UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2023

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 or Other Jurisdiction

of Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1525 Perimeter Parkway, Suite 325 Huntsville, AL

 

35806

(Address of Principal Executive Offices)

 

(Zip Code)

 

(Registrant’s telephone number, including area code) (256) 350-3873

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

LAKE

NASDAQ

 

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 ☒     No ☐  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

Accelerated filer

Non accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes     No ☒

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Class

 

 Outstanding at August 31, 2023

 Common Stock, $0.01 par value per share

 

  7,364,757 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: 

 

 

 

 

 

 

 

 

 

 

 

Page

 

Item 1.

Financial Statements (Unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations Three and Six Months Ended July 31, 2023 and 2022

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Six Months Ended July 31, 2023 and 2022

 

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets July 31, 2023 and January 31, 2023

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity Three and Six Months Ended July 31, 2023 and 2022

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows Six Months Ended July 31, 2023 and 2022

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

25

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

26

 

 

 

 

 

 

PART II - OTHER INFORMATION:

 

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

 

 

 

 

 

Item 5.

Other Information

 

28

 

 

 

 

 

 

Item 6.

Exhibits

 

29

 

 

 

 

 

 

 

Signature Pages

 

30

 

 

 
2

Table of Contents

  

LAKELAND INDUSTRIES, INC.

AND SUBSIDIARIES

 

PART I  FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

($000’s except for share and per share information)

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$33,071

 

 

$28,184

 

 

$61,771

 

 

$55,462

 

Cost of goods sold

 

 

18,888

 

 

 

16,557

 

 

 

35,144

 

 

 

32,779

 

Gross profit

 

 

14,183

 

 

 

11,627

 

 

 

26,627

 

 

 

22,683

 

Operating expenses

 

 

10,453

 

 

 

9,832

 

 

 

20,959

 

 

 

19,440

 

Operating profit

 

 

3,730

 

 

 

1,795

 

 

 

5,668

 

 

 

3,243

 

Other income (expense), net

 

 

(65)

 

 

(42)

 

 

(134)

 

 

(67)

Interest expense

 

 

(1)

 

 

(13)

 

 

(9)

 

 

(22)

Income before taxes

 

 

3,664

 

 

 

1,740

 

 

 

5,525

 

 

 

3,154

 

Income tax expense

 

 

1,199

 

 

 

2,610

 

 

 

1,740

 

 

 

2,895

 

Net income (loss)

 

$2,465

 

 

$

(870

)

 

$3,785

 

 

$259

 

Net income (loss) per common share: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$0.33

 

 

$

(0.11

)

 

$0.52

 

 

$0.03

 

Diluted

 

$0.32

 

 

$

(0.11

)

 

$0.50

 

 

$0.03

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

7,409,305

 

 

 

7,670,636

 

 

 

7,340,914

 

 

 

7,656,470

 

Diluted

 

 

7,591,786

 

 

 

7,670,636

 

 

 

7,523,395

 

 

 

7,841,281

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
3

Table of Contents

 

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

($000’s)

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$2,465

 

 

($870)

 

 

$3,785

 

 

$259

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(909)

 

 

(412)

 

 

(1,627)

 

 

(1,172)

Comprehensive income (loss)

 

$1,556

 

 

$

(1,282

)

 

$2,158

 

 

$

(913

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
4

Table of Contents

 

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(000’s except for share information)

 

 ASSETS

 

July 31,

 

 

January 31,

 

 

 

2023

 

 

2023

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$24,306

 

 

$24,639

 

Accounts receivable, net of allowance for doubtful accounts of $938 and $800 at July 31, 2023 and January 31, 2023, respectively

 

 

17,680

 

 

 

17,296

 

Inventories

 

 

57,368

 

 

 

58,176

 

Prepaid VAT and other taxes

 

 

2,523

 

 

 

1,963

 

Income tax receivable and other current assets

 

 

4,454

 

 

 

2,908

 

Total current assets

 

 

106,331

 

 

 

104,982

 

Property and equipment, net

 

 

9,131

 

 

 

9,140

 

Operating leases right-of-use assets

 

 

9,086

 

 

 

5,472

 

Deferred tax assets

 

 

2,762

 

 

 

2,764

 

Other assets

 

 

115

 

 

 

100

 

Goodwill

 

 

8,473

 

 

 

8,473

 

Intangible assets, net

 

 

5,838

 

 

 

6,042

 

Investments

 

 

5,699

 

 

 

5,354

 

Total assets

 

$147,435

 

 

$142,327

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$8,376

 

 

$6,558

 

Accrued compensation and benefits

 

 

3,173

 

 

 

2,522

 

Other accrued expenses

 

 

2,857

 

 

 

4,068

 

Income tax payable

 

 

696

 

 

 

 

Short-term borrowings

 

 

 

 

 

405

 

Accrued earnout agreement

 

 

2,004

 

 

 

3,182

 

Current portion of operating lease liabilities

 

 

1,538

 

 

 

1,253

 

Total current liabilities

 

 

18,644

 

 

 

17,988

 

     Deferred income taxes

 

 

474

 

 

 

769

 

     Long-term portion of operating lease liabilities

 

 

6,932

 

 

 

3,580

 

Total liabilities

 

 

26,050

 

 

 

22,337

 

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 8,721,232 and 8,655,699; outstanding 7,363,024 and 7,325,005 at July 31, 2023 and January 31, 2023, respectively

 

 

87

 

 

 

87

 

Treasury stock, at cost; 1,358,208 and 1,330,694 shares at July 31, 2023 and January 31, 2023, respectively

 

 

(19,979)

 

 

(19,646)

Additional paid-in capital

 

