ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
13-3115216
|
|
(State
of incorporation)
|
(IRS
Employer Identification Number)
|
|
701
Koehler Avenue, Suite 7, Ronkonkoma, New York
|
11779
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(631)
981-9700
|
||
(Registrant's
telephone number, including area code)
|
Large
Accelerated Filer o
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Accelerated
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24
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24
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26
|
PART
I -
|
FINANCIAL
INFORMATION
|
Item
1.
|
Financial
Statements:
|
|
·
|
Our
ability to obtain fabrics and components from suppliers and manufacturers
at competitive prices or prices that vary from quarter to
quarter;
|
|
·
|
Risks
associated with our international manufacturing and start up sales
operations;
|
|
·
|
Potential
fluctuations in foreign currency exchange
rates;
|
|
·
|
Our
ability to respond to rapid technological
change;
|
|
·
|
Our
ability to identify and complete acquisitions or future
expansion;
|
|
·
|
Our
ability to manage our growth;
|
|
·
|
Our
ability to recruit and retain skilled employees, including our
senior
management;
|
|
·
|
Our
ability to accurately estimate customer
demand;
|
|
·
|
Competition
from other companies, including some with greater
resources;
|
|
·
|
Risks
associated with sales to foreign
buyers;
|
|
·
|
Restrictions
on our financial and operating flexibility as a result of covenants
in our
credit facilitates;
|
|
·
|
Our
ability to obtain additional funding to expand or operate our business
as
planned;
|
|
·
|
The
impact of a decline in federal funding for preparations for terrorist
incidents;
|
|
·
|
The
impact of potential product liability
claims;
|
|
·
|
Liabilities
under environmental laws and
regulations;
|
|
·
|
Fluctuations
in the price of our common stock;
|
|
·
|
Variations
in our quarterly results of
operations;
|
|
·
|
The
cost of compliance with the Sarbanes-Oxley Act of 2002 and rules
and
regulations relating to corporate governance and public
disclosure;
|
|
·
|
The
significant influence of our directors and executive officer on
our
company and on matters subject to a vote of our
stockholders;
|
|
·
|
The
limited liquidity of our common
stock;
|
|
·
|
The
other factors referenced in this 10-Q, including, without limitation,
in
the sections entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and
“Business.”
|
ASSETS
|
July
31, 2007
(Unaudited)
|
January
31, 2007
|
||||||
Current
assets:
|
||||||||
Cash
|
$ |
1,640,664
|
$ |
1,906,557
|
||||
Accounts
receivable, net of allowance for doubtful accounts of $89,500
at July 31, 2007 and $103,000 at January 31,
2007
|
12,137,916
|
14,780,266
|
||||||
Inventories,
net of reserves of $637,000 at July 31, 2007 and
$306,000 at January 31, 2007
|
43,716,714
|
40,955,739
|
||||||
Deferred
income taxes
|
1,438,983
|
1,355,364
|
||||||
Other
current assets
|
4,350,422
|
3,115,722
|
||||||
Total
current assets
|
63,284,699
|
62,113,648
|
||||||
Property
and equipment, net of accumulated depreciation of $7,157,000
at July 31, 2007 and $6,707,000 at January 31,
2007
|
11,720,041
|
11,084,030
|
||||||
Goodwill
|
871,297
|
871,297
|
||||||
Other
assets
|
116,846
|
129,385
|
||||||
$ |
75,992,883
|
$ |
74,198,360
|
|||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ |
4,655,536
|
$ |
3,055,339
|
||||
Accrued
expenses and other current liabilities
|
1,629,465
|
1,270,623
|
||||||
Total
current liabilities
|
6,285,001
|
4,325,962
|
||||||
Deferred
income taxes
|
27,227
|
27,227
|
||||||
Construction
loan payable (net of current maturity of $94,000)
|
312,321
|
-----
|
||||||
Borrowings
under revolving credit facility
|
2,550,000
|
3,786,000
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $.01 par; authorized 1,500,000 shares
|
||||||||
(none
issued)
|
||||||||
Common
stock, $.01 par; authorized 10,000,000 shares;
|
||||||||
issued
and outstanding 5,523,288 shares at July 31, 2007 and 5,521,824
at January 31, 2007
|
55,233
|
55,218
|
||||||
Additional
paid-in capital
|
49,086,983
|
48,972,025
|
||||||
Other
comprehensive loss
|
(106,708 | ) |
-----
|
