-----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, T7qJzVA/ob+g6W4+I6bT6eHzRKmBo42jyi2ovr70tzXYEJkySfV+Whv1ahmdafoJ uSd4Wo+Uv8ZJi6p2vPZK4w== 0000914317-99-000526.txt : 19990915 0000914317-99-000526.hdr.sgml : 19990915 ACCESSION NUMBER: 0000914317-99-000526 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990914 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-Q SEC ACT: SEC FILE NUMBER: 000-15535 FILM NUMBER: 99710962 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10 - Q (Mark one) X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES ------ EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1999 OR ------ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number: 0-15535 LAKELAND INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in it's charter) Delaware 13-3115216 - -------------------------------- ------------------------------------ (State of incorporation) (IRS Employer Identification Number) 711-2 Koehler Avenue, Ronkonkoma, New York 11779 - -------------------------------------------------------------------------------- (Address of principal executive offices) (516) 981-9700 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.01 par value, outstanding at September 13, 1999 - 2,660,500 shares. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q The following information of the Registrant and its subsidiaries is submitted herewith:
PART I - FINANCIAL INFORMATION: Item 1. Financial Statements: Page ---- Introduction ....................................................................................1 Condensed Consolidated Balance Sheets - July 31, 1999 and January 31, 1999..........................2 Condensed Consolidated Statements of Income - Three Months and Six Months Ended July 31, 1999 and 1998.........................................................3 Condensed Consolidated Statement of Stockholders' Equity for the Six Months Ended July 31, 1999..............................................................4 Condensed Consolidated Statements of Cash Flows - Six Months Ended July 31, 1999 and 1998........................................................................5 Notes to Condensed Consolidated Financial Statements................................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............8 PART II - OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K....................................................................None Signatures ...................................................................................10
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Introduction The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to present fairly the consolidated financial information required therein. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended January 31, 1999. The results of operations for the three-month and six-month periods ended July 31, 1999 and 1998 are not necessarily indicative of the results to be expected for the full year. CAUTIONARY STATEMENTS This report may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical fact included in this report, including, without limitation, the statements under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position and liquidity, the Company's strategic alternatives, future capital needs, development and capital expenditures (including the amount and nature thereof), future net revenues, business strategies, and other plans and objectives of management of the Company for future operations and activities. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, and factors in the Company's other filings with the Securities and Exchange Commission (the "Commission"), general economic and business conditions, the business opportunities that may be presented to and pursued by the Company, changes in law or regulations and other factors, many of which are beyond the control of the Company. Readers are cautioned that these statements are not guarantees of future performance, and the actual results or developments may differ materially from those projected in 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. 1
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS July 31, January 31, 1999 1999 (Unaudited) (Derived from audited financial statements) ASSETS Current Assets: Cash and cash equivalents ........................... $ 729,764 $ 1,436,083 Accounts receivable, net of allowance for doubtful accounts of $200,000 at July 31, 1999 and January 31, 1999 .................................. 6,584,092 6,743,341 Inventories ......................................... 16,971,479 16,110,910 Deferred income taxes ............................... 567,000 567,000 Other current assets ................................ 628,806 461,231 ----------- ----------- Total current assets ....................... 25,481,141 25,318,565 Property and equipment, net of accumulated depreciation of $2,766,000 at July 31, 1999 and $2,619,000 at January 31, 1999 ................ 1,667,347 1,326,261 Excess of cost over fair value of net assets acquired, net of accumulated amortization of $246,000 at July 31, 1999 and $236,000 at January 31, 1999 ...................... 