RONKONKOMA, N.Y., May 21, 2013 /PRNewswire/ -- Lakeland Industries, Inc. (NASDAQ: LAKE), a leading global manufacturer of industrial protective clothing for industry, municipalities, healthcare and first responders on the federal, state and local levels, today announced that the Company accepted a commitment letter from a bank for a Senior Credit Facility subject to certain terms and conditions and is currently working towards closing this financing. However, no assurances can be given that this transaction or any transaction will be consummated.
The Company has received a letter from The Nasdaq Stock Market notifying the Company that it is not in compliance with the Nasdaq Listing Rule 5250(c)(1) because it had not filed its Annual Report on Form 10-K for the fiscal year ended January 31, 2013 on a timely basis with the Securities and Exchange Commission. Under Nasdaq rules, the Company has 60 calendar days, or until July 16, 2013, to regain compliance with Nasdaq's filing requirements for continued listing. The Company has filed its 2013 Form 10-K and believes it is now in full compliance.
Declining sales in FY13 led to quarterly losses in Brazil, which led to the necessity of writing off all goodwill, certain intangibles, and deferred tax assets of Brazil. These factors led to a default on the TD Bank loan, which in turn created substantial doubt about our ability to continue as a going concern. Successful completion of the proposed new financing, in management's opinion, would relieve this condition. Thus, we engaged with new lenders and considered other options, such as the sale of the Company, the sale of assets which has occurred, and a refinance of the TD Bank loan. We will continue pursuing all options to maximize stockholder value.
During the course of the year:
Q4 year over yearLakeland consolidated sales
(11.6%)Lakeland worldwide sales
20.9%Sequential growth by
quarter (excluding Brazil)9.7%
Commenting on the financial results and recent developments, Lakeland Industries President and Chief Executive Officer Christopher J. Ryan said, "We are disappointed about our operations in Brazil affecting the rest of the Company in this way. Our other operations are solid, and management is currently exploring our options in Brazil."
Year and Quarter Ended January 31, 2013, Compared to the Year and Quarter Ended January 31, 2012For the Year
For the Three MonthsEnded January 31,
Ended January 31,
2012Net sales from continuing operations
100.00%Gross profit from continuing operations
26.35%Operating expenses from continuing operations
32.45%Operating profit (loss) from continuing operations
(6.11%)Income (loss) before tax from continuing operations
(8.27%)Net income (loss) from continuing operations
(5.00%)Net Sales. Net sales from continuing operations decreased $1.2 million, or 1.3%, to $95.1 million for the year ended January 31, 2013, compared to $96.3 million for the year ended January 31, 2012. The net decrease was mainly due to a $9.8 million decrease in domestic sales, partially offset by a $8.6 million increase in foreign sales. The net decrease in the US was comprised mainly of a decrease in US disposables sales, resulting from the loss of the Tyvek license from DuPont. This decrease in US sales was offset by significant increases in foreign sales, including a $1.2 million increase in sales by Qualytextil, SA in Brazil, a $3.2 million increase in European sales and a $1.8 million growth in combined Chile and Argentina sales. External sales from China were flat for the fourth quarter FY13 but were up for the full year 15.7%. Sales in Brazil have decreased in Q4FY13 and we expect next fiscal year's sales to be lower in Brazil.
Net sales from continuing operations in Q4 FY13 increased by $3.2 million, or 16.0%, to $23.4 million from Q4 of FY12. This increase was due to an increase in foreign sales, from $10.6 million in Q4 FY12 to $11.3 million in Q4 FY13. Of these amounts, sales in Brazil were $2.7 million and $2.7 million for Q4 of FY12 and FY13, respectively.
Gross Profit. Gross profit from continuing operations decreased $1.5 million, or 5.1%, to $27.3 million for the year ended January 31, 2013, from $28.8 million for the year ended January 31, 2012. Gross profit as a percentage of net sales decreased to 28.7% for the year ended January 31, 2013, from 29.9% for the year ended January 31, 2012. The major factors driving the changes in gross margins were:
Operating Expenses. Operating expenses from continuing operations increased $1.3 million, or 4.9%, to $28.3 million for the year ended January 31, 2013, from $27.0 million for the year ended January 31, 2012. As a percentage of net sales, operating expenses increased to 29.8% for the year ended January 31, 2013, from 28.1% for the year ended January 31, 2012. The increase in operating expenses in the year ended January 31, 2013, as compared to the year ended January 31, 2012, included:
Operating Profit/(Loss). Operating profit/(loss) from continuing operations decreased by $2.7 million to $(1.0) million from $1.7 million for the prior year. Operating profit as a percentage of net sales decreased to (1.1)% for the year ended January 31, 2013, from 1.8% for the year ended January 31, 2012, primarily due to sharply lower volume in disposables in the US due to the termination of the Company's Tyvek and Tychem supply agreement by DuPont, a $0.6 million charge for contract termination of the President of the Brazilian subsidiary, issues in Brazil with the Navy and other contracts caused by a currency devaluation earlier in the year and weak volume in Brazil, mainly due to lack of large bid contracts in Q4 of FY13. Without Brazil's FY13 operating loss of $1.6 million, the Company would have had operating income of $0.6 million.
Interest Expense. Interest expense increased by $0.2 million for the year ended January 31, 2013, compared to the year ended January 31, 2012, because of term loan borrowing in 2012 to fund capital expansion in Brazil and Mexico outstanding throughout FY13 and also borrowing in Brazil at higher rates prevailing in Brazil and the US. Further, the Company paid higher interest rates on its TD facility in FY13 as a result of several amendments during FY13.
Other Expenses - Net. The increase in other expenses resulted mainly from the $10.0 million write down of goodwill in Brazil and the $7.9 million arbitration settlement, with two of the former owners of the Company's subsidiary in Brazil.
