Christopher J. Ryan Chief Executive Officer 29 th Annual ROTH Conference -- March 2017

Transcription

1 NASDAQ: LAKE Christopher J. Ryan Chief Executive Officer 29 th Annual ROTH Conference -- March 2017 Emerging Markets Exposure Western Markets Expertise

2 Safe Harbor Statement With the exception of historical information, the statements set forth in this presentation include forward-looking statements that involve risk and uncertainties. The company wishes to caution that a number of important factors could cause actual results to differ materially from those forward-looking statements. These and other factors could cause actual results to differ materially from those in any forward-looking statements which are discussed in this presentation. Please see Lakeland Industries SEC filings on Forms 10-K and 10-Q for important information about the Company and related risks. The Company disclaims any obligation to update its forward-looking statements. 2

3 Lakeland At A Glance Leading manufacturer of industrial protective clothing Serving all major industrial market sectors Chemical/Petrochemical Basic Industry: Auto, Steel, Construction, Electric & Gas Utilities Health Care & Food Chain; High Tech Government, Fire Department, Public Safety, DOD, CDC, DEA, etc. In business since 1982 in a stable and growing market History: Lost nearly $80 million of annual revenue from DuPont products since 2006 and $15 million in Brazil since 2012 But managed to maintain overall revenues by growing new business domestically and internationally Driven by world-wide sales and profit growth opportunities Positioned for long term growth with strengthened balance sheet and significant upside potential 3

4 ($ Millions) HOBBLED BY PRIOR DEPENDENCE ON DUPONT FABRICS & EXIT FROM BRAZIL Fiscal Year Sales History: Tyvek/Tychem and Brazil Declines Mask Organic Domestic and International Growth* $120 $100 $80 $60 $40 $20 $ Non-DuPont Items Total Ex-Brazil Brazil Sales DuPont Items Total Lost $78M in DuPont sales and $17M in Brazil Sales from *Chart shows figures for continuing and discontinued operations; fiscal year ends January 31 4

5 Financial Issues Through 2015 Company In A Sharp Turn Around Mode DuPont had squeezed us for five years before terminating license in FY 2012 We responded by opening international markets, creating our own branded products, and beefing up our sales force Then in FY 2013 Company got homered in a Brazil court case, leading to collapse of business there and $34 million in losses, and subsequent Going Concern Opinion as we lost our lender One day before loans were to be called in FY 2014, Company was able to get new (but expensive) financing, and the Going Concern Opinion was removed PIPE common stock issuance for $11.1 million completed in FY 2015, enabling payoff of high cost debt and remainder of judgement in Brazil Company was then able to exit Brazil in FY 2016 via a local management transaction What doesn t kill you makes you stronger. Lakeland has successfully responded to adversity and is stronger than ever 5

6 Growth in Operating Profit From Continuing Operations (Year Ended January 31) ($ Millions) $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $ Operating Profit From Continuing Operations 6

7 Proof Of Turn Around from FY2014-FY2016 Highlights FY 2016 (continuing operations) Revenue Growth Consolidated sales increased for third consecutive year, despite currency headwinds Revenues driven by organic growth and emergency demand in first 9M of FY 2016 Gross margin for the year was 36.5% compared to 33.9% previous year Significant Increases in Operating Income, Adjusted EBITDA* and Free Cash Flow Operating income increased to $11.8M from $7.0M previous year As a percentage of sales, increased to 11.9% from 7.5% Free cash flow (adjusted EBITDA less taxes and capital exp.) $10.8M vs. $7.4M Net Income FY 2016 net income of $7.8M declined from $11.1M previous year Decline in net income primarily reflects the income tax benefit in FY 2015 from the Brazil worthless stock deduction of approximately $34M for a $9.5M tax credit recorded for the Company s exit from Brazil Balance Sheet Strength FY 2016 vs. FY 2013: total liabilities down by 58%; shareholders equity up by 52% Uses of cash during FY 2016 include payments of arbitration settlement of $3.8M and VAT tax liability of $2.3M as part of the Company s exit from Brazil *Includes non-gaap measures and other adjustments see tables included herein for reconciliations. 7

