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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended, January 31, 1996
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No fee required)
For the transition period from _____________ to ______________
Commission File Number: 0 - 15535
LAKELAND INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3115216
(State of Incorporation) (I.R.S. Employer
Identification Number)
711-2 Koehler Ave., Ronkonkoma, NY 11779
(Address of Principal Executive Offices, Including Zip Code)
(516) 981-9700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 Par Value
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(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S - K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10 - K or any
amendment to this Form 10 - K _____.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
The aggregate market value of the Common Stock outstanding and held by
nonaffiliates (as defined in Rule 405 under the Securities Exchange Act of 1934)
of the Registrant, based upon the average high and low bid price of the Common
Stock on NASDAQ on April 22, 1996 was approximately $4,868,979 (based on
1,498,378 shares held by nonaffiliates).
The number of shares outstanding of the Registrant's common stock, $.01 par
value, on April 26, 1996 was 2,550,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended January
31, 1996 are incorporated by reference in Items 5 - 7 of Part II and certain
portions of the Registrant's Definitive Proxy Statement, for the Annual Meeting
of Stockholders to be held June 19, 1996, are incorporated by reference in Items
10 - 13 of Part III of this Annual Report on Form 10 - K.
PART I
ITEM 1. BUSINESS
Lakeland Industries, Inc. (the"Company") is a company with five divisions
and three wholly-owned subsidiaries: One large division of the Company
manufactures disposable / limited use garments and its four smaller divisions,
Chemland ("Chemland"), manufactures suits for use by toxic waste clean up
teams; Fireland ("Fireland") d/b/a Fyrepel Products, manufactures fire and heat
protective apparel and protective systems for personnel; Highland ("Highland"),
manufacturers specialty safety and industrial work gloves and Uniland
("Uniland"), manufactures industrial and medical woven cloth garments. A
predecessor corporation of the Company was incorporated in New York in April
1982. In September 1986, the Company completed its initial public offering for
950,000 shares of common stock at $6.75 per share. The Company formed two new
subsidiaries in December 1986, Chemland and Fireland (both Delaware
corporations), which purchased the assets and certain liabilities of Siena
Industries, Inc. and Fyrepel Products, Inc., respectively, both located in
Ohio. Chemland, Fireland, Highland and Uniland were all formerly wholly-owned
subsidiaries of the Company. Highland was merged into the Company on June 30,
1993 and Chemland, Fireland and Uniland were merged into the Company on August
31, 1993. A new subsidiary Fireland Industries, Inc. was formed during fiscal
1994 to hold the land and building currently owned in Ohio and act as Trustee
and Sponsor of the Fireland Industries, Inc. Pension Plan.
During fiscal 1988, the Company formed two new subsidiaries, Highland (a
Delaware corporation) which opened an office and warehouse in Edison, New
Jersey and Mayer (a Delaware corporation), formed to purchase the assets of
Walter H. Mayer & Co., located in Chicago, Illinois. Later that year, a
subsidiary, Uniland (an Arkansas corporation), opened a 30,000 square foot
manufacturing facility in St. Joseph, Missouri.
During fiscal 1989, a former subsidiary, Triland Mfg.Co., Inc. ("Triland",
a New Jersey corporation), was merged into Highland on January 31, 1989.
Highland's warehousing and manufacturing were relocated to Alabama (from New
Jersey) while the administrative operations were absorbed by the Company in New
York. Uniland's Arkansas facility was relocated to the larger facility in St.
Joseph, Missouri.
During fiscal 1990, Chemland moved its small chemical suit manufacturing
facility in Coshocton, Ohio to Somerville, Alabama and opened a larger facility
in Coshocton to replace the firecoat manufacturing previously done in St.
Joseph, Missouri. A former subsidiary Ryland Mfg., Inc. ("Ryland", an Alabama
corporation) was merged into the Company as of January 31, 1990 to eliminate
duplication of record keeping.
During fiscal 1991, Chemland closed its Coshocton, Ohio facility due to
manufacturing inefficiencies and Uniland was reorganized as a Delaware
corporation. On December 11, 1990, the Company's subsidiary, Mayer sold
substantially all of the operating assets of its health care and hospitality
divisions to a private investor group located in Charlotte, North Carolina.
Pursuant to the terms of the Asset Purchase Agreement, Mayer's name was changed
to Oakdale Distribution Company, Inc. Oakdale Distribution Company, Inc. was
later merged into the Company on January 31, 1992. Cash proceeds received at
closing were utilized to pay down bank indebtedness of the Company under a
revolving credit facility.
During fiscal 1993, in-house manufacturing was phased out at Fireland's
Ohio facility. Additionally, Highland relocated from the Decatur, Alabama plant
to share space with Chemland which has a larger facility in Somerville,
Alabama.
During fiscal 1994, the Company entered into a new, $5 million, secured,
two year revolving credit agreement with a bank replacing a $3.4 million line
which was due to expire in November 1993.
