-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BBFXISbmDjOAbSZ44W0sXQuKE5aFNa37Y/SamQOVcPDLwON3bkZMEH0Sf36bNIFm cR/iRykIqXhdfMyTDdwrqQ== 0000889812-97-001039.txt : 19970428 0000889812-97-001039.hdr.sgml : 19970428 ACCESSION NUMBER: 0000889812-97-001039 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970425 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAKELAND INDUSTRIES INC CENTRAL INDEX KEY: 0000798081 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 133115216 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15535 FILM NUMBER: 97586996 BUSINESS ADDRESS: STREET 1: 711-2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 BUSINESS PHONE: 5169819700 MAIL ADDRESS: STREET 1: 711- 2 KOEHLER AVENUE STREET 2: 711- 2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 10-K 1 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - K (Mark one) X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES - ------- EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended, January 31, 1997 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. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 13-3115216 - ------------------------ ---------------------- (State of Incorporation) (I.R.S. Employer Identification Number) 711-2 Koehler Ave., Ronkonkoma, NY 11779 ------------------------------------------------------------ (Address of Principal Executive Offices, Including Zip Code) (516) 981-9700 ---------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Common Stock, $.01 Par Value ------------------------------------------------------------- (Title of class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K _____. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ The aggregate market value of the Common Stock outstanding and held by nonaffiliates (as defined in Rule 405 under the Securities Exchange Act of 1934) of the Registrant, based upon the average high and low bid price of the Common Stock on NASDAQ on April 18, 1997 was approximately $4,856,728 (based on 1,494,378 shares held by nonaffiliates). The number of shares outstanding of the Registrant's common stock, $.01 par value, on April 25, 1997 was 2,550,000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended January 31, 1997 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 18, 1997, are incorporated by reference in Items 10-13 of Part III of this Annual Report on Form 10-K. 1 PART I ITEM 1. BUSINESS Lakeland Industries, Inc. (the"Company") is a company with six divisions and three wholly-owned subsidiaries: One large division of the Company manufactures disposable / limited use garments domestically and via offshore manufacturing operations and its four smaller divisions, Chemland ("Chemland"), manufactures suits for use by toxic waste clean up teams; Fireland ("Fireland") d/b/a Fyrepel Products, manufactures fire and heat protective apparel and protective systems for personnel; Highland ("Highland"), manufacturers specialty safety and industrial work gloves and Uniland ("Uniland"), manufactures industrial and medical woven cloth garments. A predecessor corporation of the Company was incorporated in New York in April 1982. In September 1986, the Company completed its initial public offering for 950,000 shares of common stock at $6.75 per share. The Company formed two new subsidiaries in December 1986, Chemland and Fireland (both Delaware corporations), which purchased the assets and certain liabilities of Siena Industries, Inc. and Fyrepel Products, Inc., respectively, both located in Ohio. Chemland, Fireland, Highland and Uniland were all formerly wholly-owned subsidiaries of the Company. Highland was merged into the Company on June 30, 1993 and Chemland, Fireland and Uniland were merged into the Company on August 31, 1993. A new subsidiary Fireland Industries, Inc. was formed during fiscal 1994 to hold the land and building currently owned in Ohio and act as Trustee and Sponsor of the Fireland Industries, Inc. Pension Plan. During fiscal 1988, the Company formed two new subsidiaries, Highland (a Delaware corporation) which opened an office and warehouse in Edison, New Jersey and Mayer (a Delaware corporation), formed to purchase the assets of Walter H. Mayer & Co., located in Chicago, Illinois. Later that year, a subsidiary, Uniland (an Arkansas corporation), opened a 30,000 square foot manufacturing facility in St. Joseph, Missouri. During fiscal 1989, a former subsidiary, Triland Mfg.Co., Inc. ("Triland", a New Jersey corporation), was merged into Highland on January 31, 1989. Highland's warehousing and manufacturing were relocated to Alabama (from New Jersey) while the administrative operations were absorbed by the Company in New York. Uniland's Arkansas facility was relocated to the larger facility in St. Joseph, Missouri. During fiscal 1990, Chemland moved its small chemical suit manufacturing facility in Coshocton, Ohio to Somerville, Alabama and opened a larger facility in Coshocton to replace the firecoat manufacturing previously done in St. Joseph, Missouri. A former subsidiary Ryland Mfg., Inc. ("Ryland", an Alabama corporation) was merged into the Company as of January 31, 1990 to eliminate duplication of record keeping. During fiscal 1991, Chemland closed its Coshocton, Ohio facility due to manufacturing inefficiencies and Uniland was reorganized as a Delaware corporation. On December 11, 1990, the Company's subsidiary, Mayer, sold substantially all of the operating assets of its health care and hospitality divisions to a private investor group located in Charlotte, North Carolina. Pursuant to the terms of the Asset Purchase Agreement, Mayer's name was changed to Oakdale Distribution Company, Inc. Oakdale Distribution Company, Inc. was later merged into the Company on January 31, 1992. Cash proceeds received at closing were utilized to pay down bank indebtedness of the Company under a revolving credit facility. During fiscal 1993, in-house manufacturing was phased out at Fireland's Ohio facility. Additionally, Highland relocated from the Decatur, Alabama plant to share space with Chemland which has a larger facility in Somerville, Alabama. During fiscal 1994, the Company entered into a new, $5 million, secured, two year revolving credit agreement with a bank replacing a $3.4 million line which was due to expire in November 1993. During fiscal 1995, (December 1994) Lakeland Protective Wear Inc. was formed and opened an office with warehouse facilities in Burlington, Ontario to serve the Canadian market. A sales office was opened in March 1997 in Montreal, Quebec. The company markets and sells all the products manufactured by the Lakeland group of companies through a network of safety and industrial distributors including two national distributors. With sales of $1.5 million in fiscal 1997, it is expected that market penetration and share will continue to grow. As the NAFTA trade agreement continues to reduce duties and tariffs, the trade borders will be eliminated January 1, 1998 and will offer the possibility of this facility to also service the Northeast U.S. market. During fiscal 1996 (November 1995) Lakeland de Mexico S.A. de C.V. was formed, as a wholly owned subsidiary, to assemble disposable/limited use garments on a contract basis. The Company also entered into a new $8 million, secured, three year revolving credit agreement with its Bank, to replace its existing loan facility which was about to expire. During fiscal 1997, the Company began using offshore production to assist in the manufacture of certain disposable/limited use protective garments. During the fourth quarter, the Company relocated its woven cloth manufacturing facility to a larger facility remaining in St. Joseph, Missouri. Background and Market The market for disposable industrial garments has increased substantially in the past 20 years. In 1970, Congress enacted the 2 Occupational Safety and Health Act ("OSHA"), which requires employers to supply protective clothing in certain work environments. At about the same time, DuPont developed Tyvek TM which, for the first time, allowed for the economical production of lightweight, disposable protective clothing. The attraction of disposable garments grew in the late 1970's with the increases in both labor and material costs of producing cloth garments and the promulgation of federal, state and local regulations requiring that employees wear protective clothing to protect against exposure to certain contaminants, such as asbestos and P.C.B.s. During the second half of 1989, polypropylene materials became a major competitor to Tyvek TM. Beginning in the second quarter of fiscal 1990 the Company encountered erosions in margins in its disposable garment business due to a movement by asbestos removal contractors away from Tyvek TM materials to polypropylene materials and concomitant pricing pressures in the industry as a whole. The industry pricing pressures, most intense during the fourth quarter of fiscal 1990, continued through fiscal 1991. While the Company was able to maintain its sales volume at a level comparable to fiscal 1989, a substantial portion of fiscal 1990 and 1991 sales were of polypropylene garments in lieu of Tyvek TM garments; resulting in reduced gross profit margins. During fiscal 1991, the Company attempted to increase selling prices; however, these new selling prices were still below those of prior years. During fiscal 1992, the erosion in gross margins began to stabilize. However, competition and recessionary economic conditions adversely affected sales volume, especially during the second half of fiscal 1992 and into fiscal 1993 and 1994. The use of disposable garments avoids the continuing costs of laundering and decontaminating woven cloth work garments and reduces the overhead costs associated with handling, transporting and replacing such garments. As manufacturers have become aware of the advantages of disposable clothing, the demand for such garments has increased. This has allowed for greater production volume and, in turn, has reduced the cost of manufacturing disposable industrial garments. With the acquisition of the assets and certain liabilities of Fyrepel Products, Inc., the Company entered, via Fireland, into the field of manufacturing and selling fire and heat protective garments. Fyrepel Products, Inc. conducted business in this field for 40 years, and the Company acquired its assets as well as the right to use its trade name. During fiscal 1992, the Company re-evaluated the product lines manufactured at this facility in order to reduce the operating losses that occurred in prior fiscal years. Orders that would not assure an acceptable return were not booked, causing a decrease in overall sales, but an improved bottom line. A new management team was in place at this facility to initiate a turn around. In December 1991, it was determined that even with the efforts of this new team it was apparent that the Ohio facility would be negatively affected by union related problems. The Company continued to market Fyrepel's product line and furnishes these products utilizing domestic or international independent manufacturing contractors while internal manufacturing was phased out. Chemland was formed in December 1986 to purchase the assets and certain liabilities of Siena Industries, Inc. Chemland manufactures protective garments for use in hazardous chemical environments. All of its products are sold through the Company's distributor network. The Company believes that this market will grow due to the extensive government legislation which mandates the clean up of toxic waste sites and the elimination of hazardous materials from the environment. The Environmental Protection Agency ("EPA") designated OSHA to be responsible for the health and safety of workers in and around areas of hazardous materials and contaminated waste. OSHA responded by formulating an all encompassing compendium of safety regulations that prescribe operating standards for all aspects of OSHA projects. Almost 2 million people are affected by OSHA Standards today. In 1990, additional standards proposed and developed by the National Fire Protection Association ("NFPA") and the American Society for Testing and Materials ("ASTM") were accepted by OSHA. NFPA Standard 1991 set performance requirements for total-encapsulating vapor-proof chemical suits and includes rigid chemical and flame resistance tests and a permeability test against 17 challenge chemicals. The basic OSHA Standards call for 4 levels of protection, A through D, and specific in detail the equipment and clothing required to adequately protect the wearer at corresponding danger levels. A summary of these four levels follows: NFPA 1991 / Level A calls for total encapsulation in a vapor-proof chemical suit with self-contained breathing apparatus ("SCBA") and appropriate accessories. Level B calls for SCBA or positive pressure supplied respirator with escape SCBA, plus hooded chemical resistant clothing (overalls, and long sleeved jacket; coveralls; one or two piece chemical-splash suit; or disposable chemical-resistant overalls). Level C requires hooded chemical-resistant clothing (overalls; two-piece chemical-splash suit; disposable chemical-resistant overalls). Level D is basically a work and/or training situation requiring minimal coverall protection. Highland, formed in 1987, was organized for the importation of high quality work gloves for sale primarily in retail outlets. Since another then subsidiary of the Company, Triland, was a manufacturer of industrial gloves, management combined the two operations as a cost saving measure. This merger was completed on January 31, 1989 and during fiscal 1990, the Company phased out the importation of retail gloves, concentrating solely on the manufacture of Kevlar TM and other industrial safety gloves. 3 Products General Prior to acquiring Fyrepel Products, Inc. and Siena Industries, Inc. in December 1986, the Company's product line consisted principally of two product groups: disposable / limited use protective industrial garments and specialty safety and industrial work gloves. With the formation of Fireland and Chemland, the Company entered the field of fire, heat and chemical protective garments. The Company also manufactures and sells gloves made from Kevlar TM and Spectra TM, both high-strength fibers. These gloves provide the wearer with a high degree of protection against cuts and lacerations in a glove that is both lightweight and flexible. The Company anticipates strong demand for these gloves in the manufacturing and food service industries. Disposable / Limited Use Garments The Company manufactures a complete line of limited use protective garments. These garments are offered in coveralls, lab-coats, shirts, pants, hoods, aprons, sleeves and smocks. The Company offers these garments in a number of sizes and styles to fit the end users' needs. Limited-use garments can also be coated or laminated to increase splash protection against many inorganic acids, bases, and other liquid chemicals. Limited use garments are made from several non-woven fabrics including Tyvek (TM), Tyvek(R)QC, Tyvek/Saranex 23- P, Tychem 7500, Barricade, Tychem 9400, Tychem 10,000, Pyrolon FR, and Polypropylene materials and derivatives. The Company incorporates many seaming techniques depending on the level of hold-out needed in the end use application. Seam types utilized include standard serge seam, bound seam, and heat sealed seam. During fiscal 1995, the Company continued to market the Pyrolon(TM) flame retardant garments. Pyrolon garments meet the stringent requirements of NFPA 701. This material offers multiple benefits; replacing traditional bulky layers of clothing, reducing overall weight and reducing both inventory and storage and replacement costs. The Company's limited use garments range in price from $.50 for limited use shoe covers to approximately $12.00 for Tyvek/Saranex 23-P laminated hood and booted coverall. The Company's largest selling item, a standard white limited-use Tyvek coverall, costs the end user approximately $2.75 to $3.25 per garment. By comparison, similar re-usable cloth coveralls range in price from $10.00 to $35.00, exclusive of significant laundering and maintenance expenses. Industrial and Medical Cloth Garments The Company also manufactures and markets a line of reusable and launderable woven cloth protective apparel which supplement the disposable / limited use garments, giving the Company access to the broader industrial and health care related markets. Cloth re-usable garments are more appropriate in certain situations because of their heavier weight and greater durability which gives the Company the flexibility to supply and satisfy a wider range of safety and customer needs. The Company also designs and manufactures: o special apparel for the auto industry's paint systems, o hospital garments for protection against blood borne pathogens, o clean