Tenant responsible for such repair will be billed for the necessary repair. Should the source of the problems be of such indeterminate nature, other faulty installation, all Tenants will be billed for the service in proportion with their occupancy of the building. Tenant shall be responsible for repair and maintenance of plate glass, overhead doors, plumbing, heating, and cooling systems. 43rd. If, during the term of the lease or Tenant's occupancy of the demised premise, Landlord or any predecessor in title to the premises of which the demised premises are a part is required to undertake the removal, clean-up neutralization or any other affirmative act with respect to the presence of hazardous, toxic or dangerous materials or substances whether of the Landlord's own choice or as the result of a directive or order from any governmental authority or court having jurisdiction, the Tenant specifically acknowledges and agrees that any such action shall not be a breach of the covenant of quiet enjoyment of the premises and further, the Tenant shall not be entitled to any diminution or abatement of rent in such event notwithstanding any other provisions of this lease to the contrary. Tenant further agrees to cooperate fully with the Landlord in connection with any such action. It is specifically understood and agreed that the Tenant will not contaminate the premises with any hazardous, toxic, or dangerous material or substance and nothing herein contained shall relieve the Tenant from an liability to the Landlord or any governmental authority as a result of any actions of the Tenant, its employees, agents, or invitee with respect to the causation of any such hazardous, dangerous, or toxic condition at the premises. RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 43-2. In the event the Landlord has reason to believe that the Tenant, or Tenant's employees or agents are in violation of any provision of this lease pertaining to the use or maintenance of Hazardous Substances or Hazardous Materials, the Landlord shall give written notice to the Tenant concerning the suspected issues of non-compliance. The Tenant shall respond in writingthe Landlord's concerns within ten (10) days, and shall provide such other documents or information which the Landlord deems necessary to determine that the Tenant is in compliance with all the provisions in the lease involving Hazardous Substances or Hazardous Materials. 43-3. In the event the Tenant fails to provide the assurances required by this paragraph within the time specified, the Landlord and the Landlord's designated agent shall have the right to enter and inspect the premises to determine the Tenant's compliance with the provisions of the lease pertaining to Hazardous Substances and Hazardous Materials. The Landlord, its sole discretion, shall also have the right to conduct an environmental audit of the leased premises for the purposes of establishing the Tenant's compliance with the provisions of this lease which involve Hazardous Substances or Materials. The cost of any such environments audit shall be borne by the Tenant. JBJ REALTY LAKLAND INDUSTRIES, INC. - ----------------- ---------------------------------------- LANDLORD TENANT RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 44TH Tenant agrees not to allow garbage or refuse to accumulate outside the building or grounds of the demised premises. Any violations regarding debris from the local municipality shall be made known to the Tenant and should the violation not be corrected in the given period of time, the Tenant will payment as rent, all fines and legal fees incurred. 45th. All rents are due and payable on the first day of the month. In the event of a default by the Tenant for non-payment of rent, and such default continues for a period of ten (10) days subsequent to the due date, there shall be added to the monthly rental then due and payable a sum designated as a late charge, which shall be equal to five (5) cents for each dollar of the monthly payment past due rent, shall become immediately due and payable with the succeeding month's rent. Should Tenant issue a check with insufficient funds, an additional twenty five dollars and 00/100 ($25.00) fee per check will be applied to the next month's invoice. If this occurs, Tenant will be expected to substitute cash or a certified check in person within a three -(3) day period. 45-2 Notwithstanding any provisions in the Lease permitting Tenant to cure any default within a specified period of time, if Tenant shall default (I) in the timely payments of rent or additional rent, and such default shall continue or be repeated for two consecutive months or for a total of four months in any period of twelve months or (ii) in the performance of any particular term, condition, or covenant of this Lease more than two times in any period of six months, then, notwithstanding that such defaults shall have each been cured within the period after notice if any, as provided in this Lease. Any further similar default shall be deemed to be deliberate and Landlord thereafter may cancel or terminate this Lease as provided herein without according to Tenant an opportunity to cure such further default. 46th. The Tenant agrees to comply with the following rules and regulations and with such reasonable and additions thereto as the Landlord may hereafter from time to time make for the premises. The Landlord shall not be responsible for non-compliance by any other Tenant of any said rules and regulations, however, will request the non-complying Tenant to comply with all haste. a) Tenant will not store material, supplies, or equipment outside the premises. b.) Tenant will keep loading area/overhead door clean and unobstructed in order to allow for parking lot, lawn, and other maintenance. c.) Tenant will be responsible for any damage done to the building or parking lot area by trucks making deliveries for the Tenant's business. d) Parking or storage of unregistered vehicles is expressly prohibited. RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 6/30/2002. 47th. Certificate of Insurance with owner named as co-insured mush accompany this Lease in order for it to become valid. (See Paragraph 28) 48th. Landlord agrees to give Tenant and allowance of $0 for painting and replacement of carpet. 49th. In the event Tenant vacates the premises prior to the termination date of this lease, the corporate officers or shareholders or the general partners executing this Lease on behalf of Tenant or such other guarantors who execute the guarantee at the end of this Rider personally guarantee the payment of all rent and additional rent that has accrued to the date the premises are vacated together with the costs of restoring the premises in accordance with the provisions of this Lease and Tenant's obligations under Paragraph 43 hereof. JBJ REALTY LAKLAND INDUSTRIES, INC. - ----------------- ---------------------------------------- LANDLORD TENANT State of New York }SS.: County of On the day of ,before me personally came to me known, and known to me to be the individual described in, and who executed, the foregoing instrument, and acknowledged to me that he executed the same. State of New York }SS.: County of On the day of ,before me personally came to me known, who, being by me duly sworn, did depose and say that he resides at No. that he is the of the corporation mentioned in, and which executed, the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument i such corporate seal; that it was so affixed by order of the Board of of said corporation; and that he signed he name thereto by like order. ============================== ============================== LEASE ============================== Date: ------------------------------------------ In Consideration of the letting in of the premises within mentioned to the within named Tenant and the sum of $1.00 paid to the undersigned by the within named Landlord, the undersigned do hereby covenant and agree, to and with the Landlord and the Landlord's legal representatives, that if default shall any time be made by the said Tenant in the payment of the rent and the performance of the covenants contained in the within lease, on the Tenant's part to be paid and performed, that the undersigned will well and truly pay the said rent, or any arrears thereof, that may remain due unto the said Landlord, and also pay all damages that may arise in consequence of the non-performance if said covenants, or either of them, without requiring notice of any such default form the said Landlord. The undersigned hereby waives all right to trial by jury in any action or proceeding hereinafter instituted by the Landlord, to which the undersigned may be a party. In Witness Whereof, the undersigned has set hand and seal this day of WITNESS ---------------------------------L.S. EX-11 3 EXHIBIT 11 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated April 7, 1999, accompanying the consolidated financial statements and schedule included in the Annual Report of Lakeland Industries, Inc. and Subsidiaries on Form 10-K for the fiscal year ended January 31, 1999. We hereby consent to the incorporation by reference of said report in the Registration Statement of Lakeland Industries, Inc. and Subsidiaries on Form S-8 (File No. 33-92564, effective May 15, 1995). GRANT THORNTON LLP Melville, New York April 7, 1999 EX-13 4 SELECTED FINANCIAL DATA
(In thousands, except per share amounts) For the Years Ended January 31, 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- INCOME STATEMENT DATA: Net sales $54,655 $47,263 $41,792 $40,189 $35,185 Gross profit 10,374 9,195 7,237 6,288 6,346 Operating expenses 6,451 6,157 5,212 4,882 4,704 Operating profit 3,923 3,038 2,024 1,406 1,642 Income before income taxes (1) 3,222 2,590 1,576 956 2,000 Net income 2,080 1,600 1,063 587 1,421 Earnings per share - Basic (2) $.79 $.63 $.42 $.23 $.56 ==== ==== ==== ==== ==== Earnings per share - Diluted (2) $.77 $.61 $.41 $.22 $.54 ==== ==== ==== ==== ==== Weighted average common shares outstanding: Basic 2,642,170 2,558,541 2,550,000 2,550,000 2,550,000 Diluted 2,690,920 2,627,425 2,609,700 2,635,506 2,641,000 BALANCE SHEET DATA (at end of year): Working capital $12,403 $18,903 $14,018 $13,618 $7,190 Total assets 27,160 25,812 18,573 19,263 15,562 Current liabilities 12,915 5,007 2,920 3,894 6,813 Long-term liabilities 465 9,217 5,746 6,492 441 Stockholders' equity $13,725 $11,518 $9,825 $8,762 $8,175
(1) Includes $625,000 gain recorded in 1995 relating to the favorable settlement of an outstanding litigation. (2) Earnings per share has been restated in accordance with SFAS No. 128, "Earnings Per Share". 1 CAUTIONARY 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," "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 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 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, that could cause actual results to differ materially from historical results or those currently anticipated. General For the years ending January 31, 1997, 1998 and 1999 earnings increased 81.3%, 50.5% and 30% respectively, and net sales increased 4%, 13.1% and 15.6% respectively. Management attributes these gains in earnings to its increasing revenues and cost efficiencies at all levels of the Company. In addition to this, stockholders' equity increased 19.2% over fiscal 1998 while, return on beginning stockholders' equity was 18% over fiscal 1998. Overview The Company derives the majority of its revenues from the sale of its Tyvek 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 distributors. 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. 2 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.