During fiscal 1995 (December 1994), Lakeland Protective Wear, Inc. was
formed and opened an office with warehouse facilities in Burlington, Ontario to
serve the Canadian market. The Company markets and sells all the products
manufactured by the Lakeland group of companies through a network of safety and
industrial distributors, including a national distributor with over 100
branches. As the NAFTA Trade Agreement continues to be implemented with duties
and tariffs being reduced each year, the trade borders will be eliminated,
offering the possibility of this facility to also service the northeast U.S.
market.
During fiscal 1996 (November 1995) Lakeland de Mexico S.A. de C.V. was
formed, as a wholly owned subsidiary, to assemble disposable/limited use
garments on a contract basis. The Company also entered into a new $8 million,
secured, three year revolving credit agreement with its Bank, to replace its
existing loan facility which was about to expire.
Background and Market
The market for disposable industrial garments has increased substantially
in the past 20 years. In 1970, Congress enacted the Occupational Safety and
Health Act ("OSHA"), which requires employers to supply protective clothing in
certain work environments. At about the same time, DuPont developed Tyvek TM
which, for the first time, allowed for the economical production of
lightweight, disposable protective clothing. The attraction of disposable
garments grew in the late 1970's with the increases in both labor and material
costs of producing cloth garments and the promulgation of federal, state and
local regulations requiring that employees wear protective clothing to protect
against exposure to certain contaminants, such as asbestos and P.C.B.s. During
the second half of 1989, polypropylene materials became a major competitor to
Tyvek TM.
Beginning in the second quarter of fiscal 1990 the Company encountered
erosions in margins in its disposable garment business due to a movement by
asbestos removal contractors away from Tyvek TM materials to polypropylene
materials and concomitant pricing pressures in the industry as a whole. The
industry pricing pressures, most intense during the fourth quarter of fiscal
1990, continued through fiscal 1991. While the Company was able to maintain its
sales volume at a level comparable to fiscal 1989, a substantial portion of
fiscal 1990 and 1991 sales were of polypropylene garments in lieu of Tyvek TM
garments; resulting in reduced gross profit margins. During fiscal 1991, the
Company attempted to increase selling prices, however, these new selling prices
were still below those of prior years. During fiscal 1992, the erosion in gross
margins began to stabilize. However, competition and recessionary economic
conditions adversely affected sales volume, especially during the second half
of fiscal 1992 and into fiscal 1993 and 1994.
The use of disposable garments avoids the continuing costs of laundering
and decontaminating woven cloth work garments and reduces the overhead costs
associated with handling, transporting and replacing such garments. As
manufacturers have become aware of the advantages of disposable clothing, the
demand for such garments has increased. This has allowed for greater production
volume and, in turn, has reduced the cost of manufacturing disposable
industrial garments.
With the acquisition of the assets and certain liabilities of Fyrepel
Products, Inc., the Company entered, via Fireland, into the field of
manufacturing and selling fire and heat protective garments. Fyrepel Products,
Inc. conducted business in this field for 40 years, and the Company acquired
its assets as well as the right to use its trade name. During fiscal 1992, the
Company re-evaluated the product lines manufactured at this facility in order
to reduce the operating losses that occurred in prior fiscal years. Orders that
would not assure an acceptable return were not booked, causing a decrease in
overall sales, but an improved bottom line. A new management team was in place
at this facility to initiate a turn around. In December 1991, it was determined
that even with the efforts of this new team it was apparent that the Ohio
facility would be negatively affected by union related problems. The Company
continued to market Fyrepel's product line and furnishes these products
utilizing domestic or international independent manufacturing contractors while
internal manufacturing was phased out.
Chemland was formed in December 1986 to purchase the assets and certain
liabilities of Siena Industries, Inc. Chemland manufactures protective garments
for use in hazardous chemical environments. All of its products are sold
through the Company's distributor network. The Company believes that this
market will grow due to the extensive government legislation which mandates the
clean up of toxic waste sites and the elimination of hazardous materials from
the environment. The Environmental Protection Agency ("EPA") designated OSHA to
be responsible for the health and safety of workers in and around areas of
hazardous materials and contaminated waste, OSHA responded by formulating an
all encompassing compendium of safety regulations that prescribe operating
standards for all aspects of OSHA projects. Almost 2 million people are
affected by OSHA Standards today.
In 1990, additional standards proposed and developed by the National Fire
Protection Association ("NFPA") and the American Society for Testing and
Materials ("ASTM") were accepted by OSHA. NFPA Standard 1991 set performance
requirements for total-encapsulating vapor-proof chemical suits and includes
rigid chemical and flame resistance tests and a permeability test against 17
challenge chemicals. The basic OSHA Standards call for 4 levels of protection,
A through D, and specify in detail the equipment and clothing required to
adequately protect the wearer at corresponding danger levels. A summary of
these four levels follows:
NFPA 1991 / Level A calls for total encapsulation in a vapor-proof chemical
suit with self-contained breathing apparatus ("SCBA") and appropriate
accessories.
