10-Q 1 form10q-70529_lakeland.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2005 ------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to_______________ Commission File Number: 0-15535 LAKELAND INDUSTRIES, INC. -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 13-3115216 ------------------------------ ------------------------------------- (State of incorporation) (IRS Employer Identification Number) 701 Koehler Avenue, Suite 7, Ronkonkoma, New York 11779 -------------------------------------------------------------------------------- (Address of principal executive offices) 711 Koehler Avenue, Suite 2, Ronkonkoma, New York 11779 -------------------------------------------------------------------------------- (Former name or address, if changed since last report) (631) 981-9700 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.01 par value, outstanding at September 7, 2005 - 5,017,046 shares. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q The following information of the Registrant and its subsidiaries is submitted herewith: PART I - FINANCIAL INFORMATION: Item 1. Financial Statements (unaudited):
Page ---- Introduction ...................................................................................1 Condensed Consolidated Balance Sheets July 31, 2005 and January 31, 2005........................2 Condensed Consolidated Statements of Income for the Three and Six Months Ended July 31, 2005 and 2004..............................................3 Condensed Consolidated Statement of Stockholders' Equity - Six Months Ended July 31, 2005.......4 Condensed Consolidated Statements of Cash Flows - Six Months Ended July 31, 2005 and 2004........................................................................................5 Notes to Condensed Consolidated Financial Statements............................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........12 Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................17 Item 4. Controls and Procedures .......................................................................17 PART II - OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K ...........................................................17 Signature Page............................................................................................19
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION --------------------- Item 1. Financial Statements: Introduction ------------ CAUTIONARY STATEMENTS This report may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical fact included in this report, including, without limitation, the statements under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position and liquidity, the Company's strategic alternatives, future capital needs, development and capital expenditures (including the amount and nature thereof), future net revenues, business strategies, and other plans and objectives of management of the Company for future operations and activities. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, and factors in the Company's other filings with the Securities and Exchange Commission (the "Commission"), general economic and business conditions, the business opportunities that may be presented to and pursued by the Company, changes in law or regulations and other factors, many of which are beyond the control of the Company. Readers are cautioned that these statements are not guarantees of future performance, and the actual results or developments may differ materially from those projected in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. 1
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS July 31, 2005 January 31, 2005 (Unaudited) Current assets: Cash and cash equivalents (which includes $0 and $3,711,320 of marketable securities at July 31, 2005 and January 31, 2005, respectively) $ 7,116,840 $ 9,185,382 Accounts receivable, net of allowance for doubtful accounts of $323,000 at July 31, 2005 and January 31, 2005 13,385,512 13,117,374 Inventories, net of reserves of $392,000 at July 31, 2005 and $396,000 at January 31, 2005 35,982,978 30,906,023 Deferred income taxes 960,734 960,734 Other current assets 948,811 958,491 ----------- ----------- Total current assets 58,394,875 55,128,004 Property and equipment, net of accumulated depreciation of $5,758,000 at July 31, 2005 and $5,304,000 January 31, 2005 7,315,519 5,014,240 Goodwill 889,876 -- Other assets 332,652 171,010 ----------- ----------- $66,932,922 $60,313,254 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,572,406 $ 2,710,251 Payable to seller of Mifflin Valley 1,746,439 -- Accrued expenses and other current liabilities 1,297,727 1,441,912 ----------- ----------- Total current liabilities 6,616,572 4,152,163 Other long-term liabilities 520,330 495,330 Deferred income taxes 86,229 86,229 Minority interest in Variable Interest Entities -- 1,112,861 Amount outstanding under revolving credit arrangement 1,881,933 -- Commitments and contingencies Stockholders' equity Preferred stock, $.01 par; authorized 1,500,000 shares (none issued) Common stock, $.01 par; authorized 10,000,000 shares; issued and outstanding 5,017,046 shares at July 31, 2005 and 4,560,885 shares at January 31, 2005 50,170 45,609 Additional paid-in capital 42,431,220 36,273,046 Retained earnings 15,346,468 (1) 18,148,016 ----------- ----------- Total stockholders' equity 57,827,858 54,466,671 ----------- ----------- $66,932,922 $60,313,254 ----------- -----------
(1) A cumulative total of $11,612,824 has been transferred from retained earnings to additional paid-in-capital and par value of common stock due to three separate stock dividends paid in 2002, 2003 and 2005. As reflected in the Condensed Consolidated Statement of Stockholders' Equity, $6,162,735 was included in the quarter ended April 30, 2005. The accompanying notes are an integral part of these financial statements. 2
