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Lakeland Industries Inc. Reports Operating Results (10-Q)

September 14, 2010 | About:
10qk

10qk

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Lakeland Industries Inc. (LAKE) filed Quarterly Report for the period ended 2010-07-31.

Lakeland Industries Inc. has a market cap of $50.3 million; its shares were traded at around $9.24 with a P/E ratio of 44 and P/S ratio of 0.5. LAKE is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

At July 31, 2010, the Company had an outstanding loan balance of $3.0 million under its facility with TD Bank, N.A. compared with $9.5 million at January 2010. Total stockholders equity increased $0.5 million principally due to the net loss for the period of $(0.8) million offset by the changes in foreign exchange translations in other comprehensive income of $0.7 million and the equity compensation of $0.5 million.

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 sales to the new Australian distributor 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 the earthquake. US domestic sales of disposables were flat, chemical suit sales decreased by $0.5 million, wovens decreased by $0.4 million, reflective sales were flat and glove sales increased by $0.7 million. Sales in Brazil were down 7.6% mainly from lack of large bid sales in Q2 this year.

Net Income. Net income increased $0.6 to $0.6 million for the three months ended July 31, 2010 from $0.0 million for the three months ended July 31, 2009. The increase in net income primarily resulted from higher margins resulting from the stock-out conditions prevailing in Q2 FY11, offset by charges to net income of $0.3 million for the cumulative change in Restricted Stock performance level ($0.05 per share), $0.2 million for legal fees in Brazil resulting from the terminations ($0.03 per share), $0.2 million for severance costs in Canada ($0.03 per share). Excluding these charges, the Company would have reported net income of $1.3 million in the second quarter of fiscal 2011 ($0.21 per share).

Net Sales. Net sales increased $2.9 million, or 6.1%, to $49.9 million for the six months ended July 31, 2010, from $47.0 million for the six months ended July 31, 2009. The net increase was due to an increase of $5.2 million in foreign sales, offset by a $2.3 million decrease in domestic sales. External sales from China increased by $3.3 million, or 83%, driven by sales to the new Australian distributor and domestic sales in China. Canadian sales increased by $0.7 million, or 24%, UK sales increased by $0.6 million, or 33%, Chile sales decreased by $0.5 million, or 46%, in part resulting from the earthquake. US domestic sales of disposables decreased by $1.0 million, chemical suit sales decreased by $0.8 million, wovens decreased by $0.3 million, reflective sales decreased by $0.3 million and glove sales increased by $0.9 million. Sales in Brazil were flat.

Net Income (Loss). Net income decreased $0.9 to a loss of $0.8 million for the six months ended July 31, 2010 from a profit of $0.1 million for the six months ended July 31, 2009. The decrease in net income primarily resulted from the $1.6 million charge for VAT tax expense in Brazil. Excluding the Brazilian VAT tax expense, the Company would have reported net income of $0.8 million in the six months ended July 31, 2010, a 771% increase as compared to the same period in fiscal 2010. The improved profitability before VAT tax expense reflects an increase in sales, reduction in gross margins in disposables, a $350,000 allowance against deferred taxes in the prior year resulting from the India restructuring.

Net cash provided by operating activities of $4.7 million for the six months ended July 31, 2010 was due primarily to net loss from operations of $(0.8) million and a decrease in inventories of $5.1 million, offset by an increase in accounts receivable of $(0.5) million and an increase in deferred tax asset of $(0.2) million, an increase in other assets of ($3.9) million, largely resulting from the Brazil VAT tax issues, offset by an increase in payables of $3.6 million. The increase in payables results mainly from local vendors in China as we source domestically in China, the resumption of purchases from DuPont, accruals of sales rebates and overall increases in Brazil. Net cash used in investing activities of $0.5 million in the six months ended July 31, 2010 was due to purchases of property and equipment.

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