8 Long Term Improvements in Continuing Operations Summary of Operations Year Ended January 31, (in thousands, except share and per share data) * 2014* 2013* Income Statement Data: Net sales from continuing operations 99,646 $ 93,419 $ 84,173 $ 78,260 Operating profit (loss) from continuing operations 11,812 6,691 4, Arbitration judgment in Brazil (7,874) Income (loss) from continuing operations before income taxes 10,907 2,898 2,679 (8,538) Income tax expense (benefit) 3,117 (8,188) (2,851) 4,127 Net income (loss) from continuing operations 7,790 11,086 5,530 (12,665) Net income (loss) on discontinued operations net of tax (3,936) (2,687) (5,650) (13,624) Earnings (loss) per share from continuing operations - basic $ 1.09 $ 1.78 $ 0.97 $ (2.39) Earnings (loss) per share from continuing operations diluted $ 1.07 $ 1.75 $ 0.96 $ (2.39) Weighted average common shares outstanding Basic 7,171,965 6,214,303 5,689,230 5,290,332 Diluted 7,254,340 6,325,525 5,771,226 5,290,332 Balance Sheet Data: Current assets $ 69,655 $ 68,635 $ 65,481 $ 60,605 Total assets 88,260 93,208 80,483 80,051 Current liabilities 19,958 26,222 26,835 27,761 Long-term liabilities 786 3,730 9,171 8,801 Stockholders equity 67,516 63,256 44,477 43,489 * Restated for discontinued operations 8

9 The Company Today: Positioned for Continued Long Term Growth in Revenues and Profitability 9

10 Expanded Product Line Limited Use/Disposable Protective Clothing Chemical Suits High Visibility Clothing Fire Fighting & Heat Protective Apparel/Reusable Woven Garments Gloves & Arm Guards 10

11 The Right Focus: End-user Segments for Personal Protective Equipment Other 21% Gas Detection 6% Utilities 9% Auto 11% Petrochemical 10% Metals 8% Healthcare 9% Pulp & Paper 7% Transport 7% Construction 10% Lakeland End-user Segments Address Over 70% of Total Market but the Company Possesses Less Than 1% Source: Frost & Sullivan Estimates ( ) 11

12 The Right Focus: Personal Protective Equipment Market Eye 6% Fall 4% Footwear 13% Gas Detection 6% Head 2% Hand 29% Respiratory 15% Hearing 3% Protective Clothing 22% Lakeland Product Segments Address Over 50% of $23 Billion Market but the Company Presently Represents Less Than 1% of the Total Addressable Market (TAM) Source: Frost & Sullivan Estimates 12

13 Growth Opportunities Lakeland Target Markets Among Largest and Fastest Growing CAGR for Market Segments High (>6%) Medium (2%-6%) Low (0%-2%) Head/Eye/Face Respiratory Hand Hearing Prot. Apparel Foot Fall Prot. Small (<$1.0 billion) Medium ($1.0-$2.5 billion) Large (>$2.5 Billion) Market Size of Market Segments Source: Frost & Sullivan; CAGR is calculated from

14 Product Mix Revenue by Product Historical Approximation High Visibility 7% Homeland Security Chemical Suits 7% Gloves & Arm Protection 4% Fire and Heat Protective Clothing and other Wovens 18% Disposable Clothing 64% Homeland Security Chemical Suits Gloves & Arm Protection Fire and Heat Protective Clothing and other Wovens Disposable Clothing High Visibility Revenue Composition FY16* Domestic 57% International 43% *Revenue from continuing operations 14

15 Optimized Global Presence Sales Operations (18) Manufacturing Location (5) Headquarters: Ronkonkoma, New York 15

16 International Traction International Growth Foreign Revenues Comprised 43% of Total in FY16 Manufacturing Locations Small facility in US Expanded plant in Mexico Expansion in China Start-up operation in India New Markets Since 2007/08 China/Asia Pacific Russia/Kazakhstan South America Southeast Asia/Australia Eastern Europe, Scandinavia Recent entries (late 2016): South Korea, Indonesia, Malaysia and Vietnam Snapshot Asia: 15% of revenues with big upside Europe: 12% and growing Canada: 9% and growing Russia, Latin America: flat due to political problems and oil/commodities Consolidated international unit sales increased in FY17 and FY16 from respective year earlier periods but strength of US dollar distorted results as reported Exit from Brazil from 2012 to 2015 resulted in reduction of revenues from $15M to $0; elimination was offset by organic international growth * Direct container shipments from China to US customers reclassified to USA sales in 4QFY13 16

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20 Protect Your People United States 20

21 Diversification Strategy & Transition (Continuing Operations for FY2016 Ended 1/31/16) COGS/Raw Materials Area FY2006 FY2016 Tied to DuPont Pricing Power: Gross Margin Approx. 22% Multi-sourced, lower priced fabrics than DuPont 29.2% in F14, 32.5% in F15 and 36.5% in F16 (excluding Brazil) Sales Channel Distributors Distributors and Key End Users Customer Concentration Focused: Auto Diversified: Fire, Glove, Petro, Food, Healthcare, Auto, Mining Number of Products <100 >800 Country Sales Offices 3 16 Geographic Coverage North America Global Manufacturing Locations U.S., China China, Mexico, U.S., India Manufacturing Capacity $95 Million $130+ Million Profit Power: EBITDA Margin Approx. 9% Approx. 13% 21