Years Ended January 31, 1999 1998 1997 ---- ---- ---- Revenues 100.0% 100.0% 100.0% Cost of Goods Sold 81.0 80.4 82.7 Selling, general and administrative expenses 11.8 13.0 12.5 Depreciation and amortization expense 1.0 .9 .8 Operating profit 7.2 6.4 4.8 Interest expense, net 1.3 1.0 1.2 Income tax expense 2.1 2.1 1.2 Net income 3.8 3.4 2.5 EBITDA margin (1) 8.2 7.4 5.7
- ------------------ (1) EBITDA (earnings before interest, taxes, depreciation and amortization) margin represents EBITDA expressed as a percentage of revenues. Fiscal Year Ended January 31, 1999 Compared to Fiscal Year Ended January 31, 1998. Net Sales. Net sales for the year ended January 31, 1999 increased $7,392,000 or 15.6% to $54,655,000 from $47,263,000 for the year ended January 31, 1998. The increase in sales was principally attributable to the Company's ability to increase its production capacity and maintain higher inventory levels and the institution of a price increase on its Tyvek(TM) lines on March 1, 1998. Gross Profit. Gross profit for the year ended January 31, 1999 increased by $1,179,000, or 12.8% to $10,374,000, or 19% of net sales, from $9,195,000, or 19.5% of net sales, for the year ended January 31, 1998. Gross profit was consistent between years as a result of global manufacturing efficiencies which were offset by certain expense reclassifications. Operating Expenses. Operating expenses for the year ended January 31, 1999 increased by $294,000 or 4.8%, to $6,451,000, or 11.8% of net sales, from $6,157,000, or 13% of net sales, for the year ended January 31, 1998. Operating expenses as a percentage of net sales decreased to 11.8%, from 13% as a result of increased sales volume and the reclassification of certain expenses described above. The increase in operating expenses was mainly attributable to greater payroll expenses, increased sales commissions and increased freight out. Interest Expense. Interest expense for the year ended January 31, 1999 increased by $275,975, or 55.4% to $773,714 from $497,739 for the year ended January 31, 1998. The increase in interest expense was mainly due to higher interest costs reflecting an increase in average borrowings under the Company's credit facility. Income Tax Expense. The effective tax rate of 35.4% deviates from the Federal statutory rate of 34%, mainly attributable to state income taxes. Net Income. As a result of the foregoing, net income for the year ended January 31, 1999 increased by $480,000 or 30%, to net income of $2,080,000 from net income of $1,600,000 for the year ended January 31, 1998. Fiscal Year Ended January 31, 1998 Compared to Fiscal Year Ended January 31, 1997 Net sales for the year ended January 31, 1998 increased $5,471,000 or 13.1% to $47,263,000 from $41,792,000 reported for the year ended January 31, 1997. Increased prices and unit shipments of various protective garment products are the principal reason for this upward movement in sales. This industry, however, continues to be highly competitive. Net sales increased 10.2% during the quarter ended January 31, 1998 as compared to the immediate preceding quarter, principally as the result of the Company's ability to maintain inventory levels to meet sales demand. 3 Gross profit as a percentage of net sales increased to 19.5% for the year ended January 31, 1998 from 17.3% reported for the prior year, principally due to price increases instituted at the beginning of the fiscal year and market price stabilization during the course of the year. The prior year was negatively affected as a result of the competitive and economic climate of the protective clothing industry. Margins decreased to 16.5% during the quarter ended January 31, 1998 as compared to the immediate preceding quarter due to meeting competitive pricing situations and additionally some products imported for sale during the fourth quarter were sold at lower margins. Operating expenses as a percentage of net sales increased to 13% for the year ended January 31, 1998 from 12.5% for the prior year, as sales continued to increase at a rate of 13% without a corresponding increase in selling and general and administrative expenses. Interest expense decreased slightly consistent with outstanding borrowings. As a result of the foregoing, operating results increased to net income of $1,600,000 (up 50.5%) for the year ended January 31, 1998 from net income of $1,063,000 for the year ended January 31, 1997. LIQUIDITY AND CAPITAL RESOURCES Liquidity and Capital Resources. The Company's working capital is equal to $12,403,000 at January 31, 1999. The Company's primary sources of funds for conducting its business activities have been from cash flow provided by operations and borrowings under its revolving credit facility. 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 $509,000 for the year ended January 31, 1999 and was due primarily to the decrease in accounts payable of $2,839,000, mainly offset by net income from operations of $2,080,000. Net cash provided by financing activities of $1,971,000 was primarily attributable to net borrowings of $1,912,000 during the year in connection with its revolving credit faciltiy. The long-term revolving credit facility permits the Company to borrow up to a maximum of $16 million. The agreement expires on November 30, 1999 and has therefore been classified as a short-term liability in the accompanying balance sheet at January 31, 1999. Borrowings under the revolving credit facility amounted to approximately $10,728,000 million at January 31, 1999. Management has commenced renewal negotiations with respect to this facility. 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. Year 2000 Compliance The Year 2000 issue is the result of computer programs which were written using two digits rather than four to define the applicable year. For example, date-sensitive software may recognize a date using "00" as the Year 1900, rather than the Year 2000. Such misrecognition could result in system failures or miscalculations causing disruptions of operations, including among others, a temporary inability to process transactions, send invoices or engage in similar normal business activities. The Company has established a committee to develop a comprehensive Year 2000 plan with the goal of completing updates to key systems by June 1, 1999. The Company has assessed the scope of the Company's risk related to problems its computer systems may have in processing date information related to the Year 2000 and believes such risks are not significant. The Company has identified all of its significant internal software applications which contain source codes that may be unable to appropriately interpret the Year 2000 and has already modified or replaced those applications. The 4 Company has determined that its accounting system and employee network systems are Year 2000 compliant. In addition, the Company has inquired of its major suppliers about their progress in identifying and addressing problems related to the Year 2000. Certain of the Company's major suppliers have informed the Company that such suppliers do not anticipate problems in their business operations due to Year 2000 compliance issues. The Company is currently unable to determine the extent to which Year 2000 issues will affect its other suppliers, or to the extent to which it would be vulnerable to the suppliers' failure to remediate any of their Year 2000 problems. Although no assurance can be given that all of the Company's major suppliers' systems will be Year 2000 compliant, the Company believes that the risk is not significant. 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 only 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, 1999, $10,727,863 was outstanding under the credit facility. Changes in the above described interest rates during fiscal 2000 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 $107,000. In addition, the Company had $91,400 USD on deposit in a Chinese financial institution earning interest at the rate of 4.3% and a $854,454 Money Market account in a Canadian financial institution earning interest at the rate of 4.7%. Each 1% fluctuation in interest rates earned will increase or decrease interest income on these deposits by approximately $9,000. 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 1998 First Quarter ended April 30, 1997.............................................$37/8 $2 13/16 Second Quarter ended July 31, 1997.............................................5 9/16 3 15/32 Third Quarter ended October 31, 1997...........................................9 4 3/4 Fourth Quarter ended January 31, 1998..........................................10 6 3/4