 

78,511

 

 

 

78,475

 

Retained earnings

 

 

68,084

 

 

 

64,765

 

Accumulated other comprehensive loss

 

 

(5,318)

 

 

(3,691)

Total stockholders’ equity

 

 

121,385

 

 

 

119,990

 

Total liabilities and stockholders’ equity

 

$147,435

 

 

$142,327

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
5

Table of Contents

 

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(000’s except for share information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Total

 

 

 

 

 

 

($000’s)

 

 

 

 

 

($000’s)

 

 

($000’s)

 

 

($000’s)

 

 

($000’s)

 

 

($000’s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 31, 2022

 

 

8,555,672

 

 

$86

 

 

 

(939,705)

 

$(14,206)

 

$77,826

 

 

$62,892

 

 

$(1,498)

 

$125,100

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

259

 

 

 

 

 

 

259

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,172)

 

 

(1,172)

Stock-based compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Restricted stock issued

 

 

94,908

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Restricted Stock Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

790

 

 

 

 

 

 

 

 

 

790

 

Return of shares in lieu of payroll withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(805)

 

 

 

 

 

 

 

 

(805)

Treasury stock purchased

 

 

 

 

 

 

 

 

(196,150)

 

 

(3,126)

 

 

 

 

 

 

 

 

 

 

 

(3,126)

Balance, July 31, 2022

 

 

8,650,580

 

 

$87

 

 

 

(1,135,855)

 

$(17,332)

 

$77,811

 

 

$63,151

 

 

$(2,670)

 

$121,047

 

Balance, April 30, 2022

 

 

8,635,358

 

 

$86

 

 

 

(964,722)

 

$(14,612)

 

$77,555

 

 

$64,021

 

 

$(2,258)

 

$124,792

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(870)

 

 

 

 

 

(870)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(412)

 

 

(412)

Stock-based compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock issued

 

 

15,222

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Restricted stock plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

384

 

 

 

 

 

 

 

 

 

384

 

Return of shares in lieu of payroll withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(128)

 

 

 

 

 

 

 

 

(128)

Treasury stock purchased

 

 

 

 

 

 

 

 

(171,133)

 

 

(2,720)

 

 

 

 

 

 

 

 

 

 

 

(2,720)

Balance, July 31, 2022

 

 

8,650,580

 

 

$87

 

 

 

(1,135,855)

 

$(17,332)

 

$77,811

 

 

$63,151

 

 

$(2,670)

 

$121,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 31, 2023

 

 

8,655,699

 

 

$87

 

 

 

(1,330,694)

 

$(19,646)

 

$78,475

 

 

$64,765

 

 

$(3,691)

 

$119,990

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,785

 

 

 

 

 

 

3,785

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,627)

 

 

(1,627)

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(466)

 

 

 -

 

 

 

(466)

Stock-based compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock issued

 

 

65,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

445

 

 

 

 

 

 

 

 

 

445

 

Return of shares in lieu of payroll withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(409)

 

 

 

 

 

 

 

 

(409)

Treasury stock purchased

 

 

 

 

 

 

 

 

(27,514)

 

 

(333)

 

 

 

 

 

 

 

 

 

 

 

(333)

Balance, July 31, 2023

 

 

8,721,232

 

 

$87

 

 

 

(1,358,208)

 

$(19,979)

 

$78,511

 

 

$68,084

 

 

$(5,318)

 

$121,385

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2023

 

 

8,709,256

 

 

$87

 

 

 

(1,353,508)

 

$(19,922)

 

$78,543

 

 

$65,839

 

 

$(4,409)

 

$120,138

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,465

 

 

 

 

 

 

2,465

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(909)

 

 

(909)

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(220)

 

 

 

 

 

(220)

Stock-based compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock issued

 

 

11,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

 

 

 

38

 

Return of shares in lieu of payroll withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70)

 

 

 

 

 

 

 

 

(70)

Treasury stock purchased

 

 

 

 

 

 

 

 

(4,700)

 

 

(57)

 

 

 

 

 

 

 

 

 

 

 

(57)

Balance, July 31, 2023

 

 

8,721,232

 

 

$87

 

 

 

(1,358,208)

 

$(19,979)

 

$78,511

 

 

$68,084

 

 

$(5,318)

 

$121,385

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
6

Table of Contents

 

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

($000’s)

 

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$3,785

 

 

$259

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities

 

 

 

 

 

 

 

 

Provision for (recovery of) doubtful accounts

 

 

139

 

 

 

63

 

Deferred income taxes 

 

 

(293)

 

 

1,783

 

Depreciation and amortization

 

 

1,122

 

 

 

779

 

Stock based and restricted stock compensation

 

 

445

 

 

 

790

 

(Gain) loss on disposal of property and equipment

 

 

 

 

 

(4)

Equity in loss of equity investment

 

 

275

 

 

 

129

 

Revaluation of earnout consideration

 

 

(1,178)

 

 

 

(Increase) decrease in operating assets

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(347)

 

 

(1,266)

Inventories

 

 

565

 

 

 

(9,531)

Prepaid VAT and other taxes

 

 

(562)

 

 

(48)

Other assets

 

 

(1,683)

 

 

(1,062)

Increase (decrease) in operating liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

1,499

 

 

 

3,013

 

Accrued expenses and other liabilities

 

 

114

 

 

 

517

 

Operating lease liabilities

 

 

23

 

 

 

4

 

Net cash provided by (used in) operating activities

 

 

3,904

 

 

 

(4,574)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,092)

 

 

(449)

Investments

 

 

(620)

 

 

(1,891)

Net cash (used in) investing activities:

 

 

(1,712)

