Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - LAKELAND INDUSTRIES INC | v417344_8-k.htm |
| EX-99.1 - EXHIBIT 99.1 - LAKELAND INDUSTRIES INC | v417344_ex99-1.htm |
Exhibit 99.2
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Presented below is the unaudited proforma condensed consolidated financial data of Lakeland Industries, Inc. (the “Company”) and its operating subsidiaries as of and for the periods indicated. The unaudited proforma condensed consolidated statement of income for the fiscal year ended January 31, 2015 was derived from the audited statements contained in the Annual Report on Form 10-K for the period presented, and the unaudited proforma condensed consolidated statement of income for the three months ended April 30, 2015 was derived from the unaudited Statement of Income presented in the Quarterly Report on Form 10-Q for such period. The unaudited proforma condensed consolidated Balance Sheet as of April 30, 2015 was derived from the unaudited Balance Sheet presented in the quarterly report on form 10-Q for such period.
The transaction being presented is the conditional closing (subject to the acceptance of the shares transferred on the commercial registry by the Brazilian government) on July 31, 2015 of the sale of its wholly-owned subsidiary, Lake Brasil Industria E Comercio de Roupas E Equipamentos de Protecao Individual Ltda (“Lakeland Brazil”), to Zap Comércio de Brindes Corporativos Ltda (“Transferee”), a company owned by an existing Lakeland Brazil manager. This sale is pursuant to a Shares Transfer Agreement (the “Shares Transfer Agreement”) entered into on June 19, 2015, as previously disclosed by the Company. For more complete details of the transaction, reference is made to the Shares Transfer Agreement, which was previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 25, 2015.
The unaudited proforma condensed consolidated statements of income show the effect of the sale as if it happened on the first day of the period being presented; the unaudited proforma condensed consolidated balance sheet shows the effect of the sale as if it happened on April, 30, 2015 and they are presented for illustrative purposes only.
| LAKELAND INDUSTRIES, INC. and SUBSIDIARIES |
| PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET |
| April 30, 2015 |
| ($000's) |
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||
| Current assets | As Reported at April 30, 2015 (1) | Remove Brazil Discontinued Ops (2) | Accrue Cost to Dispose (3) | Reclass other Comprehensive income to | Write Off InterCo AR from Brazil (5) | Reverse Writeoff of Partial InterCo (Real Estate) (6) | Assets Held for Sale net Deferred Gain (7) | Accrue Tax Effect of additional costs to dispose (8) | Buyout of Arbitration Award (9) | Tax Effect on Extinguishment of Debt (10) | Proforma Balance Sheet | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 8,721 | - | - | - | - | - | - | - | - | - | 8,721 | ||||||||||||||||||||||||||||||||
| Accounts receivable, net of allowance for doubtful accounts of $538 at April 30, 2015 | 14,769 | - | - | - | - | - | - | - | - | - | 14,769 | |||||||||||||||||||||||||||||||||
| Inventories, net of reserves of approximately $2,460 at April 30, 2015 | 39,495 | - | - | - | - | - | - | - | - | - | 39,495 | |||||||||||||||||||||||||||||||||
| Deferred income taxes | 1,015 | - | - | - | - | - | - | 896 | - | (81 | ) | 1,830 | ||||||||||||||||||||||||||||||||
| Assets of discontinued operations in Brazil | 6,447 | (6,447 | ) | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Assets held for sale (Brazil real estate) | - | - | - | - | - | - | 882 | - | - | - | 882 | |||||||||||||||||||||||||||||||||
| Prepaid VAT tax | 1,216 | - | - | - | - | - | - | - | - | - | 1,216 | |||||||||||||||||||||||||||||||||
| Other current assets | 3,184 | - | - | - | - | - | - | - | - | - | 3,184 | |||||||||||||||||||||||||||||||||
| Total Current Assets | 74,847 | (6,447 | ) | - | - | - | - | 882 | 896 | - | (81 | ) | 70,097 | |||||||||||||||||||||||||||||||
| Property and equipment, net | 10,311 | - | - | - | - | - | - | - | - | - | 10,311 | |||||||||||||||||||||||||||||||||
| Deferred income tax, noncurrent | 13,101 | - | - | - | - | - | - | - | - | - | 13,101 | |||||||||||||||||||||||||||||||||