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED July 31, July 31, 2005 2004 2005 2004 ---- ---- ---- ---- Net sales $ 25,089,146 $ 22,845,169 $ 50,798,074 $ 49,683,192 Cost of goods sold 19,293,516 17,983,098 38,835,565 38,841,689 ------------ ------------ ------------ ------------ Gross profit 5,795,630 4,862,071 11,962,509 10,841,503 Operating expenses 3,589,281 2,990,264 7,210,126 6,576,984 ------------ ------------ ------------ ------------ Operating profit 2,206,349 1,871,807 4,752,383 4,264,519 Interest and other income, net 65,562 849 89,024 10,309 Interest expense (3,582) (69,316) (4,012) (206,457) ------------ ------------ ------------ ------------ Income before minority interest 2,268,329 1,803,340 4,837,395 4,068,371 Minority interest in net income of variable interest entities * * -- 175,710 -- 294,406 ------------ ------------ ------------ ------------ Income before income taxes 2,268,329 1,627,630 4,837,395 3,773,965 Provision for income taxes 620,119 485,000 1,476,208 1,206,000 ------------ ------------ ------------ ------------ Net income $ 1,648,210 $ 1,142,630 $ 3,361,187 $ 2,567,965 ------------ ------------ ------------ ------------ Net income per common share*: Basic $ .33 $ .27 $ .67 $ .65 ------------ ------------ ------------ ------------ Diluted $ .33 $ .27 $ .67 $ .65 ------------ ------------ ------------ ------------ Weighted average common shares outstanding*: Basic 5,017,046 4,251,486 5,017,046 3,926,402 Diluted 5,021,058 4,257,869 5,021,267 3,932,276
*Adjusted for the 10% stock dividend to shareholders of record on April 30, 2005 and reflects 1,280,750 shares offered to the public in June and July 2004. * * Properties owned by related parties were purchased by the Company in April 2005, thus the Company deemed the impact of FIN46R to be deminimus for the July 31, 2005 financial statements. The accompanying notes are an integral part of these financial statements. 3
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) Six months ended July 31, 2005 Additional Common Stock Paid-in Retained Shares Amount Capital Earnings Total ------ ------ ------- -------- ----- Balance, January 31, 2005 4,560,885 $ 45,609 $ 36,273,046 $ 18,148,016 $ 54,466,671 10% stock dividend 456,161 4,561 6,158,174 (6,162,735) -- Net Income -- -- -- 3,361,187 3,361,187 ------------ ------------ ------------ ------------ ------------ Balance July 31,2005 5,017,046 $ 50,170 $ 42,431,220 $ 15,346,468 $ 57,827,858 ------------ ------------ ------------ ------------ ------------
(Reflects the three separate 10% stock dividends issued on July 31, 2002, 2003 and April 30, 2005 which resulted in a cumulative transfer of $11,612,824 from retained earnings to additional paid in capital and par value of common stock). (See note 1 to Condensed Consolidated Balance Sheets). The accompanying notes are an integral part of these financial statements. 4
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED July 31, 2005 2004 ---- ---- Cash Flows from Operating Activities Net income ............................................... $ 3,361,187 $ 2,567,965 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Reserve for inventory obsolescence ..................... (4,601) -- Depreciation and amortization .......................... 467,000 436,664 Decrease in accounts receivable .......................... 109,600 537,672 (Increase) in inventories * .............................. (4,425,529) (2,948,409) (Increase) Decrease in other assets ...................... (87,522) 390,631 Decrease (increase) in accounts payable, accrued expenses and other liabilities ....................... 450,547 (29,439) ------------ ------------ Net cash (used in)provided by operating activities .......................................... (129,318) 955,084 Cash Flows from Investing Activities: Purchases of property and equipment ...................... (3,821,157) (454,878) Purchase of marketable securities ........................ -- (4,477,578) ------------ ------------ Net cash used in investing activities .................... (3,821,157) (4,932,456) ------------ ------------ Cash Flows from Financing Activities: Proceeds from exercise of stock options .................. -- 54,432 Proceeds from secondary stock offerings .................. -- 24,369,023 (Repayments) borrowing under loan agreements ............. 1,881,933 (16,784,781) ------------ ------------ Net cash provided by financing activities ................ 1,881,933 7,638,674 ------------ ------------ Net increase (decrease) in cash .......................... (2,068,542) 3,661,302 Cash and cash equivalents at beginning of period ......... 9,185,382 2,445,271 ------------ ------------ Cash and cash equivalents at end of period ............... $ 7,116,840 $ 6,106,573 ------------ ------------
* Inventory increased as production increased for the second half demand and accelerated purchases made on raw materials in anticipation of the July 1, 2005 price increase. The accompanying notes are an integral part of these financial statements. 5 LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Business Lakeland Industries, Inc. and Subsidiaries (the "Company"), a Delaware corporation, organized in April 1982, manufactures and sells a comprehensive line of safety garments and accessories for the industrial protective clothing and homeland security markets. The principal market for our products is the United States. No customer accounted for more than 10% of net sales during the six month periods ended July 31, 2005 and 2004, respectively. 2. Basis of Presentation The condensed consolidated financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to present fairly the consolidated financial information required therein. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended January 31, 2005. Certain reclassifications between cost of goods sold and operating expenses were made to the first quarter of fiscal year 2006,in order to be consistent with the second quarter and year to date of fiscal 2006 classifications for the Mexico and China subsidiaries. The results of operations for the six month periods ended July 31, 2005 and 2004, respectively, are not necessarily indicative of the results to be expected for the full year. 3. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Laidlaw Adams & Peck, Inc., and Subsidiary (MeiYang Protective Products Co., Ltd., a Chinese Corporation), Lakeland Protective Wear, Inc. (a Canadian corporation), Weifang Lakeland Safety Products Co. Ltd. (a Chinese corporation), Qing Dao Maytung Healthcare Co., Ltd. (a Chinese corporation), Lakeland Industries Europe Ltd. (a British Corporation), Lakeland de Mexico S.A. de C.V (a Mexican corporation) and Mifflin Valley, Inc. (A Delaware Corporation). All significant inter-company accounts and transactions have been eliminated. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities". This interpretation provides guidance with respect 6 to the consolidation of certain entities, referred to as variable interest entities, in which an investor is subject to a majority of the risk of loss from the variable interest entity's activities, or is entitled to receive a majority of the variable interest entity's residual returns. This interpretation also provides guidance with respect to the disclosure of variable interest entities in which an investor maintains an interest but is not required to consolidate. The provisions of the interpretation were effective immediately for all variable interest entities created after January 31, 2003, or in which we obtain an interest after that date. In December 2003, the FASB issued a revision to this pronouncement, FIN 46R, which clarified certain provisions and modified the effective date from October 1, 2003 to March 15, 2004 for variable interest entities created before February 1, 2003. The two entities which leased property and buildings to the Company and were owned by related parties, which have been consolidated in our financial statements for the year ended January 31, 2005 are River Group Holding Co., L.L.P. and POMS Holding Co. Several of the owners of these entities were directors and officers of Lakeland. Under FIN 46, it is likely that leases between an entity and its related parties would be considered a variable interest, even if there is no residual value guarantee or purchase option. The FASB staff's view is that these elements are implied in a related-party lease even though they may not be explicitly stated in the lease agreement. Effective February 1, 2004 we adopted this pronouncement. As a result, certain entities which leased property to the Company and were owned by related parties were determined to be Variable Interest Entities and have been consolidated since the Company's April 30, 2004 quarterly financial statements. Creditors, or beneficial interest holders, of the consolidated variable interest entities have no recourse to the general credit of the Company. On April 25, 2005, the Company purchased property and buildings from POMS Holding Co. for a net purchase price of $2,067,584. Reference is made to the Company's filing on Form 8-K dated April 25, 2005. In April 2005, the Company entered into a real estate purchase contract with River Group Holding Co. to purchase a warehouse and the real property underlying it for $928,686. It recorded the purchase on the Company's April 30, 2005 financial statements. The purchase of this property was completed on May 25, 2005. Thus, the Company deemed the impact of FIN 46R to be deminimis for the July 31, 2005 financial statements. There are no variable interest entities in which the "Company" is not the primary beneficiary. 4. Business Combinations On August 1, 2005, the Company closed its contract to acquire the assets and operations and assume certain liabilities of Mifflin Valley, Inc., ("Mifflin") of Shillington, PA for an initial purchase price of $1.58 million, subject to certain adjustments. Mifflin did approximately $2.6 million of sales in 2004, and $1.5 million for the six months ended June 30, 2005. Mifflin is a manufacturer of protective clothing specializing in safety and visibility, largely for the Emergency Services market, but also for the entire public safety and traffic control market. Mifflin specializes in customized garments to suit customers' needs, coupled with quality, service, price and delivery. Mifflin's products include Flame Retardant garments for the Fire Industry, Nomex clothing for utilities, and High Visibility Reflective Outerwear for Departments of Transportation. The purchase was effective as of July 1, 2005 and the results of Mifflin's operations have been included since July 1 in the Company's reported results, adding approximately $257,000 in revenue for the month and $0.01 to earnings per share to the actual reported results. Had the transaction taken place on February 1, 2005, on a proforma basis, there would have been an increase in the reported amounts as follows: Quarter ended July 31, 2005 Six months ended July 31, 2005 Sales $ 505,000 $1,264,000 Net Income 136,000 163,000 Earning per share $ 0.01 $ 0.03 7 5. Inventories: Inventories consist of the following: July 31, January 31, 2005 2005 ---- ---- Raw materials ...... $14,681,895 $12,231,264 Work-in-process .... 3,385,339 2,614,710 Finished Goods ..... 17,915,744 16,060,049 ----------- ----------- .................... $35,982,978 $30,906,023 ----------- ----------- Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in-first-out basis) or market. 6. Earnings Per Share: On June 18, 2004 we concluded a secondary public stock offering issuing an additional 1,100,000 shares of common stock. On July 1, 2004 the underwriter exercised its over-allotment option whereby we issued an additional 180,750 shares of common stock. Basic earnings per share are based on the weighted average number of common shares outstanding without consideration of common stock equivalents. Diluted earnings per share are based on the weighted average number of common and common stock equivalents. The diluted earnings per share calculation takes into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the period. The following table sets forth the computation of basic and diluted earnings per share at July 31, 2005 and 2004, adjusted, retroactively, for the 10% Stock dividends to Shareholders on April 30, 2005.
