Investor Presentation | | May 2020 |
Protect Your People TM | NASDAQ: LAKE |
Christopher J. Ryan, Executive Chairman
Charles D. Roberson, President and Chief Executive Officer
Safe Harbor Statement
With the exception of historical information, the statements set forth in this presentation include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 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 obligation to update its forward-looking statements.
Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), the Company uses the following non-GAAP financial measures: EBITDA, Adjusted EBITDA and Free Cash Flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measures used by the Company in this presentation may be different from the methods used by other companies. For more information on the non-GAAP financial measures, please see the Reconciliation tables in this presentation.
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Key Statistics
Q4FY20 Results
- Net sales of $28.2M, up 13% from $25.0M in Q4FY19
- Gross profit of $10.6M, up from $6.9M in Q4FY19
- Gross margin of 37.7%, compared to 27.7% in Q4FY19
- Opex of $8.9M, compared $8.4M in Q4FY19
- Operating profit of $1.7M, up from loss of $(1.5)M in Q4FY19
- Net income of $1.2M, up from loss of $(1.9)M in Q4FY19
- EBITDA* of $2.3M, up from loss of $(0.9)M in Q4FY19
- Cash of $14.6M at 1/31/20, up from $9.1M at end of 1/31/19
- Total debt of $1.2M at 1/31/20, down from $1.3M at 1/31/19
Market Stats | |
Share Price (as of 5/13/2020) | $12.87 |
52-Week High / Low | $28.00 / $9.70 |
Average Daily Volume (3M) | 1,290,000 |
Diluted Shares Outstanding1 | 8.0 million |
Market Capitalization1 | $103.0 million |
Debt (as of 1/31/2020) | $1.2 million |
Cash (as of 1/31/2020) | $14.6 million |
Enterprise Value | $89.6 million |
Financials & Valuation | |
LTM Revenue3 | $107.8 million |
LTM EBITDA3 | $7.5 million |
LTM Net Income3 | $3.3 million |
LTM EPS3 | $0.41 |
EV/LTM Revenue | 0.9x |
EV/LTM EBITDA3 | 12.4x |
P/E (LTM)3 | 32.0 |
NOL Carryforward3 | Approx. $18.0 million |
Book Value3 | $85.4 million |
One Year Stock Performance | |
Source: Etrade
1Treasury stock method
2Source: Bloomberg/Yahoo
3As of 1/31/2020
* EBITDA is a non-GAAP figure with reconciliation provided herein. | 3 |
Uniquely Positioned to Respond to Global Crises
Crisis | Ebola | Bird Flu | CoVID-19 (Coronavirus) | |
LAKE Revenue Impact | $4.6 million (FY16) | $4.1 million (FY16) | TBD (FY20/21) | |
LAKE Role | Supplied suits to the United | Supplied protective clothing to | Supplier to hospitals and industrial | |
Kingdom Government | DiVal Safety Equipment | customers globally | ||
Situation Timeline | •August 8, 2014: Ebola | •April 11, 2015: Avian Flu | •First shipments in last 2 weeks | |
declared an "international | confirmed in a commercial | of FY20 Q4 = $1M sales | ||
health emergency"; death toll | chicken operation in WI | •PPE for U.S. co's in China | ||
reaches 1,000 | •April 20 - May 1, 2015: WI, | |||
• | Feb. 14, 2020: Asia 12-hour | |||
•September 11, 2014: LAKE | MN, IA declared state of | |||
announced increase in | emergency | shifts; modified as needed | ||
manufacturing capacity to | •May 5, 2015: US authorities | • | March 13, 2020: Expanding | |
meet demand for safety | ||||
products | approved $330 million in | sealed seam capacity by 30% | ||
emergency funds to fight spread | •April 15, 2020: Certain products | |||
contracted out through August | ||||
LAKE Product Use | ||||
LAKE Ebola Protection Suit | LAKE GB medical certified suit | |||||
LAKE Bird Flu Protection Suit | ||||||
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Coronavirus (CoVID-19) Update
- China Environment
- Largely open for business
- Logistics - ocean freight remains challenging but improving
- Raw materials available: prices are holding steady
- Work force mobility returning
- Global Environment
- Demand shifting to Europe, Russia and Americas
- Large PPE orders have been rejected globally for not meeting standards (none from LAKE)
- Logistics remain in focus
- Lakeland Response
- Service the emergency market only to the extend that we have capacity over and above our strategic growth plans based on normal operating conditions
- Added capacity; constant management of supply chain
- Utilize more expensive raw materials only to the extent that customers will accept that additional cost
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Coronavirus (CoVID-19) Impact
- Revenue
- Impact will be spread over Q4FY20 and FY21
- Selling through distribution limits transparency into application of sales
- Manufacturing
- China returned to work 4 days early and went to maximum operating schedule (start up was not delayed)