|||||
Retained
earnings (1)
|
17,782,826
|
17,031,928
|
||||||
Stockholders'
equity
|
66,818,334
|
66,059,171
|
||||||
$ |
75,992,883
|
$ |
74,198,360
|
THREE
MONTHS ENDED
July 31, |
SIX
MONTHS ENDED
July
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Net
sales
|
$ |
21,731,685
|
$ |
24,086,862
|
$ |
47,328,423
|
$ |
51,308,887
|
||||||||
Cost
of goods sold
|
16,538,171
|
17,621,040
|
36,844,951
|
38,310,335
|
||||||||||||
Gross
profit
|
5,193,514
|
6,465,822
|
10,483,472
|
12,998,552
|
||||||||||||
Operating
expenses
|
4,278,432
|
4,384,931
|
8,573,579
|
8,750,845
|
||||||||||||
Operating
profit
|
915,082
|
2,080,891
|
1,909,893
|
4,247,707
|
||||||||||||
Interest
and other income, net
|
82,078
|
18,184
|
125,138
|
32,985
|
||||||||||||
Interest
expense
|
(57,518 | ) | (116,080 | ) | (111,126 | ) | (186,773 | ) | ||||||||
Income
before income taxes
|
939,642
|
1,982,995
|
1,923,905
|
4,093,919
|
||||||||||||
Provision
for income taxes
|
172,592
|
628,476
|
561,007
|
1,277,625
|
||||||||||||
Net
income
|
$ |
767,050
|
$ |
1,354,519
|
$ |
1,362,898
|
$ |
2,816,294
|
||||||||
Net
income per common share*:
|
||||||||||||||||
Basic
|
$ |
.14
|
$ |
.25
|
$ |
.25
|
$ |
.51
|
||||||||
Diluted
|
$ |
.14
|
$ |
.25
|
$ |
.25
|
$ |
.51
|
||||||||
Weighted
average common shares outstanding*:
|
||||||||||||||||
Basic
|
5,522,604
|
5,520,981
|
5,522,214
|
5,519,938
|
||||||||||||
Diluted
|
5,543,407
|
5,524,110
|
5,540,906
|
5,524,093
|
Common
Stock
|
Additional
Paid-in
|
Retained
|
Other
Comprehensive
|
|||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Loss
|
Total
|
|||||||||||||||||||
Balance
February 1, 2007
|
5,521,824
|
$ |
55,218
|
$ |
48,972,025
|
$ |
17,031,928
|
$ |
-----
|
$ |
66,059,171
|
|||||||||||||
Net
Income
|
-----
|
-----
|
-----
|
1,362,898
|
-----
|
1,362,898
|
||||||||||||||||||
Exercise
of Stock Option
|
1,464
|
15
|
6,675
|
-----
|
-----
|
6,690
|
||||||||||||||||||
Effect
of Adoption of FIN 48 (Note
10)
|
-----
|
-----
|
-----
|
(350,000 | ) |
-----
|
(350,000 | ) | ||||||||||||||||
Effect
of Adoption of SAB No. 108 (Note
17)
|
-----
|
-----
|
-----
|
(262,000 | ) |
-----
|
(262,000 | ) | ||||||||||||||||
Other
Comprehensive Loss
|
-----
|
-----
|
-----
|
-----
|
(106,708 | ) | (106,708 | ) | ||||||||||||||||
Stock
Based Compensation
|
-----
|
-----
|
108,283
|
-----
|
-----
|
108,283
|
||||||||||||||||||
Balance
July 31, 2007
|
5,523,288
|
$ |
55,233
|
$ |
49,086,983
|
$ |
17,782,826
|
$ | (106,708 | ) | $ |
66,818,334
|
SIX
MONTHS ENDED
|
||||||||
July
31,
|
||||||||
2007
|
2006
|
|||||||
Cash
Flows from Operating Activities:
|
||||||||
Net
income
|
$ |
1,362,898
|
$ |
2,816,294
|
||||
Adjustments
to reconcile net income to net cash provided
|
||||||||
by
operating activities:
|
||||||||
Stock
based compensation
|
108,283
|
42,451
|
||||||
Reserve
for doubtful accounts
|
(13,500 | ) |
69,474
|
|||||
Reserve
for inventory obsolescence
|
330,490
|
25,347
|
||||||
Depreciation
and amortization
|
513,933
|
501,466
|
||||||
Deferred
income tax
|
(83,619 | ) |
-----
|
|||||
Changes
in operating assets and liabilities:
|
||||||||
Decrease
in accounts receivable
|
2,655,850
|
1,624,716
|
||||||
(Increase)
in inventories
|
(3,091,465 | ) | (1,715,877 | ) | ||||
(Increase)
decrease in other assets
|
(1,222,161 | ) |
(670,651
|
) | ||||
Increase
(decrease) in accounts payable, accrued expenses and other
liabilities
|
1,552,652
|
(1,339,065 | ) | |||||
Net
cash provided by operating activities
|
2,113,361
|
1,354,155
|
||||||
Cash
Flows from Investing Activities:
|
||||||||
Purchases
of property and equipment
|
(1,149,944 | ) | (375,582 | ) | ||||
Net
cash used in investing activities
|
(1,149,944 | ) | (375,582 | ) | ||||
Cash
Flows from Financing Activities:
|
||||||||
Proceeds
from Exercise of Stock Option
|
6,690
|
11,876
|
||||||
Net
repayments under loan agreements
|
(1,236,000 | ) | (218,000 | ) | ||||
Net
cash (used in) financing activities
|
(1,229,310 | ) | (206,124 | ) | ||||
Net
(decrease) increase in cash
|
(265,893 | ) |
772,449
|
|||||
Cash
and cash equivalents at beginning of period
|
1,906,557
|
1,532,453
|
||||||
Cash
and cash equivalents at end of period
|
$ |
1,640,664
|
$ |
2,304,902
|
1.