Level B calls for SCBA or positive pressure supplied respirator with escape
SCBA, plus hooded chemical resistant clothing (overalls, and long sleeved
jacket; coveralls; one or two piece chemical-splash suit; or disposable
chemical-resistant overalls.
Level C requires hooded chemical-resistant clothing (overalls; two-piece
chemical-splash suit; disposable chemical-resistant overalls).
Level D is basically a work and/or training situation requiring minimal
coverall protection.
Highland, formed in 1987, was organized for the importation of high
quality work gloves for sale primarily in retail outlets. Since another then
subsidiary of the Company, Triland, was a manufacturer of industrial gloves,
management combined the two operations as a cost saving measure. This merger
was completed on January 31, 1989 and during fiscal 1990, the Company phased
out the importation of retail gloves, concentrating solely on the manufacture
of Kevlar TM and other industrial safety gloves.
Products
General
Prior to acquiring Fyrepel Products, Inc. and Siena Industries, Inc. in
December 1986, the Company's product line consisted principally of two product
groups: disposable / limited use protective industrial garments and specialty
safety and industrial work gloves. With the formation of Fireland and Chemland,
the Company entered the field of fire, heat and chemical protective garments.
The Company also manufactures and sells gloves made from Kevlar TM and
Spectra TM, both high-strength fibers. These gloves provide the wearer with a
high degree of protection against cuts and lacerations in a glove that is both
lightweight and flexible. The Company anticipates strong demand for these
gloves in the manufacturing and food service industries.
Disposable / Limited Use Garments
The Company manufactures a complete line of limited use protective
garments. These garments are offered in coveralls, lab-coats, shirts, pants,
hoods, aprons, sleeves and smocks. The Company offers these garments in a
number of sizes and styles to fit the end users' needs. Limited-use garments
can also be coated or laminated to increase splash protection against many
inorganic acids, bases, and other liquid chemicals. Limited use garments are
made from several non-woven fabrics including Tyvek (TM), Tyvek(R)QC,
Tyvek/Saranex 23- P, Tychem 7500, Barricade, Tychem 9400, Tychem 10,000,
Pyrolon FR, and Polypropylene materials and derivatives.
The Company incorporates many seaming techniques depending on the level of
hold-out needed in the end use application. Seam types utilized include
standard serge seam, bound seam, and heat sealed seam.
During fiscal 1995, the Company continued to market the Pyrolon(TM) flame
retardant garments. Pyrolon garments meet the stringent requirements of NFPA
701. This material offers multiple benefits; replacing traditional bulky layers
of clothing, reducing overall weight and reducing both inventory and storage
and replacement costs.
The Company's limited use garments range in price from $.50 for limited
use shoe covers to approximately $12.00 for Tyvek/Saranex 23-P laminated hood
and booted coverall. The Company's largest selling item, a standard white
limited-use Tyvek coverall, costs the end user approximately $2.75 to $3.25 per
garment. By comparison, similar re-usable cloth coveralls range in price from
$10.00 to $35.00, exclusive of significant laundering and maintenance expenses.
Industrial and Medical Cloth Garments
The Company also manufactures and markets a line of reusable and
launderable woven cloth protective apparel which supplement the disposable /
limited use garments, giving the Company access to the broader industrial and
health care related markets. Cloth re-usable garments are more appropriate in
certain situations because of their heavier weight and greater durability which
gives the Company the flexibility to supply and satisfy a wider range of safety
and customer needs. The Company also designs and manufactures:
o special apparel for the auto industry's paint systems,
o hospital garments for protection against blood borne pathogens,
o clean room apparel as used in the most sophisticated semiconductor
manufacturing facilities, and
o jackets and bib overalls for use by emergency medical teams around the
country.
Safety and Industrial Gloves
The Company manufactures and sells specialty safety gloves and sleeves
made from Kevlar TM. The Company is one of four companies licensed to sell 100%
Kevlar TM gloves. Kevlar TM is a cut and heat resistant, high-strength,
lightweight, flexible and durable material produced by DuPont. Kevlar TM, on an
equivalent weight basis, is five times stronger than steel and has increasingly
been used in manufacturing such diverse products as airplane fuselage
components and bullet-resistant vests.
Gloves made of Kevlar TM offer a better overall level of protection, lower
the injury rate and are more cost effective than work gloves made from such
traditional material as leather, canvas and coated gloves. Kevlar TM gloves can
withstand temperatures of up to 400 degrees F and are sufficiently
cut-resistant to allow workers to safely handle sharp or jagged unfinished
sheet metal. Kevlar TM gloves are used primarily in the automotive and metal
fabrication industries.
The Company also markets approximately 30 different types of commodity
industrial work gloves to a small extent made from such materials as cotton,
polyester, terry cloth and nylon. Sales of these commodity gloves are used to
augment the Company's product line.
