Steve Bachelder Chief Operating Officer September 2016 Emerging - - PowerPoint PPT Presentation

NASDAQ: LAKE

Emerging Markets Exposure… …Western Markets Expertise

Steve Bachelder Chief Operating Officer

September 2016

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Safe Harbor Statement

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

• bligation to update its forward-looking statements.

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Lakeland At A Glance

• Leading manufacturer of industrial protective clothing
• Serving all major industrial market sectors

– Chemical/Petrochemical – Basic Industry: Auto, Steel, Construction, Electric & Gas Utilities – Health Care & Food Chain; High Tech – Government, Fire Department, Public Safety, DOD, CDC, DEA, etc.

• In business since 1982 in a stable and growing market
• History: Lost nearly $80 million of annual revenue from DuPont products

since 2006 and $15 million in Brazil since 2012

• But managed to maintain overall revenues by growing new business
• Driven by world-wide sales and profit growth opportunities
• Positioned for long term growth with strengthened balance sheet and

significant upside potential

HOBBLED BY PRIOR DEPENDENCE ON DUPONT FABRICS & EXIT FROM BRAZIL

4 $- $20 $40 $60 $80 $100 $120 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Non-DuPont Items Total Ex-Brazil Brazil Sales DuPont Items Total

($ Millions)

Fiscal Year Sales History: Tyvek/Tychem and Brazil Declines Mask Organic Domestic and International Growth* Lost $78M in DuPont sales and $17M in Brazil Sales from 2006-2016

*Chart shows figures for continuing and discontinued operations

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Financial Issues Through 2015

Company In A Sharp Turn Around Mode

• DuPont had squeezed us for five years before terminating license in

FY 2012.

• We responded by opening international markets, creating our own

branded products, and beefing up our sales force.

• Then in FY 2013 Company got “homered” in a Brazil court case,

leading to collapse of business there and $34 million in losses, and subsequent “Going Concern Opinion” as we lost our lender.

• One day before loans were to be called in FY 2014, Company was

able to get new (but expensive) financing, and the “Going Concern Opinion” was removed.

• PIPE common stock issuance for $11.1 million completed in FY

2015, enabling payoff of high cost debt and remainder of judgement in Brazil.

• Company was then able to exit Brazil in FY 2016 via a local

management transaction.

Growth in Operating Profit From Continuing Operations

(Year Ended January 31) 6

$- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 2013 2014 2015 2016 Operating Profit From Continuing Operations

($ Millions)

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Proof Of Turn Around from FY2014-FY2016 Highlights FY 2016 (continuing operations)

• Revenue Growth
• Consolidated sales increased for third consecutive year, despite currency headwinds
• Revenues driven by organic growth and emergency demand in first three quarters of FY

2016 Gross margin for the year was 36.5% compared to 33.9% previous yea

• Significant Increases in Operating Income, Adjusted EBITDA* and Free Cash Flow
• Operating income increased to $11.8M from $7.0M previous year
• As a percentage of sales, increased to 11.9% from 7.5%
• Free cash flow (adjusted EBITDA less taxes and capital exp.) $10.8M vs. $7.4M
• Net Income
• FY 2016 net income of $7.8M declined from $11.1M previous year
• Decline in net income primarily reflects the income tax benefit in FY 2015 from the

Brazil worthless stock deduction of approximately $34M for a $9.5M tax credit recorded for the Company’s exit from Brazil

• Balance Sheet Strength
• FY 2016 vs. FY 2013: total liabilities down by 58%; shareholders equity up by 52%
• Uses of cash during FY 2016 include payments of arbitration settlement of $3.8M and

VAT tax liability of $2.3M as part of the Company’s exit from Brazil

*Includes non-GAAP measures and other adjustments – see tables included herein for reconciliations.

