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 Lakeland Industries, Inc. Reports Second Quarter Fiscal Year 2011 Financial Results

Lakeland Industries, Inc. (NASDAQ: LAKE) today announced financial results for its second quarter fiscal year 2011 ended July 31, 2010.

Financial Results Highlights and Recent Company Developments

  • Revenue of $24.6 million in Q2FY11 up 6.5% over Q2 last year
  • International expansion efforts drive non-US revenue growth and improved market share
  • Revenues from outside the US were 43.5% of total in Q2FY11 as compared with 37.5% for Q2FY10
  • International Growth
    • China external sales continued very strong growth at nearly double Q2 sales from last year
    • India sales double from Q2 last year
    • Brazil sales relatively flat absent large orders in Q2 this year; bids outstanding on several large orders through balance of FY11
    • Stage set for further market expansion with strategically positioned global manufacturing facilities and enhanced product lines
  • Sales of disposable products in North America were flat in Q2FY11 compared with prior year periods due to Gulf oil spill demand offsetting continued depressed economy, particularly in the industrial and automotive supply chain
  • Gulf oil spill demand resulting in stock-outs and increased backlog at end of quarter although backlog is declining during Q3
  • Despite weakness in US sales during Q2FY11, the US Glove Division increased sales by more than 100% from Q2FY10, driven by Indian glove product gaining traction and the Gulf oil spill
  • Gross margin improved due to contributions from international operations and disposables relating to industry-wide shortages and price increases
  • Operating expenses increased largely due to:
    • Higher sales volumes overall
    • Freight out increases, due in part to higher volume and use of air freight due to stock-outs
    • Unusual items in Q2 operating results:
      • $457,000 cumulative charge to equity compensation resulting from the Board of Directors changing the performance level on the 2009 Equity Plan from zero to baseline [$0.054 per share]
      • $175,000 charge for legal and professional fees in Brazil resulting from the terminations of two managers [$0.027 per share]
      • $220,000 charge for severance pay resulting from a Reduction in Force [$0.026 per share]
  • Without unusual expenses in Q2FY11 EPS would have been $0.21 as compared to reported basic EPS of $0.11 and $0.00 in the same period in prior year
  • Effective inventory control and cash management initiatives resulted in $6.6 million reduction of bank debt at 7/31/10 from 1/31/10
  • Cash position increased by 30% to $6.6 million at end of Q2FY11 from beginning of fiscal year
  • No settlement reached in Brazil as arbitration approaches relating to Brazil employment terminations

Fiscal 2011 Second Quarter Financial Results

Net Sales. Net sales increased $1.5 million, or 6.5%, to $24.6 million for the three months ended July 31, 2010, from $23.0 million for the three months ended July 31, 2009. The net increase was due to an increase of $2.1 million in foreign sales, offset by a $0.6 million decrease in domestic sales.

External sales from China increased by $2.2 million, or 98%, driven by Australian sales and domestic sales in China. Canadian sales increased by $0.2 million, or 12.4%, UK sales increased by $0.2 million or 16.7%, Chile sales decreased by $0.6 million, or 68%, in part resulting from an earthquake that led to business disruptions, and India sales increased by $0.2 million, or 100%. Sales in Brazil were down 7.6% mainly from lack of large bid sales in Q2 this year as compared with the prior period.

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