- Weifang facility is operating normally under Lakeland control
- Feb. 14, 2020: India and Vietnam ended curtailed operations and went to maximum schedules (12 hours/day; 7 days/week); modified as needed
- Vietnam has returned to hiring
- Accelerating sealed seam manufacturing capacity increase in Vietnam (30% increase in total company capacity) that wenton-line through May 2020 rather than January 2021
- Supply Chain
- Currently no supply issues although logistics can be challenging
- Price increases from some suppliers continues; use of multiple suppliers partially mitigates the impact of these increases
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LAKE Product Examples
LAKE Cleanroom Suit | LAKE Homeland Security Suit |
LAKE Disposable Suit | LAKE Chemical Protection Suit |
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Leading Protective Clothing Manufacturer
Product Offering:
% of Sales1
Sales by Geography:
Industries Served:
Disposables | Chemical Suits | Wovens | Fire/Reflectives | Gloves | |
50% | 21% | 11% | 15% | 3% | |
• | Domestic: | 52% of FY20 net sales | |||
• | International: | 48% of FY20 net sales |
- 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: | • | 1,800 international employees (approx.) |
•120 domestic employees (approx.) | ||
Founded: | • | 1982 |
1As of 1/31/2020.
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Innovative Proprietary Products
LAKE utilizes proprietary textiles and designs targeted to market needs and demands
New Product Focus:
Patents:
Supply Chain:
Certifications:
Manufacturing:
Testing:
- Proprietary high margin products for stable and recurring end markets (e.g. utilities, pharmaceuticals)
- 20 patents & 1 patent in application1
- 56 trademarks and 6 trademarks in application1
- LAKE maintains strong control of its supply chain includingmulti-sourcing raw materials and having cut/sew operations performed by employees instead of contractors
- Owning our manufacturing, LAKE has control of supplier relationships
- Products are certified under relevant standards and certificates domestically and abroad
- Customers recognize certification as sign of quality
- All established LAKE manufacturing facilities are ISO 9001 or ISO 9002 certified
- New facilities in Vietnam and India
- Manufacturing resilience based on footprint & supply
- Quality control lab in China and the USA
- Chinese facility able to perform medical and industrial sterilizations
- Installed test lab in Alabama facility
1As of 1/31/2020.
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Optimized Global Presence
Manufacturing Sites
Sales Presence
Decatur, AL Facility | Anqui (Weifang), China Facility |
Manufacturing Sites
Decatur, AL (HQ)
Jerez, Mexico
Anqui (Weifang), China
Buenos Aires, Argentina
New Delhi, India
Nahm Dinh, Vietnam
Sales Presence
Beijing, China
Chongqing, China
Decatur, AL (HQ)
Europe (France, Germany, Netherlands, Poland, Spain, U.K.)
Jerez, Mexico
Melbourne, Australia
Moscow, Russia
New Delhi, India
Shanghai, China
South America (Argentina, Chile, Colombia, Ecuador, Peru)
Southeast Asia (Malaysia, Thailand, Vietnam)
Toronto, Canada
Ust-Kamenogorsk, Kazakhstan
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Increasing Manufacturing Capacity
- Deploying capital investment in new manufacturing facilities to build growth capacity
- India and Vietnam locations are now online and close to targeted growth markets
- Low cost structures in new locations are accretive to gross margins
- COVID-19
- Ability to increase staffing in Vietnam and India by estimated 50% for disposable garments
- Accelerated previously planned expansion of normalized sealed seam capacity by 30%-- 9 months ahead of plan
- Prioritizing manufacturing for regular industrial customers, allocating excess or additional capacity toCOVID-related demand
- Order backlog at 4/15/20 has filled manufacturing capacity through July/August for some products
Anqui (Weifang), China Facility
Jerez, Mexico Facility | New Vietnam Facility | |
Pilot India Manufacturing Facility | Vietnam Manufacturing | |
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Strong Business Model
Business Area | Key Characteristic |
Products | Proprietary / value-added / higher margin |
COGS / Raw Materials | Multi-sourced, lower priced fabrics than DuPont |
Gross Margin1 | 35.2% and expanding |
Sales Channels | Distributors and Key End Users |
Customer Breadth | Diversified |
Number of Products | >800 |
Sales Presence | 21 countries |
Geographic Reach | Global |
Manufacturing Locations | U.S., China, Mexico, LATAM, India, Vietnam |
1As of 1/31/20 for TTM.
