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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
For the fiscal year ended, January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
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(State of Incorporation) (I.R.S. Employer Identification Number)
711-2 Koehler Ave., Ronkonkoma, NY 11779
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(Address of Principal Executive Offices, Including Zip Code)
(516) 981-9700
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(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 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 [ ]
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 ____.
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 17, 1998 was approximately $14,163,091 (based on
1,531,145 shares held by nonaffiliates).
The number of shares outstanding of the Registrant's common stock, $.01
par value, on April 29, 1998 was 2,610,472.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended January
31, 1998 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 17, 1998, are incorporated by reference in Items
10 - 13 of Part III of this Annual Report on Form 10-K.
CAUTIONARY STATEMENTS
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are all statements other than
statements of historical fact included in this report, including, without
limitation, the statements under the headings "Business," and "Properties,"
"Market for Registrant's Common Stock and Related Stockholder Matters," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position and liquidity, the
Company's strategic alternatives, future capital needs, development and capital
expenditures (including the amount and nature thereof), future net revenues,
business strategies, and other plans and objectives of management of the Company
for future operations and activities.
Forward-looking statements are based on certain assumptions and analyses
made by the Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors it
believes are appropriate under the circumstances. These statements are subject
to a number of assumptions, risks and uncertainties, and factors in the
Company's other filings with the Securities and Exchange Commission (the
"Commission"), general economic and business conditions, the business
opportunities that may be presented to and pursued by the Company, changes in
law or regulations and other factors, many of which are beyond the control of
the Company. Readers are cautioned that these statements are not guarantees of
future performance, and the actual results or developments may differ materially
from those projected in the forward-looking statements. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by these
cautionary statements.
PART I
ITEM 1. BUSINESS
Lakeland Industries, Inc. (the"Company") believes that it is one of the
leading manufacturers of a comprehensive line of safety garments and accessories
for the industrial safety and protective clothing industries in the United
States. The Company's major product areas include disposable / limited use
protective industrial garments, specialty safety and industrial work gloves,
reusable woven industrial and medical apparel, fire and heat protective clothing
along with protective systems for personnel, and suits for use by toxic waste
clean up teams. Products are manufactured both domestically and internationally
by the Company and by contract manufacturers. Products are sold by Company
personnel and 42 independent sales representatives, primarily to a network of
500 safety and mill supply distributors.
The Company's protective garments are used primarily for: (i) safety and
hazard protection, to protect the wearer from contaminants or irritants, such
as, chemicals, pesticides, fertilizers, paint, grease, and dust and from limited
exposure to hazardous waste and toxic chemicals including acids, asbestos, lead,
and hydro-carbon's (PCB's) (ii) clean room environments, for the prevention of
human contamination of manufacturing processes in clean room environments, (iii)
hand and arm protection, to protect the wearer's hand and arms from lacerations,
heat and chemical irritants without sacrificing manual dexterity or comfort,
(iv) heat and fire protection, to protect municipal fire fighters, military,
airport and industrial fire fighting teams and for maintenance of "hot"
equipment, such as, coke ovens, kilns, glass furnaces, refinery installations,
and smelting plants, (v) protection from viral and bacterial microbiologicals,
to protect the wearer from contagious diseases, such as AIDS and hepatitis, at
hospitals, clinics and emergency rescue sites, and (vi) protection from highly
concentrated and powerful chemical and biological toxins, to protect the wearer
from toxic wastes at Super Fund sites, accidental toxic chemical spills or
biological discharges, the handling of chemical or biological warfare weapons
and the cleaning and maintenance of chemical, petro-chemical and nuclear
facilities.
These products are manufactured, distributed and sold through six
divisions and three wholly owned subsidiaries.
The Company was incorporated in New York in 1982 and later reincorporated
in Delaware in 1986. A new subsidiary, Fireland Industries, Inc. was formed
during fiscal 1994 to hold the land and building then owned in Ohio and to act
as Trustee and Sponsor of the Fireland Industries, Inc. Pension Plan. During
fiscal 1998, the name of this subsidiary was changed to Laidlaw, Adams & Peck,
Inc.
In December 1997, the Company replaced its $8 million dollar bank line of
credit with a two year $10 million credit facility.
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.