Three Months Ended Six Months Ended July 31, July 31, 2005 2004 2005 2004 ---- ---- ---- ---- Numerator Net income ............................. $1,648,210 $1,142,630 $3,361,187 $2,567,965 ---------- ---------- ---------- ---------- Denominator Denominator for basic earnings per share 5,017,046 4,251,486 5,017,046 3,926,402 (Weighted-average shares) Effect of dilutive securities ... 4,012 6,383 4,221 5,874 ---------- ---------- ---------- ---------- Denominator for diluted earnings per share ...... 5,021,058 4,257,869 5,021,267 3,932,276 ---------- ---------- ---------- ---------- (adjusted weighted-average shares) Basic earnings per share ........................ $ .33 $ .27 $ .67 $ .65 ---------- ---------- ---------- ---------- Diluted earnings per share ...................... $ .33 $ .27 $ .67 $ .65 ---------- ---------- ---------- ----------
Options to purchase 11,000 shares of the Company's common stock have been excluded for the three and six months ended July 31, 2005, as their inclusion would be anti-dilutive. 8 7. Revolving Credit Facility At July 31, 2005, the balance outstanding under our new $25 million five year revolving credit facility amounted to $1.88 million. The credit facility is collateralized by substantially all of the assets of the Company. The credit facility contains financial covenants, including, but not limited to, fixed charge ratio, funded debt to EBIDTA ratio, inventory and accounts receivable collateral coverage ratio, with respect to which the Company was in compliance at July 31, 2005 and for the period then ended. The weighted average interest rate for the six month period ended July 31, 2005 was 3.94% 8. Major Supplier We purchased 72.5% of our raw materials from one supplier during the six-month period ended July 31, 2005. We expect this relationship to continue for the foreseeable future. If required, similar raw materials could be purchased from other sources; however, our competitive position in the marketplace could be adversely affected. 9. Stock Based Compensation We have adopted the disclosure provisions of SFAS No. 123(R), "Accounting for Stock-Based Compensation" (SFAS 123(R)). In compliance with 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 employee stock-based compensation plans. We have also adopted the disclosure provisions of SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." This pronouncement requires prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reporting results. If we 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(R), the effect on the Company's net income and earnings per share as reported would be reduced for the quarters and six months ended July 31, 2005 and 2004 to the pro forma amounts indicated below:
Three Months Ended Six Months Ended July 31, July 31, 2005 2004 2005 2004 ---- ---- ---- ---- Net income as reported $ 1,648,210 $ 1,142,630 $ 3,361,187 $ 2,567,965 Less: Option expense based on fair value method -- 11,186 9,627 11,186 ----------- ----------- ----------- ----------- Pro forma $ 1,648,210 $ 1,131,444 $ 3,351,560 $ 2,556,779 ----------- ----------- ----------- ----------- Basic earnings per common share As reported $ .33 $ .27 $ .67 $ .65 ----------- ----------- ----------- ----------- Pro forma $ .33 $ .27 $ .67 $ .65 ----------- ----------- ----------- ----------- Diluted earnings per common share As reported $ .33 $ .27 $ .67 $ .65 ----------- ----------- ----------- ----------- Pro forma $ .33 $ .27 $ .67 $ .65 ----------- ----------- ----------- -----------
9 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 quarters and six months ended July 31, 2005 and 2004: expected volatility of 87% and 64%, respectively; risk-free interest rate of 3.6% and 2.93%, respectively; expected dividend yield of 0.0%; and expected life of six years. All stock-based awards were fully vested at July 31, 2005 and 2004. Earnings per share and options granted have been adjusted to reflect the 10% stock dividends to stockholders of record as of April 30, 2005. During the three months ended July 31, 2005, no options were granted or exercised. 10. Manufacturing Segment Data Domestic and international sales are as follows in millions of dollars: Three Months Ended Six Months Ended July 31, July 31, 2005 2004 2005 2004 ---- ---- ---- ---- Domestic $22.1 88.0% $21.5 94.3% $45.0 88.6% $45.6 91.7% International 3.0 12.0% 1.3 5.7% 5.8 11.4% 4.1 8.3% ----- ----- ----- ----- ----- ----- ----- Total $25.1 100% $22.8 100% $50.9 100% $49.7 100% ----- ----- ----- ----- ----- ----- ----- We manage our operations by evaluating each of our geographic locations. Our North American operations include our facilities in Decatur, Alabama (primarily the distribution to customers of the bulk of our products and the manufacture of our chemical, glove and disposable products), Celaya, Mexico (primarily disposable, glove and chemical suit production) and St. Joseph, Missouri (primarily woven products production). We also maintain three manufacturing facilities in China (primarily disposable and chemical suit production). Our China facilities and our Decatur, Alabama facility produce the majority of the Company's products. The accounting policies of these operating entities are the same as those described in Note 1 to the Company's Annual Report on Form 10-K for the year ended January 31, 2005. We evaluate the performance of these entities based on operating profit which is defined as income before income taxes, interest expense and other income and expenses. We have small sales forces in Canada, Europe and China who sell and distribute products shipped from the United States, Mexico or China. The table below represents information about reported manufacturing segments for the three and nine months noted therein:
Three Months Ended Six Months Ended July 31, July 31, (in millions of dollars)(in millions of Dollars) 2005 2004 2005 2004 ---- ---- ---- ---- Net Sales: North America $26.6 $24.3 $53.9 $50.9 China 2.8 1.9 4.8 4.2 Less inter-segment sales (4.3) (3.3) (7.9) (5.4) ----- ----- ----- ----- Consolidated sales $25.1 $22.9 50.8 $49.7 ----- ----- ----- ----- Operating Profit: North America $ 1.6 $ 1.5 $ 3.8 $ 3.7 China .7 .4 1.1 .6 Less inter-segment profit (loss) (.1) -- (.1) -- ----- ----- ----- ----- Consolidated profit $ 2.2 $ 1.9 $ 4.8 $ 4.3 ----- ----- ----- ----- Identifiable Assets (at Balance Sheet date or change during quarter): North America $2.00 $ 7.1 $57.1 $50.5 China .9 .3 9.8 8.2 ----- ----- ----- ----- Consolidated assets $2.90 $ 7.4 $66.9 $58.7 ----- ----- ----- ----- Depreciation and Amortization Expense: North America $ .19 $ .14 $ .3 $ .3 China .10 .03 .2 .1 ----- ----- ----- ----- Consolidated depreciation expense $ .29 $ .17 $ .5 $ .4 ----- ----- ----- -----
