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FORM 10-K - ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(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, 1999
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
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(Address of Principal Executive Offices)
(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
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 14, 1999 was approximately $7,284,947 (based on
1,533,673 shares held by nonaffiliates).
The number of shares outstanding of the Registrant's common stock, $.01
par value, on April 29, 1999 was 2,660,500.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
January 31, 1999 are incorporated by reference in Items 5-7A of Part II and
certain portions of the Registrant's Definitive Proxy Statement, for the Annual
Meeting of Stockholders to be held June 16, 1999, are incorporated by reference
in Items 10 - 13 of Part III of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
Lakeland Industries, Inc. (the"Company") believes that it is the
leading manufacturer 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 44 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 five
divisions and four 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 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.
Effective February 1, 1999, the China division, Weifang Lakeland Safety
Products Co., Ltd., was incorporated in China as a wholly owned subsidiary of
the Company.
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.
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
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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.
The growth in the markets for disposable/limited use garments in the
industrial safety market has resulted from the following factors:
o lower cost of disposable/limited use garments as opposed
to reusable woven and cloth garments due to the
elimination of costs associated with laundering,
decontaminating, handling, transporting and replacing
reusable woven or cloth garments;
o the promulgation of federal (OSHA) and state regulations
requiring that employees wear protective clothing to
protect against exposure to certain contaminants, such as,
asbestos, PCB(s), lead, acids and other numerous hazardous
chemicals and radioactive materials;
o increasing workmens' compensation claims and large class
action liability suits instituted by both present and
prior employees for failure to be protected against
hazardous agents found in the workplace.
In general, manufacturers of industrial and safety clothing are considered
to be highly fragmented, since they consist of a large number of closely held
small family businesses. Accordingly, the Company believes that the industries
encompassed by disposable/limited use protective garments, industrial work
gloves, reusable woven industrial and medical apparel and fire and heat
protective clothing could present attractive acquisition opportunities.
There are few, if any, dominant personal protective apparel manufacturers,
and the market is witnessing significant ongoing consolidation activity, both at
the manufacturing level and more significantly, at the safety distributor
customer level. Recently, safety distribution channels have experienced more
consolidation than the safety manufacturing segment, due to a number of large
distributors with access to capital acquiring smaller distributors.
Since 1997, the Company's net sales have increased by 31% to $54.655
million in fiscal 1999 while, during the same period, operating profit has
increased by 94% to $3.923 million in fiscal 1999.
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Products - General
The following table summarizes the principal products manufactured and/or
sold by the Company, organized by the respective fabric's principal markets/uses
therefore:
Product Raw Material Protection Against User Industry
- ------- ------------ ------------------ -------------
o Limited Use/Disposable o Tyvek(TM) and Tyvek(TM) Contaminants, irritants, o Chemical/petrochemical
Protective Clothing laminates chemicals, fertilizers, industries
pesticides, acids, o Automotive and
asbestos, PCB(s), lead pharmaceutical industries
and other hazardous o Public utilities
chemicals o Janitorial
o Gloves o Kevlar(TM) yarns Cuts, lacerations, heat o Chemical plants
o Arm guards o Spectra(TM) yarns and chemical irritants o Automotive, glass and
metal fabrication industries
o Fire fighting apparel o Neoprene Fire, burns and excessive o Municipal, corporate and
o Nomex(TM) heat volunteer fire departments
o Gortex(TM) o Airport crash rescue
o Heat protective o Aluminized Nomex(TM) Fire, burns and excessive Hot equipment maintenance
aluminized fire suits o Aluminized Kevlar(TM) heat personnel and industrial fire
departments
o Protective woven o Cotton Polyester blends o Protects manufactured o Hospital and Industrial
reusable garments o Cotton products from human Facilities
o Polyester contamination or static o clean room environments
o Staticsorb(TM) Carbon electrical charge o Emergency Medical
Thread C-3 Polyester o Bacteria, viruses and Ambulance Services
blood borne pathogens
o High end Chemical o TyChem(TM) Chemical spills o Hazardous material teams
protective suits o Teflon(TM) Toxic chemicals used in o Chemical and nuclear
o Other Company patented manufacturing processes industries-various uses
Co-Polymer Laminates
Limited Use/Disposable Protective Clothing
The Company manufactures a complete line of disposable/limited use protective
garments at its U.S., Mexican and Chinese assembly facilities. 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), TyvekQC(TM), Tyvek/Saranex 23-P(TM), Pyrolon FR(TM), and
Polypropylene and Polyethylene 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.