 

 

(2,340)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Short-term borrowings (repayments)

 

 

(405)

 

 

 

Purchase of treasury stock under stock repurchase program

 

 

(333)

 

 

(3,126)

Dividends paid

 

 

(466)

 

 

 

          Shares returned to pay employee taxes under restricted stock program

 

 

(409)

 

 

(805)

Net cash (used in) financing activities

 

 

(1,613)

 

 

(3,931)

Effect of exchange rate changes on cash and cash equivalents

 

 

(912)

 

 

(663)

Net (decrease) in cash and cash equivalents

 

 

(333)

 

 

(11,508)

Cash and cash equivalents at beginning of period

 

 

24,639

 

 

 

52,719

 

Cash and cash equivalents at end of period

 

$24,306

 

 

$41,211

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information: 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$9

 

 

$22

 

Cash paid for taxes

 

$1,266

 

 

$1,872

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

Leased assets obtained in exchange for operating lease liabilities

 

$4,099

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
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Table of Contents

 

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

(UNAUDITED)

1.Business

 

Lakeland Industries, Inc. and Subsidiaries (“Lakeland,” the “Company,” “we,” “our,” or “us”), a Delaware corporation organized in April 1986, manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 1,600 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. Internationally, we sell directly to a mixture of end users and industrial distributors depending on the particular country and market. Sales are made to more than 50 countries, the majority of which were into China, countries within the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Middle East and countries within Southeast Asia.

 

2.Basis of Presentation

 

The condensed consolidated financial statements of the Company are unaudited. These condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company’s results. Intercompany accounts and transactions have been eliminated. The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire fiscal year ending January 31, 2024, or for any future period. The January 31, 2023, Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Balance Sheet, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto as of January 31, 2023 and 2022, and for each of the two years in the period ended January 31, 2023, included in our most recent annual report on Form 10-K filed on April 18, 2023.

 

In this Form 10-Q, (a) “FY” means fiscal year; thus for example, FY24 refers to the fiscal year ending January 31, 2024, (b) “Q” refers to quarter; thus, for example, Q2 FY24 refers to the second quarter of the fiscal year ending January 31, 2024, (c) “Balance Sheet” refers to the unaudited condensed consolidated balance sheet, and (d) “Statement of Operations” refers to the unaudited condensed consolidated statement of operations.

 

3.Investments and Acquisitions

 

Bodytrak

 

On October 18, 2021, the Company entered into an Investment Agreement (the “Investment Agreement”) with Inova Design Solutions Ltd, a private limited company incorporated under the laws of England and Wales and headquartered in the United Kingdom, doing business as Bodytrak® (“Bodytrak”), and the other parties thereto, pursuant to which Bodytrak agreed to issue and sell to the Company 508,905 cumulative convertible series A shares of Bodytrak (“Series A Shares”) in exchange for a payment by the Company of £2,000,000 ($2.8 million). The closing of this minority investment transaction occurred on October 18, 2021. The Series A Shares issued to the Company at the closing represented approximately 11.43% of Bodytrak’s total share capital.

 

On April 28, 2022, the Company, under the terms of the Investment Agreement, acquired an additional 381,679 Series A1 Shares of Bodytrak for £1,500,000 ($1.9 million). On October 26, 2022, the Company acquired an additional 254,452 Series A Shares of Bodytrak for £1,000,000 ($1.2 million). After completion of the additional investments, the Company owns 22.5% of Bodytrak’s total share capital. The investment in Bodytrak is accounted for under the equity method, given our board representation and the resulting ability to exercise significant influence. A substantial portion of our investment represents differences in our investment and our share of the underlying recognized net assets of Bodytrak. These differences are predominately attributable to non-amortizing intangible assets, including internally developed intellectual property, of Bodytrak.

 

 
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On May 19, 2023, the Company entered into an agreement with Bodytrak to provide an additional investment up to an aggregate of £1,500,000 ($1.9 million on the date of initial investment) in the form of a secured convertible loan. An initial investment funding of £500,000 ($0.6 million on the date of investment) was made on May 19, 2023. The loaned amounts are due twenty-four months from the issue date, which can be extended upon mutual agreement. The convertible note bears interest at either an annual rate of 12% for cash interest or 15% for payment in kind interest on the outstanding amount under the note, such rate being selected by Bodytrak.

 

The notes can be converted into equity shares of Bodytrak under a number of conditions, including a qualified equity financing as defined in the agreement, a change of control, an IPO, default or conversion at the discretion of the Company and upon the occurrence of the specified event. The convertible note is secured by Bodytrak’s intellectual property.

 

Bodytrak provides wearable monitoring solutions for customers in industrial health, safety, defense and first responder markets wanting to achieve better employee health and performance. Bodytrak’s solution is provided as a platform as a service (PaaS), delivering real-time data, cloud-based analytics, and hardware that includes a patented earpiece for physiological monitoring and audio communications.

 

The Company recognized losses of $0.13 million and $0.1 million for the three months ended July 31, 2023 and 2022, respectively, and recognized losses of $0.3 million and $0.13 million for the six months ended July 31, 2023 and 2022, respectively, as the Company’s share of Bodytrak’s net loss. The loss is reflected in other income (expense), net in the consolidated statements of operations.

 

Acquisition of Eagle

 

On December 2, 2022, the Company acquired 100% of Eagle Technical Products Limited’s (Eagle) common stock in an all-cash transaction valued at $10.5 million, net of net working capital acquired.

 

Headquartered in Manchester, UK, Eagle is a leading designer and provider of protective apparel to the fire and industrial sectors. Eagle provides differentiated product offerings through its innovative and technical solutions.

 

Eagle’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.