| Prepaid VAT and other taxes | 173 | - | - | - | - | - | - | - | - | - | 173 | |||||||||||||||||||||||||||||||||
| Security deposits | 86 | - | - | - | - | - | - | - | - | - | 86 | |||||||||||||||||||||||||||||||||
| Intangibles, prepaid bank fees and other assets, net | 141 | - | - | - | - | - | - | - | - | - | 141 | |||||||||||||||||||||||||||||||||
| Goodwill | 871 | - | - | - | - | - | - | - | - | - | 871 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 99,530 | $ | (6,447) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 882 | $ | 896 | $ | 0 | $ | (81 | ) | $ | 94,780 | |||||||||||||||||||||
| LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||||||||||||||||||||||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||||||||||||||||||||||||||
| Accounts payable | $ | 8,512 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 8,512 | ||||||||||||||||||||||
| Accrued compensation and benefits | 854 | - | - | - | - | - | - | - | - | - | 854 | |||||||||||||||||||||||||||||||||
| Other accrued expenses | 1,798 | - | 300 | - | - | - | - | - | - | - | 2,098 | |||||||||||||||||||||||||||||||||
| Liabilities of discontinued operation in Brazil | 6,692 | (9,814 | ) | 2,155 | - | 3,122 | (337 | ) | - | - | - | - | 1,818 | |||||||||||||||||||||||||||||||
| Current maturity of long-term debt | 50 | - | - | - | - | - | - | - | - | - | 50 | |||||||||||||||||||||||||||||||||
| Current maturity of accrued arbitration award | 1,000 | - | - | - | - | - | - | - | (1,000 | ) | - | - | ||||||||||||||||||||||||||||||||
| Short-term borrowing | 3,446 | - | - | - | - | - | - | - | - | - | 3,446 | |||||||||||||||||||||||||||||||||
| Borrowing under revolving credit facility | 8,666 | - | - | - | - | - | - | - | 3,413 | - | 12,079 | |||||||||||||||||||||||||||||||||
| Total current liabilities | 31,018 | (9,814 | ) | 2,455 | - | 3,122 | (337 | ) | - | - | 2,413 | - | 28,857 | |||||||||||||||||||||||||||||||
| Accrued arbitration award, less current portion | 2,637 | - | - | - | - | - | - | - | (2,637 | ) | - | - | ||||||||||||||||||||||||||||||||
| Long-term portion of Canada loan | 830 | - | - | - | - | - | - | - | - | - | 830 | |||||||||||||||||||||||||||||||||
| VAT taxes payable long-term | 130 | - | - | - | - | - | - | - | - | - | 130 | |||||||||||||||||||||||||||||||||
| Total liabilities | 34,615 | (9,814 | ) | 2,455 | - | 3,122 | (337 | ) | - | - | (224 | ) | - | 29,817 | ||||||||||||||||||||||||||||||
| Stockholder's equity | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock, $.01 par; authorized 1,500,0000 shares (none issued) | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Common stock, $.01 par; authorized 10,000,000 shares, issued 7,428,220; outstanding 7,071,779 at April 30, 2015 | 74 | - | - | - | - | - | - | - | - | - | 74 | |||||||||||||||||||||||||||||||||
| Treasury stock, at cost; 356,441 shares at April 30, 2015 | (3,352 | ) | - | - | - | - | - | - | - | - | - | (3,352 | ) | |||||||||||||||||||||||||||||||
| Additional paid-in capital | 64,680 | (24,162 | ) | - | - | - | - | - | - | - | - | 40,518 | ||||||||||||||||||||||||||||||||
| Retained earnings | 5,883 | 26,243 | (2,455 | ) | - | (3,122 | ) | 337 | 882 | 896 | 224 | (81 | ) | 28,807 | ||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | (2,370 | ) | 1,286 | - | - | - | - | - | - | - | - | (1,084 | ) | |||||||||||||||||||||||||||||||
| 64,915 | 3,367 | (2,455 | ) | - | (3,122 | ) | 337 | 882 | 896 | 224 | (81 | ) | 64,963 | |||||||||||||||||||||||||||||||
| $ | 99,530 | (6,447 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 882 | $ | 896 | $ | 0 | $ | (81 | ) | $ | 94,780 | ||||||||||||||||||||||
| Notes: |
| 1 | As reported in the quarterly report on Form 10Q as of April 30, 2015. |
| 2 | To remove the Brazil assets and liabilities per the Brazil balance sheet as of April 30, 2015. |
| 3 | Estimated amounts the Company is contractually obligated to pay the buyer plus estimated professional and other fees to dispose. |
| 4 | Other Comprehensive Income on the books of the Brazilian subsidiary as reclassified to P&L. |
| 5 | To write off the receivables from Brazil held by Lakeland and its subsidiaries which will not be collected. |
| 6 | To reflect a portion of the intercompany accounts which will be collected via sale of Brazil real estate. |