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Long Term Improvements in Continuing Operations

Summary of Operations Year Ended January 31, (in thousands, except share and per share data) 2016 2015* 2014* 2013* Income Statement Data: Net sales from continuing operations 99,646 $ 93,419 $ 84,173 $ 78,260 Operating profit (loss) from continuing operations 11,812 6,691 4,053 579 Arbitration judgment in Brazil — — — (7,874) Income (loss) from continuing operations before income taxes 10,907 2,898 2,679 (8,538) Income tax expense (benefit) 3,117 (8,188) (2,851) 4,127 Net income (loss) from continuing operations 7,790 11,086 5,530 (12,665) Net income (loss) on discontinued operations net of tax (3,936) (2,687) (5,650) (13,624) Earnings (loss) per share from continuing operations - basic $ 1.09 $ 1.78 $ 0.97 $ (2.39) Earnings (loss) per share from continuing operations – diluted $ 1.07 $ 1.75 $ 0.96 $ (2.39) Weighted average common shares outstanding Basic 7,171,965 6,214,303 5,689,230 5,290,332 Diluted 7,254,340 6,325,525 5,771,226 5,290,332 Balance Sheet Data: Current assets $ 69,655 $ 68,635 $ 65,481 $ 60,605 Total assets 88,260 93,208 80,483 80,051 Current liabilities 19,958 26,222 26,835 27,761 Long-term liabilities 786 3,730 9,171 8,801 Stockholders’ equity 67,516 63,256 44,477 43,489

* Restated for discontinued operations

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

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Expanded Product Line

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

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The Right Focus: End-user Segments for Personal Protective Equipment

Source: Frost & Sullivan Estimates (2014-2015)

Construction 10% Transport 7% Other 21% Pulp & Paper 7% Petrochemical 10% Utilities 9% Gas Detection 6% Healthcare 9% Metals 8% Auto 11%

Lakeland End-user Segments Address Over 55%

• f Total Market but the Company Possesses Less Than 1%

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The Right Focus: Personal

Protective Equipment Market

Source: Frost & Sullivan Estimates

Protective Clothing 22% Hearing 3% Respiratory 15% Footwear 13% Fall 4% Eye 6% Gas Detection 6% Head 2% Hand 29%

Lakeland Product Segments Address Over 50% of $23 Billion Market but the Company Presently Represents Less Than 1% of the Total Addressable Market (TAM)

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Growth Opportunities

High (>6%) Medium (2%-6%) Low (0%-2%) Medium ($1.0-$2.5 billion) Small (<$1.0 billion) Large (>$2.5 Billion)

4 7 1 6 2 3 5

Market Size of Market Segments

Source: Frost & Sullivan; CAGR is calculated from 2008-2015 Head/Eye/Face

2 3 4 5 6 7 1

Respiratory Hand Hearing

• Prot. Apparel

Foot Fall Prot.

CAGR for Market Segments

Lakeland Target Markets Among Largest and Fastest Growing

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Product Mix

Homeland Security Chemical Suits 7% Gloves & Arm Protection 4% Fire and Heat Protective Clothing and other Wovens 18% Disposable Clothing 64% High Visibility 7% Homeland Security Chemical Suits Gloves & Arm Protection Fire and Heat Protective Clothing and other Wovens Disposable Clothing High Visibility

Revenue Composition FY16* Domestic 57% International 43%

*Revenue from continuing operations

Revenue by Product – Historical Approximation

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Optimized Global Presence

Sales Operations (16) Headquarters: Ronkonkoma, New York Manufacturing Location (6)

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International Traction

• International Growth – Foreign Revenues

Comprised 43% of Total in FY16

• Manufacturing Locations

– Small facility in US – Expanded plant in Mexico – Expansion in China – Start-up operation in India

• New Markets Since 2007/08

– China/Asia Pacific – Russia/Kazakhstan – South America – Southeast Asia/Australia – Eastern Europe, Scandinavia

• Snapshot

– Asia: 15% of revenues with big upside – Europe: 12% and growing – Canada: 9% and growing – Russia, Latin America: flat due to political problems and oil/commodities

* Direct container shipments from China to US customers reclassified to USA sales in 4QFY13

10 20 30 40 50 60 International Revenues ($ Millions) Consolidated International Unit Sales Increased in FY16 from FY15 but Strength

• f US Dollar Distorted Results as Reported

May want to add 1HFY17

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Diversification Strategy & Transition

(Continuing Operations for FY2016 Ended 1/31/16)