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. The Company continued to market
Fyrepel's product line and furnishes these products but utilized 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 as promulgated under prior Congressional Super Fund Acts and the
Super Fund Reform Act of 1998 presently awaiting passage. 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. Various states
have also enacted worker safety laws which are equal to or go beyond OSHA
standards and requirements, as it affects the Company's products.
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.
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 or woven 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,
Barricade, Tychem 9400, Tychem 10,000, Pyrolon FR, proprietary patented fabrics
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)
disposable 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 $.06 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, maintenance and slippage
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 enhanced 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 $12 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. The Company has also introduced two
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 from the Company's plant by the
Company's wholly owned contract assembly facilities or independent sewing
contractors. The assembly facilities and independent contractors sew and package
the finished garments at their own facilities and return them to the Company's
plant, normally within one to nine weeks for immediate shipment to the customer.
The Company presently utilizes over 30 independent sewing contractors
under agreements that are terminable at will by either party. These contractors
employ approximately 500 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, 1998, no 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. 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 its Company owned
facilities complemented by the 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.
This allows the Company to react quickly to changing unit demand for its
products.
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 garments for
emergency response paramedic teams.
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 Company 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 TM suits (a Teflon level A sophisticated chemical suit) the
Interceptor TM line of suits, and Checkmate TM suits used by hazardous materials
response teams have been developed internally to provide chemical protection at
the highest level of barrier available today and are patented products.
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.
Glove dotting for grip enhancement is also done internally.
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. The
Company's Decatur, Alabama plant was ISO 9002 certified during fiscal year 1998.
Marketing
The Company markets and sells its products through a minimum of 42
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 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, 1998, 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. Due to increasingly technical nature
of the sale, in 1992 the Fyrepel division ceased using independent sales
representatives, utilizing in house personnel only. Products are sold through
the Company's network of distributors to the steel, aluminum, nuclear, chemical
and petro chemical, fiberglass, agricultural, pharmaceutical, aerospace,
electronics, semi conductor, food processing, glass, power generation and
automotive industries, ammunition plants, and fire departments, the U.S. Defense
Department and numerous other governmental and quasi-governmental agencies.
Highland, the glove division, 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
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 Chicago, IL (Fall of 1997) and
will be represented at the American Industrial Hygienists Convention (Spring of
1998). The Company also markets its products through its web-site on the
Internet at /http://www.lakeland.com.
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 thirty 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 its raw materials,
fabrics or components on any of the above described products. 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 coatings. The chemical protective suits are made of Viton TM, butyl
rubber, PVC (available from multiple sources), proprietary and Company patented
laminates and Teflon TM, Saranex TM Tyvek QC TM, TyChem TM and Barricade TM from
DuPont. The Company also has not experienced difficulty obtaining any of the
aforementioned materials.
Competition
Competition in the market for all of the Company's products is intense.
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 continued through fiscal
1993. However, small price increases on the core Tyvek disposable line in
February of 1993, 1994, 1996 and 1998 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 1998. The Company continues to focus its efforts on increasing the
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 moderate weather and construction starts. The highest level of activity is 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. Since
fiscal 1994, the third quarter has been 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, two Company developed
patents, five additional patents in the application and approval process with
the U.S. Patent and Trademark office, and has one non-exclusive agreement with
DuPont regarding patented materials used in the manufacture of chemical suits.
Employees
As of April 15, 1998, the Company had approximately 766 full-time
employees (both domestically and internationally) 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 Company believes its employee relations
to be excellent.
ITEM 2. PROPERTIES
The Company leases three domestic manufacturing facilities, three foreign
manufacturing facilities, one foreign sales office, one Canadian 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 44,000 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 October 31, 1999.
The Company's Mexican subsidiary leases two manufacturing facilities
totaling 33,816 square feet under one lease expiring on December 31, 2000 and
the second smaller facility is leased on a month to month basis. The Company
also leases a 39,816 square foot manufacturing facility in China. This lease
agreement is with a partnership of American and Chinese individuals (which
include certain officers, employees and directors of the Company) who own the
buildings and leases the property for 50 years. The partnership in turn leases
the buildings to the Chinese division of the Company as a sales, distribution
and manufacturing facility. Currently, the lease is on a month to month basis at
an annual rental of $36,288. A formal lease is expected upon completion of the
building. A small 2,000 sq. ft. sales office is also leased (from a third party)
at an annual rental of $8,000.