|
Business
|
2.
|
Basis
of Presentation
|
4.
|
Inventories:
|
July
31,
|
January
31,
|
|||||||
2007
|
2007
|
|||||||
Raw
materials
|
$ |
21,060,205
|
$ |
19,051,284
|
||||
Work-in-process
|
3,171,923
|
2,760,196
|
||||||
Finished
Goods
|
19,484,586
|
19,144,259
|
||||||
$ |
43,716,714
|
$ |
40,955,739
|
|||||
5.
|
Earnings
Per Share:
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
July
31,
|
July
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Numerator
|
||||||||||||||||
Net
Income
|
$ |
767,050
|
$ |
1,354,519
|
$ |
1,362,898
|
$ |
2,816,294
|
||||||||
Denominator
|
||||||||||||||||
Denominator
for basic earnings per share
|
5,522,604
|
5,520,981
|
5,522,214
|
5,519,938
|
||||||||||||
(Weighted-average
shares)
|
||||||||||||||||
Effect
of dilutive securities
|
20,803
|
3,129
|
18,692
|
4,155
|
||||||||||||
Denominator
for diluted earnings per share
|
5,543,407
|
5,524,110
|
5,540,906
|
5,524,093
|
||||||||||||
(adjusted
weighted average shares)
|
||||||||||||||||
Basic
earnings per share
|
$ |
.14
|
$ |
.25
|
$ |
.25
|
$ |
.51
|
||||||||
Diluted
earnings per share
|
$ |
.14
|
$ |
.25
|
$ |
.25
|
$ |
.51
|
6.
|
Revolving
Credit Facility
|
7.
|
Major
Supplier
|
8.
|
Employee
Stock Compensation
|
Stock
Options
|
Number
of
Shares
|
Weighted
Average
Exercise
Price per
Share
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||||
Outstanding
at January 31, 2007
|
19,031
|
$
|
12.79
|
3.5
years
|
$
|
35,778
|
||||||||||
Exercised
Stock Option
|
1,464
|
$
|
4.57
|
-----
|
-----
|
|||||||||||
Outstanding
at July 31, 2007
|
17,567
|
$
|
12.79
|
3.25
years
|
$
|
5,329
|
||||||||||
Exercisable
at July 31, 2007
|
17,567
|
$
|
12.79
|
3.25
years
|
$
|
5,329
|
9.