5
Price Range of Common Stock --------------- High Low Fiscal 1999 First Quarter ended April 30, 1998.............................................$10 1/2 $7 3/4 Second Quarter ended July 31, 1998.............................................113/8 9 Third Quarter ended Oct. 31, 1998..............................................97/8 57/8 Fourth Quarter ended January 31, 1999..........................................8 57/8 First Quarter fiscal 2000 (through April 19, 1999).............................6 3/4 4
As of April 15, 1999, there were approximately 114 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 has never paid cash dividends on its common stock and does not expect to pay such dividends in the foreseeable future. The Company currently intends to retain any future earnings, for the operation and expansion of its business. The payment and rate of future dividends, if any, are subject to the discretion of the Board of Directors of the Company and will depend upon the Company's earnings, financial condition, capital requirements, contractual restrictions under its agreement with its institutional lender and other factors. 6 CORPORATE INFORMATION Directors: Raymond J. Smith, Chairman Christopher J. Ryan John J. Collins, Jr. Eric O. Hallman Walter J. Raleigh . Market Makers: Neuberger & Berman Herzog, Heine, Geduld, Inc. Donald & Co. Knight Securities INCA USLD ISLD STRK Officers: Raymond J. Smith, President Christopher J. Ryan Executive Vice President of Finance and Secretary James M. McCormick Vice President and Treasurer Harvey Pride, Jr. Vice President, Manufacturing Auditors: Grant Thornton LLP Suite 3S01 One Huntington Quadrangle Melville, NY 11747-4464 Counsel: Law Offices of Thomas J. Smith 14 Briarwood Lane Suffern, NY 10901-3602 Transfer Agent: Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 NASDAQ symbol: LAKE Executive Offices: 711-2 Koehler Ave. Ronkonkoma, NY 11779 (516) 981-9700 Subsidiaries: Lakeland Protective Wear, Inc. Lakeland de Mexico S.A. de C.V. Laidlaw, Adams & Peck, Inc. Weifang Lakeland Safety Products, Co. Ltd. Exhibits to Lakeland Industries, Inc.'s fiscal 1999 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. Thermbar(TM), Kut Buster(TM), Grapolator Mock Twist (TM), Safeguard "76"(TM), Zone Guard(TM), RyTex(TM), TomTex(TM), DextraGard (TM), Forcefield (TM), Interceptor (TM), Checkmate (TM), Heatex (TM), Pyrolon (TM), Sterling Heights (TM), Fyrepel (TM), Highland (TM), Chemland (TM) and Uniland (TM) are trademarks of Lakeland Industries, Inc. Tyvek (TM), Viton (TM), Barricade (TM), Nomex (TM), Kevlar (TM), Delrin (TM), TyChem (TM) and Teflon (TM) are registered trademarks of E.I.DuPont de Nemours and Company. Saranex (TM) is a registered trademark of Dow Chemical. Spectra (TM) is a registered trademark of Allied Signal, Inc. 7 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, 1999 and 1998, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended January 31, 1999. 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 generally accepted auditing standards. 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, 1999 and 1998, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended January 31, 1999, in conformity with generally accepted accounting principles. We have also audited Schedule II - Valuation and Qualifying Accounts for each of the three years in the period ended January 31, 1999. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. /s/ GRANT THORNTON LLP - ---------------------- GRANT THORNTON LLP Melville, New York April 7, 1999 8 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS January 31,
ASSETS 1999 1998 ------------ ------------ CURRENT ASSETS Cash and cash equivalents $ 1,436,083 $ 222,700 Accounts receivable, net of allowance for doubtful accounts of $200,000 and $203,000 at January 31, 1999 and 1998, respectively 6,743,341 6,953,538 Inventories 16,110,910 15,858,052 Deferred income taxes 567,000 511,000 Other current assets 461,231 364,697 ------------ ------------ Total current assets 25,318,565 23,909,987 PROPERTY AND EQUIPMENT, NET 1,326,261 1,392,346 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, net of accumulated amortization of $236,000 and $218,000 at January 31, 1999 and 1998, respectively 308,798 327,120 OTHER ASSETS 206,847 182,412 ------------ ------------ $ 27,160,471 $ 25,811,865 ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 ------------ ------------ CURRENT LIABILITIES Accounts payable $ 1,455,190 $ 4,294,241 Accrued compensation and benefits 429,874 283,187 Other accrued expenses 252,274 379,143 Current portion of long-term liabilities 10,777,863 50,000 ------------ ------------ Total current liabilities 12,915,201 5,006,571 LONG-TERM LIABILITIES 464,762 9,216,669 DEFERRED INCOME TAXES 56,000 71,000 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; 2,660,500 and 2,610,472 shares issued and outstanding at January 31, 1999 and 1998, respectively 26,605 26,105 Additional paid-in capital 6,199,656 6,073,358 Retained earnings 7,498,247 5,418,162 ------------ ------------ 13,724,508 11,517,625 ------------ ------------ $ 27,160,471 $ 25,811,865 ============ ============ The accompanying notes are an integral part of these statements.
9 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME Fiscal year ended January 31,
1999 1998 1997 ------------ ------------ ------------- Net sales $ 54,655,135 $ 47,262,519 $ 41,792,469 Cost of goods sold 44,281,126 38,067,351 34,555,786 ------------ ------------ ------------ Gross profit 10,374,009 9,195,168 7,236,683 ------------ ------------ ------------ Operating expenses Selling and shipping 3,334,609 3,001,500 2,569,702 General and administrative 3,116,745 3,155,605 2,642,584 ------------ ------------ ------------ Total operating expenses 6,451,354 6,157,105 5,212,286 ------------ ------------ ------------ Operating profit 3,922,655 3,038,063 2,024,397 ------------ ------------ ------------ Other (expense) income Interest expense (773,714) (497,739) (510,757) Interest income 46,176 35,371 27,293 Other income 26,968 14,179 35,363 ------------ ------------ ------------ (700,570) (448,189) (448,101) ------------ ------------ ------------ Income before income taxes 3,222,085 2,589,874 1,576,296 Income tax expense (1,142,000) (990,000) (513,000) ------------ ------------ ------------ NET INCOME 2,080,085 1,599,874 1,063,296 Net income per common share Basic $ .79 $ .63 $ .42 ============ ============ ============ Diluted $ .77 $ .61 $ .41 ============ ============ ============ Weighted average common shares outstanding Basic 2,642,170 2,558,541 2,550,000 ============ ============ ============ Diluted 2,690,920 2,627,425 2,609,700 ============ ============ ============
The accompanying notes are an integral part of these statements. 10 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Fiscal years ended January 31, 1999, 1998 and 1997
Common stock Additional --------------------------- paid-in Retained Shares Amount capital earnings Total ----------- ----------- ----------- ----------- ----------- Balance, February 1, 1996 2,550,000 $ 25,500 $ 5,981,226 $ 2,754,992 $ 8,761,718 Net income 1,063,296 1,063,296 ----------- ----------- ----------- ----------- ----------- Balance, January 31, 1997 2,550,000 25,500 5,981,226 3,818,288 9,825,014 Net income 1,599,874 1,599,874 Exercise of stock options 60,472 605 92,132 92,737 ----------- ----------- ----------- ----------- ----------- Balance, January 31, 1998 2,610,472 26,105 6,073,358 5,418,162 11,517,625 Net income 2,080,085 2,080,085 Exercise of stock options 50,028 500 126,298 126,798 ----------- ----------- ----------- ----------- ----------- Balance, January 31, 1999 2,660,500 $ 26,605 $ 6,199,656 $ 7,498,247 $13,724,508 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of this statement. 11 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal year ended January 31,