| 7 | To reflect the Brazil real estate which has been sold to the US parent company in exchange for satisfaction of several intercompany accounts. |
| 8 | To accrue tax benefits for additional costs to dispose which were not accrued and not included in the $9.5 million tax benefit for the worthless stock deduction to be claimed on the company's FY 15 US tax returns. |
| 9 | To reflect the Settlement Agreement reached on June 18, 2015 with two former officers of Lakeland Brazil. |
| 10 | To reflect the tax impact of #9 above. |
| 11 | There are contingent "bonus payments" of $150,000 after 12 months and $100,000 after 24 months from the closing date to be paid if the buyer has not declared bankruptcy or reorganization. Such payments have not been reflected herein due to the contingent nature of these payments. |
| 12 | Included in the "as reported" for FY 15 and Q1 FY 16 was a US tax benefit of $9.5 million resulting from the worthless stock deduction to be claimed on the Company's FY 15 US tax return. This has not been reflected in the discontinued operations since it is a USA tax benefit and was derived from the fact that the Brazil operations were deemed to be worthless during FY 15 and not as a result of the sale. Further, this tax benefit was included in the historic financial statements for FY 15. |
| PRO FORMA CONDENSED STATEMENT OF INCOME (to reflect sale of Brazil ) (unaudited) |
| FY 15 ($ 000) (except for share and per share data) |
| as reported (1)(5) | Brazil as reported | as restated for discontinued operations | to reflect loss on sale (3) | gain on extinguishment of arbitration award debt (4) | pro forma interest on arbitration buyout (2) | Pro forma statement of Income (1)(5) | ||||||||||||||||||||||
| Net Sales from Continuing Operations | $ | 99,733 | $ | 6,315 | $ | 93,418 | - | - | - | $ | 93,418 | |||||||||||||||||
| Gross Profit from Continuing Operations | 33,712 | 2,013 | 31,699 | - | - | - | 31,699 | |||||||||||||||||||||
| Operating expenses from Continuing Operations | 28,755 | 4,017 | 24,738 | - | - | - | 24,738 | |||||||||||||||||||||
| Operating income from Continuing Operations | 4,957 | (2,004 | ) | 6,961 | - | - | - | 6,961 | ||||||||||||||||||||
| Interest expense from Continuing Operations | 2,352 | 636 | 1,716 | - | - | 213 | 1,929 | |||||||||||||||||||||
| Other (income) expense from Continuing Operations | 2,544 | 197 | 2,347 | - | - | - | 2,279 | |||||||||||||||||||||
| Pretax income (loss) from Continuing operations | 61 | (2,837 | ) | 2,898 | - | - | (213 | ) | 2,754 | |||||||||||||||||||
| Income tax benefit from Continuing Operations | (8,337 | ) | (149 | ) | (8,188 | ) | - | - | (78 | ) | (8,199 | ) | ||||||||||||||||
| Net Income from Continuing Operations | $ | 8,399 | $ | (2,688 | ) | $ | 11,087 | - | - | $ | (135 | ) | $ | 10,952 | ||||||||||||||
| Weighted average shares for EPS basic | 6,214,303 | - | 6,214,303 | - | - | - | 6,214,303 | |||||||||||||||||||||
| Weighted average shares for EPS diluted | 6,325,525 | - | 6,325,525 | - | - | - | 6,325,525 | |||||||||||||||||||||
| Net income per share from continuing operations - basic | $ | 1.35 | - | $ | 1.78 | - | - | - | $ | 1.76 | ||||||||||||||||||
| Net income per share from continuing operations - diluted | $ | 1.33 | - | $ | 1.75 | - | - | - | $ | 1.73 | ||||||||||||||||||
| Notes: | |||||||
| 1. Included in the "as reported" for FY 15 was a US tax benefit of $9.5 million resulting from the worthless stock deduction to be claimed on the Company's FY 15 US tax return. This has not been reflected in the discontinued operations since it is a USA tax benefit and was derived from the fact that the Brazil operations were deemed to be worthless during FY 15 and not as a result of the sale. Further, this tax benefit was included in the historic financial statements for FY 15. | |||||||
| 2. Interest expense has been included on a proforma basis to reflect the $3.4 million borrowed from the revolver in Q2 to fund the buyout, at 6.25%, as if the transaction had occurred at the beginning of the fiscal period. | |||||||