|
Manufacturing
Segment Data
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||||||||||||||
July
31,
|
July
31,
|
|||||||||||||||||||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||||||||||||||||||
Domestic
|
$ |
17.9
|
82.5 | % | $ |
21.5
|
89.2 | % | $ |
39.9
|
84.4 | % | $ |
45.7
|
89.1 | % | ||||||||||||||||
International
|
3.8
|
17.5 | % |
2.6
|
10.8 | % |
7.4
|
15.6 | % |
5.6
|
10.9 | % | ||||||||||||||||||||
Total
|
$ |
21.7
|
100 | % | $ |
24.1
|
100 | % | $ |
47.3
|
100 | % | $ |
51.3
|
100 | % |
Three
Months Ended
July
31,
(in
millions of dollars)
|
Six
Months Ended
July
31,
(in
millions of dollars)
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Net
Sales:
|
||||||||||||||||
North
America and other foreign
|
$ |
22.24
|
$ |
25.36
|
$ |
48.24
|
$ |
53.48
|
||||||||
China
|
3.46
|
3.0
|
6.46
|
5.6
|
||||||||||||
India
|
.10
|
(.06 | ) |
.90
|
.32
|
|||||||||||
Less
inter-segment sales
|
(4.1 | ) | (4.2 | ) | (8.3 | ) | (8.1 | ) | ||||||||
Consolidated
sales
|
$ |
21.7
|
$ |
24.1
|
$ |
47.3
|
$ |
51.3
|
||||||||
Operating
Profit:
|
||||||||||||||||
North
America and other foreign
|
$ |
.44
|
$ |
2.1
|
$ |
1.25
|
$ |
3.62
|
||||||||
China
|
.60
|
.54
|
.98
|
.94
|
||||||||||||
India
|
(.12 | ) | (.47 | ) | (.24 | ) | (.23 | ) | ||||||||
Less
inter-segment profit (loss)
|
-----
|
(.07 | ) | (.08 | ) | (.03 | ) | |||||||||
Consolidated
profit
|
$ |
.92
|
$ |
2.1
|
$ |
1.91
|
$ |
4.3
|
||||||||
Identifiable
Assets (at Balance Sheet date or change during quarter):
|
||||||||||||||||
North
America and other foreign
|
$ |
.1
|
$ |
.20
|
$ |
63.3
|
$ |
65.6
|
||||||||
China
|
(.6 | ) |
.20
|
8.4
|
6.9
|
|||||||||||
India
|
-----
|
-----
|
4.3
|
1.3
|
||||||||||||
Consolidated
assets
|
$ |
(.5
|
) | $ |
.40
|
$ |
76.0
|
$ |
73.8
|
|||||||
Depreciation and
Amortization Expense:
|
||||||||||||||||
North
America and other foreign
|
$ |
.15
|
$ |
.14
|
$ |
.31
|
$ |
.3
|
||||||||
China
|
.11
|
.09
|
.20
|
.2
|
||||||||||||
India
|
-----
|
-----
|
-----
|
-----
|
||||||||||||
Consolidated
depreciation expense
|
$ |
.26
|
$ |
.23
|
$ |
.51
|
$ |
.50
|
10.
|
Adoption
of FIN 48
|
11.
|
Real
Estate Purchases
|
12.
|
Related
Party Transactions
|
13.
|
Formation
of New Subsidiariesand
Restructuring
|
14.
|
Mexican
Tax Situation
|
15.
|
Indian
Glove Purchase
|
16.
|
Derivative
Instruments and Foreign Currency
Exposure
|
17.
|
Adoption
of SAB No. 108
|
(in thousands)
|
|
|
Net Adjustment, After
|
|||||||||
|
Net
deecrease to
|
Net Income
|
Tax as a
% of Net
|
|||||||||
Fiscal Year
|
Net
Income
|
As Reported
|
Income As Reported
|
|||||||||
2007
|
$ |
154
|
$ |
5,104
|
3.02 | % | ||||||
2006
|
20
|
6,329
|
0.32 | % | ||||||||
2005
|
88
|
5,016
|
1.75 | % | ||||||||
Total
|
$ |
262
|
16,449
|
1.59 | % |
(in thousands)
|
Total
|
|||
Inventory
|
$ | (262 | ) | |
Retained
Earnings
|
(262 | ) | ||
Total
|
$ |
—
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
For
the Three Months
Ended
July 31
|
For
the Six Months
Ended
July 31
|
|||
2007
|
2006
|
2007
|
2006
|
|
Sales
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
Gross
Profit
|
23.90%
|
26.80%
|
22.20%
|
25.30%
|
Selling,
general and administrative
|
19.70%
|
18.20%
|
18.10%
|
17.10%
|
Income
from operations
|
4.20%
|
8.60%
|
4.00%
|
8.30%
|
Income
before provision for income taxes
|
4.30%
|
8.20%
|
4.10%
|
8.00%
|
Net
income
|
3.50%
|
5.60%
|
2.90%
|
5.50%
|
|
o
|
$0.22
million in higher professional and consulting fees, largely resulting
from
audit fees and engineering fees related to
India.
|
|
o
|
$0.17
increase in R & D costs relating to UL certifications of fire gear and
other non-related certifications.
|
|
o
|
$0.06
million in share-based
compensation.
|
|
o
|
($0.13)
million lower freight out costs resulting from slight relief in
prevailing
carrier rates and lower volume.
|
o
|
($0.14)
million miscellaneous decreases.
|
o
|
($0.06)
million in decreased bad debt
exposure.
|
|
o
|
($0.06)
million in reduced bank charges resulting from reduced use of credit
cards
and a re-negotiation of the fee
structure.