Disposable/limited use industrial garments are used in a wide variety of
industries and applications. Typical industry users are chemical plants, petro
chemical refineries and related installations, automotive manufacturers,
pharmaceutical companies, coal and oil power generation utilities and telephone
utility companies. There are many smaller industries that use these garments for
specific safety applications unique to their situation.
The Company's limited use garments range in price from $.06 for
disposable/limited use shoe covers to approximately $12.00
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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 $20.00 to $60.00, exclusive of significant
laundering, maintenance and shrinkage expenses.
The Company cuts, warehouses and sells its disposable/limited use garments
primarily at its Decatur, Alabama facility. The fabric is first cut into
required patterns at this plant which is ISO 9002 certified. 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 assembly facilities or
independent sewing contractors. The Company's assembly facilities in China or
Mexico 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 ten weeks for immediate shipment to the customer.
The Company presently utilizes over 15 independent sewing contractors under
agreements that are terminable at will by either party. These contractors employ
approximately 200 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, 1999, no independent sewing contractors accounted
for more than 5% 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 facilities
complemented by the use of independent sewing contractors, the Company is
capable of reducing or alternately increasing by 20% 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.
Gloves and Arm Guards
The Company manufacturers and sells speciality 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, glass and metal
fabrication industries.
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. Spectra(TM) is a cut resistant fiber made
by Allied Signal, Inc. In order to maintain a full line of gloves, however, the
Company intends to continue to produce or import commodity gloves as are
necessary to meet customer 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.
The Company's Kevlar(TM) and Spectra(TM) gloves range in price from $37.00 to
$240.00 for a dozen pair.
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.
Heat Protective and Fire Fighting Apparel
The Company's products protect individuals that must work in high heat
environments and the Company has been the creator, innovator and inventor of
protective systems for high heat or 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
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study to address the ergonomic needs of stressful occupations. The Company's
protective aluminized fire suits 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 apparel 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
this product division, 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 standard fire department turn-out gear to $2,000 for the fire entry
suit.
Protective Woven Reusable 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 much larger woven
industrial and health care related markets. Cloth re-usable garments are more
appropriate in certain situations or applications because of worker familiarity
with and acceptance of these fabrics and woven cloth's heavier weight,
durability and longevity. These products give the Company the flexibility to
supply and satisfy a wider range of safety and customer needs. The Company
designs and manufactures:
o special anti-static apparel, primarily for the automotive industry
(perceived as a premium-priced product)
o clean room apparel as used in the most sophisticated semiconductor
manufacturing facilities
o hospital garments for protection against blood borne pathogens
o jackets and bib overalls for use by emergency medical rescue teams
The Company's reusable wovens range in price from $10.00 to $80.00 per
garment.
The Company manufactures and sells woven cloth garments at its facility in
St. Joseph, 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.
High-End Chemical Protective Suits
The Company manufactures heavy duty fully encapsulated chemical suits
(three of which have been developed internally and are patented) using
proprietary co-polymer laminates or Viton(TM), butyl rubber, polyvinyl chloride
("PVC") and the Dupont TyChem(TM)and Barricade(TM) fabrics. 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, chemical and electronic plants. The Company's line of chemical
suits range in cost from $80.00 for the Checkmate suits to $3,400 for its
Forcefield 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 flash fire hazards. The Company has also introduced four
National Fire Protection Agency ("NFPA") approved garments for varying levels of
protection required depending on field conditions:
TyChem(TM) - 10,000 is a co-polymer film laminated to a durable spunbonded
substrate. It offers the broadest temperature range for limited use garments
- -25o F to 225o F. TyChem(TM) 10,000 meets all OSHA Level A requirements. It is
available in NFPA 1991-94 certified versions when worn with an aluminized over
cover.
TyChem(TM) - 9400 meets all OSHA Level B and all NFPA 1993 fabric
requirements and offers excellent splash protection against a wide array of
chemicals.
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.
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Checkmate(TM) - Is used for lower level chemical protection. 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. It meets all NFPA requirements.
The Company manufactures chemical protective clothing at its facility in
Somerville, Alabama. After the Company obtains such materials as Barricade (R),
TyChem(R), Viton(R), butyl rubber, PVC or its own patented laminates, it
designs, cuts, glues and/or sews the materials to meet customer purchase orders.
