Lakeland Industries Inc. Reports Fiscal 2015 Second Quarter Financial Results

RONKONKOMA, N.Y., Sept. 10, 2014 /PRNewswire/ -- Lakeland Industries, Inc. LAKE, a leading global manufacturer of industrial protective clothing for industry, municipalities, healthcare and to first responders on the federal, state and local levels, today announced financial results for its fiscal 2015 second quarter ended July 31, 2014. For financial reporting presentation purposes, the operating results in Brazil are excluded from many of the statements in this announcement because the Company's commercial lender has excluded Brazil from most covenant calculations as well as other related factors and due to the restructuring of those operations which has resulted in significant losses for the past two years that distorts analysis for the balance of the global businesses.

Financial Results Highlights -- Second Quarter Fiscal 2015 and Recent Company Developments*

• Sales worldwide were $24.6M this year and $24.6M last year. Excluding Brazil, sales were $22.8M this year compared with $22.9M last year.
• Sales growth achieved in China/Asia Pacific, UK, Latin America and Canada
• Gross margin worldwide was 32.8%, compared to 30.3% last year. Excluding Brazil, gross margin increased from 32.0% last year to 32.6% this year. Consolidated gross margin reaches highest level ever.
• Operating expenses worldwide increased by $0.4M and increased as a percent of sales to 26.8% from 25.0% last year. Operating expenses for Lakeland worldwide, excluding Brazil, increased by $0.5M, mainly as a result of foreign exchange losses in Argentina, an ongoing Enterprise Resource Planning (ERP) System conversion in the US, higher amortization of bank fees resulting from the financing closed in Q2 last year and new sales staff in Mexico. Operating expenses as a percent of sales, excluding Brazil, increased from 22.5% to 24.7%.
• Operating income was $1.5M vs. $1.3M last year. Excluding Brazil, operating income was $1.8M this year vs. $2.2M last year.
• Brazil Q2 operating loss was reduced to $331K this year vs. $881K last year.
• Adjusted EBITDA worldwide was $1.8M vs. $1.9M last year. Excluding Brazil, Adjusted EBITDA was $2.1M this year vs. $2.7M last year. The reduction in EBITDA was due to the operating expenses as described above.
• Net loss of $(0.4)M, $(0.07) per share vs. income of $4.1M, $0.74 per share last year.
• Net loss this year included a non-cash tax charge of $325K (or $0.06 per share) for a dividend from the Company's China subsidiary, $0.5M (or $0.08 per share) charge in Brazil for labor litigation and a VAT tax charge; last year's net income benefited from a reversal of a deferred tax valuation allowance of $4.5M or $0.79 per share.
• Net income this year, without Brazil and without the tax on the dividend, would have been $0.15 per share in Q2 and $0.22 per share for the six-months ended July 31, 2014, compared with $0.10 and $0.28 for the Q2 and six-month periods of the prior year without the reversal of the tax valuation allowance.
• Prepaid $500,000 toward subordinated debt with prepayment penalty waived.
• Completed first phase of the refinancing of Lakeland Brazil.
• The banking covenants are mainly based on world-wide adjusted EBITDA, excluding Brazil. Further there is a covenant prohibiting any new cash investment or advances from the parent company into Brazil. The bank has structured this in a way that allows management the freedom to restructure in Brazil.

*Includes non-GAAP measures – see table included herein for reconciliation to GAAP measures

Management's Comments

Christopher J. Ryan, President and Chief Executive Officer of Lakeland Industries, stated, "The growth in our international operations, including Brazil, remain intact. At the same time, while business mix and large order flows resulted in a modest decline in year-over-year domestic sales, business activity remains robust and we foresee increased global demand. To capitalize on this favorable outlook, we continued our strategy from the first quarter of increasing spending on business development activities while aggressively managing our other costs to drive improved profitability. We are beginning to experience the desired results as consolidated gross margin reached the highest level ever for Lakeland and operating profit increased 13% year-over-year amid substantially higher selling, general and administrative expenses intended to drive future sales growth and the operating loss from our subsidiary in Brazil which is seeking to go through a turnaround.

