investor presentation march 2018 christopher j. ryan ......fiscal 2018 third quarter financial...

NASDAQ: LAKE

Protect Your People™

Investor PresentationMarch 2018

Christopher J. Ryan, Chief Executive Officer

Safe Harbor Statement

With the exception of historical information, the statements set forth in thispresentation include forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995 that involve risk and uncertainties. Thecompany wishes to caution that a number of important factors could cause actualresults to differ materially from those forward-looking statements. These and otherfactors could cause actual results to differ materially from those in any forward-looking statements which are discussed in this presentation. Please see LakelandIndustries’ SEC filings on Forms 10-K and 10-Q for important information about theCompany and related risks. The Company disclaims any obligation to update itsforward-looking statements.

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Key Statistics

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1 Treasury stock method2 Source: Bloomberg/Yahoo3 As of 10/31/2017

Market Statistics Financials & Valuation

Share Price (as of 3/21/2018) $ 13.25 LTM Revenue3 $91.1 million

52-Week High / Low $17.18 / $9.85 LTM Adjusted EBITDA3 $10.4 million

Average Daily Volume (10-day) 48,000 LTM Net Income3 $6.3 million

Diluted Shares Outstanding1 8.0 million LTM EPS3 $0.84

Market Capitalization1 $106.0 million EV/LTM Revenue .9x

Debt (as of 10/31/2017) $2.3 million EV/LTM EBITDA 8.3x

Cash (as of 10/31/2017) $21.5 million P/E (LTM)3 16.8x

Enterprise Value $86.8 million NOL Carryforward3 Approx. $20.0 million

Book Value3 $85.8 million

Recent Developments One Year Stock PerformanceFiscal 2018 Third Quarter Financial Results • Revenue of $24.0 million, an increase of 3.1%• Net income of $1.8 million, an increase of 19%• Earnings per share of $0.23, an increase of 10%• Cash at end of quarter increased to $21.5 million from $10.4 million

at beginning of fiscal year added by free cash flow and capital raise

Underwritten Public Offering of Common Stock• Issued 725,000 shares of common stock at $13.80 on 8/17/17• Net proceeds of approximately $8.95 million• Use of proceeds: expand manufacturing facilities; equipment capital

expenditures; repay borrowings on line of credit; and general corporate purposes

• Management/Insider ownership of 7.2% post-offering

Source: Etrade

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Optimized Global Presence

Manufacturing Sites

Decatur, AL Facility Anqui (Weifang), China Facility

Manufacturing Sites

Decatur, AL

Jerez, Mexico

Anqui (Weifang), China

Buenos Aires, Argentina

New Delhi, India

Nahm Dinh, Vietnam

Sales Presence

Beijing, China

Chongqing, China

Decatur, AL

Europe (France, Germany, Netherlands, Poland, Spain, U.K.)

Jerez, Mexico

Melbourne, Australia

Moscow, Russia

New Delhi, India

Ronkonkoma, NY (HQ)

Shanghai, China

South America (Argentina, Chile, Ecuador, Peru)

Southeast Asia (Malaysia, Thailand, Vietnam)

Toronto, Canada

Ust-Kamenogorsk, Kazakhstan

Sales Presence

Innovative Proprietary Products

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LAKE develops proprietary textile and designs when it identifies a market need…

New Product Focus: • Proprietary high margin products for stable and recurring end markets (e.g. utilities, pharmaceuticals)

Patents: • 17 patents & 4 patents in application1• 31 trademarks and 22 trademarks in application1

Supply Chain: • LAKE maintains strong control of its supply chain including multi-sourcing raw materials and having cut/sew operations performed by employees instead of contractors

Certifications: • Products are certified under relevant standards and certificates domestically and abroad• Customers recognize certification as sign of quality

Manufacturing: • All LAKE manufacturing facilities are ISO 9001 or ISO 9002 certified

Testing: • Quality control lab in China• Chinese facility able to perform medical and industrial sterilizations• Installed new test lab in Alabama facility in 2015

1 As of 1/31/2017.

Leading Protective Clothing Manufacturer

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Product Offering:

52% 16% 17% 10% 5%

Sales by Geography: • Domestic:• International:

54% of FY2017 net sales146% of FY2017 net sales1

Industries Served: • Chemical/petrochemical• Basic industries: auto, steel, construction, electric & gas utilities• Healthcare, food chain & high tech• Government, fire department, public safety and public agencies including DoD, CDC & DEA

Employees: • 904 international employees1• 89 domestic employees1

Founded: • 1982

1 As of 1/31/2017.

Disposables Chemical Suits Wovens Reflectives Gloves

% of Sales1

LAKE Product Examples

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LAKE Chemical Protection Suit

LAKE Homeland Security SuitLAKE Cleanroom Suit

LAKE Disposable Suit

Uniquely Positioned to Respond to Global Crises

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Crisis Ebola Bird Flu

FY161 LAKE Revenue Impact $4.6 million $4.1 million

LAKE Role Supplied suits to the United Kingdom Government Supplied protective clothing to DiVal Safety Equipment

Situation Timeline • August 8, 2014: Ebola declared an “international health emergency”; death toll reaches 1,000

• September 11, 2014: LAKE announced increase in manufacturing capacity to meet demand for safety products

• April 11, 2015: Avian Flu confirmed in a commercial chicken operation in WI

• April 20 – May 1, 2015: WI, MN, IA declared state of emergency

• May 5, 2015: US authorities approved $330 million in emergency funds to fight spread

LAKE Product Use

LAKE Ebola Protection Suit LAKE Bird Flu Protection Suit

1 Company fiscal year ends January 31.

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Transition to a Stronger Business Model

1 As of 1/31/2006.2 As of 10/31/2017.

Business Area FY20061 Today

Products Tied to DuPont / commodity / lower margin Proprietary / value-added / higher margin

COGS / Raw Materials Tied to DuPont Multi-sourced, lower priced fabrics than DuPont

Gross Margin 24.2%1 37.8%2

Sales Channels Distributors Distributors and Key End Users

Customer Breadth Limited Diversified

Number of Products 800

Sales Presence 3 countries 21 countries

Geographic Reach North America Global

Manufacturing Locations U.S., China, Mexico U.S., China, Mexico, Argentina, India, Vietnam

Blue Chip Customers

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Distributors

End Users

$77.0 $72.0 $60.0 $57.4

$51.2 $44.5

$35.7

$19.9 $8.0 $6.2

$0.0 $0.0

$21.3 $28.1

$35.6 $44.3 $41.7

$54.7 $61.3

$76.1 $84.0

$93.5 $99.6

$86.2

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017

Sales by Segment

($ in millions)

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Strong Growth Masked By Wind-Down of DuPont & Brazil

LAKE grew larger despite winding down $77 million DuPont and $17 million Brazil businesses

1 Company fiscal year ends January 31.2 Includes $8.7 million in one time Ebola and Bird Flu related revenue.

$8.7

DuPont & Brazil Sales Lakeland (Excluding DuPont & Brazil)

Ebola & Bird Flu Sales

1, 21 1 1 1 1 1 1 1 1 1 1

$90.9

$6.0 $6.4$6.9

$9.3

2013 2014 2015 2020

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Favorable Industry Dynamics

Lakeland operates in a large and growing industry…

1 Source: Markets and Markets: Protective Clothing Market – Global Forecast to 2020.

Global Economic Growth

Rebounding Global Oil Prices

Strong Increase in Manufacturing

Robust Demand from Developing Industries

Increased Global Focus on Safety

Weaker US Dollar

Industry Tailwinds Protective Clothing Market1

($ in billions)

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Positioned for Further International Growth

• Led by multinational corporations, developing countries are increasingly adopting OSHA-like standards

• LAKE is able to offer its U.S. product range in international markets for little incremental costs• The Company recently entered South Korea, Indonesia, Malaysia and Vietnam and is hiring

aggressively in these new markets

Significant Opportunity in Developing Markets1 Sales Presence by Geography

Region Sales People2

U.S. 15

Asia Pacific 25

Latin America 6

EEC 7

Mexico 4

Canada 4

Russia / Kazakhstan 2

India 3

1 Source: Markets and Markets: Protective Clothing Market – Global Forecast to 2020.2 As of 4/30/2017.

Leveraging its worldwide operating capabilities, LAKE plans deeper penetration into existing markets and selective expansion into new geographies…