10 11. Effects of Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123(R), "Accounting for Stock-Based Compensation" ("SFAS No. 123(R)"). SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of fair value were required. The provisions of this statement are effective for the first annual reporting period that begins after June 15, 2005. Management does not believe there will be a significant impact as a result of adopting this statement In November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151 "Inventory costs." This statement amends Accounting Research Bulletin No. 43, Chapter 4, "Inventory Pricing" and removes the "so abnormal" criterion that under certain circumstances could have led to the capitalization of these items. SFAS No. 151 requires that idle facility expense, excess spoilage, double freight and re-handling costs be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." SFAS 151 also requires that allocation of fixed production overhead expenses to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for all fiscal years beginning after June 15, 2005. Management does not believe there will be a significant impact as a result of adopting this statement. On December 16, 2004, the FASB issued SFAS No. 153, "Exchange of Non-monetary Assets", an amendment of Accounting Principles Board ("APB") Opinion No. 29, which differed from the International Accounting Standards Board's ("IASB") method of accounting for exchanges of similar productive assets. Statement No. 153 replaces the exception from fair value measurement in APB No. 29, with a general exception from fair value measurement for exchanges of non-monetary assets that do not have commercial substance. The statement is to be applied prospectively and is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not believe that SFAS No. 153 will have a material impact on its results of operations or cash flows. 12. Real Estate Purchases In April 2005, the Company entered into two separate real estate purchase contracts, one with POMS and one with River Group, both related parties. The Company has purchased the land and buildings in Decatur, Alabama that it has leased from these related parties since their inception, POMS (1984) and River Group (1999). The purchase price was $2,056,000 for the POMS property and $925,000 for the River Group property pursuant to the average of three separate and independent real estate appraisals. The partnerships were accounted for in accordance with FIN46R and were reflected in the financial statements for the fiscal year ended January 31, 2005. In contemplation of the real estate purchases, the Company entered into an agreement, dated March 4, 2005, with an officer of Lakeland (who is a partner in POMS & River Group) to acquire his interest for $565,367 ($411,200 for POMS and $154,167 for River Group), at the same proportional valuation as the overall property. 11 On April 25, 2005 the Company closed on the real estate purchase contract with POMS paying a net amount of $1,656,384 ($2,056,000-$411,200 already paid +$11,584 in closing costs). The Company paid POMS the lease amount from February 1, 2005 until April 25, 2005 amounting to $86,157, which is charged to rent expense. On May 25, 2005 the Company closed on the real estate purchase contract with River Group paying a net amount of $774,519 ($925,000-$154,167 already paid +$3,686 in closing costs). The Company paid River Group the lease amount from February 1, 2005 until May 25, 2005 amounting to $63,157, which is charged to rent expense. At April 30, 2005, the Company recorded the asset land value of $230,000, the asset building value of $2,751,000, closing costs of $11,584 and a payable to River Group in the amount of $770,833. The Company recorded the purchase of the land and building from River Group as of April 30, 2005, since the contract of sale was finalized and the closing was pending the release of an easement on the property. Total rent expense for the two properties for the six months ended July 31, 2005 amounted to $146,577. The Company recorded depreciation on each of the two properties from the closing date forward. Upon conclusion of these two real estate purchase contracts, the Company no longer has related party transactions requiring the recording of variable interest entities under FIN46R. Other than the above entries, the Company has not recorded the effects of FIN46R in the current fiscal year. The Company deems any such impact to be immaterial. Building purchase in New York: On May 10, 2005 the Company purchased a 6,250 square foot office condominium to serve as its Corporate Headquarters. The purchase price was $640,000 plus $9,161 in closing costs. The lease on its current location amounted to $51,202 annually and expired on June 30, 2005. The new address is 701 Koehler Suite 7, Ronkonkoma, NY 11779. 13. Related Party Transactions Along with the asset purchase agreement, dated July 2005, between the Company and Mifflin Valley, Inc., the Company entered into a five year lease agreement with the seller (now an employee of the Company) to rent the manufacturing facility at an annual rental of $55,560, or a per square foot rental of $3.00. This amount was obtained from an independent appraisal at the fair market rental value done prior to the acquisition. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following summary together with the more detailed business information and consolidated financial statements and related notes that appeared in Form 10-K and Annual Report and in the documents that were incorporated by reference into Form 10-K for the year ended January 31, 2005. This document may contain certain "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. This information involves risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Overview We manufacture and sell a comprehensive line of safety garments and accessories for the industrial protective clothing and homeland security markets. Our products are sold by our in-house sales force and independent sales representatives to a network of over 800 safety and mill supply distributors. These distributors in turn supply end user industrial customers such as chemical/petrochemical, automobile, steel, glass, construction, smelting, janitorial, pharmaceutical and high technology electronics manufacturers, as well as hospitals and laboratories. In addition, we supply federal, state and local governmental agencies and departments such as fire and police departments, airport crash rescue units, the Department of Defense, Central Intelligence Agency, Federal Bureau of Investigation, U.S. Secret Service and the Centers for Disease Control. 12 We have operated manufacturing facilities in Mexico since 1995 and in China since 1996. Beginning in 1995, we moved the labor intensive sewing operation for our limited use/disposable protective clothing lines to these facilities. Our facilities and capabilities in China and Mexico allow access to a less expensive labor pool than is available in the United States and permit us to purchase certain raw materials at a lower cost than they are available domestically. As we have increasingly moved production of our products to our facilities in Mexico and China, we have seen improvements in the profit margins for these products. We are at the half way point of moving production of our reusable woven garments and gloves to these facilities and expect to complete this process by the third quarter of fiscal 2006. As a result, we expect to see profit margin improvements for these product lines as well. Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and disclosure of contingent assets and liabilities. We base estimates on our past experience and on various other assumptions that we believe to be reasonable under the circumstances and we periodically evaluate these estimates. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition. We derive our sales primarily from our limited use/disposable protective clothing and secondarily from our sales of high-end chemical protective suits, fire fighting and heat protective apparel, gloves and arm guards, and reusable woven garments. Sales are recognized when goods are shipped to our distributors at which time title and the risk of loss passes. Sales are reduced for sales returns and allowances. Payment terms are generally net 30 days for United States sales and net 90 days for international sales. Inventories. Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out basis) or market. Provision is made for slow-moving, obsolete or unusable inventory. Allowance for Doubtful Accounts. We establish an allowance for doubtful accounts to provide for accounts receivable that may not be collectible. In establishing the allowance for doubtful accounts, we analyze the collectibility of individual large or past due accounts customer-by-customer. We establish reserves for accounts that we determine to be doubtful of collection. Income Taxes and Valuation Reserves. We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of preparing our consolidated financial statements. This involves estimating the actual current tax in addition to assessing temporary differences resulting from differing treatments for tax and financial accounting purposes. These differences, together with net operating loss carry forwards and tax credits, are recorded as deferred tax assets or liabilities on our balance sheet. A judgment must then be made of the likelihood that any deferred tax assets will be realized from future taxable income. A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. In the event we determine that we may not be able to realize all or part of our deferred tax asset in the future, or that new estimates indicate that a previously recorded valuation allowance is no longer required, an adjustment to the deferred tax asset is charged or credited to net income in the period of such determination. The Company's Federal Income Tax returns for the fiscal years ended January 31, 2003 and 2004 are currently under audit by the Internal Revenue Service. The final results of these audits cannot be estimated by management. It is anticipated that the audits will be concluded by the end of the third quarter of Fiscal 2006. Valuation of Goodwill and Other Intangible Assets. On February 1, 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," which provides that goodwill and other intangible assets are no longer amortized, but are assessed for impairment annually and upon occurrence of an event that indicates impairment may have occurred. Goodwill impairment is evaluated utilizing a two-step process as required by SFAS No. 142. Factors that we consider important that could identify a potential impairment include: significant underperformance relative to expected historical or projected future operating results; significant changes in the overall business strategy; and significant negative industry or economic trends. When we determine that the carrying value of intangibles and goodwill may not be recoverable based upon one or more of these indicators of impairment, we measure any potential impairment based on a projected discounted cash flow method. Estimating future cash flows requires our management to make projections that can differ materially from actual results. 13 In July 2005 (in a transaction which closed August 1, 2005) the Company purchased Mifflin Valley, Inc. As a result of this purchase Goodwill was recorded in the amount of $889,876 at July 31, 2005. The transaction may be subject to certain adjustments. Self-Insured Liabilities. We have a self-insurance program for certain employee health benefits. The cost of such benefits is recognized as expense based on claims filed in each reporting period and an estimate of claims incurred but not reported during such period. Our estimate of claims incurred but not reported is based upon historical trends. If more claims are made than were estimated or if the costs of actual claims increases beyond what was anticipated, reserves recorded may not be sufficient and additional accruals may be required in future periods. We maintain separate insurance to cover the excess liability over set single claim amounts and aggregate annual claim amounts. 14 Item 2. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Significant Balance Sheet Fluctuation July 31, 2005 as compared to January 31, 2005 Cash and cash equivalents decreased by $2.07 million as the Company purchased real property in Alabama and New York. Inventory increased $5.08 million as production increased for the second half demand and accelerated purchases made on raw materials in anticipation of the July 1, 2005 price increase. Goodwill of $.89 million recorded in July 2005 relates to the acquisition of Mifflin Valley, Inc. Accounts payable increased with the accelerated purchase of raw materials and a payable of $1.7 million for the purchase of Mifflin Valley, Inc., concluded on August 1, 2005. At July 31, 2005 the Company had an outstanding loan balance of $1.88 million under its new facility with Wachovia Bank, N.A. Total stockholder's equity increased by the net income for the period of $3.36 million Six months ended July 31, 2005 as compared to the six months ended July 31, 2004 Net Sales. Net sales increased $1.1 million, or 2.2% to $50.8 million for the six months ended July 31, 2005 from $49.7 million for the six months ended July 31, 2004. The increase was primarily due to customers buying forward as a result of our selling price increase effective June 20, 2005, on Tyvek and TyChem garments. Continued growth in sales by our Canadian and UK subsidiaries and the acquisition of Mifflin Valley, Inc. added to this increase, offset partially by decreased sales in chemical protection garments due to a softness in government purchasing. Gross Profit. Gross profit increased $1.1 million or 10.3% to $12.0 million for the six months ended July 31, 2005 from $10.8 million for the six months ended July 31, 2004. Gross profit as a percentage of net sales increased to 23.6% for the six months ended July 31, 2005 from 21.8% for the six months ended July 31, 2004, primarily due to the continuation of cost reduction programs shifting production from the US to China and Mexico and a selling price increase on our Tyvek lines on June 20, 2005, partially offset by rising raw material costs. Operating Expenses. Operating expenses increased $0.63 million, or 9.6% to $7.2 million for the six months ended July 31, 2005 from $6.6 million for