Kevlar TM gloves and sleeves represent a large portion of the Company's
glove production and therefore a majority of the Company's dollar volume of
glove and sleeve sales. The Company has been manufacturing and selling knit
gloves and sleeves made of Spectra TM since 1989. The Company expects the
continued demand for these gloves to increase as users become familiar with the
cut resistance and versatility of these gloves. New markets are continuously
being explored for these gloves whose sales account for less than 10% of the
Company' dollar volume of glove and sleeve sales.
The Company phased out its importation of gloves for distribution into
retail sales channels during 1989 to concentrate on the more profitable
manufactured gloves. The Company is devoting an increasing portion of its
manufacturing capacity to the production of Kevlar TM and Spectra TM gloves,
which carry a higher profit margin than commodity gloves. In order to maintain
a full line of gloves, however, the Company intends to continue to produce
commodity gloves and to import such additional commodity gloves as are
necessary to meet demand for its glove products. The Company believes that
there are adequate and reliable foreign manufacturers available to meet the
Company's import requirements of commodity gloves, if needed.
Fire and Heat Protective Apparel and Protective Systems for Personnel
The Company's products protect individuals that must work in hostile
environments and the Company has been the creator, innovator and inventor of
protective systems for hazardous occupations for the last 12 years. The brand
name FYREPEL TM is recognized nationally and internationally. The Company has
completed an intensive redesign and engineering study to address the ergonomic
needs of stressful occupations. The Company's products include:
Fire entry suit - for total flame entry for industries dealing with volatile
and highly flammable products.
Kiln Entry suit - to protect kiln maintenance workers from extreme heat.
Proximity suits - designed for performance in high heat areas to give
protection where exposure to hot liquids, steam or hot
vapors is possible.
Approach suits - for personnel engaged in maintenance, repair and operational
tasks where temperatures do not exceed 200F degrees ambient,
with a radiant heat exposure up to 2,000F degrees.
The Company also manufactures Fire Fighters Protective Clothing for
domestic and foreign fire departments and developed the popular Sterling
Heights style (short coat and bib pants) bunker gear. Crash Rescue has been a
major market for the Company, which was the first to produce and supply
military and civilian markets with protection worn at airports, petrochemical
plants and in the marine industry. Each of the fire suits range in cost to the
end user from $450 for a standard fire department turn-out gear to $2,000 for
the fire entry suit. The Company anticipates continuing growth and emphasis in
the industrial fire market and the international markets. With greater emphasis
being placed on the globalization of the industrial manufacturing capacity, it
is expected that the Company's products will receive more attention and will be
in grater demand worldwide.
Chemical Protective Garments
The Company manufactures heavy duty fully encapsulated chemical suits which
are made of Viton TM, butyl rubber, polyvinylchloride ("PVC") TyChem TM and
Teflon TM. These suits are worn to protect the user from exposure to hazardous
chemicals. Hazardous material teams or individuals use chemical suits for
toxic cleanups, chemical spills, or in industrial and electronic plants. The
Company also makes a line of lighter weight chemical suits using such
materials as Saranex-coated Tyvek TM and Barricade TM, both DuPont products.
The Company's line of chemical suits range in cost from $25 for the
Saranex-coated Tyvek suits to $3,400 for the Teflon suits. The chemical suits
can be used in conjunction with a fire protective shell manufactured by the
Company which will protect the user from both chemical and fire hazards.
During the fourth quarter of fiscal 1991, the Company introduced two new NFPA
approved garments:
Forcefield TM - A lightweight hazmat suit, totally encapsulized providing
greater mobility, visibility, dependability and versatility in dealing safely
and effectively with most types of chemical hazards. This product meets NFPA
1991 standards for a fully certified chemical protective suit. When combined
with an Aluminized PBI/Kevlar over cover, it provides NFPA 1991 / Level A
protection;
Interceptor TM - Model A meets all OSHA Level A requirements as a
vapor-proof suit. Model 1 meets and exceeds NFPA 1991 requirements of
certification for vapor-proof suit when used with an Aluminized PBI / Kevlar
over cover.
The Company also manufactures and sells a Level B worksuit called Checkmate
TM. This suit is lightweight, tough, versatile, durable and cost effective and
can be used for: splash protection, basic clean up, toxic waste dumps and post
fire monitoring of toxic residue.
Manufacturing Disposable / Limited Use Garments
The Company manufactures its disposable / limited use garments primarily at
its Decatur, Alabama facility. The fabric is first cut into required patterns
at the Company's own plant. The cut fabric and any necessary accessories, such
as zippers or elastic, are then obtained at the Company's plant by independent
sewing contractors. These contractors sew and package the finished garments at
their own facilities and return them to the Company's plant, normally within
one week for immediate shipment to the customer. This quick turn-around time
enables the Company to operate with relatively low inventory levels of
finished goods.