Middle East & Africa

Rev

enue

s

Inception Traction Growth Maturity Decline

Asia Pacific

Latin America

EuropeNorth America

Time

Increasing Manufacturing Capacity

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$100

$150

Current Capability New Capability

August 2017 capital raise provides for investment in new manufacturing facilities

Targeting lower cost locations which are closer to customers, including India and Vietnam

Accretive to gross margins

Anqui (Weifang), China Facility

Jerez, Mexico Facility

Strong Nine Months of FY2018 Results

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LAKE management successfully implemented key strategic initiatives in Q1 FY20181that resulted in strong sales growth and improved cost controls…

Revenue Adjusted EBITDA EPS

($ in millions) ($ in millions)

Note: Company fiscal year ends January 31

Chart1

9M 2017

9M 2018

Series 1

65.8

70.9

Sheet1

Series 1

9M 201765.8

9M 201870.9

To resize chart data range, drag lower right corner of range.

Chart1

9M 2017

9M 2018

Series 1

7.675

10.428

Sheet1

Series 1

9M 20177.675

9M 201810.428


Chart1

9M 2017

9M 2018

Series 1

0.42

0.72

Sheet1

Series 1

9M 20170.42

9M 20180.72


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Significant M&A Activity

July 2016

/

EV / Revenue: 2.1x; EV / EBITDA: 9.7xFeb. 2016

May 2014

EV / Revenue: 2.2x; EV / EBITDA: 9.0x

May 2015


Source: SEC public filings, company press releases and other publicly available information.July 2013

May 2016

May 2016

June 2016

June 2016

Apr. 2015

July 2015Sept. 2016


Nov. 2015

June 2015

Mar. 2015

Nov 2013

Oct. 2015June 2017EV / Revenue: 2.0x; EV / EBITDA: 9.0x EV / Revenue: 3.4x; EV / EBITDA: 19.5x

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Low Seasonality in Business

1 Based on external sales from continuing operations, excluding intersegment sales.2 Company fiscal year ends January 31.

Q124.9%

Q229.6%

Q325.0%

Q420.5%

Q123.6%

Q225.8%

Q327.0%

Q423.6%

Sales By Quarter1

FY 20162 FY 20172

Seasoned Management Team

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Management Bio Years at LAKE

Christopher J. Ryan – President & CEOChristopher J. Ryan has served as our Chief Executive Officer and President since November 2003, Secretary since April 1991,and a director since May 1986. Mr. Ryan was our Executive Vice President - Finance from May 1986 until becoming ourPresident in November 2003. Mr. Ryan also worked as a Corporate Finance Partner at Furman Selz Mager Dietz & Birney, SeniorVice President-Corporate Finance at Laidlaw Adams & Peck, Inc., Managing-Corporate Finance Director of Brean Murray FosterSecurities, Inc. and Senior Vice President-Corporate Finance of Rodman & Renshaw, respectively, from 1983 to 1991. Mr. Ryanhas served as a Director of Lessing, Inc., a privately held restaurant chain based in New York, from 1995 to 2008. Mr. Ryanreceived his BA from Stanford University, his MBA from Columbia Business School and his J.D. from Vanderbilt Law School.

31 years1

Teri W. Hunt – Chief Financial OfficerTeri W. Hunt has served as our Chief Financial Officer since November 2015 after serving as the Acting Chief Financial Officerof the Company since July 2015. Ms. Hunt has also served as the Company’s Vice President of Finance since November 2010,before which time she served as Corporate Controller from November 2007 to November 2010. Prior to joining Lakeland Ms.Hunt served in multiple operational and financial management positions including Corporate Controller for a privately held yarnmanufacturer, TNS Mills.

12 years

Charles D. Roberson – Senior Vice President International SalesCharles D. Roberson has served as our Senior Vice President International Sales since March 2009. Mr. Roberson joined ourCompany in 2004 as Technical Marketing Manager and later served as International Sales Manager. Prior to joining ourCompany, Mr. Roberson was employed by Precision Fabrics Group, Inc. as a Market Manager from 1995 to 2001 and as aNonwovens Manufacturing Manager from 1991 to 1995. He began his career as a manufacturing manager for BurlingtonIndustries, Inc. in its Menswear Division from 1985 to 1991.