Area FY2006 FY2016

COGS/Raw Materials Tied to DuPont Multi-sourced, lower priced fabrics than DuPont Pricing Power: Gross Margin

• Approx. 22%

29.2% in F14, 32.5% in F15 and 36.5% in F16 (excluding Brazil) Sales Channel Distributors Distributors and Key End Users Customer Concentration Focused: Auto Diversified: Fire, Glove, Petro, Food, Healthcare, Auto, Mining Number of Products <100 >800 Country Sales Offices 3 16 Geographic Coverage North America Global Manufacturing Locations U.S., China China, Mexico, U.S., India Manufacturing Capacity $95 Million $130+ Million Profit Power: EBITDA Margin

• Approx. 9%
• Approx. 13%

Unique Operating Platform

• Our base business grows both organically and from international expansion
• But always in a position to gain bonus business from emergencies like pandemics,
• il/chemical spills, natural disasters, etc.
• While timing is unpredictable, they do occur regularly, and spike our earnings
• We are able to capitalize due to our unique highly scalable operating platform of

company-owned manufacturing facilities

• Ebola/Avian Flu Crises Case Study

– Sudden, significant global demand for protective suits – Increased Monthly Production Capacity 200% for sealed seam suits in just two months – That’s how we won big ebola and avian flu contracts; no one else could scale up as fast

• Successful Crisis Performance Yielding Benefits

– Enhanced our brand by outperforming the big names – Burnished reputation as the “go-to” supplier for emergencies, gaining us new customers – Improved our access to healthcare and government agencies globally – Unlike Brand D, we were also able to take care of our regular customers (and some of theirs…)

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Growth Catalysts and Strategy

• Protective clothing market projected to grow at 7% world-

wide; faster in developing markets, and we can do much better

• Concentrating on high growth potential regions (Asia) or

where market share can be increased (Europe, US)

• Developing new and higher margin products
• Investing in process improvement, equipment and systems for

increased efficiency, capacity, quality, margins, and control

• Aggressively adding sales people in regions where under-

represented

• Focusing increasingly on end-users
• Leveraging global brand and worldwide company-owned

manufacturing facilities

• Benefiting from competitors manufacturing limitations
• Entering new markets in US and Worldwide

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International Profit Leverage Opportunities

• We can grow anywhere, but best leverage is in developing

markets

• Developing countries/industries adopting OSHA-like regulations
• We already have our manufacturing capacity in place
• Little cost to extend broader US product line offerings or adapt to

local standards

• American global brands are greatly respected in developing

markets

• We have no company sales staff in many Asian countries
• We can put 5 sales people on the street in SE Asia for the cost of
• ne in the US and Europe…but selling prices are not much less
• So just hiring for better end-user coverage and to fill holes in

Europe and US

• But hiring as fast as can find qualified people in Asia
• This is our great upside play…

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Attractive Investment Merits

NASDAQ: LAKE

Stock price as at 9/15/16; includes warrant shares. Ratios use consolidated results from continuing operations for most recent quarter on annualized basis.

• Turnaround strategy has succeeded
• Potential for steady industry-beating long term

world-wide sales and profit growth

• Huge upside in developing markets
• Significant advantages from unique operating

platform

• Enhanced global recognition in $7 billion

worldwide market for protective apparel

• Strong balance sheet; access to credit facilities
• Exit from Brazil, early payoff of liability; tax

benefit of over $9M credit expected

• Eventual rebound of foreign currencies will boost

profits

• Substantial insider ownership

LAKE Stock Information Share Price $10.36 Shares (FD Issued & O/S) 7.3 million Market Cap $75.6 million Price/Sales 0.8 Price/Earnings 13.3

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Appendix: Financials

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Full Year Operating Earnings and Adjusted EBITDA Reconciliation

Operating Results as Restated for Discontinued Operations ($ 000) Reconciliation to GAAP Results

Year Ended January 31, 2016 Year Ended January 31, 2015 Net sales from continuing operations $99,646 $93,419 Year over year growth 6.7%