The Company presently utilizes over 90 independent sewing contractors under
agreements that are terminable at will by either party. These contractors
employ approximately 1,000 people full-time (both domestically and
internationally) and operate and maintain their own industrial sewing
machines. The Company believes that it is the only customer of the majority of
its independent sewing contractors and considers its relations with such
contractors to be excellent. In the year ended January 31, 1996 two
independent sewing contractors accounted for more than 10% of the Company's
production of disposable / limited use garments. The Company believes that it
can obtain adequate alternative production capacity should any of its
independent contractors become unavailable.
The Company believes that its manufacturing system permits it considerable
flexibility. Through the use of independent sewing contractors, the Company
has achieved its current level of production on a relatively small capital
investment. Furthermore, by employing additional sewing contractors, the
Company can increase production without substantial additional capital
expenditures.
While the Company has not experienced reduced demand for its disposable /
limited use garments, management believes that by its use of independent
sewing contractors, the Company is capable of reducing or alternately
increasing its production capacity without incurring large on-going costs
typical of many manufacturing operations.
Industrial and Medical Woven Garments
The Company manufactures and sells woven cloth garments at its facility in
Missouri. After the Company receives fabrics from suppliers, principally
blends of polyester and cotton, the Company cuts and sews the fabrics at its
own facilities to meet customer purchase orders. Some of the items
manufactured at this facility are static-free clean room garments, coveralls,
lab coats, shirts, pants, jackets, protective covers for industrial robots and
other garments.
Fire and Heat Protective Apparel
Prior to 1992, the Company solely manufactured fire and heat protective
garments at its Newark, Ohio facility, which facility was subsequently sold.
Independent manufacturing contractors have been utilized subsequently. The
Company receives fabric from its suppliers and sends it to the contractor who
cuts the fabric, assembles the suits, boxes the finished product and delivers
it pursuant to customer purchase orders or to a warehouse. The fire and heat
protective suits are manufactured to the purchaser's specifications and
delivered upon completion.
Chemical Protective Garments
The Company manufactures chemical protective clothing at its facility in
Somerville, Alabama. After the Company obtains such materials as
Saranex-coated Tyvek TM, Barricade TM, TyChem TM, Viton TM, butyl rubber and
PVC, it designs, cuts, glues and/or sews the materials to meet customer
purchase orders. Forcefield suits (a Teflon level A sophisticated chemical
suit) and the Interceptor line of suits, used by hazardous materials response
teams have been developed internally to provide chemical protection at the
highest level of barrier available today.
Safety and Industrial Work Gloves
The Company also manufactures gloves at its Somerville, Alabama facility.
Computerized robotic knitters are used to weave gloves from both natural and
synthetic materials, including Kevlar TM and Spectra TM, on an automatic
basis. These robotic knitters are generally in operation 20 hours a day, 5-1/2
days a week.
The Company's robotic knitters allow flexibility in production as they can
be easily reprogrammed in minutes to produce gloves and sleeves in different
sizes, styles, weights, weaves or combinations of materials. Additionally,
these robotic knitters can produce gloves and sleeves separately or as a
one-piece garment. Gloves and sleeves can also be knitted in different weights
and combinations of yarns, such as Kevlar TM mixed with cotton or polyester.
Additional processing is sometimes provided by independent sewing contractors.
The acquisition of a glove dotting machine, during fiscal 1992, allowed the
Company to eliminate the cost of out-of-factory processing.
Quality Control
To assure quality, Company employees monitor the sewing of disposable /
limited use garments at the facilities of the independent sewing contractors
and also inspect the garments upon delivery to the Company's facilities.
Finished product that is below standard is returned to the contractor for
reworking. The Company has rarely been required to return product to its
independent sewing contractors. The Company also actively participates in the
Industrial Safety Equipment Association's (ISEA) frequent independent quality
inspection programs. The Company conducts quality control inspections of its
industrial gloves, cloth, fire and chemical garments throughout the
manufacturing process.
Marketing
The Company markets and sells its products through a minimum of 22
independent manufacturers' representatives. The Company believes that these
representatives constitute one of the largest and most sophisticated
independent sales force in its industry.
These independent representatives call on over 500 safety and industrial
distributors nationwide and promote and sell the Company's products to these
safety and industrial distributors and provide product information. The
distributors buy the Company's products and maintain inventory at the local
level in order to assure quick response time and the ability to serve accounts
properly. During the year ended January 31, 1996, no one distributor accounted
for more than 5% of sales.
Fire, heat and chemical suits were sold through the sales force which was
previously used by Fyrepel Products, Inc. and Siena Industries, Inc. Starting
in fiscal 1989, the Company increased sales of these products by having them
sold through the Company's entire sales network. During fiscal 1992, Fireland
ceased using independent sales representatives, utilizing in house personnel
only. Products are sold to the steel industry, aluminum industry, nuclear
industry, utilities, refineries, chemical industry, ammunition plants,
automotive, glass industry and fire departments.