13 years

Daniel L. Edwards – Senior Vice President Sales for North AmericaDaniel L. Edwards has been our Senior Vice President Sales for North America since March 2017 after most recently serving asour Vice President of USA Sales since March 2013. Mr. Edwards has been employed by us in various capacities since joiningLakeland in 2005, including as our National Accounts Manager and Eastern Regional Sales Manager. Prior to joining ourCompany, Mr. Edwards was a Senior Market Manager at Precision Fabrics Group, Inc., where he began his career in 1990 andheld various roles at that company in manufacturing, technical and quality management.

12 years

1 Includes years serving on the LAKE board.

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Investment Highlights

Diversified Product OfferingsProduct Suite Covers Protective Apparel Industry

High Growth from Proprietary/Value Added ProductsStrong Growth Masked by Wind Down of DuPont & Brazil Businesses

Favorable Market and Industry DynamicsGlobal Industry Poised for Further Growth

Strong Management Team and High Insider OwnershipDeep Industry Knowledge and Experience

Flexible Worldwide Operating CapabilitiesHighly Leveragable Cost Structure including Global Manufacturing Sites

Leader in Product Quality and Garment InnovationCertifications and Patents Demonstrate Product Quality

Blue Chip Customer BaseLarge Customers with No Significant Customer Concentration

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3

4

5

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Financial Review

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Income Statement($ in thousands)

Three Months Ended Nine Months EndedOctober 31, October 31,

($000’s except for share information)2017 2016 2017 2016

Net sales $23,960 $23,243 $70,831 $65,881Cost of goods sold 14,907 14,724 44,530 41,999Gross profit 9,053 8,519 26,301 23,882Operating expenses 6,388 6,271 18,981 18,886

Operating profit 2,665 2,248 7,320 4,996Other income (loss), net 7 (2) 13 20Interest expense (35) (150) (147) (522)Income before taxes 2,637 2,096 7,186 4,494

Income tax expense 831 583 1,828 1,548Net income $1,806 $1,513 $5,358 $2,946Net income per common share:

Basic $0.23 $0.21 $0.72 $0.41Diluted $0.23 $0.21 $0.71 $0.40

Weighted average common shares outstanding:Basic 7,894,582 7,258,697 7,477,202 7,255,966

Diluted 7,922,397 7,332,997 7,530,637 7,321,587

22

Balance Sheet -- Assets($ in thousands)

ASSETS October 31, January 31,

2017 2017 Current assets ($000’s)

Cash and cash equivalents $21,493 $10,365 Accounts receivable, net of allowance for doubtful accounts of $375 and $417 at October 31,

2017 and January 31, 2017, respectively 13,032 10,704 Inventories, net of allowance of $2,439 and $2,305 at October 31, 2017 and January 31, 2017,

respectively 38,453 35,535 Prepaid VAT tax 1,824 1,361 Other current assets 1,843 2,121

Total current assets 76,645 60,086 Property and equipment, net 8,624 8,527 Assets held for sale 901 901 Deferred income tax 12,764 13,515 Prepaid VAT and other taxes 319 478 Other assets 239 176 Goodwill 871 871 Total assets $100,363 $84,554

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Balance Sheet – Liabilities and Stockholders’Equity

($ in thousands)

, ,

LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities

Accounts payable $8,547 $4,928 Accrued compensation and benefits 1,216 1,311 Other accrued expenses 1,244 1,024 Current maturity of long-term debt 158 50 Short-term borrowings 754 153 Borrowings under revolving credit facility ----- 4,865

Total current liabilities 11,919 12,331 Long-term portion of debt 1,351 716 Total liabilities 13,270 13,047 Commitments and contingencies Stockholders’ equity

Preferred stock, $0.01 par; authorized 1,500,000 shares (none issued) ----- ----- Common stock, $.01 par; authorized 10,000,000 shares,

Issued 8,472,640 and 7,620,215; outstanding 8,116,199 and 7,263,774 at October 31, 2017 and January 31, 2017, respectively 85 76