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Blue Chip Customers
Distributors
End Users
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Favorable Industry Dynamics
Lakeland operates in a large and growing industry…
Industry Tailwinds | Protective Clothing Market1 |
($ in billions)
- Global Economic Growth
✓Global Oil Prices in Check
- Strong Increase in Manufacturing
- Robust Demand from Developing Industries
- Increased Global Focus on Safety
1Source: Markets and Markets
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Strong Presence in Large & Fragmented U.S. Market
Lakeland's US Sales are in excess of 50% of Total Sales in FY2020
Source of Graphic: Houlihan Lokey | 15 |
Positioned for Further International Growth
Revenues
Leveraging its worldwide operating capabilities, LAKE plans deeper penetration into
existing markets and selective expansion into new geographies…
- Led by multinational corporations, developing countries are increasingly adoptingOSHA-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
- Diversified product lines and geographic presence provide for low seasonality
Significant Opportunity in Developing Markets1 | Sales Presence by Geography | ||||||
Inception | Traction | Growth | Maturity | Decline | Region | Sales People2 | |
U.S. | 28 | ||||||
Europe | North America | Asia Pacific | 27 | ||||
Latin America | 10 | ||||||
Latin America | EEC | 7 | |||||
Asia Pacific | Mexico | 11 | |||||
Middle East & Africa | Canada | 5 | |||||
Russia / Kazakhstan | 4 | ||||||
India | 8 |
Time
- Source: Markets and Markets:Protective Clothing Market - Global Forecast to 2020.
- As of 9/18/19, including Sales and Sales Support
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Growth and Performance Improvement Initiatives
- Investments in digital transformation
- ERP implementation
- Launch of new websites for nine global locations
- Amazon platform in multiple countries
- Online marketing strategies
- Investments in manufacturing
- Vietnam (now largest facility for the Company)
- India (planning major expansion in future for current pilot plant)
- Short run pilot plant for high margin products
- Investments in product development
- Higher margin segments:
- Cleanroom suits for Big Pharma
- Electric arc protective apparel for Utilities
- 2Q20 results began reflecting above measures
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LAKE Shares Trade at Discount on Improving Financials
Attractive Valuation* | LAKE Improving Performance | |
LAKE Trades at 9.2x EV/EBITDA Based on 4Q20 Annualized Results
Revenue Growth | Gross Margin |
EBITDA** Margin
Source of Chart: Houlihan Lokey/Capital IQ, as of 5/15/20
- Valuation assumes LAKE share price on 4/13/20
- EBITDA is anon-GAAP financial measure; reconciliation provided herein.