Quality Control
To assure quality, Company employees monitor the sewing of disposable /
limited use garments at its own Mexican and Chinese facilities and at the
facilities of independent sewing contractors and also inspect the garment upon
delivery to the Company's facilities. Finished product that is below standard is
returned to the contractor for reworking. The Company has been required on a few
occasions 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. ISO standards are
internationally recognized quality manufacturing standards established by the
International Organization for Standardization based in Geneva, Switzerland. To
obtain its ISO registration, the Company's factories were independently audited
to ensure compliance with the applicable standards, and to maintain
registration, the factories receive regular announced inspections by an
independent certification organization. The Company believes that the ISO 9002
registration makes it more competitive in the marketplace, as customers are
increasingly recognizing the standard as an indication of product quality.
Marketing and Sales
The Company's products are sold primarily by over 500 safety and mill
supply distributors including four of the five leading North American
distributors. Sales of the Company's products are solicited by 16 agencies
engaging 44 independent sales representatives. The Company also employs an
in-house sales force of nine (9) people.
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 service accounts properly. The
independent representatives maintain regular interaction with end users and
decision makers at the distribution level, thereby providing the Company with
valuable feedback on market perception of the Company's products, as well as new
developments within the industry. During the year ended January 31, 1999, no one
distributor accounted for more than 5% of sales.
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 Los Angeles, CA (Fall of 1998)
and at the American Industrial Hygienists Convention (Spring of 1998).
Research and Development
The Company has a history of new product development and innovation and has
recently introduced the Grapolator(TM) and Kut Buster(TM) glove and sleeve lines
which combine a stainless steel wire core combined with high strength man made
fibers providing the ultimate in cut protection without sacrificing dexterity,
and additionally the Thermbar Mock Twist(TM) which provides heat protection for
temperatures up to 600o F. The Company has nine patents on various fabrics and
production machinery. The Company plans to continue to be an innovator in
protective apparel fabrics, manufacturing equipment, and intends to introduce
new products to the market place in the future. Specifically, the Company plans
to develop new anti-static reusable gowns for the automotive industry made of
specially knit polyester with carbon threads and will continue to dedicate
resources to research and development.
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 product lines. Tyvek(TM) and Kevlar(TM), however, are
purchased from Dupont under
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licensing agreements. Polypropylene, Polyethylene, Polyvinyle Chloride and their
derivatives are available from thirty or more major mills, while 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 also has not experienced difficulty
in obtaining materials, including cotton, polyester and nylon, used in the
production of reusable non-wovens and 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(TM) yarn used in its Dextra Guard(TM) 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(TM).
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) and Gortex(TM), 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 has not experienced
difficulty obtaining any of the aforementioned materials.
Competition
The Company's business is in a highly competitive industry. The Company
believes that the barriers to entry in each of the fields in which it operates
are relatively low, except in Tyvek(TM) disposable limited use clothing because
of the limited number of Tyvek(TM) licensees. The Company faces competition in
some of its other product markets from large established companies that have
greater financial, managerial, sales and technical resources than the Company.
Where larger competitors offer products that are directly competitive with the
Company's products, particularly as part of an established line of products,
there can be no assurance that the Company can successfully compete for sales
and customers. Larger competitors also may be able to benefit from economics of
scale or to introduce new products that compete with the Company's products.
Seasonality
The Company's quarterly operating results have varied and are expected to
continue to vary in the future. These fluctuations may be caused by many
factors, including seasonal buying patterns, demand for the Company's sales
cycle, competitive pricing and services, the size and timing of individual
sales, the lengthening of the Company's sales cycle, competitive pricing
pressures, customer order deferrals in anticipation of new products, changes in
the mix of products and services sold, the timing of introductions and
enhancements of products by the Company or its competitors, market acceptance of
new products, technological changes in fabrics or production equipment used to
make the Company's products, changes in the Company's operating expenses,
changes in the mix of domestic and international revenues, the Company's ability
to complete fixed price government or private long-term contracts within a
budget, personnel changes, expansion of international operations, changes in the
Company's strategies, and general industry and economic conditions.
The Company's business has experienced, and is expected to continue to
experience, seasonal fluctuations due in large part to the cyclical nature of
certain industrial customers' businesses. Historically, more disposable garments
are sold in the spring and summer months due to moderate weather and
construction starts. Sales are lowest in the third quarter as use of the
Company's disposable garments decrease during the warm summer months.