Highland uses independent sales representatives, exclusively.
The Company's marketing plan is to maximize the efficiency of its
established distribution network by direct promotion at the end-user level.
Advertising is primarily through trade publications. Promotional activities
will include sales catalogs, mailings to end users and a nationwide publicity
program. The Company exhibits at both regional and national trade shows and
was represented at the National Safety Congress in Dallas, TX (Fall of 1995)
and will be represented at the American Industrial Hygienists Convention
(Spring of 1996).
Suppliers and Materials
The Company does not have long-term, formal agreements with unaffiliated
suppliers of non-woven fabric raw materials used by the Company in the
production of its disposable garments. Tyvek TM, Tychem TM and Kevlar TM,
however, are purchased from DuPont under licensing agreements; Polypropylene
is available from ten or more major mills; flame retardant fabrics are also
available from a number of both domestic and international mills.
The accessories used in the production of the Company's disposable garments
such as zippers, snaps and elastics are obtained from unaffiliated suppliers.
The Company has not experienced difficulty in obtaining its requirements for
these commodity component items.
The Company has not experienced difficulty in obtaining materials,
including cotton, polyester and nylon, used in Highland's production of
commodity gloves. Kevlar TM, used in the production of the Company's specialty
safety gloves, is obtained from independent mills that purchase the fiber from
DuPont. The Company has not experienced difficulty in obtaining its
requirements for Kevlar TM. The Company obtains the Spectra yarn used in its
Dextra Guard gloves from mills that purchase the fiber from Allied Signal
Company, Inc. ("Allied"). The Company believes that Allied will be able to meet
the Company's needs for Spectra.
In manufacturing its fire and heat protective suits, the Company uses glass
fabric, aluminized glass, Nomex TM, aluminized Nomex TM, Kevlar TM, aluminized
Kevlar TM, polybenzimidazole (PBI) as well as combinations utilizing neoprene
coating. The chemical protective suits are made of Viton TM, butyl rubber,
PVC, proprietary patented laminates, Teflon TM, Saranex TM coated Tyvek TM,
TyChem TM and Barricade TM from DuPont. The Company has not experienced
difficulty obtaining any of the aforementioned materials.
Competition
Competition in the market for all of the Company's products is intense,
more so in the five most recent fiscal years than in previous fiscal years.
The Company competes with a large number of domestic and foreign companies,
public and private, some of which are larger and have substantially greater
financial resources. Competition within the industry is on the basis of price,
quality, timely delivery, consistency of product, and support services to
distributors and end users.
Beginning in the third quarter of fiscal 1990, intense competition in the
disposable garment business drove margins on non- Tyvek TM garments down. This
competition and the concomitant sales price erosion noted earlier continued
through fiscal 1993. However, small price increases on the core Tyvek
disposable line in February of 1993, 1994 and 1996 have and should continue to
result in gross margin increases. Management continued to take steps to reduce
the Company's manufacturing costs and overhead in order to improve operating
results in fiscal 1996. The Company continues to focus its efforts to increase
sales and profitability of all products, and to redeploy its capital toward
higher margin proprietary products.
Seasonality
Historically, more disposable garments are sold in spring and summer due to
the asbestos abatement industry, which has its highest level of activity in
the spring months. This does not materially affect the total sales of the
Company. The fourth quarters of fiscal years 1990 and 1991 yielded the lowest
sales volume of each fiscal year. However, during fiscal 1992 and 1993 the
third quarter and second quarter, respectively, yielded the lowest sales
volume. During fiscal 1994, 1995 and 1996, the third quarter was the only
seasonally weak quarter.
Patents and Trademarks
At this time, there are no patents or trademarks which are significant to
the Company's operations; however, the Company has one exclusive licensing
arrangement covering seven patents in the Company's name and has one non-
exclusive agreement with DuPont regarding patented materials used in the
manufacture of chemical suits.
Employees
As of April 22, 1996, the Company had approximately 222 full-time employees
and meets its manpower requirements at one division through an employee
leasing agreement with Madison Manpower and Mobile Storage, Inc., the
president and principal stockholder of which is also an officer of the
Company. The Company has experienced a low turnover rate among its employees.
The one former subsidiary that had been represented by a union phased out
manufacturing and utilizes independent contract manufacturers. The Company
believes its employee relations to be excellent.
ITEM 2. PROPERTIES
The Company leases three manufacturing facilities, one warehouse facility
and a corporate office headquarters. The Company's 90,308 square foot facility
in Decatur, Alabama, is used in the production of disposable / limited use
garments. The Alabama facility is leased entirely by the Company from a
partnership consisting primarily of certain stockholders of the Company,
pursuant to two lease agreements expiring on August 31, 1999.
Chemland and Highland lease 12,000 sq. ft. of manufacturing space, each,
on a month to month basis in Somerville, Alabama. This Somerville facility is
owned by an officer of the Company.