the six months ended July 31, 2005. As a percent of sales, operating expenses increased to 14.2% for the six months ended July 31, 2005 from 13.2% for the six months ended July 31, 2004. The $0.63 million increase in operating expenses in the six months ended July 31, 2005 as compared to the six months ended July 31, 2004 was principally due to increases (decreases) in: Salaries $0.118 million Sales commissions $(0.275 million) Sales related expenses $0.09 million Insurance $(0.044 million) Pension reversal $(0.048 million) Consulting $0.113 million Professional fees $0.168 million All other G&A $0.30 million Freight expenses $0.119 million Bad debt expenses $0.054 million Currency fluctuation $0.034 million The above increases in Consulting and Professional Fees are a result of compliance with Sarbanes-Oxley requirements. Interest Expenses. Interest expenses decreased by $0.202 million for the six months ended July 31, 2005 as compared to the six months ended July 31, 2004 because we paid off our credit facility in full on June 18, 2004 using the proceeds of our secondary stock offering. 15 Income Tax Expense. Income tax expenses consist of federal, state, and foreign income taxes. Income tax expenses increased $0.27 million, or 22.4%, to $1.48 million for the six months ended July 31, 2005 from $1.21 million for the six months ended July 31, 2004. Our effective tax rate was 30.5% and 32.0% for the six months ended July 31, 2005 and 2004, respectively. Our effective tax rate varied from the federal statutory rate of 34% due primarily to lower foreign taxes, partially offset by state taxes. Our effective tax rate declined due to an increase in production in China. Minority Interest. Minority interest in net income of variable interest entities decreased $0.1 million for the six months ended July 31, 2005 as a result of the purchase in fiscal 2006 of the related party property that was accounted for under FIN46R during fiscal 2005. As a result, those entities were consolidated in our statement of income for the six months ended July 31, 2004. Net Income. Net income increased $0.793 million, or 30.9% to $3.36 million for the six months ended July 31, 2005 from $2.57 million for the six months ended July 31, 2004. The increase in net income primarily resulted from cost reduction programs and the continuing production shifts from the U.S. to China and Mexico, partially offset by rising raw material costs. Three months ended July 31, 2005 as compared to the three months ended July 31, 2004 Net Sales. Net sales increased $2.2 million, or 9.8%, to $25.1 million for the three months ended July 31, 2005 from $22.8 million for the three months ended July 31, 2004. The increase was primarily due to customers buying forward as a result of our selling price increase effective June 20, 2005, on Tyvek and TyChem garments. Sales also increased due to the Mifflin Valley, Inc. acquisition and to continued sales growth and customer base in our Canadian and U.K. subsidiaries. This increase was partially offset by a decrease in chemical suit sales due to a shift to more low-end garments and fewer high-end, higher margin garments sold in the second quarter last year. Gross Profit. Gross profit increased $.93 million, or 19.2%, to $5.8 million for the three months ended July 31, 2005 from $4.9 million for the three months ended July 31, 2004. Gross profit as a percentage of net sales increased to 23.1% for the three months ended July 31, 2005 from 21.3% for the three months ended July 31, 2004. Operating Expenses. Operating expenses increased $0.6 million, or 20.0% to $3.6 million for the three months ended July 31, 2005 from $3.0 million for the three months ended July 31, 2004. As a percent of sales, operating expenses increased to 14.3% for the three months ended July 31, 2005 from 13.1% for the three months ended July 31, 2004. The $1.0 million increase in operating expenses in the three months ended July 31, 2005 as compared to the three months ended July 31, 2004 was principally due to increases (decreases) in: Freight expenses $0.058 million Salaries $0.087 million Insurance $0.112 million Consulting $0.030 million Professional fees $0.105 million All other G&A $0.143 million Currency fluctuation $0.027 million Bad Debts $0.038 million The above increases in Consulting and Professional Fees are a result of compliance with Sarbanes-Oxley requirements. Interest Expense. Interest expenses decreased by $0.07 million for the three months ended July 31, 2005 as compared to the three months ended July 31, 2004 because we paid off our credit facility in full on June 18, 2004 using the proceeds of our secondary stock offering. Income Tax Expenses. Income tax expenses consist of federal, state and foreign income taxes. Income tax expense increased $0.135 million, or 27.9% to $0.62 million for the three months ended July 31, 2005 from $0.485 million for the three months ended July 31, 2004. Our effective tax rate was 27.3% and 29.8% in the three months ended July 31, 2005 and 2004, respectively. Our effective tax rate varied from the federal statutory rate of 34% due 16 primarily to lower foreign tax rates, partially offset by state taxes. Our effective tax rate declined due to an increase in production in China. Minority Interest. Minority interest in net income of variable interest entities decreased $0.176 million for the three months ended July 31, 2005 as a result of the purchase in fiscal 2006 of the related party property that was accounted for under FIN46R during fiscal 2005. As a result, those entities were consolidated in our statement of income for the three months ended July 31, 2005. Net Income. Net income increased $0.51 million, or 44.2% to $1.65 million for the three months ended July 31, 2005 from $1.14 million for the three months ended July 31, 2004. The increase in net income primarily resulted from cost reduction programs and the continuing production shifts from the U.S. to China and Mexico, partially offset by rising raw materials. Liquidity and Capital Resources Cash Flows ---------- As of July 31, 2005 we had cash and cash equivalents of $7.1 million and working capital of $51.8 million, a decrease of $2.1 million and an increase of $0.8 million, respectively, from January 31, 2005. Our primary sources of funds for conducting our business activities have been from cash flow provided by operations and borrowings under our credit facilities described below. We require liquidity and working capital primarily to fund increases in inventories and accounts receivable associated with our net sales and, to a lesser extent, for capital expenditures. Net cash used in operating activities of $0.13 million for the six months ended July 31, 2005 was due primarily to net income from operations of $3.4 million offset by a decrease in accounts payable of $0.45 million, an increase in inventories of $4.4 million and an decrease in accounts receivable of $0.11 million. Net cash provided by operating activities of $0.96 million for the six months ended July 31, 2004 was due primarily to net income from