1999 1998 1997 ----------- ----------- ----------- Cash flows from operating activities Net income $ 2,080,085 $ 1,599,874 $ 1,063,296 Adjustments to reconcile net income to net cash (used in) provided by operating activities Deferred income taxes (71,000) (53,000) (70,000) Depreciation and amortization 534,673 435,849 342,963 Gain on sale of property - - (4,530) (Increase) decrease in operating assets Accounts receivable 210,197 (1,059,944) (913,620) Inventories (252,858) (5,963,896) 1,350,085 Other current assets (236,785) (54,602) 314,415 Other assets (18,808) 23,688 (46,653) Increase (decrease) in operating liabilities Accounts payable (2,839,051) 1,759,242 (930,553) Accrued expenses and other liabilities 84,143 355,463 759 ----------- ----------- ----------- Net cash (used in) provided by operating activities (509,404) (2,957,326) 1,106,162 ----------- ----------- ----------- Cash flows from investing activities Purchases of property and equipment - net (388,393) (803,487) (283,358) Principal payments on note receivable 140,251 7,104 7,082 Proceeds from sale of property - - 10,414 ----------- ----------- ----------- Net cash used in investing activities (248,142) (796,383) (265,862) ----------- ----------- ----------- Cash flows from financing activities Net borrowings (reductions) under line of credit agreements 1,911,631 3,416,232 (700,000) Proceeds from exercise of stock options 126,798 92,737 - Deferred financing costs (67,500) (37,500) - ----------- ----------- ----------- Net cash provided by (used in) financing activities 1,970,929 3,471,469 (700,000) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,213,383 (282,240) 140,300 Cash and cash equivalents at beginning of year 222,700 504,940 364,640 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 1,436,083 $ 222,700 $ 504,940 =========== =========== ===========
The accompanying notes are an integral part of these statements. 12 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1999, 1998 and 1997 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, 1999, 1998 and 1997. 2. Principles of Consolidation The accompanying 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 transactions have been eliminated. 3. Inventories Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out method. 4. 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. 5. 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. 6. 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. 13 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE A (continued) 7. Earnings Per Share 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 fiscal year. 8. 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 dominated cash and cash equivalents were $1,253,000 and $152,000 at January 31, 1999 and 1998, respectively. Supplemental cash flow information for the fiscal years ended January 31 is as follows:
1999 1998 1997 ---------- ---------- ---------- Interest paid $ 771,294 $ 446,550 $ 494,102 Income taxes paid 1,387,778 825,648 325,242
9. 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 its receivable credit risk exposure is limited. 10. 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. 14 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE A (continued) 11. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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. NOTE B - NOTE RECEIVABLE An installment mortgage note receivable from the sale of a facility in fiscal 1995 was paid in full in December 1998. The unpaid balance was $140,251 at January 31, 1998. NOTE C - INVENTORIES Inventories consist of the following at January 31:
1999 1998 ----------- ----------- Raw materials $ 2,461,225 $ 2,672,719 Work-in-process 3,618,901 4,168,376 Finished goods 10,030,784 9,016,957 ----------- ----------- $16,110,910 $15,858,052 =========== ===========
NOTE D - PROPERTY AND EQUIPMENT Property and equipment consist of the following at January 31:
Useful life in years 1999 1998 ---------- ---------- ---------- Machinery and equipment 3 - 10 $3,432,145 $3,076,002 Furniture and fixtures 3 - 10 249,423 223,190 Leasehold improvements Lease term 263,269 257,252 ---------- ---------- 3,944,837 3,556,444 Less accumulated depreciation and amortization 2,618,576 2,164,098 ---------- ---------- $1,326,261 $1,392,346 ========== ==========
15 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's principal financial instrument consists of its outstanding revolving credit facility. The Company believes that the carrying amount of such debt approximates the fair value as the variable interest rate approximates the current prevailing interest rate. NOTE F - LONG-TERM LIABILITIES Long-term liabilities consist of the following at January 31:
1999 1998 ----------- ----------- Revolving credit facility $10,727,863 $ 8,816,232 Pension liability (Note K) 514,762 450,437 ----------- ----------- 11,242,625 9,266,669 Less current portion 10,777,863 50,000 ----------- ----------- Long-term liabilities $ 464,762 $ 9,216,669 =========== ===========
During December 1997, the Company entered into a $10,000,000 secured revolving credit facility (the "facility") with a financial institution with an expiration date of November 30, 1999. On May 1, 1998, the facility was increased to $13,000,000. Effective September 23, 1998, the facility was amended to provide for a temporary increase to $16,000,000 through August 31, 1999. Amounts outstanding under the $3,000,000 temporary facility are due on August 31, 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%, with interest payable monthly. At January 31, 1999, interest on outstanding borrowings was based on the commercial paper rate option (6.6%). The facility is collateralized by substantially all the assets of the Company and guaranteed by certain of the Company's subsidiaries. The facility requires the Company to maintain a minimum tangible net worth, at all times. The maximum amounts borrowed under the revolving line of credit during the fiscal years ended January 31, 1999 and 1998 were $12,800,000 and $10,000,000, respectively, and the average interest rates during the periods were 7.1% and 7.6%, respectively. NOTE G - COMMITMENTS AND CONTINGENCIES 1. Employment Contracts The Company has employment contracts with three principal officers expiring through January 2001. Such contracts are automatically renewable for one- or two-year terms, unless 30 to 120 days' notice is given by either party. Pursuant to such contracts, the Company is committed to aggregate base remuneration of $572,500 and $397,500 for the fiscal years ended January 31, 2000 and 2001, respectively. 16 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE G (continued) 2. Leases The Company leases the majority of its premises under various operating leases expiring through fiscal 2003. The lease for the manufacturing facility (located in Decatur, Alabama) is with a partnership whose partners are principal officers and stockholders of the Company. This lease expires on August 31, 1999 and requires annual payments of approximately $365,000 plus certain operating expenses. The Company also leases two manufacturing facilities pursuant to month-to-month leases from an officer of the Company. Monthly payments are $3,100. In addition, the Company has several operating leases for machinery and equipment. In January 1998, the Company entered into a month-to-month lease for a manufacturing facility in the People's Republic of China. The lessor is a partnership of which the Company's directors, one officer and four employees hold partnership interests. This leasing arrangement requires monthly payments of approximately $3,300. 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, 1999 $643,174 $4,611 $402,096 1998 621,162 9,704 405,120 1997 581,161 3,024 392,160
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, 1999 are summarized as follows:
Year ending January 31, 2000 $419,562 2001 198,277 2002 141,343 2003 39,920 -------- $799,102 ========
Certain leases require additional payments based upon increases in property taxes and other expenses. 3. Services Agreement Pursuant to the terms of a services agreement with an affiliated entity, principally owned by a principal officer and stockholder of the Company, the affiliate provides professional and/or skilled labor to the Company, as needed, at 17 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE G (continued) contractual rates of compensation. Such agreement is cancelable by either the Company or the affiliate upon thirty days' written notice. Costs incurred by the Company in connection with such agreement aggregated $509,000, $552,000 and $426,000 for the fiscal years ended January 31, 1999, 1998 and 1997, respectively. This agreement was terminated as of February 1, 1999. 4. 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 consolidated financial position or results of operations of the Company. 5. 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. NOTE H - 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 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 for the years ended January 31, 1999, 1998 and 1997 would be reduced to the pro forma amounts indicated below: 18 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE H (continued)