|
|
o
|
($0.23)
million decreased sales commissions and selling expenses due to
decreased
volume
|
|
o
|
$0.11
increase in R & D costs relating to UL certifications of fire gear and
other non-related certifications.
|
o
|
$0.08
million in higher professional and consulting fees, largely resulting
from
audit fees and engineering fees related to
India.
|
o
|
$0.07
million miscellaneous net
increases.
|
|
o
|
($0.09)
million lower freight out costs resulting from slight relief in
prevailing
carrier rates and lower volume.
|
|
o
|
($0.18)
million decreased sales commissions and selling expenses due to
decreased
volume
|
|
o
|
($.10)
reduced currency fluctuation, largely resulting from our hedging
activities.
|
(in thousands)
|
|
|
Net Adjustment, After
|
|||||||||
|
Net
decrease to
|
Net Income
|
Tax as a
% of Net
|
|||||||||
Fiscal Year
|
Net
Income
|
As Reported
|
Income As Reported
|
|||||||||
2007
|
$ |
154
|
$ |
5,104
|
3.02 | % | ||||||
2006
|
20
|
6,329
|
0.32 | % | ||||||||
2005
|
88
|
5,016
|
1.75 | % | ||||||||
Total
|
$ |
262
|
16,449
|
1.59 | % |
(in thousands)
|
|
|
Total
|
|
|
Inventory
|
|
|
$
|
(262)
|
|
Retained
Earnings
|
|
|
(262)
|
|
|
Total
|
|
|
$
|
—
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Item
4.
|
Controls
and Procedures
|
Item
4.
|
Submission
of Matters to a vote of Security
Holders
|
|
a.
|
The
annual meeting of shareholders of the Company (the “Annual Meeting”) was
held on June 20, 2007 in Ronkonkoma, New York. The Company had
5,521,824 shares of common stock
outstanding as of April 27, 2007, the record date for the Annual
Meeting.
|
|
|
b.
|
The
following persons were elected Directors pursuant to the votes
indicated
|
Name
|
Votes
For
|
Votes
Against
|
|
Raymond
J. Smith
|
4,597,311
|
520,726
|
|
c.
|
The
other matter to be voted upon was the ratification of the appointment
of
Holtz Rubenstein Reminick LLP as the Registrant’s Independent Public
Accountant as follows:
|
For
|
Against
|
Abstain
|
|
5,028,836
|
88,741
|
460
|
Item
6.
|
Exhibits*
and Reports on Form
8-K:
|
|
Exhibits:
|
|
a.
|
31.1
Certification Pursuant to Rule 13a-14(b) and
Rule 15d-14(b) of the Exchange Act, Signed by Chief Executive Officer
(filed herewith)
|
|
b.
|
31.2
Certification Pursuant to Rule 13a-14(b) and
Rule 15d-14(b) of the Exchange Act, Signed by Chief Financial Officer
(filed herewith)
|
|
c.
|
32.1
Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002, Signed by Chief Executive Officer (filed
herewith)
|
|
d.
|
32.2
Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002, Signed by Chief Financial Officer (filed
herewith)
|
|
Reports
on Form 8-K:
|
|
a
-
|
On
May 2, 2007, the Company filed a Form 8-K under Item 2.05 announcing
the
closure of its Celaya, Mexico plant and the opening of its new Jerez,
Mexico plant; and under Item 1.0 announcing the award of a significant
chemical suit contract.
|
|
b
-
|
On
June 7, 2007, the Company filed a Form 8-K under Item 2.02, relating
to
the results of operations and financial condition for the purpose
of
furnishing a press release announcing results of operations for the
three
months ended April 30, 2007.
|
|
*
|
Incorporated
by reference herein are two Registration Statements on Form S-8 filed
by
the Company on January 9, 1987 registering the common stock underlying
the
options in the Employee Incentive Stock Option Plan and the Directors
Stock Option Plan and on July 26, 2007, registering the common stock
awardable to employees and directors pursuant to the 2006
Equity Incentive Plan
|
LAKELAND
INDUSTRIES, INC.
|
|
(Registrant)
|
|
Date: September
6, 2007
|
/s/
Christopher J. Ryan
|
Christopher
J. Ryan,
|
|
Chief
Executive Officer, President,
|
|
Secretary
and General Counsel
|
|
(Principal
Executive Officer and Authorized
|
|
Signatory)
|
|
Date:
September 6, 2007
|
/s/Gary
Pokrassa
|
Gary
Pokrassa,
|
|
Chief
Financial Officer
|
|
(Principal
Accounting Officer and Authorized
|
|
Signatory)
|