room apparel as used in the most sophisticated semiconductor manufacturing facilities, and o jackets and bib overalls for use by emergency medical teams around the country. Safety and Industrial Gloves The Company manufactures and sells specialty safety gloves and sleeves made from Kevlar TM. The Company is one of four companies licensed to sell 100% Kevlar TM gloves. Kevlar TM is a cut and heat resistant, high-strength, lightweight, flexible and durable material produced by DuPont. Kevlar TM, on an equivalent weight basis, is five times stronger than steel and has increasingly been used in manufacturing such diverse products as airplane fuselage components and bullet-resistant vests. Gloves made of Kevlar TM offer a better overall level of protection, lower the injury rate and are more cost effective than work gloves made from such traditional material as leather, canvas and coated gloves. Kevlar TM gloves can withstand temperatures of up to 400 degrees F and are sufficiently cut-resistant to allow workers to safely handle sharp or jagged unfinished sheet metal. Kevlar TM gloves are used primarily in the automotive and metal fabrication industries. The Company also markets approximately 30 different types of commodity industrial work gloves to a small extent made from such materials as cotton, polyester, terry cloth and nylon. Sales of these commodity gloves are used to augment the Company's product line. Kevlar TM gloves and sleeves represent a large portion of the Company's glove production and therefore a majority of the Company's dollar volume of glove and sleeve sales. The Company has been manufacturing and selling knit gloves and sleeves made of Spectra TM since 1989. The Company expects the continued demand for these gloves to increase as users become familiar with the cut resistance and versatility of these gloves. New markets are continuously being explored for these gloves whose sales account for less than 10% of the 4 Company' dollar volume of glove and sleeve sales. The Company phased out its importation of gloves for distribution into retail sales channels during 1989 to concentrate on the more profitable manufactured gloves. The Company is devoting an increasing portion of its manufacturing capacity to the production of Kevlar TM and Spectra TM gloves, which carry a higher profit margin than commodity gloves. In order to maintain a full line of gloves, however, the Company intends to continue to produce commodity gloves and to import such additional commodity gloves as are necessary to meet demand for its glove products. The Company believes that there are adequate and reliable foreign manufacturers available to meet the Company's import requirements of commodity gloves, if needed. Fire and Heat Protective Apparel and Protective Systems for Personnel The Company's products protect individuals that must work in hostile environments and the Company has been the creator, innovator and inventor of protective systems for hazardous occupations for the last 12 years. The brand name FYREPEL TM is recognized nationally and internationally. The Company has completed an intensive redesign and engineering study to address the ergonomic needs of stressful occupations. The Company's products include: Fire entry suit - for total flame entry for industries dealing with volatile and highly flammable products. Kiln Entry suit - to protect kiln maintenance workers from extreme heat. Proximity suits - designed for performance in high heat areas to give protection where exposure to hot liquids, steam or hot vapors is possible. Approach suits - for personnel engaged in maintenance, repair and operational tasks where temperatures do not exceed 200F degrees ambient, with a radiant heat exposure up to 2,000F degrees. The Company also manufactures Fire Fighters Protective Clothing for domestic and foreign fire departments and developed the popular Sterling Heights style (short coat and bib pants) bunker gear. Crash Rescue has been a major market for the Company, which was the first to produce and supply military and civilian markets with protection worn at airports, petrochemical plants and in the marine industry. Each of the fire suits range in cost to the end user from $450 for a standard fire department turn-out gear to $2,000 for the fire entry suit. The Company anticipates continuing growth and emphasis in the industrial fire market and the international markets. With greater emphasis being placed on the globalization of the industrial manufacturing capacity, it is expected that the Company's products will receive more attention and will be in grater demand worldwide. Chemical Protective Garments The Company manufactures heavy duty fully encapsulated chemical suits which are made of Viton TM, butyl rubber, polyvinylchloride ("PVC") TyChem TM and Teflon TM. These suits are worn to protect the user from exposure to hazardous chemicals. Hazardous material teams or individuals use chemical suits for toxic cleanups, chemical spills, or in industrial and electronic plants. The Company also makes a line of lighter weight chemical suits using such materials as Saranex-coated Tyvek TM and Barricade TM, both DuPont products. The Company's line of chemical suits range in cost from $25 for the Saranex-coated Tyvek suits to $3,400 for the Teflon suits. The chemical suits can be used in conjunction with a fire protective shell manufactured by the Company which will protect the user from both chemical and fire hazards. During the fourth quarter of fiscal 1991, the Company introduced two new NFPA approved garments: Forcefield TM-A lightweight hazmat suit, totally encapsulized providing greater mobility, visibility, dependability and versatility in dealing safely and effectively with most types of chemical hazards. This product meets NFPA 1991 standards for a fully certified chemical protective suit. When combined with an Aluminized PBI/Kevlar over cover, it provides NFPA 1991 / Level A protection; Interceptor TM-Model A meets all OSHA Level A requirements as a vapor-proof suit. Model 1 meets and exceeds NFPA 1991 requirements of certification for vapor-proof suit when used with an Aluminized PBI / Kevlar over cover. The Company also manufactures and sells a Level B worksuit called Checkmate TM. This suit is lightweight, tough, versatile, durable and cost effective and can be used for: splash protection, basic clean up, toxic waste dumps and post fire monitoring of toxic residue. Manufacturing Disposable / Limited Use Garments The Company manufactures its disposable / limited use garments primarily at its Decatur, Alabama facility. The fabric is first cut into required patterns at the Company's own plant. The cut fabric and any necessary accessories, such as zippers or elastic, are then obtained at the Company's plant by independent sewing contractors. These contractors sew and package the finished garments at their own facilities and return them to the Company's plant, normally within one week for immediate shipment to the customer. This quick turn-around time 5 enables the Company to operate with relatively low inventory levels of finished goods. The Company presently utilizes over 90 independent sewing contractors under agreements that are terminable at will by either party. These contractors employ approximately 1,000 people full-time (both domestically and internationally) and operate and maintain their own industrial sewing machines. The Company believes that it is the only customer of the majority of its independent sewing contractors and considers its relations with such contractors to be excellent. In the year ended January 31, 1997 two independent sewing contractors accounted for more than 10% of the Company's production of disposable / limited use garments. The Company believes that it can obtain adequate alternative production capacity should any of its independent contractors become unavailable. The Company believes that its manufacturing system permits it considerable flexibility. Through the use of independent sewing contractors, the Company has achieved its current level of production on a relatively small capital investment. Furthermore, by employing additional sewing contractors, the Company can increase production without substantial additional capital expenditures. While the Company has not experienced reduced demand for its disposable limited use garments, management believes that by its use of independent sewing contractors, the Company is capable of reducing or alternately increasing its production capacity without incurring large on-going costs typical of many manufacturing operations. Industrial and Medical Woven Garments The Company manufactures and sells woven cloth garments at its facility in Missouri. After the Company receives fabrics from suppliers, principally blends of polyester and cotton, the Company cuts and sews the fabrics at its own facilities to meet customer purchase orders. Some of the items manufactured at this facility are static-free clean room garments, coveralls, lab coats, shirts, pants, jackets, protective covers for industrial robots and other garments. Fire and Heat Protective Apparel Prior to 1992, the Company solely manufactured fire and heat protective garments at its Newark, Ohio facility, which facility was subsequently sold. Independent manufacturing contractors have been utilized subsequently. The Company receives fabric from its suppliers and sends it to the contractor who cuts the fabric, assembles the suits, boxes the finished product and delivers it pursuant to customer purchase orders or to a warehouse. The fire and heat protective suits are manufactured to the purchaser's specifications and delivered upon completion. Chemical Protective Garments The Company manufactures chemical protective clothing at its facility in Somerville, Alabama. After the Company obtains such materials as Saranex-coated Tyvek TM, Barricade TM, TyChem TM, Viton TM, butyl rubber and PVC, it designs, cuts, glues and/or sews the materials to meet customer purchase orders. Forcefield suits (a Teflon level A sophisticated chemical suit) and the Interceptor line of suits, used by hazardous materials response teams have been developed internally to provide chemical protection at the highest level of barrier available today. Safety and Industrial Work Gloves The Company also manufactures gloves at its Somerville, Alabama facility. Computerized robotic knitters are used to weave gloves from both natural and synthetic materials, including Kevlar TM and Spectra TM, on an automatic basis. These robotic knitters are generally in operation 20 hours a day, 5-1/2 days a week. The Company's robotic knitters allow flexibility in production as they can be easily reprogrammed in minutes to produce gloves and sleeves in different sizes, styles, weights, weaves or combinations of materials. Additionally, these robotic knitters can produce gloves and sleeves separately or as a one-piece garment. Gloves and sleeves can also be knitted in different weights and combinations of yarns, such as Kevlar TM mixed with cotton or polyester. Additional processing is sometimes provided by independent sewing contractors. The acquisition of a glove dotting machine, during fiscal 1992, allowed the Company to eliminate the cost of out-of-factory processing. Quality Control To assure quality, Company employees monitor the sewing of disposable / limited use garments at the facilities of the independent sewing contractors and also inspect the garments upon delivery to the Company's facilities. Finished product that is below standard is returned to the contractor for reworking. The Company has rarely been required to return product to its independent sewing contractors. The Company also actively participates in the Industrial Safety Equipment Association's (ISEA) frequent independent quality inspection programs. The Company conducts quality control inspections of its industrial gloves, cloth, fire and chemical garments throughout the manufacturing process. The Company expects to be ISO 9001 approved during fiscal year 1998. 6 Marketing The Company markets and sells its products through a minimum of 22 independent manufacturers' representatives. The Company believes that these representatives constitute one of the largest and most sophisticated independent sales force in its industry. These independent representatives call on over 500 safety and industrial distributors nationwide and promote and sell the Company's products to 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, 1997, no one distributor accounted for more than 5% of sales. Fire, heat and chemical suits were sold through the sales force which was previously used by Fyrepel Products, Inc. and Siena Industries, Inc. Starting in fiscal 1989, the Company increased sales of these products by having them sold through the Company's entire sales network. During fiscal 1992, Fireland ceased using independent sales representatives, utilizing in house personnel only. Products are sold to the steel industry, aluminum industry, nuclear industry, utilities, refineries, chemical industry, ammunition plants, automotive, glass industry and fire departments. Highland uses independent sales representatives, exclusively. The Company's marketing plan is to maximize the efficiency of its established distribution network by direct promotion at the end-user level. Advertising is primarily through trade publications. Promotional activities 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 Orlando, FL (Fall of 1996) and will be represented at the American Industrial Hygienists Convention (Spring of 1997). Suppliers and Materials The Company does not have long-term, formal agreements with unaffiliated suppliers of non-woven fabric raw materials used by the Company in the production of its disposable garments. Tyvek TM, Tychem TM and Kevlar TM, however, are purchased from DuPont under licensing agreements; Polypropylene is available from ten or more major mills; flame retardant fabrics are also available from a number of both domestic and international mills. The accessories used in the production of the Company's disposable garments such as zippers, snaps and elastics are obtained from unaffiliated suppliers. The Company has not experienced difficulty in obtaining its requirements for these commodity component items. The Company has not experienced difficulty in obtaining materials, including cotton, polyester and nylon, used in Highland's production of commodity gloves. Kevlar TM, used in the production of the Company's specialty safety gloves, is obtained from independent mills that purchase the fiber from DuPont. The Company has not experienced difficulty in obtaining its requirements for Kevlar TM. The Company obtains the Spectra yarn used in its Dextra Guard gloves from mills that purchase the fiber from Allied Signal Company, Inc. ("Allied"). The Company believes that Allied will be able to meet the Company's needs for Spectra. In manufacturing its fire and heat protective suits, the Company uses glass fabric, aluminized glass, Nomex TM, aluminized Nomex TM, Kevlar TM, aluminized Kevlar TM, polybenzimidazole (PBI) as well as combinations utilizing neoprene coating. The chemical protective suits are made of Viton TM, butyl rubber, PVC, proprietary patented laminates, Teflon TM, Saranex TM coated Tyvek TM, TyChem TM and Barricade TM from DuPont. The Company has not experienced difficulty obtaining any of the aforementioned materials. Competition Competition in the market for all of the Company's products is intense, more so in the five most recent fiscal years than in previous fiscal years. The Company competes with a large number of domestic and foreign companies, public and private, some of which are larger and have substantially greater financial resources. Competition within the industry is on the basis of price, quality, timely delivery, consistency of product, and support services to distributors and end users. Beginning in the third quarter of fiscal 1990, intense competition in the disposable garment business drove margins on non- Tyvek TM garments down. This competition and the concomitant sales price erosion noted earlier continued through fiscal 1993. However, small price increases on the core Tyvek disposable line in February of 1993, 1994 and 1996 have and should continue to result in gross margin increases. Management continued to take steps to reduce the Company's manufacturing costs and overhead in order to improve operating results in fiscal 1997. The Company continues to focus its efforts to increase sales and profitability of all products, and to redeploy its capital toward higher margin proprietary products. Seasonality Historically, more disposable garments are sold in spring and summer due to the asbestos abatement industry, which has its highest level of activity in the spring months. This does not materially affect the total sales of the Company. The fourth quarters of fiscal years 1990 and 1991 yielded the lowest sales volume of each fiscal year. However, during fiscal 1992 and 1993 the third quarter and second quarter, respectively, yielded the lowest sales volume. During fiscal 1994, 1995, 1996 and 1997, the third quarter was the only seasonally weak quarter. 