1999 1998 1997 ---------- ---------- ---------- Net income per common share As reported $2,080,085 $1,599,874 $1,063,296 Pro forma 2,073,495 1,584,144 974,555 Basic earnings per common share As reported $ .79 $ .63 $ .42 Pro forma .79 .62 .38 Diluted earnings per common share As reported $ .77 $ .61 $ .41 Pro forma .77 .60 .37
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, 1999, 1998 and 1997, respectively: expected volatility of 60%, 52% and 57%; risk-free interest rates of 5.6%, 6.5% and 7%; and expected life of six years for all periods. Additional information with respect to the Company's plans for the fiscal years ended January 31, 1999, 1998 and 1997 is summarized as follows:
1999 ------------------------------------------------ Directors' Plan Incentive Plan -------------------- -------------------- Weighted- Weighted- Number average Number average of exercise of exercise shares price shares price ------ ---------- ------ --------- Shares under option Outstanding at beginning of year 10,000 $ 3.85 99,528 $ 2.77 Granted 1,000 10.75 - - Exercised (3,000) 3.58 (47,028) 2.47 ------ ------ Outstanding at end of year 8,000 4.81 52,500 3.06 ====== ====== Options exercisable at year-end 8,000 4.81 52,500 3.06 Weighted-average remaining contractual life of options outstanding 3.6 years 6 years Weighted-average fair value per share of options granted during 1999 $ 6.59 -
19 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE H (continued)
1998 -------------------------------------------------------------- Directors' Plan Incentive Plan ---------------------------- ----------------------------- Weighted- Weighted- Number average Number average of exercise of exercise shares price shares price ------ ----- ------ ----- Shares under option Outstanding at beginning of year 18,000 $1.90 150,000 $2.36 Granted 7,000 3.78 - - Exercised (10,000) 1.44 (50,472) 1.54 Expired (5,000) 1.56 - - Outstanding at end of year 10,000 3.85 99,528 2.77 ======= ======= Options exercisable at year-end 10,000 3.85 99,528 2.77 Weighted-average remaining contractual life of options outstanding 4.5 years 3.5 years Weighted-average fair value per share of options granted during 1998 $2.25 -
1997 -------------------------------------------------------------- Directors' Plan Incentive Plan ---------------------------- ----------------------------- Weighted- Weighted- Number average Number average of exercise of exercise shares price shares price ------ ----- ------ ----- Shares under option Outstanding at beginning of year 18,000 $1.90 150,000 $2.13 Granted - - 34,000 3.50 Expired - - (34,000) 2.50 ------- ------- Outstanding at end of year 18,000 1.90 150,000 2.36 ======= ======= Options exercisable at year-end 18,000 1.90 150,000 2.36 Weighted-average remaining contractual life of options outstanding 1 year 4 years Weighted-average fair value per share of options granted during 1997 - $2.61
20 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE H (continued) Summarized information about stock options outstanding under the two plans at January 31, 1999 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, 1999 years price --------------- --------------- --------------- --------------- $2.25 - $3.38 21,500 4.91 $2.39 3.39 - 5.12 38,000 6.05 3.61 10.75 1,000 5.50 10.75 ------ $2.25 - $10.75 60,500 5.62 3.29 ======
NOTE I - EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings per share at January 31:
1999 1998 1997 ----------- ---------- -------- Numerator Net income $2,080,085 $1,599,874 $1,063,296 ========= ========= ========= Denominator Denominator for basic earnings per share (weighted-average shares) 2,642,170 2,558,541 2,550,000 Effect of dilutive securities: Stock options 48,750 68,884 59,700 ----------- ----------- ----------- Denominator for diluted earnings per share (adjusted weighted-average shares) and assumed conversions 2,690,920 2,627,425 2,609,700 ========= ========= ========= Basic earnings per share $.79 $.63 $.42 === === === Diluted earnings per share $.77 $.61 $.41 === === ===
21 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE J - INCOME TAXES The provision for income taxes is summarized as follows:
Year ended January 31, 1999 1998 1997 ----------- ----------- -------- Current Federal $1,116,000 $ 938,000 $603,000 State 97,000 105,000 (20,000) ----------- ----------- -------- 1,213,000 1,043,000 583,000 Deferred (71,000) (53,000) (70,000) ----------- ----------- -------- $1,142,000 $ 990,000 $513,000 =========== =========== ========
The following is a reconciliation of the effective income tax rate to the Federal statutory rate:
Year ended January 31, 1999 1998 1997 ----------- ----------- -------- Statutory rate 34.0% 34.0% 34.0% State income taxes, net of Federal tax benefit 2.0 2.7 (.4) Nondeductible expenses .3 .5 .8 Foreign operating results generating no current tax (provision) benefit (.6) 2.5 1.8 Change in deferred assets (2.0) (4.4) Other (.3) .5 .7 ---- ------ ------ Effective rate 35.4% 38.2% 32.5% ==== ==== ====
22 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE J (continued) The tax effects of temporary differences which give rise to deferred tax assets at January 31, 1999 and 1998 are summarized as follows:
January 31, ---------------------------- 1999 1998 ------- -------- Deferred tax assets Inventories $265,000 $284,000 Net operating loss carryforward - Canadian subsidiary 102,000 100,500 Accounts receivable 75,000 75,000 Accrued compensation and other 125,000 51,500 ------- -------- Gross deferred tax assets 567,000 511,000 ------- ------- Deferred tax liabilities Depreciation 56,000 71,000 -------- -------- Gross deferred tax liabilities 56,000 71,000 -------- -------- Net deferred tax asset $511,000 $440,000 ======= =======
Net operating loss carryforwards of $291,000 applicable to the Canadian subsidiary expire in fiscal 2002 through 2006. NOTE K - 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. 23 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE K (continued) The following table sets forth the plan's funded status for the fiscal years ended January 31:
1999 1998 --------- --------- Change in benefit obligation Benefit obligation at beginning of year $ 917,791 $ 863,621 Service cost 1,613 1,613 Interest cost 67,649 63,772 Actuarial loss 5,202 15,431 Benefits paid (31,621) (26,646) --------- --------- Benefit obligation at end of year $ 960,634 $ 917,791 ========= ========= Change in plan assets Fair value of plan assets at beginning of year $ 467,354 $ 467,832 Actual return on plan assets (1,779) 16,168 Employer contributions 11,918 10,000 Benefits paid (31,621) (26,646) --------- --------- Fair value of plan assets at end of year $ 445,872 $ 467,354 ========= ========= Funded status (underfunded) $(514,762) $(450,437) Unrecognized net actuarial loss 73,638 19,112 Required minimum liability (included as a component of other assets) (73,638) (19,112) --------- --------- Accrued pension liability $(514,762) $(450,437) ========= =========
The components of net periodic pension cost for the fiscal years ended January 31 are summarized as follows:
1999 1998 1997 ---------- ---------- ---------- Service cost $ 1,613 $ 1,613 $ 1,613 Interest cost 67,649 63,772 62,259 Actual return on plan assets 1,779 (16,168) (92,226) Net amortization and deferral (39,469) (10,771) 71,026 ---------- ---------- ---------- Net periodic pension cost $ 31,572 $ 38,446 $ 42,672 ========== ========== ==========