 

As part of the Eagle acquisition agreement, the Company agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6 million GBP for the period May 1, 2022 through April 30, 2023. The Company also agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6.3 million GBP for the period May 1, 2023 through April 30, 2024. The estimated amount of the earnout payment developed using a Monte Carlo simulation included in the preliminary valuation was $3.2 million.

 

Eagle did not reach the revenue threshold for the period May 1, 2022 through April 30, 2023 and received no payment for that period. Based on the revised forecast for the period May 1, 2023 through April 30, 2024, the estimated amount of the earnout payment developed using a Monte Carlo simulation is $2.0 million. The adjustment to the accrued earnout payment of $0.7 million was recorded in the quarter ended July 31, 2023 and an adjustment of $1.2 million was recorded in the six months ended July 31, 2023, and reflected as a reduction in operating expenses.

 

Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals and valuations related to contingent consideration, inventory, contractual relationships and intangible assets. These changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date. There were no material changes to the valuation during the quarter ended July 31, 2023.

 

 
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The following unaudited pro forma information presents our combined results as if the Eagle acquisition had occurred at the beginning of FY22. The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the combined company’s results. There were no material transactions between the Company and Eagle during the periods presented that are required to be eliminated. The unaudited pro forma combined financial information does not reflect cost savings, operating synergies or revenue enhancements that the combined companies may achieve or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies or revenue enhancements.

 

Pro forma combined financial information (Unaudited)

 

(in millions, except per share amounts)

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$28,534

 

 

$28,212

 

 

$56,602

 

 

$63,051

 

Net income (loss)

 

$

(971

)

 

$2,965

 

 

$168

 

 

$7,964

 

Basic earnings per share

 

$

(0.13

)

 

$0.37

 

 

$0.02

 

 

$1.00

 

Diluted earnings per share

 

$

(0.13

)

 

$0.36

 

 

$0.02

 

 

$0.98

 

 

The unaudited pro forma combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that we would have reported had the acquisition been completed as of the date and for the periods presented and should not be taken as representative of our consolidated results of operations or financial condition following the acquisition. In addition, the unaudited pro forma combined financial information is not intended to project the future results of the combined company.

 

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting under existing U.S. GAAP. The Company has been treated as the acquirer.

 

4.Inventories

 

Inventories consist of the following (in $000s):

 

 

 

July 31, 2023

 

 

January 31, 2023

 

 

 

 

 

 

 

 

Raw materials

 

$29,566

 

 

$29,036

 

Work-in-process

 

 

968

 

 

 

952

 

Finished goods

 

 

32,015

 

 

 

32,855

 

Excess and obsolete adjustments

 

 

(5,181)

 

 

(4,667)

 

 

$57,368

 

 

$58,176

 

 

 
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5. Goodwill and Intangible Assets, Net

 

Changes in intangible assets, net, during the three and six months ended July 31, 2023, were as follows (in $000s):

 

Balance at February 1, 2023

 

$6,042

 

Amortization expense

 

 

(102)

Balance at April 30, 2023

 

$5,940

 

Amortization expense

 

 

(102)

Balance at July 31, 2023

 

$5,838

 

 

There were no material changes to goodwill during the three and six month periods ended July 31, 2023.

 

6. Contract Advances

 

The Company receives advances under certain of its contracts for products sold by Eagle.  Those advances are considered contract liabilities with revenues recorded upon delivery of promised goods to customers.  These advances are included in Other Accrued Expenses on the Company’s consolidated balance sheet.  The following is a roll-forward of the advances from January 31, 2023 through July 31, 2023 (in $000s):

 

Contract liability – January 31, 2023

 

$1,627

 

Increases to contract liability

 

 

271

 

Decreases to contract liability

 

 

(1,672)

Contract liability – July 31, 2023

 

$226

 

 

7. Long-Term Debt

 

Revolving Credit Facility

On June 25, 2020, the Company entered into a Loan Agreement with Bank of America (“Lender”). The Loan Agreement, as amended to date (the “Loan Agreement”), provides the Company with a secured $25.0 million revolving credit facility, which includes a $5.0 million letter of credit sub-facility. The Company may request from time to time an increase in the revolving credit loan commitment of up to $5.0 million (for a total commitment of up to $30.0 million). Borrowing pursuant to the revolving credit facility is subject to a borrowing base amount calculated as (a) 80% of eligible accounts receivable, as defined, plus (b) 50% of the value of acceptable inventory, as defined, minus (c) certain reserves as the Lender may establish for the amount of estimated exposure, as reasonably determined by the Lender from time to time, under certain interest rate swap contracts. The borrowing base limitation only applies during periods when the Company’s quarterly funded debt to EBITDA ratio, as defined, exceeds 2.00 to 1.00. The Loan Agreement permits, without the prior consent of the Lender, acquisitions of a business or its assets by the Company or its subsidiaries if there is no default under the Loan Agreement and the aggregate consideration does not exceed $7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions. On March 3, 2023, the Company changed the benchmark interest rate in the credit facility from LIBOR to the Secured Overnight Financing Rate (“SOFR”). The credit facility will mature on June 25, 2025.

 

As of July 31, 2023, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

 

Borrowings in UK

There were $0 and $0.4 million in borrowings outstanding under the Company’s credit facility with HSBC Bank at July 31, 2023 and January 31, 2023.

 

8. Concentration of Risk

 

Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents and trade receivables. Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas, principally within the United States. The Company routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. The Company does not require customers to post collateral.