7 Patents and Trademarks At this time, there are no patents or trademarks which are significant to the Company's operations; however, the Company has one exclusive licensing arrangement covering seven patents in the Company's name and has one non-exclusive agreement with DuPont regarding patented materials used in the manufacture of chemical suits. Employees As of April 15, 1997, the Company had approximately 416 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 domestic and one foreign 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 two leases expiring on September 30, 1997 and December 31, 2000. The Company also leases a 12,000 square foot manufacturing facility overseas. This lease expired on March 30, 1997 and is presently leased on a month to month basis. A smaller facility lease expired on March 30, 1997 and was not renewed. 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, 1997, the Company paid total rent on property and all leased equipment of approximately $581,161 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 1997 Annual Report to Shareholders filed as an exhibit hereto, which information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Reference is made to Page 2 ("Selected Financial Data") of the Registrant's 1997 Annual Report to Shareholders filed as an exhibit hereto, which information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Reference is made to Page 3 ("Management's Discussion and Analysis of Financial Condition and Results of Operation") of the Registrant's 1997 Annual Report to Shareholders filed as an exhibit hereto, which information is incorporated herein by reference. 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following Consolidated Financial Statements are incorporated herein by reference to Pages 5 to 21 of the Registrant's Annual Report to Shareholders for the year ended January 31, 1997: Report of Independent Certified Public Accounts Consolidated Balance Sheets as of January 31, 1997 and 1996 Consolidated Statements of Income and Retained Earnings for the years ended January 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows for the years ended January 31, 1997, 1996 and 1995 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 1997 Annual Meeting of Stockholders ("Proxy Statement"), which information is incorporated herein by reference. The following table sets forth the names and ages of all executive officers of the Company, and all positions and offices within the Company presently held by such executive officers. None of the directors, executive officers or nominees for director has any family relationship with any other director, executive officer or nominee for director of the Company. Name Age Position Held - ---- --- ------------- Raymond J. Smith 58 Chairman of the Board, President and Director Christopher J. Ryan 45 Executive Vice President-Finance & Secretary and Director Harvey Pride, Jr. 50 Vice President-Manufacturing James M. McCormick 49 Vice President and Treasurer Mr. Smith, a co-founder of the Company, has been Chairman of the Board and President since its incorporation. Prior to 1982, he was employed for 16 years by Disposables, Inc., a manufacturer of disposable garments, first as sales manager, then as Executive Vice President and subsequently as President and Director. Mr. Christopher J. Ryan has served as Executive Vice President- Finance and director since May, 1986 and Secretary since April 1991. From October 1989 until February 1991 Mr. Ryan was employed by Sands Brothers, Mitchell Co. Ltd. and Rodman & Renshaw, Inc., both investment banking firms. Prior to that, he was an independent consultant with Laidlaw Holding Co., Inc., an investment banking firm, from January 1989 until September 1989. From February, 1987 to January, 1989 he was employed as the Managing Director of Corporate Finance for Brean Murray, Foster Securities, Inc. Mr. Pride has been Vice President of the Company since May 1986. He was Vice President of Ryland (the Company's former subsidiary) from May 1982 to June 1986, and President of Ryland until its merger into Lakeland on January 31, 1990. Mr. McCormick has been Vice President and Treasurer since May 1986. Between January 1986 and May 1986 he was the Company's Controller. ITEM 11. EXECUTIVE COMPENSATION See information under the caption "Compensation of Executive Officers" in the Company's Proxy Statement, which information is incorporated herein by reference. 9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See the information under the caption "Voting Securities and Stock Ownership of Officers, Directors and Principal Stockholders" in the Company's Proxy Statement, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the information under the caption "Certain Relationships and Related Transactions" in the Company's Proxy Statement, which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Index to Consolidated Financial Statements and Schedules: (1) Financial Statements: The following Consolidated Financial Statements of the Registrant are incorporated herein by reference to the Registrant's Annual Report to Shareholders for the year ended January 31, 1997, as noted in Item 8 hereof: Report of Independent Certified Public Accountants Consolidated Balance Sheets as of January 31, 1997 and 1996 Consolidated Statements of Income and Retained Earnings for the years ended January 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows for the years ended January 31, 1997, 1996 and 1995 Notes to Consolidated Financial Statements (2) Financial Statement Schedule: Schedule for the years ended January 31, 1997, 1996 and 1995: II-Valuation and Qualifying Accounts All other schedules to the Consolidated Financial Statements are omitted because the required information is inapplicable or has been presented in the consolidated financial statements or related notes thereto. (b) Reports on Form 8-K. No report on Form 8-K has been filed for the Quarter ended January 31, 1997. (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 10 (f) Asset Purchase Agreement, dated September 30, 1987 by and among the Company and Walter H. Mayer & Co. (Incorporated by reference to the report on Form 8-K filed by the Company on October 14, 1987.) 10 (g) Employment agreement between the Company and Raymond J. Smith, dated September 7, 1994 10 (h) Employment agreement between the Company and Harvey Pride, Jr., dated January 31, 1995 10 (i) Lease between Lakeland Industries, Inc. and JBJ Realty, dated April 11, 1994 10 (j) Asset Purchase Agreement, dated November 19, 1990 by and among the Company, Mayer and WHM Acquisition Corp. (Incorporated by reference to the report on Form 10-Q for the quarter ended October 31, 1990, filed by the Company on December 14, 1990). 10 (k) Employment agreement between the Company and Christopher J. Ryan, dated February 14, 1997. 10 (l) Loan agreement dated August 30, 1995 between the Company and its bank (Incorporated by reference to the report on Form 10-Q for the quarter ended October 31, 1995). 10 (m) Consulting and License Agreements between the Company and W. Novis Smith dated December 10, 1991. 10 (n) Agreement dated June 17, 1993 between the Company and Madison Manpower and Mobile Storage, Inc. 11 Consent of Grant Thornton LLP dated April 25, 1997*** 13 Annual Report to Shareholders for the year ended January 31, 1997 20 Proxy Statement of the Registrant for Annual Meeting of Stockholders-June 18, 1997 22 Subsidiaries of the Company (wholly-owned): Fireland Industries, Inc. Lakeland Protective Wear Inc. Lakeland de Mexico S.A. de C.V. All other exhibits are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. - ------------------------ * Incorporated by reference to Registration Statement on Form S-18 on file with the Securities and Exchange Commission No.33-7512-NY. ** Incorporated by reference to report on Form 8-K filed by the Company on January 9, 1987. *** Incorporated by reference to Registration Statement on Form S-8 on file with the Securities & Exchange Commission No. 33-92564 - NY. The Exhibits listed above (with the exception of the Annual Report to Shareholders) have been filed separately with the Securities and Exchange Commission in conjunction with this Annual Report on Form 10-K. On request, Lakeland Industries, Inc. will furnish to each of its shareholders a copy of any such Exhibit for a fee equal to Lakeland's cost in furnishing such Exhibit. Requests should be addressed to the Office of the Secretary, Lakeland Industries, Inc., 711-2 Koehler Avenue, Ronkonkoma, New York 11779. 11 _________________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 25, 1997 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 25, 1997 - ----------------------- President and Director Raymond J. Smith (Principal Executive Officer) /s/ Christopher J. Ryan Executive V. P.- Finance April 25, 1997 - ----------------------- & Secretary and Director Christopher J. Ryan /s/ James M. McCormick Vice President and Treasurer April 25, 1997 - ----------------------- (Principal Financial and James M. McCormick Accounting Officer) /s/ Eric O. Hallman Director April 25, 1997 - ----------------------- Eric O. Hallman /s/ John J. Collins Director April 25, 1997 - ----------------------- John J. Collins,Jr. /s/ Walter J. Raleigh Director April 25, 1997 - ----------------------- Walter J. Raleigh 12 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, 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 ======= ======== ======= ======= Year ended January 31, 1995 Allowance for doubtful accounts (a) $516,757 $141,606 $282,766(b) $375,597 ======= ======= ======= =======
(a) Deducted from accounts receivable. (b) Uncollectible accounts receivable charged against allowance. EX-10.K 2 EMPLOYMENT AGREEMENT Exhibit 10(k) [LETTERHEAD OF LAKELAND INDUSTRIES, INC.] February 14, 1997 Mr. Christopher J. Ryan 136 West Bayberry Rd. Islip, NY 11751 Dear Mr. Ryan: The purpose of this letter is to confirm your continuing employment with Lakeland Industries Inc. on the following terms and conditions: 1. THE PARTIES This is an agreement between Christopher J. Ryan residing at 136 West Bayberry Rd., Islip 11751 (hereinafter referred to as "you") and Lakeland Industries, Inc., a Delaware corporation, with principal place of business located at 711-2 Koehler Avenue, Ronkonkoma, NY 11779-7410 (hereinafter the Company). 2. TERM; RENEWAL The term of the agreement shall be for a 3 year period from February 14, 1997 through and including February 13, 2000 which term shall be automatically renewed for a maximum of 2 successive annual periods unless either party notifies the other 120 days prior to the expiration of the original term or renewal thereof, that the agreement will not be renewed. 3. CAPACITY You shall be employed in the capacity of Executive Vice President, Secretary and In-House General Counsel of Lakeland Industries, Inc. and such other senior executive title or titles as may from time to time be determined by the Board of Directors of the Company. You shall be nominated for election to serve as a member of the Board of Directors of the Company, so long as this agreement shall remain in effect. You shall be directly responsible to the Board of Directors of the Company and to the President of Lakeland. 4. COMPENSATION As full compensation for your services you shall receive following from the Company: (a) A base annual salary of $175,000 per year payable bi-weekly; and (b) Participation when eligible in any of the Company's Pension, Profit Sharing Plans, medical and disability plans, stock appreciation rights plan or stock option plans and ESOP-401(K) plans when any such plans become effective: (c) Such other benefits as are consistent with the personnel benefits provided by the Company to its other officers and employees; provided however that your vacation shall be for a period of no less than 5 weeks; and (d) You shall be entitled to an automobile allowance consistent with the allowance you have been receiving; and (e) Reimbursement for any dues and expenses incurred by you that are necessary and proper in the conduct of the Company's business; and (f) An annual bonus as set forth in this agreement. 5. ANNUAL BONUS In May of each year commencing in 1998 you shall be awarded an annual bonus based on the performance of the Company in the previous fiscal year. The bonus to be awarded in May of 1998, 1999 and 2000 shall be based upon the following formula by pro rata increments for each cents per share earnings measured upwardly from fiscal 1997 earnings per share. For each .01(cents) earnings per share increase over fiscal year and 1997 earnings per share, you shall receive $1000.00 in bonus. Thus, if EPS 1997 are .37(cents) then if EPS for fiscal 1998 are .50(cents) you shall receive a bonus of 13 x 1,000 or $13,000.00. Further, if EPS for fiscal 1998 are .60(cents), the fiscal 1999 bonus will be .60(cents) - .50(cents) the '99 earnings minus the '98 earnings = 10 x $1,000 = $10,000 and so on. The earnings per share shall be the earnings per share of common stock of the Company as determined by the Company's auditors in the preparation of the annual audit and reported to the Company's shareholders. If during the fiscal year commencing February 1, 1997 or thereafter, the Company acquires all of the stock and/or assets of a separate business entity or divests itself of one or more subsidiaries or is involved in a recapitalization or other public offering of the Company's securities, then in that event the amount of the aforesaid annual bonus will be adjusted to reflect such change or changes. The adjustment to the annual bonus and any additional discretionary bonus will be made by the Compensation Committee of the Board of Directors of the Company. The decision of the Compensation Committee of the Board of Directors as to any matter relating to the annual bonus or any additional discretionary bonus shall be final, binding and conclusive and shall not be subject to any further review. 6. NON-COMPETITION During the term of this Agreement and for six months thereafter, you shall not either directly or indirectly as an agent, employee, partner, stockholder, director, investor, or otherwise engage in any activity in competition with the activities of the Company, its subsidiaries or affiliates. You acknowledge that the Company's products are marketed throughout North America and therefore, for the duration of this non-competition period you shall not compete with the Company in any location therein whatsoever. 7. CONFIDENTIALITY Except as required in your duties to the Company, you shall not at any time during your employment and for a period of twelve months thereafter, directly or indirectly, use or disclose any confidential information relating to the Company or its business which is disclosed to you or known by you as a consequence of or through your employment by the Company and which is not otherwise generally obtainable by the public. 8. CHANGE IN CONTROL Upon the occurrence of a change in control (as hereinafter defined) you shall have the right to terminate at your option this agreement within 30 days after the occurrence of such change in control (provided such ten day period shall not begin to run until you have actual knowledge of the change in control). Upon the effective date of such termination, you shall be entitled to receive a lump sum severance payment in an amount equal to the greater of the present value (determined by applying a discount factor of 6% effective annual interest rate) of (I) the balance of your Base Salary of the Term of the Agreement, plus your estimated Annual Bonus for the fiscal year in which such termination occurs, or (ii) two times your Base Salary, plus your estimated Annual Bonus for the fiscal year in which such termination occurs. The estimated amount of your Annual Bonus in this Agreement for the fiscal year during which the termination occurs shall be determined in good faith by the Compensation Committee of the Board of Directors of the Company based upon the Company's results of operations for the partial fiscal year through the effective date of the termination and the Company's historical results of operations. A "change of control" shall have occurred (I) upon any person or group becoming directly or indirectly, the beneficial owner of 50% or more of the Company's then outstanding securities or (ii) upon the disposition by the Company (whether direct or indirect by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of the Company's business and/or assets. For purposes of this paragraph, "person" means such term as used in Section 13(d) (1) of the Securities Exchange Act of 1934 (the "1934 Act"); "beneficial owner" means such term as defined in Rule 13d-3 of the SEC under the 1934 Act; and "group" means such term as defined in Section 13(d) (3) of the 1934 Act. In the event of a disposition by the Company (whether direct or indirect by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets the Company will require any successor to expressly assume and agree to perform this agreement in the same manner and to the same extent that the Company would be required to perform, if no such disposition had taken place. 