• Gross profit from continuing operations

36,333 31,698 Gross profit % 36.5% 33.9% Operating expenses from continuing operations 24,521 24,737 Operating expenses as a percentage of sales 24.6% 26.5% Operating income from continuing operations 11,812 6,961 Operating income as a percentage of sales 11.9% 7.5% Interest expense from continuing operations 785 1,688 Other expense from continuing operations (120) (2,375) Pretax income from continuing operations 10,907 2,898 Income tax expense (benefit) from continuing operations 3,117 (8,188) Net income from continuing operations 7,790 11,086 Non-cash reclassification of Other Comprehensive Income to Statement of Operations with no impact on stockholder’s equity (1,286)

• Loss from operations from discontinued operations

(3,538) (2,836) Loss from disposal of discontinued operations (515)

• Loss before taxes for discontinued operations

(5,339) (2,836) Income tax expense (benefit) from discontinued operations (1,403) (149) Net loss from discontinued operations (3,936) (2,687) Net income $3,854 $8,399 Weighted average shares for EPS-Basic 7,171,965 6,214,303 Net income per share from continuing operations $1.09 $1.78 Net loss per share from discontinued operations $(0.55) $(0.43) Net income per share $0.54 $1.35 Operating income from continuing operations $11,812 $6,961 Adjusted EBITDA 13,504 10,000 Free cash flow $10,838 $7,362

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Quarterly Operating Earnings and Adjusted EBITDA Reconciliation

Operating Results as Restated for Discontinued Operations ($000) Reconciliation to GAAP Results Quarter Ended July 31, 2016 Quarter Ended April 30, 2016 Net sales from continuing operations $22,269 $20,369 Gross profit from continuing operations 8,590 6,776 Gross profit % 38.6% 33.3% Operating income from continuing operations 2,631 169 Operating income % 11.8% 0.8% Interest expense from continuing operations 175 198 Other income from continuing operations (35) 8 Pretax income from continuing operations 2,421 (21) Income tax expense from continuing operations 990 (24) Net income $1,431 $3 Weighted average shares for EPS-Basic 7,254,999 7,254,162 Net income per share from continuing operations $0.20 $0.0 Net loss per share from discontinued operations

• Net income per share

$0.20 $0.0 Operating income from continuing operations $2,631 $169 Depreciation and amortization 317 287 Other income from continuing operations (35) 8 EBITDA from continuing operations 2,913 464 Equity Compensation (52) 130 USA severance 152 309 Adjusted EBITDA 3,013 903 Free cash flow $2,537 $741

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Balance Sheet

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS July 31, January 31, 2016 2016 Current assets ($000’s) Cash and cash equivalents $7,940 $7,022 Accounts receivable, net of allowance for doubtful accounts of $573 and $593 at July 31, 2016 and January 31, 2016, respectively 11,978 11,476 Inventories, net of allowance of $2,355 and $2,566 at July 31, 2016 and January 31, 2016, respectively 39,239 40,841 Other assets 5,526 4,333 Total current assets 64,683 63,672 Property and equipment, net 9,861 10,369 Deferred income tax, noncurrent 12,783 12,783 Prepaid VAT and other taxes 377 377 Security deposits 111 93 Other assets 8 95 Goodwill 871 871 Total assets $88,694 $88,260 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $6,616 $4,254 Other accrued expenses 2,758 2,970 Current maturity of long-term debt 50 50 Short-term borrowing 3,232 3,226 Borrowings under revolving credit facility 6,160 9,458 Total current liabilities 18,816 19,958 Long-term liabilities 739 786 Total liabilities 19,555 20,744 Stockholders’ equity Preferred stock, $0.01 par; authorized 1,500,000 shares (none issued)

• Common stock, $0.01 par; authorized 10,000,000 shares,

Issued 7,612,638 and 7,610,603; outstanding 7,256,197 and 7,254,162 at July 31, 2016 and January 31, 2016, respectively 76 76 Treasury stock, at cost; 356,441 shares at July 31, 2016 and January 31, 2016 (3,352) (3,352) Additional paid-in capital 64,543 64,468 Retained earnings 9,942 8,508 Accumulated other comprehensive loss (2,070) (2,184) Total stockholders' equity 69,139 67,516 Total liabilities and stockholders' equity $88,694 $88,260