22 Unique Operating Platform Our base business grows both organically and from international expansion Positioned to gain bonus business from emergencies like pandemics, oil/chemical spills, natural disasters, etc. While timing is unpredictable, they do occur regularly, and spike our earnings resulting in uneven year-over-year comparisons We are able to capitalize due to our unique highly scalable operating platform of company-owned manufacturing facilities Ebola/Avian Flu Crises Case Study Sudden, significant global demand for protective suits Increased Monthly Production Capacity 200% for sealed seam suits in just two months That s how we won big ebola and avian flu contracts; no one else could scale up as fast Successful Crisis Performance Yielding Benefits Enhanced our brand by outperforming the big names Burnished reputation as the go-to supplier for emergencies, gaining new customers Improved our access to healthcare and government agencies globally Unlike Brand D, we have taken care of our regular customers (and some of theirs) 22

23 Growth Catalysts and Strategy Protective clothing market projected to grow at 7% world-wide; faster in developing markets, and we can do much better Concentrating on high growth potential regions (Asia, Latin America) or where market share can be increased (Europe, US) Developing new and higher margin products Investing in process improvement, equipment and systems for increased efficiency, capacity, quality, margins, and expense control Aggressively adding sales people in regions where underrepresented Focusing increasingly on end-users Leveraging global brand and worldwide company-owned manufacturing facilities Benefiting from competitor manufacturing limitations Entering new markets in US and Worldwide 23

24 International Profit Leverage Opportunities We can grow anywhere, but best leverage is in developing markets Developing countries/industries adopting OSHA-like regulations We already have our manufacturing capacity in place Little cost to extend broader US product line offerings or adapt to local standards American global brands are greatly respected in developing markets We have no company sales staff in many Asian countries We can put 5 sales people on the street in SE Asia for the cost of one in the US and Europe but selling prices are not much less Hiring for better end-user coverage and to fill holes in Europe/US Hiring as fast as we can find qualified people in Asia This is our great upside play 24

25 Attractive Investment Merits NASDAQ: LAKE Turnaround strategy has succeeded Potential for steady industry-beating long term world-wide sales, profit and cash flow growth Huge upside in developing markets Significant advantages from unique operating platform Enhanced global recognition in $7 billion worldwide market for protective apparel Strong balance sheet; access to credit facilities Incremental value: real estate in China purchased in 1996 not reflected on balance sheet Exit from Brazil, early payoff of liability; tax benefit of over $9M credit expected Eventual rebound of foreign currencies will boost profits; emergency bonus situations $2.5 million share repurchase program authorized Cash flow and cash on hand may be used for buyback and/or acquisitions Substantial insider ownership LAKE Stock Information Share Price $10.10 Book Value Per Share $9.72 Shares (FD Issued & O/S) Market Cap Cash Bank Debt Net Worth 7.3 million $74 million $8.5 million $6.8 million Current Ratio 4.36:1 Price/Sales 0.8 Price/Earnings 12.0 $70.6 million Stock price as at 3/2/17; includes warrant shares. Ratios use consolidated results from continuing operations for most recent quarter on annualized basis or at 10/31/16 for balance sheet related items. 25

26 Appendix: Financials 26

27 Full Year Operating Earnings and Adjusted EBITDA Reconciliation Operating Results as Restated for Discontinued Operations ($ 000) Reconciliation to GAAP Results Year Ended January 31, 2016 Year Ended January 31, 2015 Net sales from continuing operations $99,646 $93,419 Year over year growth 6.7% Gross profit from continuing operations 36,333 31,698 Gross profit % 36.5% 33.9% Operating expenses from continuing operations 24,521 24,737 Operating expenses as a percentage of sales 24.6% 26.5% Operating income from continuing operations 11,812 6,961 Operating income as a percentage of sales 11.9% 7.5% Interest expense from continuing operations 785 1,688 Other expense from continuing operations (120) (2,375) Pretax income from continuing operations 10,907 2,898 Income tax expense (benefit) from continuing operations 3,117 (8,188) Net income from continuing operations 7,790 11,086 Non-cash reclassification of Other Comprehensive Income to Statement of Operations with no impact on stockholder s equity (1,286) Loss from operations from discontinued operations (3,538) (2,836) Loss from disposal of discontinued operations (515) Loss before taxes for discontinued operations (5,339) (2,836) Income tax expense (benefit) from discontinued operations (1,403) (149) Net loss from discontinued operations (3,936) (2,687) Net income $3,854 $8,399 Weighted average shares for EPS-Basic 7,171,965 6,214,303 Net income per share from continuing operations $1.09 $1.78 Net loss per share from discontinued operations $(0.55) $(0.43) Net income per share $0.54 $1.35 Operating income from continuing operations $11,812 $6,961 Adjusted EBITDA 13,504 10,000 Free cash flow $10,838 $7,362 27