24 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1999, 1998 and 1997 NOTE K (continued) 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, 1999, approximately 82% of the plan's assets was held in mutual funds invested primarily in equity securities, 9% was invested in equity securities and debt instruments and 9% 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 $55,322 and $18,950 in the fiscal years ended January 31, 1999 and 1998, respectively. NOTE L - MAJOR SUPPLIER The Company purchased approximately 74% of its raw materials from one supplier under licensing agreements for each of the years ended January 31, 1999, 1998 and 1997. 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. 25 Lakeland Industries, Inc. and Subsidiaries SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions --------------------------- Balance at Charged to Charged to Balance at beginning costs and other end of of period expenses accounts Deductions period --------- -------- -------- ---------- ------ Year ended January 31, 1999 Allowance for doubtful accounts (a) $203,000 $60,263 $ 63,263(b) $200,000 ======== ======= ========= ======== Year ended January 31, 1998 Allowance for doubtful accounts (a) $150,000 $69,421 $ 16,421 (b) $203,000 ======== ======= ========= ======== Year ended January 31, 1997 Allowance for doubtful accounts (a) $262,765 $ 7,439 $ 120,204 (b) $150,000 ======== ======== ========= ========
(a) Deducted from accounts receivable. (b) Uncollectible accounts receivable charged against allowance. 26 EX-20 5 May 13, 1999 Dear Stockholder, I am pleased to extend to you my personal invitation to attend the 1999 Annual Meeting of Stockholders of Lakeland Industries, Inc. (the "Company") on Wednesday, June 16, 1999 at 10:00 a.m. at the Holiday Inn, 3845 Veterans Memorial Highway, Ronkonkoma, NY 11779. The accompanying Notice of Annual Meeting and Proxy Statement contain a description of the formal business to be acted upon by the stockholders. At the meeting, I intend to discuss the Company's performance for its fiscal year ended January 31, 1999 and its plans for the current fiscal year. Certain members of the Company's Board of Directors and officers of the Company, as well as a representative of Grant Thornton LLP, the Company's independent auditors, will be available to answer any questions you may have, or to make a statement if they wish to. While I am looking forward to seeing you at the meeting, it is very important that those of you who cannot personally attend assure your shares are represented. I urge you therefore to sign and date the enclosed form of proxy and return it promptly in the accompanying envelope. If you attend the meeting, you may, if you wish, withdraw any proxy previously given and vote your shares in person. Sincerely, /s/ Raymond J. Smith ---------------- Raymond J. Smith President and Chairman of the Board NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS June 16, 1999 TO THE STOCKHOLDERS OF LAKELAND INDUSTRIES, INC.: Notice is hereby given that the Annual Meeting of Stockholders of Lakeland Industries, Inc., a Delaware corporation (the "Company"), will be held on Wednesday, June 16, 1999 at 10:00 a.m. at the Holiday Inn, 3845 Veterans Memorial Highway, Ronkonkoma, NY 11779 for the following purposes: 1. To elect one Class I members of the Board of Directors, and 2. To transact such other business as properly may come before the meeting or any adjournment thereof. Each share of the Company's Common Stock will be entitled to one vote upon all matters described above. Stockholders of record at the close of business on April 29, 1999 will be entitled to notice and to vote at the meeting. May 13, 1999 BY ORDER OF THE BOARD OF DIRECTORS Christopher J. Ryan, Secretary PLEASE DATE, VOTE AND SIGN THE ENCLOSED PROXY AND RETURN PROMPTLY. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE. 1 LAKELAND INDUSTRIES, INC. 711-2 Koehler Ave. Ronkonkoma, New York 11779 PROXY STATEMENT 1999 Annual Meeting of Stockholders June 16, 1999 GENERAL INFORMATION ------------------------- This proxy statement is furnished in connection with the solicitation by the Board of Directors of Lakeland Industries, Inc. (the "Company") of proxies from the holders of the Company's $.01 par value Common Stock (the "Common Stock") for use at the 1999 Annual Meeting of Stockholders to be held on June 16, 1999, and at any adjournment thereof (the "Annual Meeting"). This proxy statement, the accompanying form of proxy and the Company's 1999 Form 10-K (which includes the Company's Annual Report to Stockholders) are first being sent to the Company's stockholders on or about May 13, 1999. The accompanying proxy may be revoked by the person giving it at any time prior to its being voted; such revocation may be accomplished by a letter, or by a properly signed proxy bearing a later date, filed with the Secretary of the Company prior to the Annual Meeting. If the person giving the proxy is present at the meeting and wishes to vote in person, he or she may withdraw his or her proxy at that time. The Company has borne all costs of solicitation of proxies. In addition to solicitation by mail, there may be incidental personal solicitations made by directors, officers and regular employees of the Company and its subsidiaries. The cost of solicitation, including the payments to nominees who at the request of the Company mail such material to their customers, will be borne by the Company. VOTING SECURITIES AND STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS All holders of record of the Common Stock at the close of business on April 29, 1999, are entitled to notice of and to vote at the Annual Meeting. At the close of business on April 29, 1999, there were 2,660,500 shares of outstanding Common Stock, each entitled to one vote per share on all matters to be voted upon at the Annual Meeting. The Company's stockholders do not have cumulative voting rights. 2 The following table sets forth information as of April 29, 1999, with respect to beneficial ownership of the Company's Common Stock by all persons known by the Company to own beneficially more than 5% of the Common Stock, each director and nominee for director of the Company and all directors and officers of the Company as a group. All persons listed have sole voting and investment power with respect to their shares of Common Stock.
Name and Address Number of Common Percent of Beneficial Owner Shares Beneficially Owned of Class - ------------------- ------------------------ ---------- Raymond J. Smith 579,500 (1) 21.78% 711-2 Koehler Ave. Ronkonkoma, NY 11779 Christopher J. Ryan 250,977 (2) (6) 9.43% 711-2 Koehler Ave. Ronkonkoma, NY 11779 Joseph P. Gordon 134,500 5.06% 177-23 Union Tpke., Flushing, NY 11366 John J. Collins, Jr. 123,400 (3) 4.64% Eric O. Hallman 47,500 (3) 1.79% Walter J. Raleigh 7,000 (4) .26% All officers and directors as a group (7 persons) 1,052,827 (5) 39.57%
- -------------------------- Included in the above are fully exercisable options to purchase the Company's common stock, as follows: (1) 9,000 shares granted on June 5, 1996; (2) 4,050 shares granted on January 1, 1994; (3) 1,000 shares granted on June 15, 1994 and 1,000 shares granted on June 18, 1997 to each of Mr. Hallman and Mr. Collins; (4) 3,000 shares granted on April 18, 1997 and 1,000 shares granted June 17, 1998; (5) 60,500 shares granted between January, 1, 1994 and June 17, 1998 (6) Mr. Ryan disclaims beneficial ownership of 15,000 shares owned by his wife. 3 Proposal 1 - ELECTION OF DIRECTORS The Company's Certificate of Incorporation provides for three classes of directors with staggered terms of office and provides that upon the expiration of the terms of office for a class of directors, nominees for each class shall be elected for a term of three years to serve until the election and qualification of their successors or until their earlier resignation, death or removal from office. The Company currently has one Class I director, two Class II directors and two Class III directors. At the 1999 Annual Meeting there is one nominee for director in Class I. The incumbent Class II and Class III directors have one year and two years, respectively, remaining on their terms of office. The Company has no reason to believe that either of the nominees will be disqualified or unable to serve, or will refuse to serve if elected. However, if a nominee is unable or unwilling to accept election, the proxies will be voted for such substitute as the Board of Directors may select. It is intended that the shares represented by proxies will be voted, in the absence of contrary instructions, for the election as director of the nominee for Class I named in the following table. The Board of Directors has nominated and Management recommends the election of the person listed in the following table as Class I director. The table also sets forth the names of the two directors in Class II and the two directors in Class III whose terms of office have not expired, their ages, their positions with the Company and the period each has served as a director of the Company. There are no family relationships among the Board members.