 

 
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The Company’s foreign financial depositories are Bank of America; China Construction Bank; Bank of China; China Industrial and Commercial Bank; HSBC (UK); Rural Credit Cooperative of Shandong; Postal Savings Bank of China; Punjab National Bank; HSBC in India, Argentina and UK; Raymond James in Argentina; TD Canada Trust; Banco Itaú S.A., Banco Credito Inversione in Chile; Banco Mercantil Del Norte SA in Mexico; ZAO KB Citibank Moscow in Russia, and JSC Bank Centercredit in Kazakhstan. The Company monitors its financial depositories by their credit rating, which varies by country. In addition, cash balances in banks in the United States of America are insured by the Federal Deposit Insurance Corporation, subject to certain limitations. There was approximately $1.6 million total included in the U.S. bank accounts and approximately $22.6 million total in foreign bank accounts as of July 31, 2023, of which $23.5 million was uninsured.

 

Major Customer

No customer accounted for more than 10% of net sales during the three and six-month periods ended July 31, 2023 and 2022.

 

Major Supplier

No vendor accounted for more than 10% of purchases during the three and six-month periods ended July 31, 2023 and 2022.

 

9. Stockholders’ Equity

 

On June 21, 2017, the stockholders of the Company approved the Lakeland Industries, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The executive officers and all other employees and directors of the Company, including its subsidiaries, are eligible to participate in the 2017 Plan. The 2017 Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), except that with respect to all non-employee directors, the Committee shall be deemed to include the full Board. The 2017 Plan provides for the grant of equity-based compensation in the form of stock options, restricted stock, restricted stock units, performance shares, performance units, or stock appreciation rights (“SARs”).

 

On June 16, 2021, the stockholders of the Company approved Amendment No. 1 (the “Amendment”) to the 2017 Plan. The Amendment increases the number of shares of common stock, par value $0.01 per share, of the Company reserved for issuance under the 2017 Plan by 480,000 shares.

 

An aggregate of 840,000 shares of the Company’s common stock are authorized for issuance under the 2017 Plan, as amended, subject to adjustment as provided in the 2017 Plan for stock splits, dividends, distributions, recapitalizations and other similar transactions or events. If any shares subject to an award are forfeited, expire, lapse or otherwise terminate without issuance of such shares, such shares shall, to the extent of such forfeiture, expiration, lapse or termination, again be available for issuance under the 2017 Plan.

 

The Company recognized total stock-based compensation costs, which are reflected in operating expenses (in $000’s):

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

2017 Plan:

 

 

 

 

 

 

 

 

 

 

 

 

Total restricted stock and stock option programs

 

$38

 

 

$384

 

 

$445

 

 

$790

 

Total income tax expense recognized for stock-based compensation arrangements

 

$8

 

 

$81

 

 

$94

 

 

$166

 

 

 
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Table of Contents

 

Restricted Stock and Restricted Stock Units

 

Under the 2017 Plan, as described above, the Company awarded performance-based and service-based shares of restricted stock and restricted stock units to eligible employees and directors. The following table summarizes the activity under the 2017 Plan for the six months ended July 31, 2023 and 2022. This table reflects the amount of awards granted at the number of shares that would be vested if the Company were to achieve the maximum performance level under the June 2021, April 2022, June 2022 and April 2023 grants.

 

 

 

Performance-

Based

 

 

Service-Based

 

 

Total

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at January 31, 2023

 

 

127,480

 

 

 

40,665

 

 

 

168,145

 

 

$22.95

 

Awarded

 

 

64,953

 

 

 

105,818

 

 

 

170,771

 

 

$14.20

 

Vested

 

 

(71,202)

 

 

(24,603)

 

 

(95,805)

 

$

 14.90

 

Forfeited

 

 

(32,112)

 

 

(28,518)

 

 

(60,630)

 

 

 

 

Outstanding at July 31, 2023

 

 

89,119

 

 

 

93,362

 

 

 

182,481

 

 

$19.49

 

 

 

 

Performance-

Based

 

 

Service-Based

 

 

Total

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at January 31, 2022

 

 

232,838

 

 

 

14,970

 

 

 

247,808

 

 

$20.89

 

Awarded

 

 

33,492

 

 

 

53,082

 

 

 

86,574

 

 

$18.17

 

Vested

 

 

(119,164)

 

 

(22,669)

 

 

(141,833)

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at July 31, 2022

 

 

147,166

 

 

 

45,383

 

 

 

192,549

 

 

$19.66

 

 

The actual number of shares of common stock of the Company, if any, to be earned by the award recipients is determined over a three-year performance measurement period based in part on measures that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and free cash flow for the June 2021 grants and revenue growth and EBITDA margin for the April 2022 and June 2022 grants and revenue growth, EBITDA margin and return on invested capital for the April 2023 grants. The performance targets have been set for each of the Minimum, Target, and Maximum levels. The actual performance amount achieved is determined by the Committee and may be adjusted for items determined to be unusual in nature or infrequent in occurrence at the discretion of the Committee.

 

The compensation cost is based on the fair value at the grant date, recognized over the requisite performance/service period using the straight-line method, and periodically adjusted for the probable number of shares to be awarded. As of July 31, 2023, unrecognized stock-based compensation expense totaled $1.9 million pursuant to the 2017 Plan based on outstanding awards under the 2017 Plan. This expense is expected to be recognized over approximately two years.

 

Stock Repurchase Program

On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock. On July 6, 2021, the Board of Directors authorized an increase in the Company’s stock repurchase program of up to an additional $5 million of its outstanding common stock. On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock, which became effective upon the completion of the prior share repurchase program. On December 1, 2022, the Board of Directors authorized an increase in the Company’s stock repurchase program, under which the Company may repurchase up to an additional $5 million of its outstanding common stock.