9. TERMINATION You or the Company may terminate your employment prior to the end of the Term for any reason upon written notice to the other party in accordance with the following provisions; a) Termination of Employment for Cause or Without Good Reason. If, before the end of the Term, the Company terminates your employment for Cause (as defined below) or you quit without Good Reason (as defined below), the Company shall pay you, within thirty days of such termination, (I) that portion of your Base Salary which is accrued but unpaid as of the date of such termination, and (ii) any other benefits accrued prior to the date of termination under this Agreement, but you will not be entitled to receive any portion of your Annual Bonus for the year in which said termination occurs or any other compensation or benefits under this Agreement. If the Company terminates your employment for Cause, the written notice of such termination shall set forth the effective date of your termination (which shall not be prior to the date such notice is delivered) and a reasonable detailed description of the facts and circumstances giving rise to the Cause for termination.' "Cause" means a written finding by the Board or the Company, acting through an authorized officer, that you were convicted of, or entered a plea of nolo contendere to a charge of, committing a felony involving moral turpitude, or you were grossly negligent in performing your duties and responsibilities (other than on account of "total disability" as referred to in sub-Paragraph c below), or that you committed an act of fraud, embezzlement, or gross neglect of duty. Cause shall not mean (I) the exercise of bad judgment alone, (ii) negligence not amounting to gross negligence, (iii) any act or omission believed by you in good faith to have been in or not opposed to the interest of the Company (without intent of you to gain therefrom, directly or indirectly, a profit to which you were not legally entitled), or (iv) any act or omission with respect to which notice of the termination of your employment is given to you more than 12 months after the earliest date on which any member of the Board who is not a party to the act or omission, knew of such act or omission. "Good Reason" means any of the following events: (I) the assignment to you of any duties materially and adversely inconsistent with your position, responsibilities, duties, or officer ships, as required under Section 3 hereof, (ii) the liquidation or dissolution of the Company, (iii) any material breach by the Company of the provisions of this Agreement, or (iv) the Company's requiring, without your written consent, that you be based in an office or location other than the Company's principal business location at Ronkonkoma, New York. b) Death. Your employment shall terminate on the date of your death. Your Base Salary (as in effect on the date of death) shall continue through the last day of the month in which your death occurs. Payment of your Base Salary shall be made to your estate or your beneficiary as designated in writing to the Company. Your estate or designated beneficiaries, as applicable, shall also receive a pro-rata portion of the Annual Bonus, if any, determined for the fiscal year up to and including the date of death which shall be determined in good faith by the Compensation Committee of the Board of Directors. Your beneficiaries shall also be entitled to all other benefits generally paid by the Company on an employee's death. c) Total Disability. Your employment shall terminate if you become totally disabled. You shall be deemed to be totally disabled if you are unable, for any reason, to substantially perform your duties to the Company for a period of (sixty consecutive days). In the event of your Total Disability, you shall receive 100% of your Base Salary for the greater of (I) the remainder of the Term of this Agreement or (ii) one year, such amount shall be reduced by the amount of any disability insurance payments received by you under any disability insurance policy maintained by the Company. For the six months thereafter, you shall receive 50% of your Base Salary reduced by the amount of any such disability insurance payments. d) Termination Without Cause or for Good Reason. If, before the end of the Term, the Company terminates your employment without Cause or you quit with Good Reason, the Company shall: (i) Pay you within 10 days of the termination of your employment, a lump sum amount equal to the then present value of your Base Salary (as in effect on the date of your termination) though the remainder of the Term, determined by applying a discount factor of 6% effective annual interest rate. (ii) Pay you within 10 days of the termination of your employment, a lump sum amount equal to a pro-rata portion of the Annual Bonus, if any, that you would have received for the fiscal year in which such termination occurs determined in good faith by the Compensation Committee of the Board of Directors. (iii) Pay you within 10 days of the termination of your employment, a lump sum amount equal to the present value of (two) times your Base Salary (as in effect of the date of your termination), determined by applying a discount factor of 6% effective annual interest rate. (iv) Continue to provide to you for a period equal to the greater of (i) the remainder of the Term of this Agreement or (ii) one year, benefits under any of the following welfare benefit programs of the Company as in effect from time to time during the Term of this Agreement: long term disability insurance, life insurance, accidental death and dismemberment insurance, and health and major medical benefits, pursuant to COBRA. 10. TAX GROSS-UP If it is determined that as a result of any payments provided to you under this Agreement, you will incur an excise tax under Section 4999 of the Internal Revenue Code on "excess parachute payments" or any similar tax payable under any federal, state, local or other law, as a result of payments made to you under this Agreement, then the Company shall pay to you an amount necessary to reimburse you for such excise taxes and the tax due on such reimbursement payments. All determinations and payments hereunder shall be made in adequate time to permit you to prepare and file your individual tax returns in a timely fashion. 11. MITIGATION In no event shall you, subsequent to the termination of your employment, be obligated to seek other employment arrangements or take any other action by way of mitigation of the amounts payable to you under and provision of this Agreement, nor shall the amount of any payment, hereunder be reduced by any compensation earned by you as a result of a subsequent contract with or employment by another employer. 12. ASSIGNMENT AND SUCCESSORS The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors of the Company. This Agreement may not be assigned by the Company unless the assignee or successor (as the case may be) expressly assumes the Company's obligations hereunder in writing or unless, in the opinion of counsel for the Company addressed to you, the obligations of the Company under this Agreement become the obligations of the successor to the Company by operation of law. In the event of a successor to the Company or the assignment of the Agreement, the term "Company" as used herein shall include any such successor or assignee. 13. CONSTRUCTION This Agreement shall be interpreted and construed in accordance with the laws of the State of New York without regard to its choice of law principles. In case of any dispute or disagreement arising out of or connected with this Agreement, the parties hereto hereby agree to resolve such dispute or disagreement in a court of competent jurisdiction within the State of New York. The Company shall reimburse you for all reasonable legal fees and expenses incurred by you in an effort to establish entitlement to fees and benefits under this Agreement. If you do not prevail (after exhaustion of all available judicial remedies), and a court of competent jurisdiction decides that you had no reasonable basis for bringing you action or there was an absence of good faith for bringing your action, no further reimbursement for legal fees and expenses shall be due to you, and you shall repay the Company for any amounts previously paid by the Company. It is understood that in all events, the Company shall be responsible for its own legal fees and expenses incurred for any action brought hereunder. 14. NOTICES Any notices required to be given under this Agreement shall unless otherwise agreed to by you and the Company be in writing and by certified mail, return receipt requested and mailed to the Company at its headquarters at 711-2 Koehler Avenue Ronkonkoma, NY 11779-7410 or to you at your home address at 136 W. Bayberry Rd., Islip, NY 11751. 15. WAIVER OR MODIFICATION No waiver or modification in whole or in part of this agreement or any term or condition hereof, shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or right or power by any party on one occasion shall not be construed as a waiver of or a bar to the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. 16. SEPARABILITY Any provision of this agreement which is unenforceable or invalid in any respect in any jurisdiction shall be ineffective in such jurisdiction to the extent that it is unenforceable or invalid without effecting the remaining provisions hereof, which shall continue in full force and effect. The unenforceability or invalidity of any provision of the agreement in one jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. LAKELAND INDUSTRIES, INC. /s/ Christopher J. Ryan - ------------------------ ---------------------------------- Christopher J. Ryan By: John J. Collins Executive Vice President /s/ Eric O. Hallman ---------------------------------- By: Eric O. Hallman /s/ W. James Raleigh ---------------------------------- By: W. James Raleigh Board of Directors Compensation Committee Raymond J. Smith /s/ Raymond J. Smith ----------------------------------- Chairman of the Board and President of Lakeland Industries, Inc. EX-11 3 CONSENT OF ACCOUNTANTS EXHIBIT 11 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated April 10, 1997, accompanying the consolidated financial statements and schedule incorporated by reference in the Annual Report of Lakeland Industries, Inc. and Subsidiaries on Form 10-K for the fiscal year ended January 31, 1997. We hereby consent to the incorporation by reference of said report in the Registration Statement of Lakeland Industries, Inc. and Subsidiaries on Form S-8 (File No. 33-92564, effective May 15, 1995). /s/ Grant Thornton LLP GRANT THORNTON LLP Melville, New York April 25, 1997 EX-13 4 ANNUAL REPORT TO SHAREHOLDERS Exhibit 13 Dear Fellow Shareholders: The fiscal year ended January 31, 1997 witnessed a significant improvement in the operating results of your Company. Sales increased to a record $41.8 million, compared with $40.2 million in the previous fiscal year. Net income rose to $1,063,000, versus a prior-year net profit of $587,000. On a per share basis, earnings reached $0.41, which represented a gain of 86% over the $0.22 per share profit reported in fiscal 1996. Pre-tax profit margins expanded to 3.8% of sales in the most recent fiscal year, compared with 2.4% for the year ended January 31, 1996. Management has taken a number of steps during the past 24 months to strengthen Lakeland Industries' position as a leader in the protective garment industry. We expanded our facilities in Decatur, Alabama, allowing us to automate cutting operations, increase warehouse space for raw materials and finished goods, and shorten response time to customers' orders. We opened a new factory in Mexico, which allowed us to take advantage of lower offshore manufacturing costs and enhance Lakeland's competitiveness within our industry. The Company is now the recipient of nine patents covering proprietary fabrics and machinery. We also established a new subsidiary which has begun to penetrate the Canadian market. Our employees have worked diligently to refine our manufacturing, sales and delivery systems, and your Company is considerably more efficient than it was two years ago. By teaming up with the Dupont company in a number of new licensing agreements involving Tyvek(Registered) and Tychem(Registered) clothing, our most popular products, we have forged a relationship with one of the world's largest producers of specialized textile fibers and related products. Such solid relationships with Dupont and other vendors provide us with reliable access to raw materials, while offshore production capabilities should position Lakeland as one of the most efficient manufacturers in the protective garment industry. When combined with our strong lender relationships and creative sales and marketing strategies, we believe your Company is poised to further improve its operating performance and significantly enhance shareholder values in the future. In order to better communicate with customers and investors, Lakeland Industries has established an award-winning website (Majon's Web Select Award) on the Internet at http://www.lakeland.com, and we encourage you to visit the site for a more comprehensive understanding of the Company and its entire product line. We are also taking advantage of multimedia technology in our marketing programs, as evidenced by the publication of product information and catalogs in CD-ROM format. In the United States, protective clothing products are routinely required for many workers in the chemical, petrochemical, health care, automotive, glass, cement and other industries which involve the handling of hazardous materials and/or exposure to extreme environmental conditions. We expect international markets for protective garments and related products to expand significantly as national boundaries become less important in a worldwide economy. Lakeland Industries, with its 14-year history as a quality manufacturer and its excellent vendor/customer relationships with Dupont, is now well positioned to take advantage of these international market opportunities. On behalf of management and the Board of Directors, I would like to thank all of our employees, customers, vendors and shareholders for their continued support, and I look forward to reporting upon your Company's future accomplishments. Respectfully submitted, /s/ Raymond J. Smith Raymond J. Smith President and Chief Executive Officer
SELECTED FINANCIAL DATA (In thousands, except per share amounts) For the Years Ended January 31, 1997 1996 1995 1994 1993 INCOME STATEMENT DATA: Net sales $41,792 $40,189 $35,185 $30,143 $26,512 Gross profit 7,237 6,288 6,346 4,763 3,885 Operating expenses (1) 5,212 4,882 4,704 4,739 4,281 Operating income (loss) 2,024 1,406 1,642 24 (396) Income (loss) before income taxes and cumulative effect of change in accounting principle 1,576 956 2,000 (137) (701) Income (loss) before cumulative effect of change in accounting principle 1,063 587 1,421 (278) (683) Cumulative effect of change in accounting principle (2) 241 ------ Net income (loss) 1,063 587 1,421 (37) (683) ===== ===== ===== ====== ===== Earnings (loss) per share: Income (loss) before cumulative effect of change in accounting .41 .22 .54 (.11) (.27) Cumulative effect of change in accounting principle .10 ===== ===== ===== ====== ===== Net earnings (loss) $.41 $.22 $.54 $(.01) $(.27) ===== ===== ===== ====== ===== Weighted average common and common equivalent shares 2,607 2,637 2,641 2,550 2,550 BALANCE SHEET DATA (at end of year): Working capital $14,018 $13,618 $7,190 $8,871 $5,008 Total assets 18,573 19,263 15,562 13,103 13,157 Current liabilities 2,920 3,894 6,813 2,464 5,752 L/T liabilities 5,746 6,492 441 3,680 615 Stockholders' equity $9,825 $8,762 $8,175 $6,754 $6,790