Position With the Director Name Age Company Since - --------------------------------------------------------------------------------------------------------- NOMINEE FOR DIRECTOR - CLASS I (Nominee for three year Term Expiring in June, 2002) --------------------------------------------------- Christopher J. Ryan 47 Executive Vice President - 1986 Finance, Secretary and Director INCUMBENT DIRECTORS - CLASS II (One Year remaining on Term Expiring in June, 2000) -------------------------------------------------- John J. Collins, Jr. 56 Director 1986 Eric O. Hallman 55 Director 1982 INCUMBENT DIRECTORS - CLASS III (Two years remaining on Term Expiring in June, 2001) -------------------------------------------------- Raymond J. Smith 60 Chairman of the Board, 1982 President and Director Walter J. Raleigh 71 Director 1991
4 The principal occupations and employment of the nominees for director and for the directors continuing in office are set forth below: Christopher J. Ryan has served as Executive Vice President-Finance and director since May, 1986 and Secretary since April 1991. From October 1989 until February 1991 Mr. Ryan was employed by Sands Brothers and Rodman & Renshaw, Inc., both investment banking firms. Prior to that, he was an independent consultant with Laidlaw Holding Co., Inc., an investment banking firm, from January 1989 until September 1989. From February, 1987 to January, 1989 he was employed as the Managing Director of Corporate Finance for Brean Murray, Foster Securities, Inc. He was employed from June, 1985 to March, 1986 as a Senior Vice President with the investment banking firm of Laidlaw Adams Peck, Inc., a predecessor firm to Laidlaw Holdings, Inc. Mr. Ryan has been a director of Auerback, Pollack & Richardson and Lessing, Inc. since 1996. John J. Collins, Jr. was Executive Vice President of Chapdelaine GSI, a government securities firm from 1977 to January 1987. He was Senior Vice President of Liberty Brokerage, a government securities firm between January 1987 and November 1998. Presently, Mr. Collins is self-employed, managing a direct investment portfolio of small business enterprises for his own accounts. Eric O. Hallman has been a director of the Company since its incorporation. He was President of Naess Hallman Inc., a shipbrokering firm, between 1984 and 1991. Mr. Hallman was also affiliated between 1991 and 1992 with Finanshuset (U.S.A.), Inc., a shipbrokering and international financial services and consulting concern, and was an officer of Sylvan Lawrence, a real estate development company, between 1992 and 1998. Mr. Hallman is presently President of PREMCO, a real estate management company. Raymond J. Smith, a co-founder of the Company, has been Chairman of the Board of Directors and President since its incorporation in 1982. Walter J. Raleigh is a director of CMI Industries, Inc., the successor company to Clinton Mills, Inc. and was president of Clinton Mills Sales, Co. Division, N.Y. from 1974 to 1995. Clinton Mills was a textile manufacturer of woven fabrics. Mr. Raleigh retired from Clinton Mills in 1995 and now is a Senior Adviser to CMI Industries, Inc. Mr. Raleigh is a former director of Kerry Petroleum Company, an oil and gas development company. During the year ended January 31, 1999, the Board of Directors of the Company met two times, and four of the five members of the Board of Directors attended at least 75% of the aggregate of (1) the total number of meetings of the Board of Directors held during the period when he was a director, and (2) the total number of meetings held by all committees of the Board of Directors on which he served (during the periods when he served). Committees of the Board of Directors are as follows: 1- The Stock Option and Compensation Committee is responsible for evaluating the performance of the Company's management, fixing or determining the method of fixing compensation of the Company's salaried employees, administering the Company's Stock Option and 401K/ESOP Plans, and reviewing significant amendments to a subsidiary's employee pension benefit plan. The Committee also, in conjunction with the Chief Executive Officer, considers the qualifications of prospective Directors of the Company and, as vacancies occur, recommends nominees to the Board of Directors. The Stock Option and Compensation Committee (which also functions as a nominating committee for nominations to the Board) will consider nominees to the Board recommended by stockholders. Such recommendations must be in writing and sent to the Secretary of the Company no later than January 31st of the year in which the Annual Meeting is to be held, accompanied by a brief description of the proposed nominee's principal occupation and his or her other qualifications which, in the stockholder's opinion, make such person a suitable candidate for nomination to the Board. This Committee met once during the year ended January 31, 1999. The committee members are: John J. Collins, Jr., Eric O. Hallman, and Walter J. Raleigh Compensation Committee Interlocks and Insider Participation Members of the Stock Option and Compensation Committee are outside directors who do not serve in any other capacity with respect to the Company or any of its subsidiaries. Messrs. Collins and Hallman are partners of POMS Holding Co. See "Certain Relationships and Related Transactions". 2- The Audit Committee was formed in September, 1987 and is responsible for recommending to the Board of Directors the appointment of independent auditors for the fiscal year, reviewing with the independent auditors the scope of their proposed and completed audits, and reviewing with the Company's financial management and its independent auditors other matters relating to audits and to the adequacy of the Company's internal control structure. This Committee met once during the year ended January 31, 1999. The committee members are: John J. Collins, Jr., Eric O. Hallman, and Christopher J. Ryan COMPENSATION OF EXECUTIVE OFFICERS -------------------------------------- The table below sets forth all salary, bonus and all other compensation paid to the Company's chief executive officer and each of the Company's other executive officers (who earned more than $100,000 per year in salary and bonus) for the years ended January 31, 1999, 1998 and 1997:
Name and All Other Principal Position Year Salary Bonus Compensation - ------------------ ---- ------ ----- ------------ Raymond J. Smith, 1999 $262,500 $25,000 $5,899 Chairman, President and CEO 1998 225,000 3,089 1997 225,000 Christopher J. Ryan, 1999 $175,000 $20,000 $3,724 Executive V.P.-Finance 1998 169,003 7,750 1,262 and Secretary 1997 115,000 23,250 Harvey Pride, Jr. 1999 $135,000 $3,465 Vice President- 1998 115,000 $23,000 910 Manufacturing 1997 115,000 19,136 James M. McCormick 1999 $115,000 $13,500 $4,214 VP - Treasurer 1998 115,000 8,450 2,138 1997 89,000 16,350
There are four executive officers with salary and bonus individually exceeding $100,000. There were no pension or retirement plans or other benefits, payable or accrued, for such persons during fiscal year 1999. The Company has entered into employment contracts with certain executive officers providing for annual compensation of $262,500 for Mr. Smith and $175,000 for Mr. Ryan and $135,000 for Mr. Pride. Messrs. Smith and Pride each have a three year contract which expires on January 31, 2001, Mr. Ryan has a three year contract which expires on February 13, 2000. All contracts are automatically renewable for one or two year terms, unless in various instances 30 to 120 days notice is given by either party. The above named executives participate in the Company's 401-K Plan which commenced on January 1, 1995. The Company has made a contribution to this plan totaling $55,332, during the plan year ended December 31, 1998. 6 These employment contracts are similar in nature and include disability benefits, vacation time, non-compete and confidentiality clauses. There are no provisions for retirement. Messrs. Smith, Ryan and Pride's contracts have an additional provision for annual bonus based on the Company's performance and based upon earnings per share formulas determined by the Stock Option and Compensation Committee of the Board of Directors of the Company. Accordingly, the annual bonus accrued at January 31, 1999 (for payment in May 1999) for Messrs. Smith, Ryan and Pride were $92,500, $16,000 and $12,800, respectively. All contracts provide for lump sum payments of contracted salaries pursuant to various formulas should there be a change in control of the Company. STOCK OPTION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Policies: The compensation policy of the Company is to provide its executive officers and management with a level of pay and benefits that will assure the Company's competitiveness and continued growth, and allow the Company to retain key executives critical to this long-term success and attract and retain qualified personnel. The Company competes for talented executives in a market segment where successful entrepreneurial executives are highly compensated. It also competes for executives with a background in manufacturing and selling protective safety garments. As a result, to obtain and retain highly qualified and motivated executives, the Compensation Committee has deemed it desirable to structure employment arrangements which compensate highly for high profitability and performance and to enter into written employment agreements with its senior executive officers. The Compensation Committee's responsibilities include overseeing the Company's compensation policies, supervising compensation for management and employee benefits and administering the Company's stock option and other employee benefit plans. The Compensation Committee also develops and negotiates employment agreements with key executive officers. These employment agreements include base salaries and incentive compensation arrangements designed to reward management for achieving certain production or performance levels. The Compensation Committee is also responsible for developing or reviewing incentive compensation arrangements which the Company enters into with executive officers and key individuals, other than those senior executives who have written employment agreements. See "Compensation of Executive