 

 
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Shares repurchased during the three months ended July 31, 2023 totaled 4,700 shares at a cost of $57,000, leaving $5.0 million remaining under the share repurchase program at July 31, 2023. The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time.

 

10. Income Taxes

 

The Company’s provision for income taxes for the three and six months ended July 31, 2023 and 2022 is based on the estimated annual effective tax rate, in addition to discrete items.

 

The Company’s effective tax rate for the second quarter of FY24 was 32.7% which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and Global Intangible Low-Taxed Income (“GILTI”). The Company’s effective tax rate for the second quarter of FY23 was 149.9%. The Company changed its permanent reinvestment assertions for its Chinese operations during the second quarter of FY23 due to increased volatility of the Chinese yuan and an updated evaluation of investment strategies. The Company recorded $2 million in withholding taxes for a planned repatriation. Excluding this discrete expense, the effective rate was 35.0%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and state income taxes.

 

The Company’s effective tax rate for the six months ended July 31, 2023 was 31.5%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI. The Company’s effective tax rate for the six months ended July 31, 2022 was 91.8%. In addition to the $2 million discrete item above, in Q1 FY23, the Company recorded deferred tax benefits of $0.2 million related to accruals for China social taxes based on our evaluation of the deductibility of these items. Excluding these discrete items, the effective rate was 34.1%, which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and GILTI.

 

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. The valuation allowance was $3.6 million at July 31, 2023 and January 31, 2023.

 

 
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11. Net Income (Loss) Per Share

 

The following table sets forth the computation of basic and diluted net income (loss) per share as follows (in $000s except per share amounts):

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$2,465

 

 

$(870)

 

$3,785

 

 

$259

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic net income (loss) per share (weighted-average shares which exclude shares in the treasury, 1,358,208 and 1,135,855 at July 31, 2023 and  2022, respectively

 

 

7,409,305

 

 

 

7,670,636

 

 

 

7,340,914

 

 

 

7,656,470

 

Effect of dilutive securities from restricted stock plan

 

 

182,481

 

 

 

 

 

 

182,481

 

 

 

184,811

 

Denominator for diluted net income (loss) per share (adjusted weighted average shares)

 

 

7,591,786

 

 

 

7,670,636

 

 

 

7,523,395

 

 

 

7,841,281

 

Basic net income (loss) per share

 

$0.33

 

 

$(0.11)

 

$0.52

 

 

$0.03

 

Diluted net income (loss) per share 

 

$0.32

 

 

$(0.11)

 

$0.50

 

 

$0.03

 

 

12. Contingencies

 

Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s management and legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been or is probable of being incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

 

General litigation contingencies

The Company is involved in various litigation proceedings arising during the normal course of business which, in the opinion of the management of the Company, will not have a material effect on the Company’s financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these matters. As of July 31, 2023, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.

 

 
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13. Segment Reporting

 

We manage our operations by evaluating each of our geographic locations. Our US operations include a facility in Alabama (primarily the distribution to customers of the bulk of our products). The Company also maintains one manufacturing company in China (primarily disposable and chemical suit production), a manufacturing facility in Mexico (primarily disposable, reflective, fire service and chemical suit production), a manufacturing facility in Vietnam (primarily disposable production) and a small manufacturing facility in India. Our China facilities produce the majority of the Company’s products, and China generates a significant portion of the Company’s international revenues. 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 sales forces in the USA, Canada, Mexico, Europe, Latin America, India, Russia, Kazakhstan and China, which sell and distribute products shipped from the United States, Mexico, India or China.

 

The table below represents information about reported segments for the three and six month periods noted therein:

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

(in millions of dollars)

 

 

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$16.55

 

 

$13.43

 

 

$30.16

 

 

$25.68

 

Other foreign

 

 

3.22

 

 

 

2.43

 

 

 

6.30

 

 

 

4.62

 

Europe (UK)

 

 

5.40

 

 

 

1.88

 

 

 

9.42

 

 

 

3.85

 

Mexico

 

 

2.37

 

 

 

1.50

 

 

 

3.61

 

 

 

2.74

 

Asia

 

 

10.91

 

 

 

19.32

 

 

 

22.03

 

 

 

33.98

 

Canada

 

 

2.03

 

 

 

2.26

 

 

 

4.56

 

 

 

4.53

 

Latin America

 

 

4.61

 

 

 

2.55

 

 

 

7.79

 

 

 

4.45

 

Less intersegment sales

 

 

(12.02)

 

 

(15.19)

 

 

(22.10)

 

 

(24.39)

Consolidated sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

External Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$15.21

 

 

$11.90

 

 

$27.49

 

 

$23.13

 

Other foreign

 

 

1.97

 

 

 

1.83

 

 

 

4.24

 

 

 

3.64

 

Europe (UK)

 

 

5.31

 

 

 

1.88

 

 

 

9.33

 

 

 

3.85

 

Mexico

 

 

1.09

 

 

 

1.06

 

 

 

1.89

 

 

 

1.91

 

Asia

 

 

2.96

 

 

 

6.74

 

 

 

6.63

 

 

 

13.98

 

Canada

 

 

2.04

 

 

 

2.26

 

 

 

4.56

 

 

 

4.53

 

Latin America

 

 

4.49

 

 

 

2.51

 

 

 

7.63

 

 

 

4.42

 

Consolidated external sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

 

 
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Intersegment Sales:

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$1.32

 

 

$1.53

 

 

$2.66

 

 

$2.55

 

Other foreign

 

 

1.25

 

 

 

0.60

 

 

 

2.07

 

 

 

0.98

 

Europe (UK)

 

 

0.09

 

 

 

 

 

 

0.09

 

 

 

 

Mexico

 