- ---------- (1)Includes a write-off of $583,669 in Notes receivable due from one customer in 1994. (2) Effective February 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which requires an asset and liability approach to accounting for income taxes. The cumulative effect as of February 1, 1993, of the adoption of SFAS No. 109, resulted in a fiscal 1994 benefit of $241,000 or $.10 per common share. Prior year's financial statements were not restated. 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal Year Ended January 31, 1997 Compared to Fiscal Year Ended January 31, 1996 Net sales for the year ended January 31, 1997 increased $1,603,000 or 3.99% to $41,792,000 from $40,189,000 reported for the year ended January 31, 1996. Increased prices and unit shipments of various protective garment products are the principal reason for this upward movement in sales. This industry, however, continues to be highly competitive. Net sales increased 13.7% during the quarter ended January 31, 1997 as compared to the immediate preceding quarter, principally as the result of the Company's ability to maintain inventory levels to meet sales demand. Gross profit as a percentage of net sales increased to 17.3% for the year ended January 31, 1997 from 15.6% reported for the prior year, principally due to the price increase instituted at the beginning of the fiscal year and price stabilization. The prior year was negatively affected as a result of the competitive and economic climate of the protective clothing industry. Margins decreased to 14.8% during the quarter ended January 31, 1997 as compared to the immediate preceding quarter as some products imported for sale during the fourth quarter were sold at lower margins. Operating expenses as a percentage of net sales increased to 12.5% for year ended January 31, 1997 from 12.1% for the prior year, as sales continue to increase without a corresponding increase in general and administrative expenses as well as the prior year having benefited from a reduction in pension expense. Interest expense remained the same consistent with outstanding borrowings. As a result of the foregoing, operating results increased to net income of $1,063,000 for the year ended January 31, 1997 from net income of $587,000 for the year ended January 31, 1996. Fiscal Year Ended January 31, 1996 Compared to Fiscal Year Ended January 31, 1995 Net sales for the year ended January 31, 1996 increased $5,004,000 or 14.2% to $40,189,000 from $35,185,000 reported for the year ended January 31, 1995. Increased prices and unit shipments of various protective garment products are the principal reason for this upward movement in sales. This industry, however, continues to be highly competitive. Net sales increased 14.6% during the quarter ended January 31, 1996 as compared to the immediate preceding quarter, principally as the result of the Company's ability to maintain inventory levels to meet sales demand. Gross profit as a percentage of net sales decreased to 15.6% for the year ended January 31, 1996 from 18.0% reported for the prior year, principally due to the erosion of the price increase instituted at the beginning of the fiscal year. Both years were negatively affected as a result of the competitive and economic climate of the protective clothing industry. Margins decreased to 12.1% during the quarter ended January 31, 1996 as compared to the immediate preceding quarter as manufacturing difficulties were incurred during the fourth quarter. Operating expenses as a percentage of net sales decreased to 12.1% for year ended January 31, 1996 from 13.4% for the prior year, as sales continue to increase without a corresponding increase in general and administrative expenses. Interest expense increased as borrowings increased during the current year, while other income decreased as the prior year included a $625,000 law suit settlement. As a result of the foregoing, operating results decreased to net income of $587,000 for the year ended January 31, 1996 from net income of $1,421,000 for the year ended January 31, 1995. 3 LIQUIDITY AND CAPITAL RESOURCES Lakeland has historically met its cash requirements through funds generated from operations and borrowings under a revolving credit facility. On August 30, 1995, the Company entered into a new $8 million facility with its Bank. This facility matures on July 31, 1998. Interest charges under this credit facility are calculated on various optional formulas using the prime rate, LIBOR, banker's acceptances and letters of credit. The Company's January 31, 1997 balance sheet shows a strong current ratio and working capital position and management believes that its positive financial position, together with its credit agreement, will provide sufficient funds for operating purposes for the next twelve months. IMPACT OF INFLATION Management believes inflation has not had a material effect on the Company's operations or its financial condition. There can be no assurance, however, that the Company's business will not be affected by inflation in the future. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Prior to September 9, 1986, there was no public market for the Company's Common Stock. On September 9, 1986, the effective date of the Company's initial public offering, the Company's Common Stock began trading in the over-the-counter market. On June 2, 1987, the Company's Common Stock began trading in the over-the-counter market as a National Market Issue. The Company's Common Stock trades on The Nasdaq Stock Market under the symbol "LAKE". It is listed in major publications under "Lakeland". The following table sets forth the high and low trade prices, as reported by NASDAQ for the last two fiscal years: Fiscal 1997 Fiscal 1996 High Low High Low ---- --- ---- --- First Quarter 4 1/4 3 1/8 6 1/8 4 Second Quarter 4 5/8 2 3/4 5 7/8 3 3/4 Third Quarter 4 1/16 3 4 7/8 3 1/4 Fourth Quarter 3 1/2 2 3/4 4 3/8 2 7/8 First Quarter fiscal 1998 3 3/4 2 13/16 (through April 18, 1997) The Company has never declared or paid a cash dividend on its Common Stock, and the Company has no present intention of declaring or paying any cash dividends on its Common Stock in the foreseeable future. The Company's revolving credit facility provides for certain restrictions that, at January 31, 1997 prohibited the Company from paying any cash dividends. As of April 11, 1997, there were 129 holders of record of the Common Stock of the Company. There are believed to be in excess of 500 beneficial shareholders in addition to those of record, since over 1 million shares are held in street name by Cede & Co. a large financial clearing house. 4 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Lakeland Industries, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Lakeland Industries, Inc. and Subsidiaries (the "Company") as of January 31, 1997 and 1996, and the related consolidated statements of income and retained earnings and cash flows for each of the three years in the period ended January 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of January 31, 1997 and 1996, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended January 31, 1997, in conformity with generally accepted accounting principles. We have also audited Schedule II - Valuation and Qualifying Accounts for each of the three years in the period ended January 31, 1997. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON LLP Melville, New York April 10, 1997 5 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS January 31,
ASSETS 1997 1996 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 504,940 $ 364,640 Accounts receivable, net of allowance for doubtful accounts of $150,000 and $263,000 at January 31, 1997 and 1996, respectively 5,893,594 4,979,975 Inventories 9,894,156 11,244,241 Deferred income taxes 469,000 432,000 Other current assets 176,901 490,776 ----------- ----------- Total current assets 16,938,591 17,511,632 PROPERTY AND EQUIPMENT, NET 989,667 1,026,203 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, net of accumulated amortization of $198,000 and $178,000 at January 31, 1997 and 1996, respectively 347,116 367,104 NOTE RECEIVABLE 140,298 147,921 OTHER ASSETS 157,444 209,872 ----------- ----------- $18,573,116 $19,262,732 =========== ===========
The accompanying notes are an integral part of these statements. 6 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (continued) January 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 ----------- ----------- CURRENT LIABILITIES Accounts payable $ 2,534,999 $ 3,465,552 Accrued expenses and other current liabilities 335,314 378,524 Current portion of long-term liabilities 50,000 50,000 ----------- ----------- Total current liabilities 2,920,313 3,894,076 LONG-TERM LIABILITIES 5,745,789 6,491,938 DEFERRED INCOME TAXES 82,000 115,000 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.01 par; 1,500,000 shares authorized; none issued Common stock, $.01 par; 10,000,000 shares authorized; 2,550,000 shares issued and outstanding 25,500 25,500 Additional paid-in capital 5,981,226 5,981,226 Retained earnings 3,818,288 2,754,992 ----------- ----------- 9,825,014 8,761,718 ----------- ----------- $18,573,116 $19,262,732 =========== ===========
The accompanying notes are an integral part of these statements. 7 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Fiscal year ended January 31,
1997 1996 1995 ------------ ------------ ------------ Net sales $ 41,792,469 $ 40,188,916 $ 35,184,994 Cost of goods sold 34,555,786 33,901,232 28,839,099 ------------ ------------ ------------ Gross profit 7,236,683 6,287,684 6,345,895 ------------ ------------ ------------ Operating expenses Selling and shipping 2,569,702 2,691,193 2,288,602 General and administrative 2,625,866 2,163,621 2,315,611 Research and development 16,718 27,298 99,795 ------------ ------------ ------------ Total operating expenses 5,212,286 4,882,112 4,704,008 ------------ ------------ ------------ Operating profit 2,024,397 1,405,572 1,641,887 ------------ ------------ ------------ Other (expense) income Interest expense (510,757) (511,180) (304,613) Interest income 27,293 19,938 632 Other income 35,363 41,292 662,572 ------------ ------------ ------------ (448,101) (449,950) 358,591 ------------ ------------ ------------ Income before income taxes 1,576,296 955,622 2,000,478 Income tax expense (513,000) (369,000) (579,000) ------------ ------------ ------------ NET INCOME 1,063,296 586,622 1,421,478 Retained earnings at beginning of year 2,754,992 2,168,370 746,892 ------------ ------------ ------------ Retained earnings at end of year $ 3,818,288 $ 2,754,992 $ 2,168,370 ============ ============ ============ Net income per common share $ .41 $ .22 $ .54 ============ ============ ============ Average number of common shares outstanding 2,607,498 2,637,394 2,640,518 ============ ============ ============
The accompanying notes are an integral part of these statements. 8 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal year ended January 31,
1997 1996 1995 ----------- ----------- ----------- Cash flows from operating activities Net income $ 1,063,296 $ 586,622 $ 1,421,478 Adjustments to reconcile net income to net cash provided by (used in) operating activities Deferred income taxes (70,000) 5,000 (212,000) Depreciation and amortization 342,963 272,135 266,565 Gain on sale of property (4,530) (Increase) decrease in operating assets Accounts receivable (913,620) (571,104) (353,872) Inventories 1,350,085 (2,385,943) (2,157,905) Other current assets 314,415 (329,725) 92,270 Other assets (46,653) 130,550 (8,444) Increase (decrease) in operating liabilities Accounts payable (930,553) 641,004 669,663 Accrued expenses and other liabilities 759 6,108 143,941 ----------- ----------- ----------- Net cash provided by (used in) operating activities 1,106,162 (1,645,353) (138,304) ----------- ----------- ----------- Cash flows from investing activities Purchases of property and equipment - net (283,358) (577,756) (84,099) Payments on note receivable 7,082 6,015 2,048 Proceeds from sale of property 10,414 -- 33,063 ----------- ----------- ----------- Net cash used in investing activities (265,862) (571,741) (48,988) ----------- ----------- ----------- Cash flows from financing activities Net borrowings (reductions) under line of credit agreement (700,000) 2,485,150 295,904 Deferred financing costs -- (23,335) -- ----------- ----------- ----------- Net cash (used in) provided by financing activities (700,000) 2,461,815 295,904 ----------- ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 140,300 244,721 108,612 Cash and cash equivalents at beginning of year 364,640 119,919 11,307 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 504,940 $ 364,640 $ 119,919 =========== =========== ===========
The accompanying notes are an integral part of these statements. 9 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997, 1996 and 1995 NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES 1. Business Lakeland Industries, Inc. and Subsidiaries (the "Company"), a Delaware corporation, organized in April 1982, is engaged primarily in the manufacture of disposable and reusable protective work clothing. The principal market for the Company's products is in the United States. No customer accounted for more than 10% of net sales during the fiscal years ended January 31, 1997, 1996 and 1995. 2. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Fireland Industries, Inc., Lakeland Protective Wear, Inc. (a Canadian corporation) and Lakeland de Mexico S.A. de C.V. (a Mexican corporation). All significant intercompany accounts and transactions have been eliminated. 3. Inventories Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out method. 4. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, on a straight-line basis. Leasehold improvements and leasehold costs are amortized over the term of the lease or service lives of the improvements, whichever is shorter. The costs of additions and improvements which substantially extend the useful life of a particular asset are capitalized. Repair and maintenance costs are charged to expense. 5. Excess of Cost Over the Fair Value of Net Assets Acquired The excess of cost over the fair value of net assets acquired (goodwill) is amortized on a straight-line basis over a 30-year period. On an ongoing basis, management reviews the valuation and amortization of goodwill to determine possible impairment by considering current operating results and comparing the carrying value to the anticipated undiscounted future cash flows of the related assets. 6. Income Taxes Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities and loss carryforwards and tax credit carryforwards for which income tax benefits are expected to be realized in future years. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that all, or some portion of, such deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. 10 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE A (continued) 7. Income (Loss) Per Common Share Income per share is based on the weighted average number of common shares outstanding and common share equivalents. 8. Statement of Cash Flows The Company considers highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. Cash equivalents consist of money market funds. The market value of the cash equivalents approximates cost. Supplemental cash flow information for the fiscal years ended January 31 was as follows: 1997 1996 1995 --------- --------- -------- Interest paid $494,102 $431,555 $304,676 Income taxes paid, net of refunds 325,242 618,853 665,488 9. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentration of credit risk consist principally of trade receivables. Concentration of credit risk with respect to these receivables is generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across geographic areas within the United States. The Company routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. 10. Foreign Currency Translation The monetary assets and liabilities of the Company's foreign operations are translated into U.S. dollars at current exchange rates, while nonmonetary items are translated at historical rates. Revenues and expenses are generally translated at average exchange rates for the year. Resulting translation adjustments are reflected as a separate component of stockholders' equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. 11. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at year-end and the reported amounts of revenues and expenses 11 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE A (continued) during the reporting period. Actual results could differ from those estimates. The significant estimates include the allowance for doubtful accounts and inventory reserves. It is reasonably possible that events could occur during the upcoming year that could change such estimates. NOTE B - NOTE RECEIVABLE In October 1994, the Company sold its Ohio facility to an unrelated third party for $187,500 ($25,000 cash and a $162,500 mortgage note). The selling price of the property approximated the net book value at the time of sale. The mortgage note is payable in 47 consecutive monthly payments of $1,523, including principal and interest at an annual rate of 8%, until October 1998 when the entire unpaid balance of the indebtedness shall be due and payable. This note is secured by a mortgage on real estate located in the City of Newark, Licking County, Ohio. NOTE C - INVENTORIES Inventories consist of the following at January 31:
1997 1996 ----------- ----------- Raw materials $2,669,254 $ 2,980,137 Work-in-process 3,124,141 3,225,272 Finished goods 4,100,761 5,038,832 --------- ----------- $9,894,156 $11,244,241
NOTE D - PROPERTY AND EQUIPMENT Property and equipment consist of the following at January 31:
Useful life in years 1997 1996 ----------- ----------- ----------- Machinery and equipment 10 $2,409,648 $2,180,832 Furniture and fixtures 5 - 10 157,722 148,814 Leasehold improvements Lease term 185,587 147,374 ---------- ---------- 2,752,957 2,477,020 Less accumulated depreciation and amortization 1,763,290 1,450,817 --------- --------- $ 989,667 $1,026,203 ========== =========
12 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Fair Value of Financial Instruments," requires disclosure of the estimated fair value of an entity's financial instrument assets and liabilities. The Company's principal financial instrument consists of its three-year revolving credit facility with a bank. The Company believes that the carrying amount of such debt approximates the fair value as the variable interest rate approximates the current prevailing interest rate. Additionally, the Company's financial position has not substantially changed since the August 1995 inception of such credit facility. NOTE F - LONG-TERM LIABILITIES Long-term liabilities consist of the following at January 31: 1997 1996 ----------- ----------- Revolving credit facility $5,400,000 $6,100,000 Pension liability (Note J) 395,789 441,938 ---------- ---------- 5,795,789 6,541,938 Less current portion of pension liability 50,000 50,000 ----------- ----------- Long-term liabilities $5,745,789 $6,491,938 ========= ========= During August 1995, the Company entered into a $8,000,000, three-year secured revolving credit facility with a bank, replacing the two-year facility that was due to expire. Under this secured revolving credit facility, which expires on July 31, 1998, the Company may borrow up to a maximum of $8,000,000 based upon eligible accounts receivable and inventories, as defined in the Agreement. Borrowings under the revolving credit facility bear interest at a rate per annum equal to the prime commercial lending rate or LIBOR plus 200 points (7.44% at January 31, 1997). Such interest is payable at the end of the respective interest period, ranging from 30 to 180 days. A fee of 1/2% per annum is charged to the Company on the unused portion of such facility. The loan is collateralized by substantially all the assets of the Company. Deferred financing fees of $20,000 are being amortized on a straight-line basis over the three-year term of this facility. The revolving credit facility also contains restrictive covenants, measurable on a quarterly or annual basis, with respect to: tangible net worth, capital expenditures and certain financial ratios, as defined. The revolving credit agreement restricts the Company from declaring or paying any dividends. As of January 31, 1997, the Company was in compliance with all covenants related to this agreement. The maximum amounts borrowed under the revolving lines of credit during the fiscal years ended January 31, 1997 and 1996 were $7,000,000 and $7,120,000, respectively, and the average interest rate for each period then ended was 7.5% and 9.4%, respectively. 13 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE G - COMMITMENTS AND CONTINGENCIES 1. Employment Contracts The Company has employment contracts with three principal officers expiring through February 2000. Such contracts are automatically renewable for one- or two-year terms, unless 30 to 120 days' notice is given by either party. Pursuant to such contracts, the Company is committed to aggregate base remuneration of $515,000, $175,000 and $175,000 for the fiscal years ended January 31, 1998, 1999 and 2000, respectively. 2. Leases The Company leases the majority of its premises under various operating leases expiring through fiscal 2002. The lease for the principal manufacturing facility (located in Decatur, Alabama) is with a partnership whose partners are principal officers and stockholders of the Company. This lease expires on August 31, 1999 and requires annual payments of approximately $365,000 plus certain operating expenses. In addition, the Company has several operating leases for machinery and equipment. Total rental expense under all operating leases is summarized as follows: Total Rentals Gross sublease paid to rental rental related expense income parties ------- --------- ------- Year ended January 31, 1997 581,161 $ 3,024 $392,160 1996 483,690 20,011 369,150 1995 340,171 13,169 249,300 Minimum annual rental commitments for the remaining term of the Company's noncancellable operating leases relating to office space and equipment rentals at January 31, 1997 are summarized as follows: Year ending January 31, 1998 $ 622,795 1999 594,151 2000 383,885 2001 76,576 2002 8,062 ------------ $1,685,469 ============ Certain leases require additional payments based upon increases in property taxes and other expenses. 14 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE G (continued) 3. Services Agreement In August 1993, the Company entered into a services agreement with an affiliated entity, principally owned by a principal officer and stockholder of the Company. Pursuant to the terms of such agreement, the affiliate provides professional and/or skilled labor to a division of the Company, as needed, at contractual rates of compensation. Such agreement is cancelable by either the Company or the affiliate upon thirty days' written notice. Costs incurred by the Company in connection with such agreement aggregated $426,000, $520,000 and $654,000 for the fiscal years ended January 31, 1997, 1996 and 1995, respectively. 4. Litigation In January 1995, the Company received a $625,000 cash settlement pursuant to an action filed against its prior legal counsel, involving a number of causes of action relating to that law firm's representation of the Company between 1987 and 1991. This amount is included in "Other income" for the fiscal year ended January 31, 1995. The Company is involved in various litigation arising during the normal course of business which, in the opinion of the management of the Company, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. 5. Self-insurance The Company maintains a self-insurance program for that portion of health care costs not covered by insurance. The Company is liable for claims up to defined limits. Self-insurance costs are based upon the aggregate of the liability for reported claims and an estimated liability for claims incurred but not reported. NOTE H - STOCKHOLDERS' EQUITY AND STOCK OPTIONS A Nonemployee Directors' Option Plan (the "Directors' Plan") was adopted by the Board of Directors and approved by the stockholders during the year ended January 31, 1990. Under the Directors' Plan, 60,000 shares of common stock have been authorized for issuance. The Directors' Plan provides for an automatic one-time grant of options to purchase 5,000 shares of common stock to each nonemployee director elected or appointed to the Board. Options become exercisable commencing six months from the date of grant and expire six years from the date of grant. In addition, all nonemployee directors re-elected to the Company's Board of Directors at any annual meeting of the stockholders will be automatically granted additional options to purchase 1,000 shares of common stock on each of such dates. On May 1, 1986, the Company's 1986 Incentive and Nonstatutory Stock Option Plan (the "Incentive Plan"), which provides for the granting of incentive stock options and nonstatutory options, was adopted by the Board of Directors and approved by the stockholders. This plan provides for the grant of options to key employees and independent sales representatives to purchase up to 400,000 shares of the Company's common stock, upon terms and conditions determined by a committee of the Board of Directors which administers the plan. 15 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE H (continued) Options are granted at not less than fair market value (110 percent of fair market value as to incentive stock options granted to ten percent stockholders) and are exercisable over a period not to exceed ten years (five years as to incentive stock options granted to ten percent stockholders). On February 15, 1989, the Board of Directors approved a restatement of the Incentive Plan to conform with certain changes required by the Tax Reform Act of 1986. The Board of Directors also restated the Incentive Plan to provide for stock appreciation rights and changed provisions of the plan relative to option holders' rights upon termination of employment with the Company and modified the language of the Incentive Plan in other sections such as "Eligibility" and "Terms and Conditions of Options." The restatement of the Incentive Plan was approved by the stockholders. The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans and does not recognize compensation expense for its stock-based compensation plans. If the Company had elected to recognize compensation expense based upon the fair value at the date of grant for awards under these plans consistent with the methodology prescribed by SFAS 123, the effect on the Company's net income and earnings per share for the year ended January 31, 1996 would not be material in relation to the consolidated financial statements and the Company's net income and earnings per share for the year ended January 31, 1997 would be reduced to the pro forma amounts indicated below: Net income As reported $1,063,296 Pro forma 974,555 Net income per common share As reported $.41 Pro forma .37 These pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation expense related to grants made before fiscal 1995. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for the years ended January 31, 1997 and 1996, respectively: expected volatility of 57% and 43%; risk-free interest rates of 7% and 6%; and expected life of six years for both periods. 16 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE H (continued) Additional information with respect to the Company's plans for the fiscal years ended January 31, 1997, 1996 and 1995 is summarized as follows:
1997 ------------------------------------------------------------- Directors' Plan Incentive Plan -------------------------- ------------------------- Weighted- Weighted- Number average Number average of exercise of exercise Shares price shares price ------ --------- ------ --------- Shares under option Outstanding at beginning of year 18,000 $1.90 150,000 $2.13 Granted - - 34,000 3.50 Expired - - (34,000) 2.50 ------ ------- Outstanding at end of year 18,000 1.90 150,000 2.36 ====== ======= Options exercisable at year-end 18,000 1.90 150,000 2.36 Weighted-average remaining contractual life of options outstanding 1 year 4 years Weighted-average fair value per share of options granted during 1997 - 2.61
The exercise prices of options outstanding at January 31, 1997 ranged from $1.37 to $4.25.
1996 ------------------------------------------------------------- Directors' Plan Incentive Plan -------------------------- ------------------------- Weighted- Weighted- Number average Number average of exercise of exercise Shares price shares price ------ --------- ------ --------- Shares under option Outstanding at beginning of year 17,000 $1.76 150,000 $2.13 Granted 1,000 4.25 - ------ ------- Outstanding at end of year 18,000 1.90 150,000 2.13 ====== ======= Options exercisable at year-end 18,000 1.90 150,000 2.13 Weighted-average fair value per share of options granted during 1996 2.15 -
17 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE H (continued)
1995 ------------------------------------------------------------- Directors' Plan Incentive Plan -------------------------- ------------------------- Weighted- Weighted- Number average Number average of exercise of exercise Shares price shares price ------ --------- ------ --------- Shares under option Outstanding at beginning of year 15,000 $1.48 150,000 $2.13 Granted 2,000 3.88 - ------ ------- Outstanding at end of year 17,000 1.76 150,000 2.13 ====== ======= Options exercisable at year-end 17,000 1.76 150,000 2.13
NOTE I - INCOME TAXES The provision for income taxes is summarized as follows:
Year ended January 31, ------------------------------------------------ 1997 1996 1995 -------- -------- -------- Current Federal $603,000 $382,000 $ 584,000 State (20,000) (18,000) 207,000 -------- --------- --------- 583,000 364,000 791,000 Deferred (70,000) 5,000 (212,000) -------- --------- --------- $513,000 $369,000 $ 579,000 ======== ========= =========
18 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE I (continued) The following is a reconciliation of the effective income tax rate to the Federal statutory rate:
Year ended January 31, ---------------------------------------------- 1997 1996 1995 ------ ------ ------ Statutory rate 34.0% 34.0% 34.0% State income taxes, net of Federal tax benefit (.4) (.4) 4.6 Nondeductible expenses .8 1.7 .5 Operating loss generating no current tax benefit 1.8 2.5 Change in deferred assets/valuation allowance (4.4) .5 (10.0) Other .7 .3 (.2) ------ ------ ------ Effective rate 32.5% 38.6% 28.9% ====== ====== ======
The tax effects of temporary differences which give rise to deferred tax assets at January 31, 1997 and 1996 are summarized as follows:
January 31, ----------------------------- 1997 1996 ------- ------- Deferred tax assets Accounts receivable $ 57,000 $100,000 Inventories 302,500 271,300 Vacation accrual 37,500 36,300 Net operating loss carryforward - Canadian subsidiary 53,000 24,400 Accrued compensation 19,000 -------- Gross deferred tax assets 469,000 432,000 ------- ------- Deferred tax liabilities Depreciation 82,000 115,000 -------- ------- Gross deferred tax liabilities 82,000 115,000 ------- ------- Net deferred tax asset $387,000 $317,000 ======= =======
19 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE I (continued) The net operating loss carryforwards applicable to the Company's Canadian subsidiary expire in fiscal 2002 through 2004. The Internal Revenue Service is currently auditing the Company's fiscal 1995 return. The State of Missouri is currently auditing the Company's 1993 to 1996 fiscal periods. The management of the Company does not expect that these examinations will have a material adverse impact on the consolidated financial statements. NOTE J - DEFINED BENEFIT PENSION PLAN A former subsidiary of the Company has a defined benefit pension plan which the Company assumed in connection with an acquisition made in fiscal 1987. This plan covers substantially all of the former subsidiary's employees. Benefits pursuant to this plan were frozen as of January 1, 1986. The benefits earned are based on years of service and the employee's final average annual salary which is based on the highest five consecutive of the last ten years of employment prior to January 1, 1986. The Company's funding policy is to contribute annually the recommended amount based on computations made by its consulting actuary. The components of the net periodic pension cost for the fiscal years ended January 31 are summarized as follows:
1997 1996 1995 --------- -------- --------- Normal cost $ 1,613 $ 1,613 $ 1,613 Interest cost on projected benefit obligation 62,259 60,611 56,692 Actual return on assets (92,226) (40,653) (4,322) Net amortization and deferral 71,026 25,159 (8,529) ------- ------- ------ Net periodic pension cost $ 42,672 $ 46,730 $45,454 ======= ======= ======
The following is a summary of the plan's funded status and amounts recognized in the Company's consolidated balance sheets at January 31:
1997 1996 ---------- ---------- Actuarial present value of benefit obligation Vested benefits $863,621 $842,701 ------- ------- Projected benefit obligation 863,621 842,701 Plan assets at fair market value 467,832 400,763 ------- ------- Projected benefit obligation in excess of plan assets 395,789 441,938
20 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 1997, 1996 and 1995 NOTE J (continued)
1997 1996 ---------- ---------- Unrecognized gain (loss) $ 16,945 $ (62,021) Unrecognized net obligation at transition amortized over a 15-year period (79,213) (89,068) Required minimum liability (also included as a component of other assets) 62,268 151,089 -------- ------- Pension cost liability (included in long-term liabilities) $395,789 $441,938 ======= =======