operations of $2.6 million, a decrease in accounts receivable of $0.54 million, and an increase in accounts payable of $0.029 million, offset in part by an increase in inventories of $2.9 million. Net cash used in investing activities of $3.8 million and $4.9 million in the six months ended July 31, 2005 and 2004, respectively, was due to purchases of property and equipment and for marketable securities in 2004. Net cash provided by financing activities in the six months ended July 31, 2004 was primarily attributable to borrowings under our credit facilities and to the proceeds from the secondary stock offering in 2004. We currently have one credit facility - a $25 million revolving credit, of which we had $1.88 million of borrowings outstanding as of July 31, 2005; on July 10, 2005 the Company entered into a $25 million five year secured revolving loan agreement to replace the former two facilities, one of which was to expire on July 31, 2005. Our credit facility requires that we comply with specified financial covenants relating to fixed charge ratio, debt to EBIDTA coverage, and inventory and accounts receivable collateral coverage ratios. These restrictive covenants could affect our financial and operational flexibility or impede our ability to operate or expand our business. Default under our credit facility would allow the lender to declare all amounts outstanding to be immediately due and payable. Our lender has a security interest in substantially all of our assets to secure the debt under our credit facility. As of July 31, 2005, we were in compliance with all covenants contained in our credit facility. We believe that our current cash position of $7.1 million, our cash flow from operations along with borrowing availability under our $25 million revolving credit facility will be sufficient to meet our currently anticipated operating, capital expenditures and debt service requirements for at least the next 12 months. Capital Expenditures -------------------- Our capital expenditures principally relate to purchases of manufacturing equipment, computer equipment, leasehold improvement and automobiles, as well as payments related to the construction of our facilities in China. Our facilities in China are not encumbered by commercial bank mortgages and thus Chinese commercial mortgage loans may be available with respect to these real estate assets if we need additional liquidity. Our capital expenditures are expected to be approximately $4.8 million in total; $3.6 million to purchase our Decatur Alabama facilities and similar facilities adjacent to our New York corporate headquarters (all currently rented for $615,000 annually) and $1.2 million for capital equipment primarily computer equipment and apparel manufacturing equipment in fiscal 2006. 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes in market risk from that disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2005. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures - Lakeland Industries, Inc.'s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of Lakeland Industries, Inc.'s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(c) under the Securities Exchange Act) as of the end of the period covered by this report, have concluded that, based on the evaluation of these controls and procedures, the Company's disclosure controls and procedures were effective. Changes in Internal Control Over Financial Reporting - Lakeland Industries, Inc.'s management, with the participation of Lakeland Industries, Inc.'s Chief Executive Officer and Chief Financial Officer, has evaluated whether any change in the Company's internal control over financial reporting occurred during the second quarter of fiscal 2006. Based on that evaluation, management concluded that there has been no change in Lakeland Industries, Inc.'s internal control over financial reporting during the second quarter of fiscal 2006 that has materially affected, or is reasonably likely to materially affect, Lakeland Industries, Inc.'s internal control over financial reporting. Through the eighteen months ended July 31, 2005 additional expense has been incurred relating to documenting and testing the systems of internal controls. The Company hired an internal auditor in July 2004 and has contracted with an independent consultant for services related to overall Sarbanes-Oxley Act compliance and more specifically Section 404, in February 2004. The total amount expensed so far is approximately $521,000 and is expected to increase in fiscal 2006 by $250,000 due to the hiring of additional accounting personnel. PART II. OTHER INFORMATION Items 1, 2, 3 and 5 are not applicable. Item 4. Submission of Matters to a vote of Security Holders The annual meeting of shareholders of the Company (the "Annual Meeting") was held on June 15, 2005 in Ronkonkoma, New York. The Company had 4,560,885 shares of common stock outstanding as of April 25, 2005, the record date for the Annual Meeting. Proposal 1 - Election of Directors The candidates listed below were duly elected to the Board of Directors at the Annual Meeting by the tally indicated. Candidate Votes in Favor Votes Witheld ------------------------------------------------------------------------ Christopher J. Ryan 3,811,694 508,008 Michael E. Cirenza 4,283,854 35,848 John Kreft 4,283,959 35,749 Proposal 2 - Ratification of Auditors for fiscal 2005 and 2006 Holtz Rubenstein Reminick, LLP 4,285,189 34,513 Item 6. Exhibits and Reports on Form 8-K: a- 10.11*, Loan Agreement dated July 7, 2005 between Lakeland Industries, Inc. and Wachovia Bank, N.A. 10.15* Asset Purchase Agreement, dated July, 2005, between Lakeland Industries, Inc., and Mifflin Valley, Inc. 10.16* Lease Agreement, dated July 2005 between Lakeland Industries, Inc. and M. Gallen. 10.17* Employment Contract, dated July 2005, between Lakeland Industries, Inc. and M. Gallen. 18 b- On June 6, 2005, the Company filed a Form 8-K for the purpose of furnishing under Items 2.02 and 9.01 a press release announcing results of operations for the quarter ended April 30, 2005. On June 6, 2005, the Company filed a Form 8-K under Item 2.02, relating to a Notice of Teleconference call for 4:30 PM June 9, 2005. On July 11, 2005, the Company filed a Form 8-K under Item 1.01 regarding the closing on a $25 million secured revolving line of credit for a five year term with Wachovia Bank, N.A. On July 19, 2005, the Company filed a Form 8-K under Items 1.01 and 8.01 regarding the acquisition of Mifflin Valley, Inc., Lakeland joins New Russell Microcap Index and Lakeland raises garment prices. --------------------- * Filed herein 19 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. LAKELAND INDUSTRIES, INC. (Registrant) Date: September 7, 2005 /s/ Christopher J. Ryan ----------------------- Christopher J. Ryan, Chief Executive Officer, President, Secretary and General Counsel (Principal Executive Officer and Authorized Signatory) Date: September 7, 2005 /s/Gary Pokrassa ---------------- Gary Pokrassa, Chief Financial Officer (Principal Accounting Officer and Authorized Signatory) 20