"In Brazil, the turnaround is showing steady indications of progress as it nears completion, with second quarter sales increasing by 6%. For the second consecutive quarter, operating losses declined by over 60% as compared with prior year periods. Breakeven is now within reach for our Brazil subsidiary, although it is still absorbing non-operating expenses due to the resolution of prior issues. After the end of the quarter, we completed the first phase of the refinancing of Lakeland Brazil. This represents a significant step in establishing the subsidiary as financially self-sustaining while maintaining the financial integrity of the parent company through the non-recourse nature of subsidiary financing facilities, although the lending environment in Brazil is more difficult lately due to the recent recessionary economy.

"Given Mexico's new spending on oil and gas exploration with foreign partners, we expect Mexican sales to grow nicely over the next few years. We have realigned and upgraded the Mexican sales staff to accommodate the economic growth trends in the region. As we look ahead, we remain encouraged by the global growth trends and our strengthening operational and financial condition which should enable us to drive improved profitability from the leverage in our business."

 

 

Numbers may not add due to rounding
*This table is a reconciliation of GAAP to non-GAAP Financial Measures.
**Brazil numbers, as presented in this table, include immaterial intercompany transactions.

 

 

Numbers may not add due to rounding
*This table is a reconciliation of GAAP to non-GAAP Financial Measures.
**Brazil numbers, as presented in this table, include immaterial intercompany transactions.

 

 

 

Numbers may not add due to rounding
*This table is a reconciliation of GAAP to non-GAAP Financial Measures.
**Brazil numbers, as presented in this table, include immaterial intercompany transactions.

Financial Results Conference Call

Lakeland will host a conference call at 4:30 PM (EDT) today to discuss the Company's second quarter fiscal 2015 financial results. The conference call will be hosted by Christopher J. Ryan, Lakeland's Chief Executive Officer and Gary Pokrassa, Lakeland's Chief Financial Officer. Investors can listen to the call by dialing 877-870-4263 (Domestic) or 412-317-0790 (International) or 855-669-9657 (Canada), Pass Code 10052047.

For a replay of this call, dial 877-344-7529 (Domestic) or 412-317-0088 (International) or 855-669-9658 (Canada), Pass Code 10052047.

About Lakeland Industries, Inc.:
Lakeland Industries, Inc. LAKE manufactures and sells a comprehensive line of safety garments and accessories for the industrial protective clothing market.  The Company's products are sold by a direct sales force and through independent sales representatives to a network of over 1,200 safety and mill supply distributors. These distributors in turn supply end user industrial customers such as chemical/petrochemical, automobile, steel, glass, construction, smelting, janitorial, pharmaceutical and high technology electronics manufacturers, as well as hospitals and laboratories. In addition, Lakeland supplies federal, state, and local government agencies, fire and police departments, airport crash rescue units, the Department of Defense, the Centers for Disease Control and Prevention, and many other federal and state agencies.  For more information concerning Lakeland, please visit the Company online at www.lakeland.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:  Forward-looking statements involve risks, uncertainties and assumptions as described from time to time in Press Releases and Forms 8-K, registration statements, quarterly and annual reports and other reports and filings filed with the Securities and Exchange Commission or made by management.  All statements, other than statements of historical facts, which address Lakeland's expectations of sources or uses for capital or which express the Company's expectation for the future with respect to financial performance or operating strategies can be identified as forward-looking statements.  As a result, there can be no assurance that Lakeland's future results will not be materially different from those described herein as "believed," "projected," "planned," "intended," "anticipated," "estimated" or "expected," or other words which reflect the current view of the Company with respect to future events.  We caution readers that these forward-looking statements speak only as of the date hereof.  The Company hereby expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectations or any change in events conditions or circumstances on which such statement is based.

Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), the Company uses the following non-GAAP financial measures: EBITDA, Adjusted EBITDA and consolidated income, excluding Brazil. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies.

For more information on the non-GAAP financial measures, please see the Reconciliation of GAAP to non-GAAP Financial Measures tables in this press release.  These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

 

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SOURCE Lakeland Industries, Inc.