An assumed discount rate of 7.5% was used in determining the actuarial present value of benefit obligations for all periods presented. The expected long-term rate of return on plan assets was 8% for all periods presented. At January 31, 1997, approximately 73% of the plan's assets were held in mutual funds invested primarily in equity securities, approximately 14% was invested in money market instruments and the remaining 13% was invested in equity securities and debt instruments. NOTE K - MAJOR SUPPLIER The Company purchased approximately 74% of its raw materials from one supplier under licensing agreements. The Company expects this relationship to continue for the foreseeable future. If required, similar raw materials could be purchased from other sources. 21 > CORPORATE INFORMATION --------------------- Directors: Raymond J. Smith, Chairman Christopher J. Ryan John J. Collins, Jr. Senior Vice President of Liberty Brokerage, Inc. Eric O. Hallman Officer of Sylvan-Lawrence Walter J. Raleigh Senior Advisor to CMI Industries, Inc. Market Makers: Troster Singer Corp. Legg Mason Wood Walker Inc. G.V.R. Company Mayer & Schweitzer Inc. Nash Weiss/Div of Shatkin Inv. Herzog, Heine, Geduld, Inc. Mercer Bokert Buckman & Reid Worldco L.L.C. M.H. Meyerson & Co. MPAC Capital Partners, L.P. Wein Securities Corp. Officers: Raymond J. Smith, President Christopher J. Ryan Executive Vice President of Finance and Secretary James M. McCormick Vice President and Treasurer Harvey Pride, Jr. Vice President, Manufacturing Auditors: Grant Thornton LLP Suite 3S01 One Huntington Quadrangle Melville, NY 11747-4464 Counsel: Law Offices of Thomas J. Smith 14 Briarwood Lane Suffern, NY 10901-3602 Transfer Agent: Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 NASDAQ symbol: LAKE Executive Offices: 711-2 Koehler Ave. Ronkonkoma, NY 11779 (516) 981-9700 Subsidiaries: Fireland Industries, Inc. Lakeland Protective Wear, Inc. (Canada) Lakeland de Mexico S.A. de C.V. Exhibits to Lakeland Industries, Inc.'s 1997 Form 10-K are available to shareholders for a fee equal to Lakeland's cost in furnishing such exhibits, on written request to the Secretary, Lakeland Industries, Inc., 711-2 Koehler Avenue, Ronkonkoma, New York 11779. DextraGard TM, Forcefield TM, Interceptor TM, Checkmate TM, Heatex TM, Pyrolon TM, Sterling Heights TM, Fyrepel TM, Highland TM, Impede TM, Chemland TM and Uniland TM are trademarks of Lakeland Industries, Inc. Tyvek TM, Viton TM, Barricade TM, Nomex TM, Kevlar TM, Delrin TM, TyChem TM and Teflon TM are registered trademarks of E.I.DuPont de Nemours and Company. Saranex TM is a registered trademark of Dow Chemical. Spectra TM is a registered trademark of Allied Signal, Inc. 22 [LOGO] Corporate Headquarters 711-2 Koehler Avenue Ronkonkoma, NY U.S.A.11779-7410 Tel: 516-981-9700 Fax: 516-981-9751 E-Mail: 74313.1743@compuserve.com Internet: http://www.lakeland.com Lakeland Limited-Use Clothing Customer Service 800-645-9291 Tel: 205-350-3873 Fax: 205-350-0773 Chemical Protective Clothing Division Customer Service 800-645-9291 Tel: 205-350-3873 Fax: 205-350-3011 Hand/Arm Protection Division Customer Service 800-886-8010 Tel: 205-351-9126 Fax: 205-353-9463 Woven Clothing Division Customer Service 800-933-0115 Tel: 219-929-5536 Fax: 219-929-5562 Fire Protective Clothing Division Customer Service 800-345-7845 Tel: 205-350-3107 Fax: 205-350-3011 Lakeland Protective Wear Inc. Canada 5109 Harvestor Road Unit B-14 Burlington, Ontario L7L5Y9 800-489-9131 Tel: 905-634-6400 Fax: 905-634-6611 EX-20 5 PROXY STATEMENT FOR ANNUAL MEETING May 13, 1997 Dear Stockholder, I am pleased to extend to you my personal invitation to attend the 1997 Annual Meeting of Stockholders of Lakeland Industries, Inc. (the "Company") on Wednesday, June 18, 1997 at 10:00 a.m. at the Decatur Country Club, 2401 Country Club Road SE, Decatur, AL 35601. The accompanying Notice of Annual Meeting and Proxy Statement contain a description of the formal business to be acted upon by the stockholders. At the meeting, I intend to discuss the Company's performance for its fiscal year ended January 31, 1997 and its plans for the current fiscal year. Certain members of the Company's Board of Directors and officers of the Company, as well as a representative of Grant Thornton LLP, the Company's independent auditors, will be available to answer any questions you may have, or to make a statement if they wish to. While I am looking forward to seeing you at the meeting, it is very important that those of you who cannot personally attend assure your shares are represented. I urge you therefore to sign and date the enclosed form of proxy and return it promptly in the accompanying envelope. If you attend the meeting, you may, if you wish, withdraw any proxy previously given and vote your shares in person. Sincerely, /s/ Raymond J. Smith Raymond J. Smith President and Chairman of the Board LAKELAND INDUSTRIES, INC. NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS June 18, 1997 TO THE STOCKHOLDERS OF LAKELAND INDUSTRIES, INC.: Notice is hereby given that the Annual Meeting of Stockholders of Lakeland Industries, Inc., a Delaware corporation (the "Company"), will be held on Wednesday, June 18, 1997 at 10:00 a.m. at the Decatur Country Club, 2401 Country Club Road SE, Decatur, AL 35601 for the following purposes: 1. To elect two Class II members of the Board of Directors, and 2. To transact such other business as properly may come before the meeting or any adjournment thereof. Each share of the Company's Common Stock will be entitled to one vote upon all matters described above. Stockholders of record at the close of business on April 29, 1997 will be entitled to notice and to vote at the meeting. May 13, 1997 BY ORDER OF THE BOARD OF DIRECTORS Christopher J. Ryan, Secretary PLEASE DATE, VOTE AND SIGN THE ENCLOSED PROXY AND RETURN PROMPTLY. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE. LAKELAND INDUSTRIES, INC. 711-2 Koehler Ave. Ronkonkoma, New York 11779 PROXY STATEMENT 1997 Annual Meeting of Stockholders June 18, 1997 GENERAL INFORMATION ------------------------- This proxy statement is furnished in connection with the solicitation by the Board of Directors of Lakeland Industries, Inc. (the "Company") of proxies from the holders of the Company's $.01 par value Common Stock (the "Common Stock") for use at the 1997 Annual Meeting of Stockholders to be held on June 18, 1997, and at any adjournment thereof (the "Annual Meeting"). This proxy statement, the accompanying form of proxy and the Company's 1997 Form 10-K (which includes the Company's Annual Report to Stockholders) are first being sent to the Company's stockholders on or about May 13, 1997. The accompanying proxy may be revoked by the person giving it at any time prior to its being voted; such revocation may be accomplished by a letter, or by a properly signed proxy bearing a later date, filed with the Secretary of the Company prior to the Annual Meeting. If the person giving the proxy is present at the meeting and wishes to vote in person, he or she may withdraw his or her proxy at that time. The Company has borne all costs of solicitation of proxies. In addition to solicitation by mail, there may be incidental personal solicitations made by directors, officers and regular employees of the Company and its subsidiaries. The cost of solicitation, including the payments to nominees who at the request of the Company mail such material to their customers, will be borne by the Company. VOTING SECURITIES AND STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS All holders of record of the Common Stock at the close of business on April 29, 1997, are entitled to notice of and to vote at the Annual Meeting. At the close of business on April 29, 1997, there were 2,550,000 shares of outstanding Common Stock, each entitled to one vote per share on all matters to be voted upon at the Annual Meeting. The Company's stockholders do not have cumulative voting rights. 1 The following table sets forth information as of April 25, 1997, with respect to beneficial ownership of the Company's Common Stock by all persons known by the Company to own beneficially more than 5% of the Common Stock, each director and nominee for director of the Company and all directors and officers of the Company as a group. All persons listed have sole voting and investment power with respect to their shares of Common Stock. Name and Address Number of Common Percent of Beneficial Owner Shares Beneficially Owned of Class - ------------------- ------------------------ ---------- Raymond J. Smith 579,500 (1) 22.73% 711-2 Koehler Ave. Ronkonkoma, NY 11779 Christopher J. Ryan 248,972 (2)(6) 9.76% 711-2 Koehler Ave. Ronkonkoma, NY 11779 Joseph P. Gordon 140,500 5.51% 177-23 Union Tpke., Flushing, NY 11366 John J. Collins, Jr. 126,400 (3) 4.96% Eric O. Hallman 74,000 (3) 2.90% Walter J. Raleigh 6,000 (4) .24% All officers and directors as a group (7 persons) 1,079,822 (5) 42.35% - -------------------------- Included in the above are fully exercisable options to purchase the Company's common stock, as follows: (1) 9,000 shares granted on June 5, 1996; and 44,500 shares granted January 1 and 2, 1994; (2) 40,000 shares granted on May 28, 1991; and 8,750 shares granted January 1, 1994; (3) 5,000 shares granted on June 5, 1991; and 1,000 shares granted on June 15, 1994 to each of Mr. Hallman and Mr. Collins; (4) 5,000 shares granted on April 18, 1997 and 1,000 shares granted June 15, 1995; (5) 164,700 shares granted between May 28, 1991 and April 18, 1997 (6) Mr. Ryan disclaims beneficial ownership of 15,000 shares owned by his wife. 2 Proposal 1 - ELECTION OF DIRECTORS The Company's Certificate of Incorporation provides for three classes of directors with staggered terms of office and provides that upon the expiration of the terms of office for a class of directors, nominees for each class shall be elected for a term of three years to serve until the election and qualification of their successors or until their earlier resignation, death or removal from office. The Company currently has one Class I director, two Class II directors and two Class III directors. At the 1997 Annual Meeting there are two nominees for director in Class II. The incumbent Class III and Class I directors have one year and two years, respectively, remaining on their terms of office. The Company has no reason to believe that either of the nominees will be disqualified or unable to serve, or will refuse to serve if elected. However, if a nominee is unable or unwilling to accept election, the proxies will be voted for such substitute as the Board of Directors may select. It is intended that the shares represented by proxies will be voted, in the absence of contrary instructions, for the election as director of the nominees for Class II named in the following table. The Board of Directors has nominated and Management recommends the election of the persons listed in the following table as Class II directors. The table also sets forth the names of the one director in Class I and the two directors in Class III whose terms of office have not expired, their ages, their positions with the Company and the period each has served as a director of the Company. There are no family relationships among the Board members.
Position With the Director Name Age Company Since - --------------------------------------------------------------------------------------------------------------- NOMINEES FOR DIRECTOR CLASS II (Nominees for 3 Year Term Expiring in June, 2000) ----------------------------------------- John J. Collins, Jr. 54 Director 1986 Eric O. Hallman 53 Director 1982 INCUMBENT DIRECTOR - CLASS I (Two Years Remaining on Term Expiring in June, 1999) ----------------------------------------- Christopher J. Ryan 45 Executive Vice President - 1986 Finance, Secretary and Director INCUMBENT DIRECTORS - CLASS III (One Year remaining on Term Expiring in June, 1998) ------------------------------------------ Raymond J. Smith 58 Chairman of the Board, 1982 President and Director Walter J. Raleigh 69 Director 1991
3 The principal occupations and employment of the nominees for director and for the directors continuing in office are set forth below: John J. Collins, Jr. has been Senior Vice President of Liberty Brokerage, a government securities firm, since January 1987. From 1977 to January, 1987, he was Executive Vice President of Chapdelaine GSI, a government securities firm. Eric O. Hallman has been a director of the Company since its incorporation. He was President of Naess Hallman Inc., a shipbrokering firm, between 1984 and 1991. Mr. Hallman was also affiliated between 1991 and 1992 with Finanshuset (U.S.A.), Inc., a shipbrokering and international financial services and consulting concern, and is currently an officer of Sylvan Lawrence, a real estate development company. Raymond J. Smith, a co-founder of the Company, has been Chairman of the Board of Directors and President since its incorporation in 1982. Walter J. Raleigh is a director of Clinton Mills, Inc. and was president of Clinton Mills Sales, Co. Division, N.Y. from 1974 to 1995. Clinton Mills was a textile manufacturer of woven fabrics. Mr. Raleigh retired from Clinton Mills in 1995 and now is a Senior Adviser to CMI Industries, Inc., the successor company to Clinton Mills. Mr. Raleigh is a director of Kerry Petroleum Company, an oil and gas development company. Christopher J. Ryan has served as Executive Vice President-Finance and director since May, 1986 and Secretary since April 1991. From October 1989 until February 1991 Mr. Ryan was employed by Sands Brothers, Mitchell Co. Ltd. and Rodman & Renshaw, Inc., both investment banking firms. Prior to that, he was an independent consultant with Laidlaw Holding Co., Inc., an investment banking firm, from January 1989 until September 1989. From February, 1987 to January, 1989 he was employed as the Managing Director of Corporate Finance for Brean Murray, Foster Securities, Inc. He was employed from June, 1985 to March, 1986 as a Senior Vice President with the investment banking firm of Laidlaw Adams Peck, Inc., a predecessor firm to Laidlaw Holdings, Inc. During the year ended January 31, 1997, the Board of Directors of the Company met three times, and four of the five members of the Board of Directors attended at least 75% of the aggregate of (1) the total number of meetings of the Board of Directors held during the period when he was a director, and (2) the total number of meetings held by all committees of the Board of Directors on which he served (during the periods when he served). Committees of the Board of Directors are as follows: 1- The Stock Option and Compensation Committee is responsible for evaluating the performance of the Company's management, fixing or determining the method of fixing compensation of the Company's salaried employees, administering the Company's Stock Option and 401K/ESOP Plans, and reviewing significant amendments to a subsidiary's employee pension benefit plan. The Committee also, in conjunction with the Chief Executive Officer, considers the qualifications of prospective Directors of the Company and, as vacancies occur, recommends nominees to the Board of Directors. The Stock Option and Compensation Committee (which also functions as a nominating committee for nominations to the Board) will consider nominees to the Board recommended by stockholders. Such recommendations must be in writing and sent to the Secretary of the Company no later than January 31st of the year in which the Annual Meeting is to be held, accompanied by a brief description of the proposed nominee's principal occupation and his or her other qualifications which, in the stockholder's opinion, make such person a suitable candidate for nomination to the Board. This Committee did not meet during the year ended January 31, 1997. The committee members are: John J. Collins, Jr., Eric O. Hallman, and Walter J. Raleigh 4 Compensation Committee Interlocks and Insider Participation Members of the Stock Option and Compensation Committee are outside directors that do not serve in any other capacity with respect to the Company or any of its subsidiaries. Messrs. Collins and Hallman are partners of POMS Holding Co., see Certain Relationships and Related Transactions. 2- The Audit Committee was formed in September, 1987 and is responsible for recommending to the Board of Directors the appointment of independent auditors for the fiscal year, reviewing with the independent auditors the scope of their proposed and completed audits, and reviewing with the Company's financial management and its independent auditors, other matters relating to audits and to the adequacy of the Company's internal control structure. This Committee met once during the year ended January 31, 1997. The committee members are: John J. Collins, Jr., Eric O. Hallman, and Christopher J. Ryan COMPENSATION OF EXECUTIVE OFFICERS -------------------------------------- The table below sets forth all salary, bonus and all other compensation paid to the Company's chief executive officer and each of the Company's other executive officers (who earned more than $100,000 per year in salary and bonus) for the years ended January 31, 1997, 1996 and 1995:
Name and All Other Principal Position Year Salary Bonus Compensation Raymond J. Smith, 1997 $225,000 $-------- $-------- Chairman, President and CEO 1996 225,000 28,653 -------- 1995 195,000 29,250 -------- Christopher J. Ryan, 1997 115,000 23,250 -------- Executive V.P.-Finance 1996 115,000 55,956 -------- and Secretary 1995 115,000 17,250 -------- Harvey Pride, Jr. 1997 115,000 19,136 -------- Vice President- 1996 115,000 9,044 -------- Manufacturing 1995 108,619 16,044 -------- James McCormick 1997 89,000 16,350 -------- VP - Treasurer 1996 89,000 10,968 -------- 1995 87,802 12,684 --------
There are four executive officers with salary and bonus individually exceeding $100,000. There were no pension or retirement plans or other benefits, payable or accrued, for such persons during fiscal year 1997. The Company has entered into employment contracts with certain executive officers providing for annual compensation of $225,000 for Mr. Smith and $175,000 for Mr. Ryan and $115,000 for Mr. Pride. Mr. Smith has a three year contract which expires on January 31, 1998, Mr. Pride has a one year contract which expires on January 31, 1998 and Mr. Ryan has a three year contract which expires on February 13, 2000. All contracts are automatically renewable for one or two year terms, unless in various instances 30 to 120 days notice is given by either party. The above named executives participate in the Company's 401-K Plan which commenced on January 1, 1995. The Company has not made a contribution to this plan. These employment contracts are similar in nature and include disability benefits, vacation time, non-compete and 5 confidentiality clauses. There are no provisions for retirement. Messrs. Smith, Ryan and Pride's contracts have an additional provision for annual bonus based on the Company's performance and based upon earnings per share formulas determined by the Stock Option and Compensation Committee of the Board of Directors of the Company. All contracts contain language substantially similar to the following change in control clause: "Upon the occurrence of a change in control..., you shall have the right to terminate, at your option this agreement within 10 to 45 days after the occurrence of such change in control. Upon the effective date of such termination, you shall be entitled to receive a lump sum severance amount equal to the sum of (i) the greater of the present value of your base salary in effect at the time of the change in control for one year or the present value of your base salary in effect at the time of the change of control for the remainder of the term and (ii) the estimated amount which would have been payable to you pursuant to any bonus as set forth in this agreement for the fiscal year during which the change in control occurred, as determined in good faith by the (Stock Option and Compensation Committee) Board of Directors of the Company based upon the Company's results of operations for the fiscal year through the effective date of the termination and its historical results of operations and pro-rated to the effective date of termination... In the event of a disposition by the Company (whether direct or indirect, by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets the Company will require any successor, to expressly assume and agree to perform this agreement in the same manner and to the same extent that the Company would be required to perform if no such disposition had taken place." STOCK OPTION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Policies: The compensation policy of the Company is to provide its executive officers and management with a level of pay and benefits that will assure the Company's competitiveness and continued growth, and allow the Company to retain key executives critical to this long-term success and attract and retain qualified personnel. The Company competes for talented executives in a market segment where successful entrepreneurial executives are highly compensated. It also competes for executives with a background in manufacturing and selling protective safety garments. As a result, to obtain and retain highly qualified and motivated executives, the Compensation Committee has deemed it desirable to structure employment arrangements which compensate highly for high profitability and performance and to enter into written employment agreements with its senior executive officers. The Compensation Committee's responsibilities include overseeing the Company's compensation policies., supervising compensation for management and employee benefits and administering the Company's stock option and other employee benefit plans. The Compensation Committee also develops and negotiates employment agreements with key executive officers. These employment agreements include base salaries and incentive compensation arrangements designed to reward management for achieving certain production or performance levels. The Compensation Committee is also responsible for developing or reviewing incentive compensation arrangements which the Company enters into with executive officers and key individuals, other than those senior executives that have written employment agreements. See "Compensation of Executive Officers". In order to determine appropriate levels of executive compensation, the Compensation Committee reviews various factors, including individual performance, and evaluates the progress of the Company towards attaining its long-term profit and return on equity goals. Compensation packages for senior executive officers have been structured to attempt to compensate them to a substantial extent based on both the profitability of the Company as a whole and the productivity of their individual departments. Particulars: Messrs. Eric O. Hallman, John J. Collins, Jr. and Walter J. Raleigh were members of the Company's Stock Option and Compensation Committee when it ratified Mr. Smith's employment contract on September 7, 1994, and Mr. Pride's employment contract renewed February 1, 1995 and Mr.Ryan's which was ratified on February 14, 1997. Mr. Walter J. Raleigh joined the Board of Directors on April 18, 1991, as a third outside director and with Messrs. Hallman and Collins, these three outside directors presently make up the Stock Option and Compensation Committee. Messrs. Smith, Pride and Ryan were awarded base compensations of $225,000, $115,000 and $115,000, for fiscal 1997, respectively. In addition, the Committee reviewed what was normally paid the President and Chairman in Mr. Smith's case and Executive Vice President Finance and InHouse Counsel in Mr. Ryan's case and the Chief Manufacturing Executive in Mr. Pride's case, in public companies of Lakeland's size and concluded that the compensation package represented close to the median of what other officers were being compensated in like public companies of comparable size 6 after reviewing Growth Resources Officer Compensation Report Tenth Edition - Panel Publications. These contracts also provide for bonuses in addition to salary based upon the Company's increase in earnings. No options during this period were exercised by any officer. (See Directors and Principal Stockholders.) The Stock Option and Compensation Committee believes that the contracts covering Messrs. Smith, Pride and Ryan are appropriately tied to their respective levels of expertise, were constructed at or below industry norms, and any increases in compensation were and will be tied to increases in the Company's earnings. The Stock Option and Compensation Committee also took into consideration that since the inception of the Company 15 years ago there have been no executive pension plans, deferred compensation plans, or other compensation or benefit plans for executives of the Company other than the Company Stock Option Plan and the 401-K/ESOP Plan, the latter of which went into effect January 1, 1995. The Board Compensation Committee Report on Executive Compensation shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. Performance Graph The Corporate Performance Graph, appearing on the following page, obtained from Media General Financial Services of Virginia, compares the five year cumulative total return of the Company's common stock with that of a broad equity market index (NASDAQ), including dividend reinvestment and with that of a peer group: Option/SAR Grants in Last Fiscal Year - No stock options were granted to any employee not listed below in fiscal 1997 and no SAR grants have been made since inception of the Stock Option Plan. See Directors' Compensation. Stock Option Plan Messrs. Smith, Ryan, Pride and McCormick participate in the Company's Incentive Stock Option Plan (common stock) as follows:
No. of Date(s) Grant Name of Shares Option of Expiration Date Executive Granted Price Grant Date(s) Value - --------------------------------------------------------------------------------------------------------------------- Mr. Smith 53,500 $2.25 - 3.50 6/5/96 & 1/2/94 & 1/1/94 6/4/06 & 1/2/99 & 1/1/99 $140,894 Mr. Ryan 48,750 $1.37 - 2.25 5/28/91 & 1/1/94 5/27/01 & 1/1/04 $74,487 Mr. Pride 29,600 $2.25 - 3.50 6/5/96 & 1/1/94 6/4/06 & 1/1/04 $91,600 Mr. McCormick 14,850 $2.25 - 3.50 6/5/96 & 1/1/94 6/4/06 & 1/1/04 $39,663
There are currently 250,000 option shares available for future grant under this plan. During the year ended January 31, 1997, 34,000 stock options were granted (replacing same that expired); no stock options have ever been exerecised under this Plan. 7 [CHART] COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG LAKELAND INDUSTRIES, INC., NASDAQ MARKET INDEX AND PEER GROUP INDEX
FISCAL YEAR ENDING ------------------------------------------------------------------- COMPANY 1992 1993 1994 1995 1996 1997 - ------- ---- ---- ---- ---- ---- ---- LAKELAND INDUSTRIES, INC. $100 $187.50 $262.50 $475.00 $428.13 $315.63 BROAD MARKET 100 99.66 125.55 118.65 166.13 218.63 PEER GROUP 100 75.15 83.71 78.60 52.53 50.93
ASSUMES $100 INVESTED ON FEB. 1, 1992 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING JAN. 31, 1997 8 DIRECTORS' COMPENSATION ----------------------------- Members of the Board of Directors, in their capacity as directors, are reimbursed for all travel expenses to and from meetings of the Board. Outside Directors received $750 for each meeting as compensation for serving on the Board. There are no charitable award or director legacy programs. Messrs. Collins, Hallman and Raleigh participate in the Company's Non-employee Directors' Option Plan as follows: # of Option Date of Expiration Director Shares Price Grant Date ------------- -------- ------ -------- ---------- Mr. Collins 5,000 1.43 6/5/91 6/5/97 Mr. Hallman 5,000 1.43 6/5/91 6/5/97 Mr. Collins 1,000 3.88 6/15/94 6/15/2000 Mr. Hallman 1,000 3.88 6/15/94 6/15/2000 Mr. Raleigh 1,000 4.25 6/15/95 6/15/2001 Mr. Raleigh 5,000 3.25 4/18/97 4/18/2003 There are currently 42,000 option shares available for future grant under this plan. During the year ended January 31, 1997, no options were granted and no options have ever been exercised under this plan. On April 18, 1997, 5,000 option shares for Mr. Raleigh expired and were renewed for an additional six year period at the market price at the close of business April 18, 1997. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------------- POMS Holding Co. ("POMS", a partnership consisting of Raymond J. Smith, Eric O. Hallman, John J. Collins, Jr., Joseph P. Gordon, Harvey Pride, Jr. and certain other stockholders of the Company) leases to the Company a 90,308 square foot disposable garment manufacturing facility in Decatur, Alabama. Under leases effective January 1 and March 1, 1995 and expiring on August 31, 1999, the Company pays an annual rent of $364,900 and is the sole occupant of the facility. The Company received a $3,000 monthly rent reduction from POMS (that commenced August 1, 1991 and continued until August 31, 1994, and during January 1994, the Company received an additional one time rent reduction of $5,000. For the years ended January 31, 1997, 1996 and 1995 this rent reduction amounted to $0, $0, and $21,000, respectively. During September 1992 Highland, a former wholly-owned subsidiary of the Company, relocated to Somerville, Alabama from the above mentioned Decatur facility. Highland entered into $1,500 month to month lease agreement for 12,000 sq. ft. of manufacturing space, sharing this same Somerville location with Chemland, another former wholly-owned subsidiary of the Company. Chemland currently has a $1,600 month to month lease agreement for 12,000 sq. ft. This Somerville facility is owned by Harvey Pride, Jr., an officer of the Company. The Company believes that all rents paid to POMS and Harvey Pride, Jr. by the Company, Highland and Chemland Divisions are comparable to what would be charged by an unrelated third party. The net rent paid to POMS by the Company for the year ended January 31, 1997, amounted to $354,960 and the total rent paid to Harvey Pride, Jr. by the Company for use by its Highland and Chemland divisions, for the year ended January 31, 1997, amounted to $37,200. During the year ended January 31, 1997 the Company made payments totaling $4,396 to Madison Mobile Storage, Inc. for trailer rentals, and $433,262 for expenses incurred by Madison Mobile Storage, Inc. in running the Company's Missouri facility. Such expenses included payroll, insurance, auto and other miscellaneous expenses. The principal shareholder of Madison Mobile Storage, Inc. is Mr. Harvey Pride, Jr. who is also an officer of the Company. The Company paid or accrued legal fees of $2,670 for the fiscal year ended January 31, 1997 to the law firm of Wildman, Harrold, Allen, Dixon & Smith, the Company's General Counsel, of which a partner, Mr. Thomas Smith, is the brother of Raymond J. Smith. 9 OTHER MATTERS ------------------ The Board of Directors knows of no matters other than those described above that may come before the Annual Meeting. As to other matters, if any, that properly may come before the Annual Meeting, the Board of Directors intends that proxies in the accompanying form will be voted in respect thereof in accordance with the judgment of the person or persons voting the proxies. STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING --------------------------------------------- Stockholder proposals for inclusion in the Company's Proxy Statement for the 1998 Annual Meeting of Stockholders must be received by the Company not later than January 1, 1998. The person submitting the proposal must have been a record or beneficial owner of the Company's Common Stock for at least one year and must continue to own such securities through the date on which the meeting is held, and the securities so held must have a market value of at least $1,000. Any such proposal will be included in the Proxy Statement for such Annual Meeting if the rules of the Securities and Exchange Commission are complied with as to the timing and form of such proposal, and the content of such stockholder's proposal is determined by the Company to be appropriate under rules promulgated by the Commission. By the Order of the Board of Directors /s/ Christopher J. Ryan Christopher J. Ryan, Secretary May 13, 1997 10 /x/ PLEASE MARK VOTES PROXY AS IN THIS EXAMPLE LAKELAND INDUSTRIES, INC. 711-2 KOEHLER AVENUE, RONKONKOMA, NEW YORK 11779-7410
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned hereby appoints Raymond J. Smith and Christopher J. Ryan as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of common stock of Lakeland Industries, Inc., held of record by the undersigned on April 29, 1997, at the annual meeting of stockholders to be held on June 18, 1997 or any adjournment thereof. PLEASE BE Dated: 1997 SURE TO SIGN AND DATE THIS PROXY IN THE BOX BELOW. Signature Signature if held jointly
FOR WITHHOLD nominee AUTHORITY listed to vote below for (except nominee as listed marked to below the contrary below) 1. Election of Directors / / / /
JOHN J. COLLINS, JR., ERIC O. HALLMAN (Instruction: To withhold authority to vote for any individual nominee write that nominee's name on the space provided below.) - ------------------------------------------------------------------- 2. Other Business 1. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1. Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. + + DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. LAKELAND INDUSTRIES, INC. PLEASE DATE, VOTE SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. EX-27 6 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from [identify specific financial statements[s]] and is qualified in its entirety by reference to such financial statement[s]. 1 YEAR JAN-31-1997 FEB-01-1996 JAN-31-1997 504,940 0 5,893,594 0 9,894,156 16,938,591 989,667 0 18,573,116 2,920,313 0 0 0 25,500 5,981,226 18,573,116 41,792,469 41,792,469 34,555,786 5,212,286 0 0 510,757 1,576,296 513,000 1,063,296 0 0 0 1,063,296 .41 .41
-----END PRIVACY-ENHANCED MESSAGE-----