298,804 308,798 Other assets ........................................ 148,626 206,847 ----------- ----------- $27,595,918 $27,160,471 =========== =========== LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS July 31, January 31, 1999 1999 (Unaudited) (Derived from audited financial statements) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable .................................... $ 2,626,755 $ 1,455,190 Current portion of long-term liabilities ............ 9,613,293 10,777,863 Accrued expenses and other current liabilities ...... 530,450 682,148 ----------- ----------- Total current liabilities ...................... 12,770,498 12,915,201 Long-term liabilities ............................... 455,020 464,762 Deferred income taxes ............................... 56,000 56,000 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 shares issued and outstanding at July 31, 1999 and January 31, 1999 ............. 26,605 26,605 Additional paid-in capital .......................... 6,199,656 6,199,656 Retained earnings ................................... 8,088,139 7,498,247 ----------- ----------- Total stockholders' equity ..................... 14,314,400 13,724,508 ----------- ----------- $27,595,918 $27,160,471 =========== ===========
See notes to condensed consolidated financial statements. 2
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED July 31, July 31, 1999 1998 1999 1998 Net Sales ................................. $ 13,940,948 $ 13,854,419 $ 29,396,610 $ 29,896,116 Cost of Goods Sold ........................ 11,758,063 11,013,068 24,621,953 23,876,031 ------------ ------------ ------------ ------------ Gross Profit .............................. 2,182,885 2,841,351 4,774,657 6,020,085 Operating Expenses ........................ 1,883,100 1,735,863 3,540,867 3,444,623 ------------ ------------ ------------ ------------ Operating Profit .......................... 299,785 1,105,488 1,233,790 2,575,462 Other Income/(Expense), net ............... 14,985 9,046 29,277 21,879 Interest Expense .......................... (169,082) (207,587) (338,175) (375,742) ------------ ------------ ------------ ------------ Income before Income Taxes ................ 145,688 906,947 924,892 2,221,599 Provision for Income Taxes ................ 60,000 355,000 335,000 868,000 ------------ ------------ ------------ ------------ Net Income ................................ $ 85,688 $ 551,947 $ 589,892 $ 1,353,599 ============ ============ ============ ============ Net Income per common share: Basic ................................ $ .03 $ .21 $ .22 $ .52 ============ ============ ============ ============ Diluted .............................. $ .03 $ .20 $ .22 $ .50 ============ ============ ============ ============ Weighted average common shares outstanding: Basic ................................ 2,660,500 2,645,102 2,660,500 2,627,787 ============ ============ ============ ============ Diluted .............................. 2,689,760 2,698,514 2,686,502 2,692,720 ============ ============ ============ ============
See notes to condensed consolidated financial statements. 3
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) Six months ended July 31, 1999 Additional Common Stock Paid-in Retained Shares Amount Capital Earnings Total ------ ------ ------- -------- ----- Balance, January 31, 1999 2,660,500 $26,605 $6,199,656 $7,498,247 $13,724,508 Net income 589,892 589,892 --------- ------- ---------- ---------- ----------- Balance, July 31, 1999 2,660,500 $26,605 $6,199,656 $8,088,139 $14,314,400 ========= ======= ========== ========== ===========
See notes to condensed consolidated financial statements. 4
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED July 31, 1999 1998 ----------- ----------- Cash Flows from Operating Activities: Net Income .............................................. $ 589,892 $ 1,353,599 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ........................... 236,063 235,041 Decrease (increase) in accounts receivable .............. 159,249 (9,590) Decrease (increase) in inventories ...................... (860,569) (801,693) Decrease (increase) in other current assets ............. 167,575) (100,604) Decrease (increase) in other assets ..................... 58,221 23,559 Increase (decrease) in accounts payable, accrued expenses and other liabilities ........................ 1,010,125 (2,812,271) ----------- ----------- Net cash provided (used in) by operating activities ............................................ 1,025,406 (2,111,959) Cash Flows from Investing Activities: Purchases of property and equipment ..................... (567,155) (102,602) Cash Flows from Financing Activities: Proceeds from exercise of stock options ................. -- 100,869 Net borrowings (reduction) under line of credit agreement (1,164,570) 3,137,871 ----------- ----------- Net cash (used in) provided by financing activities ..... (1,164,570) 3,238,740 ----------- ----------- Net (decrease) increase in cash ......................... (706,319) 1,024,179 Cash and cash equivalents at beginning of period ........ 1,436,083 222,700 ----------- ----------- Cash and cash equivalents at end of period .............. $ 729,764 $ 1,246,879 =========== =========== Supplemental disclosures of cash flow information: Cash paid during period for: Interest ............................................ $ 282,071 $ 300,679 =========== =========== Income taxes ........................................ $ 370,000 $ 742,185 =========== ===========