Income Tax Expense. Income tax expenses from continuing operations consist of federal, state and foreign income taxes. Income tax expense increased $5.3 million to $5.0 million for the year ended January 31, 2013, from $(0.3) million for the year ended January 31, 2012. Our effective tax rate was meaningless for the fiscal years ended January 31, 2013 and 2012. Our effective tax rate varied from the federal statutory rate of 34% due primarily to the $7.9 million arbitration settlement in Brazil, which did not get a tax benefit, $10.0 million goodwill and other intangibles write-off in Brazil and the establishment of a $4.5 million valuation allowance for deferred tax assets. Our income taxes in the current year were benefited by losses in the US and a "check-the-box" US tax benefit from the losses in India at a higher rate than most of the foreign income. Further, there was a $4.5 million valuation allowance charged to tax expense this year relating to the deferred tax asset.
Net Income/(Loss). Net income/(loss) from continuing operations decreased $26.9 million to a loss of $(25.8) million for the year ended January 31, 2013, from $1.1 million for the year ended January 31, 2012. The decrease in net income was primarily a result of arbitration settlement and goodwill and other intangibles impairment charge in Brazil (see Notes 4 and 5 for full discussion).
Fourth Quarter Results Continuing Operations. The sales in Brazil in Q4 of FY13 and FY12 had no large bid sales and were $353,000 lower than the prior year. The increase in sales in other foreign jurisdictions is primarily due to the introduction of new products and new marketing material targeting specific markets.
Factors effecting 4QFY13 results included:
Discontinued Operations. In Q4FY12, the Company commenced its efforts to market its property in India. Based on the difficulty in marketing this property in Q4FY13, the Company determined carrying value exceeded projected undiscounted cash flows and recorded a loss of $800,000 to reduce carrying value to future value.
Management's CommentsMr. Ryan continued, "Lakeland will continue to seek to reduce operating costs, dispose of low ROI assets and increase sales. We hope to completely stabilize the Company by the end of the third quarter with more restructuring and reduction in both debt and operating costs."
Financial Results Conference Call
Lakeland will host a conference call at 4:30 PM (EDT) today to discuss the Company's fourth quarter and full fiscal year 2013 financial results. The conference call will be hosted by Christopher J. Ryan, Lakeland's President and CEO, and Gary Pokrassa, Lakeland's Chief Financial Officer. Investors can listen to the call by dialing 800-860-2442 (Domestic) or 412-858-4600 (International), Pass Code 10029101.
A conference call replay will be available by dialing 877-344-7529 (Domestic) or 412-317-0088 (International), Pass Code 10029101.
About Lakeland Industries, Inc.:
Lakeland Industries, Inc. (NASDAQ: 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 8-K(s), registration statements, annual reports and other periodic 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.Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETSJanuary 31, 2013 and 2012(in $000's)January 31,2013
2012ASSETSCurrent assetsCash and cash equivalents
$5,711Accounts receivable, net
45,668Deferred income taxes
3,988Assets of discontinued operations in India
1,999Prepaid income tax
1,773Other current assets
1,993Total current assets
73,708Property and equipment, net
13,915Prepaid VAT and other taxes, noncurrent
1,331Intangibles and other assets, net
$102,405LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable
$4,600Accrued compensation and benefits
1,305Other accrued expenses
1,585Liabilities of discontinued operations in India
65Current maturity of long-term debt
1,898Current maturity of arbitration settlement
-----Term loans to TD Bank
-----Borrowings under revolving credit facility
-----Total current liabilities
9,453Accrued arbitration award in Brazil (net of current maturities)
-----Borrowings under revolving credit facility
11,458Other long-term debt
4,815Other liabilities - accrued legal fees in Brazil
99VAT taxes payable long-term
29,138Stockholders' equityPreferred stock, $.01 par; authorized 1,500,000 shares(none issued)-----------Common stock, $.01 par; authorized 10,000,000 shares,
issued 5,688,600 and 5,581,919; outstanding, 5,332,159
and 5,225,478 at January 31, 2013 and 2012, respectively
56Treasury stock, at cost; 356,441 shares at January 31, 2013
and January 31, 2012
(3,352)Additional paid-in capital
50,772Retained earnings (deficit)
25,816Accumulated other comprehensive loss
(25)Total stockholders' equity
73,267Total liabilities and stockholders' equity
$102,405 Lakeland Industries, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF OPERATIONSFor the Years Ended January 31, 2013 and 2012 (In $000's)Years EndedJanuary 31,2013
2012Net sales from continuing operations
$96,327Cost of goods sold from continuing operations
67,541Gross profit from continuing operations
28,786Operating expenses from continuing operationsSelling and shipping
11,980General and administrative
15,064Total operating expense from continuing operations
27,044Operating profit (loss) from continuing operations
1,742Foreign Exchange loss Brazil
(305)Arbitration judgment in Brazil
------Goodwill and other intangible impairment in Brazil
------Other income (loss)
81Additional VAT tax charge in Brazil
(679)Income (loss) from continuing operations before income taxes
839Provision (benefit) for income taxes on continuing operations
(254)Income (loss) from continuing operations
1,093Discontinued operations:Loss from operations of discontinued India glove
manufacturing facility (including loss on disposal of
$800,000 in assets in 2013 and $1,734,000 in 2012)
(2,315)Benefit from income taxes
(845)Loss on discontinued operations
$(377)Basic earnings per share:Income (loss) from continuing operations
(0.28)Basic loss per share
$(0.07)Diluted earnings per share:Income (loss) from continuing operations
(0.27)Diluted loss per share
$(0.07)Weighted average common shares outstanding:Basic
|SOURCE Lakeland Industries, Inc.|
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