Treasury stock, at cost; 356,441 shares at October 31, 2017 and January 31, 2017 (3,352) (3,352) Additional paid-in capital 74,771 64,764 Retained earnings 17,759 12,401 Accumulated other comprehensive loss (2,170) (2,382)

Total stockholders' equity 87,093 71,507 Total liabilities and stockholders' equity $100,363 $84,554

Appendix

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FY2018 Third Quarter EBITDA Reconciliation

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Three months ended October 31, Nine month ended October 31, 2017 2016 2017 2016

Net sales $23,960 $23,243 $70,831 $65,881 Year over year growth 3.1% ----- 7.5% -----Gross profit 9,053 8,519 26,301 23,882Gross profit % 37.8% 36.7% 37.1% 36.3%Operating expenses 6,388 6,271 18,981 18,886Operating expenses as a percentage of sales 26.7% 27.0% 26.8% 28.7%

Operating income 2,665 2,248 7,320 4,996 Operating income as a percentage of sales 11.1% 9.7% 10.3% 7.6%Interest expense (35) (150) (147) (522)Other income (loss), net 7 (2) 13 20 Pretax income 2,637 2,096 7,186 4,494 Income tax expense 831 583 1,828 1,548 Net income $1,806 $1,513 $5,358 $2,946

Weighted average shares for EPS-Basic 7,894,582 7,258,697 7,477,202 7,255,966Net income per share $0.23 $0.21 $0.72 $0.41

Operating income $2,665 $2,248 $7,320 $4,996 Depreciation and amortization 197 359 582 963 EBITDA 2,862 2,607 7,902 5,959 Equity Compensation 93 99 291 177 USA Severance Associated with Restructure ----- ----- - 461 Adjusted EBITDA 2,955 2,706 8,193 6,597 Cash paid for taxes (foreign) 217 534 928 1,126Capital expenditures 171 70 619 116

Free cash flow $2,567 $2,102 $6,646 $5,355

TTM Adjusted EBITDA $10,428 $7,675 $10,428 $7,675 TTM cash paid for taxes (foreign) 1,401 1,575 1,401 1,575 TTM capital expenditures 916 291 916 291 TTM free cash flow $8,111 $5,809 $8,111 $5,809

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Real Estate

Location Sq. Ft. Leased / Owned Primary Function

Canada (Brantford) 22,092 Owned Sales / Warehouse

China (Weifang)122,665 Owned Administration / Manufacturing / Warehouse / Sales

16,145 Leased Warehouse

Decatur, AL147,228 Owned Administration / Manufacturing / Sales

21,000 Leased Warehouse

Mexico (Zacatecas) 74,000 Owned Administration / Manufacturing / Warehouse / Sales

Argentina (Buenos Aires) 3,770 Leased Administration / Manufacturing / Warehouse / Sales

Chile (Santiago) 3,996 Leased Administration / Warehouse / Sales

China (Beijing) 3,047 Leased Sales / Warehouse

China (Shanghai) 11,746 Leased Administration / Sales / Warehouse

India (Noida) 32,005 Leased Manufacturing / Warehouse / Sales

Kazakhstan (Ust-Kamenogorsk) 89 Leased Warehouse / Sales

Ronkonkoma, NY 2,500 Leased Headquarters – Administration / Sales

Russia (Moscow) 875 Leased Warehouse / Sales

U.K. (Newport, East Yorkshire) 9,833 Leased Warehouse / Sales

Vietnam (Nahm Dinh) 140,000 Leased Manufacturing / Warehouse

Slide Number 1Safe Harbor StatementKey StatisticsSlide Number 4Innovative Proprietary ProductsLeading Protective Clothing ManufacturerLAKE Product ExamplesUniquely Positioned to Respond to Global CrisesSlide Number 9Blue Chip CustomersStrong Growth Masked By Wind-Down of DuPont & BrazilSlide Number 12Slide Number 13Increasing Manufacturing CapacityStrong Nine Months of FY2018 ResultsSlide Number 16Slide Number 17Seasoned Management TeamSlide Number 19Financial ReviewSlide Number 21Slide Number 22Slide Number 23AppendixFY2018 Third Quarter EBITDA ReconciliationSlide Number 26

investor presentation march 2018 christopher j. ryan ......fiscal 2018 third quarter financial...

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