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 ten (10) year
licensing arrangement covering seven patents in the Company's name, two Company
developed patents, two 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, 1999, the Company had approximately 923 full-time employees
(735 or 79.6% of whom were international and 188 or 20.4% of whom were domestic)
and in fiscal 1999 met 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
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is also an officer of the Company. This arrangement has been discontinued and
these people are now employees 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.
The glove and chemical suit product divisions 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, from a third party, which is used in the manufacturing of woven cloth
garments and other cloth products. This lease expires on October 31, 1999, and
has been renewed to October 31, 2001.
The Company's Mexican subsidiary leases two manufacturing facilities from
third parties 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 46,920 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 who have leased the underlying real property for 50 years. The
partnership in turn leases the buildings and real property to the Company's
Chinese subsidiary as a sales, distribution and manufacturing facility. In
fiscal 1999, the lease was on a month to month basis at an annual rental of
$39,020. The rent was increased by $6,960 as 7,100 additional square feet was
added to the building in fiscal 1999. A formal long term lease is expected upon
completion of the buildings at an annual rental of $45,980. 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 from a third
party under a lease expiring on November 30, 2002.
The Company leases 4,362 square feet of office space in Ronkonkoma, New
York, from a third party, in which its corporate, executive and sales offices
are located. This lease expires on June 30, 1999, and has been renewed to June
30, 2002.
For the years ended January 31, 1999, 1998 and 1997, the Company paid total
rent on property and all leased equipment of approximately $643,000, $621,000
and $581,000, respectively. 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 5 ("Market for the Registrant's Common Stock and
Related Stockholder Matters") of the Registrant's 1999 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 1 ("Selected Financial Data") of the Registrant's
1999 Annual Report to Shareholders filed as ----
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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 2 ("Management's Discussion and Analysis of
Financial Condition and Results of Operations") of the Registrant's 1999 Annual
Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by
reference. (See Part IV, Item 14(c) Exhibits.)
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Page 5 ("Quantitative and Qualitative Disclosures about
Market Risk") of the Registrant's 1999 Annual Report to Shareholders filed as
Exhibit 13 hereto and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements are incorporated herein by
reference to Pages 7 to 24 of the Registrant's
Annual Report to Shareholders for the year ended January 31, 1999:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - January 31, 1999 and 1998
Consolidated Statements of Income for the years ended January 31, 1999,
1998 and 1997
Consolidated Statement of Stockholders' Equity for the years ended January
31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended January 31, 1999,
1998 and 1997 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 1999 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 60 Chairman of the Board, President and Director
Christopher J. Ryan 47 Executive Vice President - Finance & Secretary and Director
Harvey Pride, Jr. 52 Vice President - Manufacturing
James M. McCormick 51 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.
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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 SCHEDULE AND REPORTS ON FORM 8 - K
(a) Index to Consolidated Financial Statements and Schedule:
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, 1999, as
noted in Item 8 hereof:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - January 31, 1999 and 1998
Consolidated Statements of Income for the years ended January 31, 1999,
1998 and 1997
Consolidated tatement of Stockholders' Equity for the years ended
January 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended January 31,
1999, 1998 and 1997
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, 1999.
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(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 Southwest Parkway, Inc., as
lessor, and the Company, as lessee, dated June 11,
1996.
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
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 16, 1999.
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 7,1999***
13 Annual Report to Shareholders for the year ended
January 31, 1999
20 Proxy Statement of the Registrant for Annual Meeting
of Stockholders - June 16, 1999
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22 Subsidiaries of the Company (wholly-owned):
Lakeland Protective Wear, Inc.
Lakeland de Mexico S.A. de C.V.
Laidlaw, Adams & Peck, Inc.
Weifang Lakeland Safety Products Co. Ltd.
(effective February 1, 1999)
27 Financial Data Schedule
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.
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_________________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, 1999
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,
- --------------------------- President and Director
Raymond J. Smith (Principal Executive Officer) April 30, 1999
/s/ Christopher J. Ryan Executive V. P.- Finance April 30, 1999
- --------------------------- & Secretary and Director
Christopher J. Ryan
/s/ James M. McCormick Vice President and Treasurer April 30, 1999
- --------------------------- (Principal Financial and
James M. McCormick Accounting Officer)
/s/ Eric O. Hallman Director April 30, 1999
- ---------------------------
Eric O. Hallman
/s/ John J. Collins Director April 30, 1999
- ---------------------------
John J. Collins,Jr.
/s/ Walter J. Raleigh Director April 30, 1999
- ---------------------------
Walter J. Raleigh
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