The Company leases 30,000 square feet of manufacturing space in St.
Joseph, Missouri used in the manufacturing of woven cloth garments and other
cloth products. This lease expires on November 11, 1996. Additionally, a 4,000
square foot warehouse facility is leased for a one year period expiring in July
1996. Both leases are expected to be renewed prior to expiration.
The Company leases 4,362 square feet of office space in Ronkonkoma, New
York, in which its corporate, executive and sales offices are located. This
lease expires on June 30, 1999.
For the year ended January 31, 1996, the Company paid total rent on
property and all leased equipment of approximately $490,000 on a net basis.
The Company believes that these facilities are adequate for its present
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved as plaintiffs in certain
receivable collection actions and claims arising in the ordinary course of
business, none of which are of a material nature.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders of the Company.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Reference is made to Page 4 ("Market for the Registrant's Common Stock and
Related Stockholder Matters") of the Registrant's 1996 Annual Report to
Shareholders filed as an exhibit hereto, which information is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to Page 2 ("Selected Financial Data") of the Registrant's
1996 Annual Report to Shareholders filed as an exhibit hereto, which
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Reference is made to Page 3 ("Management's Discussion and Analysis of
Financial Condition and Results of Operation") of the Registrant's 1996 Annual
Report to Shareholders filed as an exhibit hereto, which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements are incorporated herein by
reference to Pages 5 to 22 of the Registrant's Annual Report to Shareholders
for the year ended January 31, 1996:
Consolidated Balance Sheets as of January 31, 1996 and 1995
Consolidated Statements of Operations and Retained Earnings for the years
ended January 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended January 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the information under the caption "Election of Directors" in the
Company's Proxy Statement relating to the 1996 Annual Meeting of Stockholders
("Proxy Statement"), which information is incorporated herein by reference.
The following table sets forth the names and ages of all executive officers
of the Company, and all positions and offices within the Company presently
held by such executive officers. None of the directors, executive officers or
nominees for director has any family relationship with any other director,
executive officer or nominee for director of the Company.
Name Age Position Held
- - ---- --- -------------
Raymond J. Smith 57 Chairman of the Board, President and
Director
Christopher J. Ryan 44 Executive Vice President - Finance &
Secretary and Director
Harvey Pride, Jr. 49 Vice President - Manufacturing
James M. McCormick 48 Vice President and Treasurer
Mr. Smith, a co-founder of the Company, has been Chairman of the Board and
President since its incorporation. Prior to 1982, he was employed for 16 years
by Disposables, Inc., a manufacturer of disposable garments, first as sales
manager, then as Executive Vice President and subsequently as President and
Director.
Mr. Christopher J. Ryan has served as Executive Vice President- Finance
and director since May, 1986 and Secretary since April 1991. From October 1989
until February 1991 Mr. Ryan was employed by Sands Brothers, Mitchell Co. Ltd.
and Rodman & Renshaw, Inc., both investment banking firms. Prior to that, he
was an independent consultant with Laidlaw Holding Co., Inc., an investment
banking firm, from January 1989 until September 1989. From February, 1987 to
January, 1989 he was employed as the Managing Director of Corporate Finance for
Brean Murray, Foster Securities, Inc.
Mr. Pride has been Vice President of the Company since May 1986. He was
Vice President of Ryland (the Company's former subsidiary) from May 1982 to
June 1986, and President of Ryland until its merger into Lakeland on January
31, 1990.
Mr. McCormick has been Vice President and Treasurer since May 1986.
Between January 1986 and May 1986 he was the Company's Controller.
ITEM 11. EXECUTIVE COMPENSATION
See information under the caption "Compensation of Executive Officers"
in the Company's Proxy Statement, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information under the caption "Voting Securities and Stock
Ownership of Officers, Directors and Principal Stockholders" in the Company's
Proxy Statement, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the information under the caption "Certain Relationships and Related
Transactions" in the Company's Proxy Statement, which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Index to Consolidated Financial Statements and Schedules:
(1) Financial Statements:
The following Consolidated Financial Statements of the Registrant are
incorporated herein by reference to the Registrant's Annual Report to
Shareholders for the year ended January 31, 1996, as noted in Item 8 hereof:
Accountant's Report
Consolidated Balance Sheets as of January 31, 1996 and 1995
Consolidated Statements of Operations and Retained Earnings for the years
ended January 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended January 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule:
Schedule for the years ended January 31, 1996, 1995 and 1994:
II - Valuation and Qualifying Accounts
All other schedules to the Consolidated Financial Statements are omitted
because the required information is inapplicable or has been presented in the
consolidated financial statements or related notes thereto.
(b) Reports on Form 8 - K.
No report on Form 8 - K has been filed for the Quarter ended January 31,
1996.