28 Quarterly Operating Earnings and Adjusted EBITDA Reconciliation Operating Results as Restated for Discontinued Operations ($000 s) Reconciliation to GAAP Results Quarter Ended October 31, 2016 Quarter Ended October 31, 2015 Nine months Ended October 31, 2016 Nine months Ended October 31, 2015 Net sales from continuing operations $23,243 $24,888 $65,881 $79,172 Year over year growth (6.6)% (16.8)% Gross profit from continuing operations 8,519 9,248 23,882 30,322 Gross profit % 36.7% 37.2% 36.3% 38.3% Operating expenses from continuing operations 6,271 6,056 18,886 18,211 Operating expenses as a percentage of sales 27.0% 24.3% 28.7% 23.0% Operating income from continuing operations 2,248 3,192 4,996 12,111 Operating income as a percentage of sales 9.7% 12.8% 7.6% 15.3% Interest expense from continuing operations Other income (loss) from continuing operations (2) (7) 20 9 Pretax income from continuing operations 2,096 3,002 4,494 11,544 Income tax expense from continuing operations ,548 3,676 Net income from continuing operations $1,513 $2,120 $2,946 $7,868 Loss before taxes for discontinued operations (3,054) Income tax benefit from discontinued operations (569) Net loss from discontinued operations (2,485) Net income $1,513 $2,120 $2,946 $5,383 Weighted average shares for EPS-Basic 7,258,697 7,234,914 7,255,966 7,148,430 Net income per share from continuing operations $.21 $0.29 $0.41 $1.10 Net loss per share from discontinued operations ($0.35) Net income per share $0.21 $0.29 $0.41 $0.75 Operating income from continuing operations $2,248 $3,192 $4,996 $12,111 Depreciation and amortization Other income (loss) from continuing operations (2) (7) 20 9 EBITDA from continuing operations 2,605 3,415 5,979 12,824 Equity Compensation USA Severance Associated with Restructure Adjusted EBITDA 2,704 3,580 6,617 13,244 Cash paid for taxes (foreign) ,126 1,377 Capital expenditures Free cash flow $2,050 $2,957 $5,325 $11,152 TTM Adjusted EBITDA 6,796 TTM cash paid for taxes (foreign) 1,575 TTM capital expenditures 291 TTM free cash flow $4,930 28

29 Balance Sheet LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS October 31, January 31, Current assets ($000 s) Cash and cash equivalents $8,453 $7,022 Accounts receivable, net of allowance for doubtful accounts of $552 and $593 at October 31, 2016 and January 31, 2016, respectively 11,322 11,476 Inventories, net of allowance of $2,561 and $2,566 at October 31, 2016 and January 31, 2016, respectively 36,605 40,841 Prepaid VAT tax 1,516 1,143 Other current assets 2,018 1,635 Total current assets 59,914 62,117 Property and equipment, net 8,538 9,268 Assets held for sale 976 1,101 Deferred income tax 14,098 14,338 Prepaid VAT and other taxes Other assets Goodwill Total assets $85,047 $88,260 LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities Accounts payable $4,833 $4,254 Accrued compensation and benefits 1,149 1,157 Other accrued expenses 1,640 1,813 Current maturity of long-term debt Short-term borrowings 294 3,226 Borrowings under revolving credit facility 5,771 9,458 Total current liabilities 13,737 19,958 Long-term portion of debt VAT taxes payable 8 95 Total liabilities 14,449 20,744 Commitments and contingencies Stockholders equity Preferred stock, $0.01 par; authorized 1,500,000 shares (none issued) Common stock, $0.01 par; authorized 10,000,000 shares, Issued 7,618,155 and 7,610,603; outstanding 7,261,714 and 7,254,162 at October 31, 2016 and January 31, 2016, respectively Treasury stock, at cost; 356,441 shares at October 31, 2016 and January 31, 2016 (3,352) (3,352) Additional paid-in capital 64,683 64,468 Retained earnings 11,454 8,508 Accumulated other comprehensive loss (2,263) (2,184) Total stockholders' equity 70,598 67,516 Total liabilities and stockholders' equity $85,047 $88,260 29