Officers". In order to determine appropriate levels of executive compensation, the Compensation Committee reviews various factors, including individual performance, and evaluates the progress of the Company towards attaining its long-term profit and return on equity goals. Compensation packages for senior executive officers have been structured to attempt to compensate them to a substantial extent based on both the profitability of the Company as a whole and the productivity of their individual departments. Particulars: Messrs. Eric O. Hallman, John J. Collins, Jr. and Walter J. Raleigh were members of the Company's Stock Option and Compensation Committee when it ratified Mr. Smith's and Mr. Pride's employment contracts in January 1998, and Mr. Ryan's which was ratified on February 14, 1997. Mr. Walter J. Raleigh joined the Board of Directors on April 18, 1991, as a third outside director and with Messrs. Hallman and Collins, these three outside directors presently make up the Stock Option and Compensation Committee. Messrs. Smith, Pride and Ryan were awarded base compensations of $262,500, $175,000 and $135,000, for fiscal 1999, respectively. In addition, the Committee reviewed what was normally paid the President and Chairman in Mr. Smith's case and Executive Vice President Finance and In-House Counsel in Mr. Ryan's case and the Chief Manufacturing Executive in Mr. Pride's case, in public companies of Lakeland's size and concluded that the compensation package represented close to the median of what other officers were being compensated in like public companies of comparable size after reviewing Growth Resources Officer Compensation Report Eleventh Edition - Panel Publications. These contracts also provide for bonuses in addition to salary based upon the Company's increase in earnings. (See Directors and Principal Stockholders.) The Stock Option and Compensation Committee believes that the contracts covering Messrs. Smith, Pride and Ryan are appropriately tied to their respective levels of expertise, were constructed at or below industry norms, and any increases in compensation were and will be tied to increases in the Company's earnings. The Stock Option and Compensation Committee also took into consideration that since the inception of the Company 15 years ago there have been no executive pension plans, deferred compensation plans, or other compensation or benefit plans for executives of the Company other than the Company's Stock Option Plan and the 401-K/ESOP Plan, the latter of which went into effect January 1, 1995. 7 The Board Compensation Committee Report on Executive Compensation shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. Performance Graph The Corporate Performance Graph, appearing on the following page, obtained from Media General Financial Services of Virginia, compares the five year cumulative total return of the Company's common stock with that of a broad equity market index, including dividend reinvestment and with that of a peer group: Option/SAR Grants in Last Fiscal Year - No stock options were granted to any employee in fiscal 1999 and no SAR grants have been made since inception of the Stock Option Plan. See "Directors' Compensation". Stock Option Plan Messrs. Smith, Ryan, Pride and McCormick participate in the Company's Incentive Stock Option Plan (common stock). The outstanding incentive stock options as of January 31, 1999 are as follows:
No. of Date(s) Grant Name of Shares Option of Expiration Date Executive Granted Price Grant Date(s) Value - ------------------------------------------------------------------------------------------------------------------- Mr. Smith 9,000 $ 3.50 6/5/96 6/4/06 $31,500 Mr. Ryan 4,050 $2.25 1/1/94 1/1/04 $9,113 Mr. Pride 29,600 $2.25 - 3.50 6/5/96 & 1/1/94 6/4/06 & 1/1/04 $91,600 Mr. McCormick 9,850 $2.25 - 3.50 6/5/96 & 1/1/94 6/4/06 & 1/1/04 $28,413
There are currently 250,000 option shares available for future grant under this plan. During the year ended January 31, 1999, no stock options were granted and the following options were exercised:
No. of Name of Shares Exercise Date of Per Share Exercise Executive Exercised Price Exercise Date Value - ----------------------------------------------------------------------------------------------------------- Mr. Smith 34,045 $2.48 5/11/98 $10.625 6,255 $2.48 9/8/98 $7.50 4,200 $2.48 10/10/98 $6.125
8 [ Grapic ommitted depicting of: Compare 5 Year Cumulative Total Return ] 9 DIRECTORS' COMPENSATION ----------------------------- Members of the Board of Directors, in their capacity as directors, are reimbursed for all travel expenses to and from meetings of the Board. Outside Directors received $750 for each meeting as compensation for serving on the Board. There are no charitable award or director legacy programs. Messrs. Collins, Hallman and Raleigh participate in the Company's Non-employee Directors' Option Plan as follows:
# of Option Date of Expiration Director Shares Price Grant Date -------- ------ ----- ----- ---- Mr. Collins 1,000 5.125 6/18/97 6/18/2003 Mr. Collins 1,000 3.88 6/15/94 6/15/2000 Mr. Hallman 1,000 5.125 6/18/97 6/18/2003 Mr. Hallman 1,000 3.88 6/15/94 6/15/2000 Mr. Raleigh 3,000 3.25 4/18/97 4/18/2003 During the year ended January 31, 1999, the following options were granted. Mr. Raleigh 1,000 10.75 6/17/98 6/17/2004 There are currently 40,000 option shares available for future grant under this plan. During the year ended January 31, 1999, the following options were exercised:
# of Exercise Date Per Share Exercise Director Shares Price of Exercise Date Value -------- ------ ----- ----------- ---------- Mr. Raleigh 2,000 $3.25 5/19/98 $10.375 1,000 $4.25 5/19/98 $10.375
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------------------------------------------------- POMS Holding Co. ("POMS", a partnership consisting of Raymond J. Smith, Eric O. Hallman, John J. Collins, Jr., Joseph P. Gordon, Harvey Pride, Jr. and certain other stockholders of the Company) leases to the Company a 90,308 square foot disposable garment manufacturing facility in Decatur, Alabama. Under leases effective January 1 and March 1, 1995 and expiring on August 31, 1999, the Company pays an annual rent of $364,900 and is the sole occupant of the facility. During September 1992 Highland, a former wholly-owned subsidiary of the Company, relocated to Somerville, Alabama from the above mentioned Decatur facility. Highland entered into a $1,500 month to month lease agreement for 12,000 sq. ft. of manufacturing space, sharing this same Somerville location with Chemland, another former wholly-owned subsidiary of the Company. Chemland currently has a $1,600 month to month lease agreement for 12,000 sq. ft. This Somerville facility is owned by Harvey Pride, Jr., an officer of the Company. The Company believes that all rents paid to POMS and Harvey Pride, Jr. by the Company, Highland and Chemland Divisions are comparable to what would be charged by an unrelated third party. The net rent paid to POMS by the Company for the year ended January 31, 1999, amounted to $364,900 and the total rent paid to Harvey Pride, Jr. by the Company for use by its Highland and Chemland divisions, for the year ended January 31, 1999, amounted to $37,200. An Qiu Holding Co., ("An Qiu" a partnership consisting of all the Directors of the Company, one officer and four employees) entered into a month to month lease with its then Chinese division for 38,820 square fee at an annual rental fee of $39,020. On January 1, 1999, the rent was increased by $6,960, as 7,100 additional square feet was added to the building in fiscal 1999. A formal long term lease is expected upon completion of the building in fiscal 2000 at an annual rental of $45,980. The Company's subsidiary is the sole occupant of the facility. During the year ended January 31, 1999 the Company made payments totaling $180 to Madison Mobile Storage, Inc. for trailer rentals, and $510,183 for expenses incurred by Madison Mobile Storage, Inc. in running the Company's Missouri facility. Such expenses included employee payroll, insurance, auto and other miscellaneous expenses. The principal shareholder of Madison Mobile Storage, Inc. is Mr. Harvey Pride, Jr. who is also an officer of the Company. The Agreement between the Company and Madison Mobile Storage, Inc. was terminated as of February 1, 1999. 10 The Company paid or accrued legal fees of $5,415 for the fiscal year ended January 31, 1999 to the Law Offices of Thomas J. Smith, the Company's General Counsel. Mr. Thomas J. Smith, is the brother of Raymond J. Smith. OTHER MATTERS ------------------ The Board of Directors knows of no matters other than those described above that may come before the Annual Meeting. As to other matters, if any, that properly may come before the Annual Meeting, the Board of Directors intends that proxies in the accompanying form will be voted in respect thereof in accordance with the judgment of the person or persons voting the proxies. STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING --------------------------------------------- Stockholder proposals for inclusion in the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders must be received by the Company not later than January 31, 2000. The person submitting the proposal must have been a record or beneficial owner of the Company's Common Stock for at least one year and must continue to own such securities through the date on which the meeting is held, and the securities so held must have a market value of at least $1,000. Any such proposal will be included in the Proxy Statement for such Annual Meeting if the rules of the Securities and Exchange Commission are complied with as to the timing and form of such proposal, and the content of such stockholder's proposal is determined by the Company to be appropriate under rules promulgated by the Commission. By the Order of the Board of Directors /s/ Christopher J. Ryan, ------------------------ Christopher J. Ryan, Secretary May 13, 1999 11 EX-27 6
5 YEAR JAN-31-1999 JAN-31-1999 1,436,083 0 6,743,341 0 16,110,910 25,318,565 1,326,261 0 27,160,471 12,915,201 0 0 0 26,605 13,697,903 27,160,471 54,655,135 54,655,135 44,281,126 6,451,354 (26,968) 0 727,538 3,222,085 1,142,000 2,080,085 0 0 0 2,080,085 .79 .77
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