 

1.28

 

 

 

0.44

 

 

 

1.72

 

 

 

0.83

 

Asia

 

 

7.96

 

 

 

12.58

 

 

 

15.40

 

 

 

20.00

 

Canada

 

 

 

 

 

 

 

 

0.01

 

 

 

 

Latin America

 

 

0.12

 

 

 

0.04

 

 

 

0.15

 

 

 

0.03

 

Consolidated intersegment sales

 

$12.02

 

 

$15.19

 

 

$22.10

 

 

$24.39

 

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

(in millions of dollars)

 

 

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating Profit (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$1.16

 

 

$(1.24)

 

$(0.65)

 

$(3.30)

Other foreign

 

 

0.56

 

 

 

(0.07)

 

 

1.22

 

 

 

0.14

 

Europe (UK)

 

 

0.38

 

 

 

(0.36)

 

 

0.59

 

 

 

(0.62)

Mexico

 

 

(0.47)

 

 

(0.07)

 

 

(0.86)

 

 

(0.61)

Asia

 

 

1.03

 

 

 

3.40

 

 

 

1.88

 

 

 

5.95

 

Canada

 

 

0.21

 

 

 

0.32

 

 

 

0.66

 

 

 

0.95

 

Latin America

 

 

1.19

 

 

 

0.54

 

 

 

2.07

 

 

 

0.84

 

Intersegment profit (loss)

 

 

(0.33)

 

 

(0.72)

 

 

0.76

 

 

 

(0.11)

Consolidated operating profit

 

$3.73

 

 

$1.80

 

 

$5.67

 

 

$3.24

 

 

 

 

July 31, 2023

 

 

January 31, 2023

 

 

 

(in millions of dollars) 

 

Total Assets Less Intersegment:

 

 

 

 

 

 

USA Operations (including Corporate)

 

$70.18

 

 

$64.33

 

Other foreign

 

 

9.76

 

 

 

9.24

 

Europe (UK)

 

 

11.42

 

 

 

12.53

 

Mexico

 

 

5.54

 

 

 

5.32

 

Asia

 

 

32.15

 

 

 

35.64

 

Canada

 

 

7.62

 

 

 

5.81

 

Latin America

 

 

10.77

 

 

 

9.30

 

Consolidated assets

 

$147.44

 

 

$142.17

 

 
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The table below presents external sales by product line:

 

 

 

Three Months Ended

July 31,

(in millions of dollars)

 

 

Six Months Ended

July 31,

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

External Sales by product lines:

 

 

 

 

 

 

 

 

 

 

 

 

Disposables

 

$12.55

 

 

$12.72

 

 

$24.91

 

 

$27.22

 

Chemical

 

 

5.26

 

 

 

7.16

 

 

 

10.71

 

 

 

12.27

 

Fire Service

 

 

9.00

 

 

 

2.98

 

 

 

14.47

 

 

 

5.67

 

Gloves

 

 

0.49

 

 

 

0.55

 

 

 

1.20

 

 

 

1.09

 

High Visibility

 

 

1.58

 

 

 

1.34

 

 

 

2.73

 

 

 

2.94

 

High Performance Wear

 

 

1.47

 

 

 

1.11

 

 

 

2.74

 

 

 

2.48

 

Wovens

 

 

2.72

 

 

 

2.32

 

 

 

5.01

 

 

 

3.79

 

Consolidated external sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

 

14. Subsequent Events

 

On August 1, 2023, the Company’s Board of Directors declared a quarterly cash dividend. The quarterly dividend of $0.03 per share or approximately $0.2 million, was paid on August 22, 2023, to stockholders of record as of August 15, 2023.

 

 
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the historical financial statements and other financial information included elsewhere in this quarterly report on Form 10-Q. This Form 10-Q may contain certain forward-looking statements. When used in this Form 10-Q or in any other presentation, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “project”, “plan,” “seek,” “will,” “may,” “might,” “would,” “could” and similar expressions, are intended to identify forward-looking statements. They also include statements containing a projection of sales, earnings or losses, capital expenditures, dividends, capital structure or other financial terms and expectations with respect to the timing and intended use for our planned manufacturing expansion.

 

The forward-looking statements in this Form 10-Q are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to us. These statements are not statements of fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Some of the important factors that could cause our actual results, performance or financial condition to differ materially from expectations are:

 

 

·

we are subject to risk as a result of our international manufacturing operations and are subject to the risk of doing business in foreign countries, particularly in China and Vietnam, which could affect our ability to manufacture or sell our products, obtain products from foreign suppliers or control the costs of our products;

 

·

we identified a material weakness in our internal control over accounting for foreign currency exchange and foreign currency translation and remeasurement related to our international subsidiaries that could adversely affect our results of operations, our stock price and investor confidence in our Company;

 

·

a terrorist attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively impact our domestic and/or international operations;

 

·

our results of operations could be negatively affected by potential fluctuations in foreign currency exchange rates;

 

·

the implementation of our Enterprise Resource Planning (“ERP”) system had, and may in the future as we implement ERP into foreign operations have, an adverse effect on operating results;

 

 
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·

global supply chain constraints have led to inflation in prices of some fabrics we acquire, as well as labor and operating costs, and further pricing increases may result in a decline in our future profitability;

 

·

we have manufacturing and other operations in China which may be adversely affected by tariff wars and other trade maneuvers;

 

·

the failure to optimize the Company’s manufacturing capacity may have an adverse impact on our business and operations;

 

·

our results of operations may vary widely from quarter to quarter;

 

·

disruption in our supply chain, manufacturing or distribution operations could adversely affect our business;

 

·

climate change and other sustainability matters may adversely affect our business and operations;