(c) Exhibits:
3 (a) Restated Certificate of Incorporation*
3 (b) By-Laws, as amended*
10 (a) Lease agreements between POMS Holding Co., as lessor, and
the Company, as lessee, dated January 1, 1995 10
(b) Lease agreement between Central Life Assurance Company, as
lessor, and the Company, as lessee, dated September 10,
1987. (Incorporated by reference to the Company's Form 10
- K for the year ended January 31, 1988).
10 (c) The Company's Stock Option Plan*
10 (d) Asset Purchase Agreement, dated as of December 26, 1986,
by and among the Company, Fireland, Fyrepel Products, Inc.
and John H. Weaver, James R. Gauerke and Vernon W. Lenz**
10 (e) Asset Purchase Agreement, dated as of December 26, 1986,
by and among the Company, Chemland, Siena Industries, Inc.
and John H. Weaver, James R. Gauerke, Eugene R. Weir, John
E. Oberfield and Frank Randles**
10 (f) Asset Purchase Agreement, dated September 30, 1987 by and
among the Company and Walter H. Mayer & Co. (Incorporated
by reference to the report on Form 8 - K filed by the
Company on October 14, 1987.)
10 (g) Employment agreement between the Company and Raymond J.
Smith, dated September 7, 1994
10 (h) Employment agreement between the Company and Harvey Pride,
Jr., dated January 31, 1995
10 (i) Lease between Lakeland Industries, Inc. and JBJ Realty,
dated April 11, 1994
10 (j) Asset Purchase Agreement, dated November 19, 1990 by and
among the Company, Mayer and WHM Acquisition Corp.
(Incorporated by reference to the report on Form 10 - Q
for the quarter ended October 31, 1990, filed by the
Company on December 14, 1990).
10 (k) Employment agreement between the Company and Christopher
J. Ryan, dated February 1, 1995.
10 (l) Loan agreement dated August 30, 1995 between the
Company and its bank (Incorporated by reference to the
report on Form 10 - Q for the quarter ended October 31,
1995).
10 (m) Consulting and License Agreements between the Company and
W. Novis Smith dated December 10, 1991.
10 (n) Agreement dated June 17, 1993 between the Company and
Madison Manpower and Mobile Storage, Inc.
11 Consent of Grant Thornton LLP dated April 25,1996***
13 Annual Report to Shareholders for the year ended January
31, 1996
20 Proxy Statement of the Registrant for Shareholders'
Meeting - June 19, 1996
22 Subsidiaries of the Company (wholly-owned):
Fireland Industries, Inc.
Lakeland Protective Wear Inc.
Lakeland de Mexico S.A. de C.V.
All other exhibits are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
________________________
* Incorporated by reference to Registration Statement on Form S - 18 on
file with the Securities and Exchange Commission No.33-7512-NY.
** Incorporated by reference to report on Form 8 - K filed by the Company on
January 9, 1987.
*** Incorporated by reference to Registration Statement on Form S-8 on file
with the Securities & Exchange Commission No. 33-92564 - NY.
The Exhibits listed above (with the exception of the Annual Report to
Shareholders) have been filed separately with the Securities and Exchange
Commission in conjunction with this Annual Report on Form 10-K. On request,
Lakeland Industries, Inc. will furnish to each of its shareholders a copy of
any such Exhibit for a fee equal to Lakeland's cost in furnishing such
Exhibit. Requests should be addressed to the Office of the Secretary, Lakeland
Industries, Inc., 711-2 Koehler Avenue, Ronkonkoma, New York 11779.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: April 26, 1996
LAKELAND INDUSTRIES, INC.
By: /s/ Raymond J. Smith
Raymond J. Smith, Chairman of the
Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Name Title Date
- - ---- ----- ----
/s/ Raymond J. Smith Chairman of the Board,
Raymond J. Smith President and Director April 26, 1996
(Principal Executive Officer)
/s/ Christopher J. Ryan Executive V.P.-Finance April 26, 1996
Christopher J. Ryan & Secretary and Director
/s/ James M. McCormick Vice President and Treasurer April 26, 1996
James M. McCormick (Principal Financial and
Accounting Officer)
/s/ Eric O. Hallman Director April 26, 1996
Eric O. Hallman
/s/ John J. Collins Director April 26, 1996
John J. Collins,Jr.
/s/ Walter J. Raleigh Director April 26, 1996
Walter J. Raleigh
Lakeland Industries, Inc.
and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end of
of period expenses accounts Deductions period
--------- ---------- ---------- ---------- ----------
Year ended January 31, 1996
Allowance for doubtful
accounts (a) $375,597 $ 32,069 $144,901 (b) $262,765
======== ========= ======== ========
Year ended January 31, 1995
Allowance for doubtful
accounts (a) $516,757 $141,606 $282,766 (b) $375,597
======== ========= ======== ========
Year ended January 31, 1994
Allowance for doubtful
accounts (a) $593,070 $152,000 $228,313 (b) $516,757
======== ========= ======== ========
(a) Deducted from accounts receivable.
(b) Uncollectible accounts receivable charged against allowance.