(1) | Excludes Delta Plus, Koken and Shigematsu as guidance not yet available. | 18 |
(2) | Excludes Riken Keiki and Blackline Safety as guidance not yet available. |
Significant M&A Activity
Notable Transactions
Oct. 2015
EV / Revenue: 3.4x; EV / EBITDA: 19.5x
Mar. 2015
EV / Revenue: 2.2x; EV / EBITDA: 9.0x
Nov 2013
EV / Revenue: 2.1x; EV / EBITDA: 9.7x
Source: Houlihan Lokey as of 5/15/20 and/or SEC public filings, company press releases and other publicly available information. | 19 |
Seasoned Management Team
Management Bios | Years at LAKE | |
Christopher J. Ryan - Executive Chairman | ||
Upon his appointment as Executive Chairman in February 2020, Christopher J. Ryan 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 our President in November 2003. Mr. Ryan also worked as a Corporate | ||
Finance Partner at Furman Selz Mager Dietz & Birney, Senior Vice President-Corporate Finance at Laidlaw Adams & Peck, Inc., | 33 years1 | |
Managing-Corporate Finance Director of Brean Murray Foster Securities, Inc. and Senior Vice President-Corporate Finance of | ||
Rodman & Renshaw, respectively, from 1983 to 1991. Mr. Ryan has served as a Director of Lessing, Inc., a privately held | ||
restaurant chain based in New York, from 1995 to 2008. Mr. Ryan received his BA from Stanford University, his MBA from | ||
Columbia Business School and his J.D. from Vanderbilt Law School. | ||
Charles D. Roberson - President & CEO | ||
Upon his appointment as President and CEO as well as to the Company's Board of Directors in February 2020, Charles D. | ||
Roberson served as our Chief Operating Office since 2019. He served as our Senior Vice President International Sales since | ||
March 2009. Mr. Roberson joined our Company in 2004 as Technical Marketing Manager and later served as International Sales | 15 years | |
Manager. Prior to joining our Company, Mr. Roberson was employed by Precision Fabrics Group, Inc. as a Market Manager from | ||
1995 to 2001 and as a Nonwovens Manufacturing Manager from 1991 to 1995. He began his career as a manufacturing manager | ||
for Burlington Industries, Inc. in its Menswear Division from 1985 to 1991. | ||
Allen E. Dillard - Chief Financial Officer | ||
Appointed CFO of Lakeland in July 2019, Allen E. Dillard's career spans three decades of senior-executive financial, operational | ||
and organizational leadership experience. For the preceding 16 years he served as CEO, CFO and COO of 2 middle market B-to- | ||
B companies, while also serving as a Board of Director for one of the companies. Earlier, he served as Treasurer and Director of | 1 year | |
Corporate Communications at Wolverine Tube, Inc. (NYSE: WLV). Previously he served as Corporate Vice President, Treasurer | ||
and Chief Financial Officer of Nichols Research Corporation, a NASDAQ-listed company which was successfully sold to a larger | ||
competitor. Mr. Dillard began his career as a public accountant with Ernst & Young where he worked for nearly a decade. He is | ||
a certified public accountant and a graduate of the University of Alabama at Birmingham. | ||
Daniel L. Edwards - Senior Vice President Sales for North America | ||
Daniel L. Edwards has been our Senior Vice President Sales for North America since March 2017 after most recently serving as | 14 years | |
our Vice President of USA Sales since March 2013. Mr. Edwards has been employed by us in various capacities since joining | ||
Lakeland in 2005, including as our National Accounts Manager and Eastern Regional Sales Manager. Prior to joining our | ||
Company, Mr. Edwards was a Senior Market Manager at Precision Fabrics Group, Inc., where he began his career in 1990 and | ||
held various roles at that company in manufacturing, technical and quality management. | ||
1Includes years serving on the LAKE board. | 20 | |
Investment Highlights
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High Growth from Proprietary/Value Added Products
Strong Growth Masked by Wind Down of DuPont & Brazil Businesses
Flexible Worldwide Operating Capabilities
Highly Leveragable Cost Structure including Global Manufacturing Sites
Leader in Product Quality and Garment Innovation
Certifications and Patents Demonstrate Product Quality
Blue Chip Customer Base
Large Customers with No Significant Customer Concentration
Diversified Product Offerings
Product Suite Covers Protective Apparel Industry
Favorable Market and Industry Dynamics
Global Industry Poised for Further Growth
Strong Management Team and High Insider Ownership
Deep Industry Knowledge and Experience