| 3. Loss on sale of $1.381 million is after including a reclassification of $1.2 million from other comprehensive income to loss from discontinued operations. The reclassification adjustment had no impact on shareholder equity and thus shareholder equity has increased by $48,000 as a result of the sale before other proforma adjustments. This has not been reflected in the proforma statement since the proforma statement shows only income from continuing operations. There will be small rounding differences between the P&L and Balance Sheet proformas. | |||||||
| 4. Gain on extinguishment of arbitration debt was $224,000 pretax. A proforma tax impact of $82,000 was included. This has not been reflected in the proforma statement of income since the proforma statement of income shows only income from continuing operations. | |||||||
| 5. There are contingent "bonus payments" of $150,000 after 12 months and $100,000 after 24 months from the closing date to be paid if the buyer has not declared bankruptcy or reorganization. Such payments have not been reflected herein due to the contingent nature of these payments. | |||||||
| PRO FORMA CONDENSED STATEMENT OF INCOME (to reflect sale of Brazil ) (unaudited) |
| Q1 FY 16 ($ 000) (except for share and per share data) |
| as reported - restated for discontinued operations (1)(5) | to reflect loss on sale (3) | gain on extinguishment of arbitration award debt (4) | pro forma interest on arbitration buyout (2) | Pro forma statement of Income (5) | ||||||||||||||||
| Net Sales from Continuing Operations | $ | 24,819 | - | - | - | $ | 24,819 | |||||||||||||
| Gross Profit from Continuing Operations | 9,279 | - | - | - | 9,279 | |||||||||||||||
| Operating expenses from Continuing Operations | 6,059 | - | - | - | 6,059 | |||||||||||||||
| Operating income from Continuing Operations | 3,220 | - | - | - | 3,220 | |||||||||||||||
| Interest expense from Continuing Operations | 183 | - | - | 53 | 236 | |||||||||||||||
| Other (income) expense from Continuing Operations | 15 | - | - | - | 15 | |||||||||||||||
| Pretax income (loss) from Continuing operations | 3,052 | - | - | (53 | ) | 2,999 | ||||||||||||||
| Income tax expense (benefit) from Continuing Operations | 892 | - | - | (19 | ) | 873 | ||||||||||||||
| Net Income from Continuing Operations | $ | 2,160 | - | - | $ | (34 | ) | $ | 2,126 | |||||||||||
| Weighted average shares for EPS basic | 7,062,144 | - | - | - | 7,062,144 | |||||||||||||||
| Weighted average shares for EPS diluted | 7,235,385 | - | - | - | 7,235,385 | |||||||||||||||
| Net income per share from continuing operations - basic | $ | 0.31 | - | - | - | $ | 0.30 | |||||||||||||
| Net income per share from continuing operations - diluted | $ | 0.30 | - | - | - | $ | 0.29 | |||||||||||||
| Notes: | ||
| 1. Included in the "as reported" for FY 15 was a US tax benefit of $9.5 million resulting from the worthless stock deduction to be claimed on the Company's FY 15 US tax return. This has not been reflected in the discontinued operations since it is a USA tax benefit and was derived from the fact that the Brazil operations were deemed to be worthless during FY 15 and not as a result of the sale. Further, this tax benefit was included in the historic financial statements for FY 15. | ||
| 2. Interest expense has been included on a proforma basis to reflect the $3.4 million borrowed from the revolver in Q2 to fund the buyout, at 6.25%, as if the transaction had occurred at the beginning of the fiscal period. | ||
| 3. Loss on sale of $1.381 million is after including a reclassification of $1.2 million from other comprehensive income to loss from discontinued operations. The reclassification adjustment had no impact on shareholder equity and thus shareholder equity has increased by $48,000 as a result of the sale before other proforma adjustments. This has not been reflected in the proforma statement since the proforma statement shows only income from continuing operations. | ||
| 4. Gain on extinguishment of arbitration debt was $224,000 pretax. A proforma tax impact of $82,000 was included. This has not been reflected in the proforma statement since the proforma statement shows only income from continuing operations. | ||
| 5. There are contingent "bonus payments" of $150,000 after 12 months and $100,000 after 24 months from the closing date to be paid if the buyer has not declared bankruptcy or reorganization. Such payments have not been reflected herein due to the contingent nature of these payments. | ||