The Company leases a 5,600 square foot warehouse in Canada under a lease
expiring on November 30, 2001.
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, 1998, the Company paid total rent on
property and all leased equipment of approximately $669,514 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 1998 Annual Report to
Shareholders filed as Exhibit 13 hereto and incorporated herein by reference.
(See Part IV, Item 14(c) Exhibits.)
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to Page 2 ("Selected Financial Data") of the
Registrant's 1998 Annual Report to Shareholders filed as an exhibit hereto filed
as an Exhibit 13 hereto and incorporated herein by reference. (See Part IV, Item
14(c) Exhibits.)
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 Operations") of the Registrant's 1998 Annual
Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by
reference. (See Part IV, Item 14(c) Exhibits.)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements are incorporated herein by
reference to Pages 5 to 23 of the Registrant's Annual Report to Shareholders for
the year ended January 31, 1998:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - January 31, 1998 and 1997
Consolidated Statements of Income for the years ended January 31,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the years ended
January 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended January
31, 1998, 1997 and 1996
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 1998 Annual Meeting of Stockholders
("Proxy Statement"), which information is included in Exhibit 20 hereto and
incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.)
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 59 Chairman of the Board, President and Director
Christopher J. Ryan 46 Executive Vice President - Finance & Secretary and Director
Harvey Pride, Jr. 51 Vice President - Manufacturing
James M. McCormick 50 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 & 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 included in Exhibit 20
hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.)
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 included in Exhibit 20 hereto and
incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.)
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. (See Part IV, Item 14(c) Exhibits.)
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, 1998, as noted
in Item 8 hereof:
Report of Independent Certified Public Accounts
Consolidated Balance Sheets - January 31, 1998 and 1997
Consolidated Statements of Income for the years ended January 31,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the years ended
January 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended January
31, 1998, 1997 and 1996
Notes to consolidated financial statements
2. Financial Statement Schedules
The following consolidated financial statement schedule is included
in Part IV of this report: Schedule II - Valuation and qualifying
accounts All other schedules are omitted because they are not
applicable, or not required, or because the required information is
included in the consolidated financial statements or notes thereto.
(b) Reports on Form 8 - K.
No report on Form 8 - K has been filed for the Quarter ended January 31,
1998.
(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 January 23, 1998
10 (h) Employment agreement between the Company and Harvey Pride, Jr.,
dated January 31, 1998
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 14, 1997.
10 (l) Loan agreement dated December 12, 1997 between the Company and
Merrill Lynch.
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 29, 1998***
13 Annual Report to Shareholders for the year ended January 31, 1998
20 Proxy Statement of the Registrant for Annual Meeting of Stockholders -
June 17, 1998
22 Subsidiaries of the Company (wholly-owned):
Lakeland Protective Wear, Inc.
Lakeland de Mexico S.A. de C.V.
Laidlaw, Adams & Peck, Inc.
27 Financial Data Schedules
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 30, 1998
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, April 30, 1998
- ------------------- President and Director
Raymond J. Smith (Principal Executive Officer)
/s/Christopher J. Ryan Executive V. P.- Finance April 30, 1998
- ---------------------- & Secretary and Director
Christopher J. Ryan
/s/James M. McCormick Vice President and Treasurer April 30, 1998
- --------------------- (Principal Financial and
James M. McCormick Accounting Officer)
/s/Eric O. Hallman Director April 30, 1998
- ------------------
Eric O. Hallman
/s/John J. Collins, Jr. Director April 30, 1998
- -----------------------
John J. Collins, Jr.
/s/Walter J. Raleigh Director April 30, 1998
- --------------------
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, 1998
Allowance for doubtful
accounts (a) $150,000 $69,421 $ 16,421 (b) $203,000
Year ended January 31, 1997
Allowance for doubtful
accounts (a) $262,765 $ 7,439 $120,204 (b) $150,000
Year ended January 31, 1996
Allowance for doubtful
accounts (a) $375,597 $32,069 $144,901 (b) $262,765
(a) Deducted from accounts receivable.
(b) Uncollectible accounts receivable charged against allowance.