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Protect Your People™
Financial Review
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Income Statement - Fiscal Year
($ in thousands)
Year Ended January 31, | ||
2020 | 2019 | |
Net sales | $107,809 | $99,011 |
Cost of goods sold | 69,912 | 65,105 |
Gross profit | 37,897 | 33,906 |
Operating expenses | 32,021 | 30,341 |
Operating profit | 5,876 | 3,565 |
Other income (expense), net | (7) | 41 |
Interest expense | (116) | (125) |
Income before taxes | 5,753 | 3,481 |
Income tax expense | 2,472 | 2,022 |
Net income | $3,281 | $1,459 |
Net income per common share: | ||
Basic | $0.41 | $0.18 |
Diluted | $0.41 | $0.18 |
Weighted average common shares outstanding: | ||
Basic | 8,005,927 | 8,111,458 |
Diluted | 8,037,019 | 8,170,401 |
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EBITDA Reconciliation - Fiscal Year
Year Ended January 31, | ||
2020 | 2019 | |
Net Income to EBITDA | ||
Net Income | $3,281 | $1,459 |
Interest | 116 | 125 |
Taxes | 2,472 | 2,022 |
Depreciation and amortization | 1,645 | 965 |
Other income (expense) | (7) | 41 |
EBITDA | 7,521 | 4,530 |
EBITDA to Adjusted EBITDA | ||
(excluding non-cash expenses) | ||
Equity compensation | (403) | 744 |
Adjusted EBITDA | $7,118 | $5,274 |
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Balance Sheet - Fiscal Year
($ in thousands)
ASSETS | ||
January 31, | ||
2020 | 2019 | |
Current assets | ||
Cash and cash equivalents | $14,606 | $12,831 |
Accounts receivable, net of allowance for doubtful accounts of $497 and $434 | ||
at January 31, 2020 and 2019, respectively | 17,702 | 16,477 |
Inventories | 44,238 | 42,365 |
Prepaid VAT and other taxes | 1,228 | 1,478 |
Other current assets | 2,033 | 2,319 |
Total current assets | 79,807 | 75,470 |
Property and equipment, net | 10,113 | 10,781 |
Operating leases right-of-use assets | 2,244 | ----- |
Deferred tax assets | 5,939 | 7,267 |
Prepaid VAT and other taxes | 333 | 176 |
Other assets | 98 | 158 |
Goodwill | 871 | 871 |
Total assets | $99,405 | $94,723 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities | ||
Accounts payable | $7,204 | $6,214 |
Accrued compensation and benefits | 1,300 | 1,137 |
Other accrued expenses | 2,445 | 2,825 |
Current maturity of long-term debt | 1,155 | 158 |
Current portion of operating lease liability | 835 | ----- |
Total current liabilities | 12,939 | 10,334 |
Long-term portion of debt | ----- | 1,161 |
Long-term portion of operating lease liability | 1,414 | ----- |
Total liabilities | 14,353 | 11,495 |
Commitments and contingencies | ||
Stockholders' equity | ||
Preferred stock, $0.01 par; authorized 1,500,000 shares (none issued) | ----- | ----- |
Common stock, $0.01 par; authorized 20,000,000 shares, | ||
Issued 8,481,665 and 8,475,929; outstanding 7,972,423 and 8,013,840 at January 31, 2020 | ||
and 2019, respectively | 85 | 85 |
Treasury stock, at cost; 509,242 and 462,089 shares at January 31, 2020 and 2019, respectively | (5,023) | (4,517) |
Additional paid-in capital | 75,171 | 75,612 |
Retained earnings | 17,581 | 14,300 |
Accumulated other comprehensive loss | (2,762) | (2,252) |
Total stockholders' equity | 85,052 | 83,228 |
Total liabilities and stockholders' equity | $99,405 | $94,723 |
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Protect Your People™
Appendix
26
Strong Growth Masked By Wind-Down of DuPont & Brazil
Sales by Segment
($ in millions)
$93.5 | $99.6 | ||||||||||||
$84.0 | $8.7 | $86.2 | |||||||||||
$77.0 | $76.1 | ||||||||||||
$72.0 | |||||||||||||
$60.0 | $57.4 | $54.7 | $61.3 | ||||||||||
$51.2 | |||||||||||||
$44.3 | $44.5 | ||||||||||||
$41.7 | |||||||||||||
$35.6 | $35.7 | ||||||||||||
$28.1 | |||||||||||||
$21.3 | $19.9 | ||||||||||||
$8.0 | $6.2 | $0.0 | $0.0 | ||||||||||
FY2006 | FY2007 | FY2008 | FY2009 | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
$8.7
$99.0
$96.0
FY2018 FY2019
DuPont & Brazil Sales | Lakeland (Excluding DuPont & Brazil) |
Ebola & Bird Flu Sales
LAKE grew larger despite winding down $77 million DuPont and $17 million Brazil businesses
Company fiscal year ends January 31.
FY2016 includes $8.7 million in one time Ebola and Bird Flu related revenue.
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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, AL | 147,228 | 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 | |
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Lakeland Industries Inc. published this content on 26 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 May 2020 14:07:04 UTC