See notes to condensed consolidated financial statements. 5 LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) A. Business Lakeland Industries, Inc. and Subsidiaries (the "Company"), a Delaware corporation, organized in April 1982, is engaged primarily in the manufacture of disposable and reusable protective work clothing. The principal market for the Company's products is the United States. No customer accounted for more than 10% of net sales during the six month periods ended July 31, 1999 and 1998. B. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Laidlaw, Adams & Peck, Inc. (formerly Fireland Industries, Inc.), Lakeland Protective Wear, Inc. (a Canadian corporation) and Lakeland de Mexico S.A. de C.V. (a Mexican corporation) and Weifang Lakeland Safety Products, Co., Ltd. (a Chinese corporation). All significant intercompany accounts and transactions have been eliminated. C. Inventories: Inventories consist of the following:
July 31, January 31, 1999 1999 ---- ---- Raw materials......................................... $3,155,439 $2,461,225 Work-in-process....................................... 4,470,226 3,618,901 Finished goods........................................ 9,345,814 10,030,784 ----------- ------------ $16,971,479 $16,110,910 =========== ============
Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out method. D. Earnings Per Share: Basic earnings per share are based on the weighted average number of common shares outstanding without consideration of potential common stock. Diluted earnings per share are based on the weighted average number of common and potential common shares outstanding. The calculation takes into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the period. 6 The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended July 31, July 31, 1999 1998 1999 1998 ---- ---- ---- ---- Numerator Net income $85,688 $551,947 $589,892 $1,353,599 ======= ======== ======== ========== Denominator Denominator for basic earnings per share (Weighted-average shares) 2,660,500 2,645,102 2,660,500 2,627,787 Effect of dilutive securities: Stock options 29,260 53,412 26,002 64,933 ------ ------ ------ ------ Denominator for diluted earnings per share (adjusted weighted-average shares) and assumed conversions 2,689,760 2,698,514 2,686,502 2,692,720 ========= ========= ========= ========= Basic earnings per share $.03 $.21 $.22 $.52 ==== ==== ==== ==== Diluted earnings per share $.03 $.20 $.22 $.50 ==== ==== ==== ====
E. Revolving Credit Facility: At July 31, 1999, the balance outstanding under the Company's secured $16 million revolving credit facility amounted to $9,563,293. This facility is collateralized by substantially all of the assets of the Company, guaranteed by certain of the Company's subsidiaries and expires on November 30, 1999, however, $3 million of this line expired 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%. The facility requires the Company to maintain a minimum tangible net worth, at all times. The Company is presently in the process of negotiating the renewal of the facility. F. Major Supplier The Company purchased approximately 75.1% of its raw materials from one supplier under licensing agreements during the six month period ended July 31, 1999. 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. G. Commitments On June 1, 1999, the Company entered into a 5 year lease agreement with River Group Holding Co. LLP for a 40,000 sq. ft. warehouse facility located next to the existing facility in Decatur, Alabama. River Group Holding, Co. LLP is a limited liability partnership made up of the Directors and certain officers of the Company. The annual rent for this facility is $199,100 and the Company is the sole occupant of the facility. 7 LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2. Six months ended July 31, 1999 compared to the six months ended July 31, 1998. Net Sales. Net sales for the six months ended July 31, 1999 decreased $499,000 or 1.7% to $29,397,000 from $29,896,000 for the six months ended July 31, 1998. The decrease in sales was principally attributable to competitive conditions, product mix and that the prior year period was aided by a price increase effective March 1, 1998. Gross Profit. Gross profit for the six months ended July 31, 1999 decreased by $1,245,00 0 or 20.7% to $4,775,000 or 16.2% of net sales from $6,020,000 or 20.1% of net sales, for the six months ended July 31, 1998. The Gross profit decreased principally as a result of inefficiencies in manufacturing due to the start up phase of automated equipment and plant expansion and relocation, which is expected to be completed by the year end. A decrease in unit sales and lower margin product mix contributed to this decrease. Operating Expenses. Operating expenses for the six months ended July 31, 1999 increased by $96,000 or 2.5% to $3,541,000, or 12.1% of nets sales, from $3,445,000, or 11.5% of net sales, for the six months ended July 31,1998. Operating expenses as a percentage of net sales increased to 12.1% from 11.5% principally as a result of increased freight, commissions, payroll and expenses related to the addition of in-house regional sales managers (commencing in the fourth quarter of fiscal 1999). Interest Expense. Interest expense for the six months ended July 31, 1999 decreased by $38,000 or 10.1% to $338,000 from $376,000 for the six months ended July 31, 1998. The decrease in interest expense was mainly due to lower interest costs reflecting a decrease in average borrowings under the Company's credit facility. Income Tax Expense. The effective tax rate for the six months ended July 31, 1999 and 1998 of 36% and 39%, respectively 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 six months ended July 31, 1999 decreased by $764,000 to net income of $590,000 from net income of $1,354,000 for the six months ended July 31, 1998. Three months ended July 31, 1999 compared to the three months ended July 31, 1998. Net Sales. Net sales for the three months ended July 31, 1999 increased $87,000 or .6% to $13,941,000 from $13,854,000 for the three months ended July 31, 1998. The increase in sales was negatively affected by the meeting of competitive price conditions and the mix of products sold. Gross Profit. Gross profit for the three months ended July 31, 1999 decreased by $658,000 or 23.2% to $2,183,000 or 15.7% of net sales from $2,841,000 or 20.5% of net sales, for the three months ended July 31, 1998. Gross profit decreased as a result of inefficiencies incurred in manufacturing due to the start up phase of additional automated equipment and plant expansion and relocation., which is expected to be completed by year end. Lower margin sales of certain products also contributed to this decrease. Operating Expenses. Operating expenses for the three months ended July 31, 1999 increased by $147,000 or 8.5% to $1,883,000, or 13.5% of net sales, from $1,736,000, or 12.5% of net sales, for the three months ended July 31,1998. Operating expenses as a percentage of net sales increased to 13.5% from 12.5% principally as a result of increased freight, commissions and payroll and expenses related to the addition of in-house regional sales managers. Interest Expense. Interest expense for the three months ended July 31, 1999 decreased by $39,000 or 18.6% to $169,000 from $208,000 for the three months ending July 31, 199. The decrease in interest expense was mainly due to lower interest costs reflecting a decrease in average borrowings under the Company's credit facility. Income Tax Expense. The effective tax rate for the three months ended July 31, 1999 and 1998 of 41% and 39%, respectively 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 three months ended July 31, 1999 decreased by $466,000 to net income of $86,000 from net income of $552,000 for the three months ended July 31, 1998. 8 LIQUIDITY and CAPITAL RESOURCES Liquidity and Capital Resources. The Company's working capital is equal to $ 12,711,000 at July 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 provided by operating activities was $1,025,000 for the six months ended July 31, 1999 and was due primarily to the increase in accounts payable of $1,010,000. Net cash used in financing activities of $1,165,000 was attributable to net repayment of the revolving credit facility during the period. 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 July 31, 1999. $3 million of this facility expired on August 31, 1999. Borrowings under the revolving credit facility amounted to approximately $9,563,000 million at July 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 substantially completed its program to prepare computer systems and applications for the Year 2000. The Company expects to incur minimal additional internal staff costs, consulting and other expenses related to enhancements necessary to complete the systems for the Year 2000. Management believes that the estimated costs to complete the program will not be material to the Company. 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. Item 6......................Exhibits and Reports on Form 8-K: a - None b - No reports on Form 8-K were filed during the three month period ended July 31, 1999. 9 _________________SIGNATURES_________________ Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LAKELAND INDUSTRIES, INC. ------------------------- (Registrant) Date: September 13, 1999 /s/Raymond J. Smith ------------------ ------------------- Raymond J. Smith, President and Chief Executive Officer Date: September 13, 1999 James M. McCormick ------------------ ------------------ James M. McCormick, Vice President and Treasurer (Principal Accounting Officer) 10 EX-27 2
5 6-MOS JAN-31-2000 JUL-31-1999 729,764 0 6,584,092 0 16,971,479 25,481,141 1,667,347 0 27,595,918 12,770,498 0 0 0 26,605 14,287,795 27,595,918 29,396,610 29,396,610 24,621,953 3,540,867 (29,277) 0 338,175 924,892 335,000 0 0 0 0 589,892 .22 .22
-----END PRIVACY-ENHANCED MESSAGE-----