 

·

some of our sales are to foreign buyers, which exposes us to additional risks;

 

·

we deal in countries where corruption is an obstacle;

 

·

we are exposed to U.S. and foreign tax risks;

 

·

because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could negatively impact our inventory levels and net sales;

 

·

we face competition from other companies, a number of which have substantially greater resources than we do;

 

·

our operations are substantially dependent upon key personnel;

 

·

cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations;

 

·

we may be subject to product liability claims, and insurance coverage could be inadequate or unavailable to cover these claims;

 

·

environmental laws and regulations may subject us to significant liabilities;

 

·

provisions in our restated certificate of incorporation and by-laws and Delaware law could make a merger, tender offer or proxy contest difficult;

 

·

we may not achieve the expected benefits from strategic acquisitions, investments, joint ventures, capital investments and other corporate transactions that we have pursued or may pursue;

 

·

we may need additional funds, and if we are unable to obtain these funds, we may not be able to expand or operate our business as planned;

 

·

adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations;

 

·

rapid technological change could negatively affect sales of our products, inventory levels and our performance; and,

 

·

the other factors referenced in this Form 10-Q, including, without limitation, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the factors described under “Risk Factors” disclosed in our fiscal 2023 Form 10-K.

 

We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements which are based on current expectations. Furthermore, forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements after the date of this Form 10-Q, whether as a result of new information, future events or otherwise, except as may be required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q might not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors.

 

Business Overview

We manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 1,600 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. Internationally, we sell to a mixture of end users directly and to industrial distributors depending on the particular country and market. In addition to the United States, sales are made to more than 50 foreign countries, the majority of which were in China, the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Middle East and Southeast Asia.

 

 
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We have operated 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. During Q2 FY24, the Company was impacted by tariff costs on certain products imported from China. The Company has been able to pass along a portion of these costs to its customers.  We added manufacturing operations in Vietnam and India to offset increasing manufacturing costs in China and further diversify our manufacturing capabilities. Our China operations will continue primarily manufacturing for the Chinese market and other markets where duty advantages exist. Due to damage recently experienced at our newly leased Monterrey site we are currently evaluating our leasehold improvement buildout schedule which may impact our go-live production timing. The Company believes it has global capacity to support its operations for the foreseeable future.

 

On December 2, 2022, the Company acquired UK-based Eagle Technical Products Limited (“Eagle”) in an all-cash transaction valued at approximately $10.5 million, subject to post-closing adjustments and potential future earnout payments. The acquisition enhances Lakeland’s product portfolio, particularly within fire service protective clothing and expands its sales presence in the Middle East and Europe. 

 

Our net sales attributable to customers outside the United States were $17.9 million and $16.4 million for the three months ended July 31, 2023 and 2022, respectively and $34.3 million and $32.4 million for the six months ended July 31, 2023 and 2022, respectively.

 

We are continually monitoring the potential financial impact of the Russian invasion of Ukraine on our operations.  For the first half of FY24, sales in Russia were approximately 3.3% of our consolidated sales and sales into Ukraine were not significant.  We do not have any capital assets in Russia.

 

 
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Results of Operations

 

Three Months ended July 31, 2023, Compared to the Three Months Ended July 31, 2022

 

The economy has been impacted by certain macroeconomic challenges which have contributed to a rising inflationary trend that has impacted both our revenues and costs globally, and which we expect will continue into the foreseeable future.  If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.  There can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future.

 

Net Sales. Net sales were $33.1 million for the three months ended July 31, 2023, an increase of $4.9 million or 17.4% compared to $28.2 million for the three months ended July 31, 2022.  Sales of our fire service, high performance, high visibility and woven product lines increased by $7.0 million reflecting strengthening in the industrial markets. Eagle contributed $3.5 million in fire service sales during the quarter.  Our sales were negatively impacted by declines in our disposable and chemical product lines by $1.9 million though we were seeing an increase in direct container activity at the end of the second quarter.

 

Gross Profit. Gross profit for the three months ended July 31, 2023 was $14.2 million, an increase of $2.6 million, or 22.4%, compared to $11.6 million for the three months ended July 31, 2022. Gross profit as a percentage of net sales increased to 42.9% for the three-month period ended July 31, 2023, from 41.3% for the three months ended July 31, 2022. Gross profit performance in current period benefited from higher factory utilization and an improving product mix.  Major factors driving the increase in gross margins in the three months ended July 31, 2023, were:

 

 

·

Change in product mix during the current quarter with a decline in disposable and chemical sales.

 

·

Decreases in transportation costs.

Operating Expense. Operating expenses increased 6.1% from $9.8 million for the three months ended July 31, 2022 to $10.4 million for the three months ended July 31, 2023. This increase is attributable to increases in selling expenses,  travel and trade show expenses, administrative expenses and currency fluctuations.  Currency fluctuations accounted for $0.3 million of the increases due primarily to the fluctuation in the Chinese yuan and Argentine peso.  During the quarter ended July 31, 2023, the Company evaluated the earnout consideration accrual related to the Eagle acquisition and reduced the accrual by $0.7 million, which was recorded as a reduction in operating expenses.  Severance costs of $0.4 million were partially offset by the impact of forfeitures of equity awards on equity compensation expense.  Operating expenses as a percentage of net sales was 31.6% for the three months ended July 31, 2023, an improvement from 34.8% for the three months ended July, 2022 primarily due to increased revenue. 

 

Operating Profit. Operating profit increased to $3.7 million for the three months ended July 31, 2023 from $1.8 million for the three months ended July 31, 2022, due to the impacts detailed above. Operating margins were 11.2% for the three months ended July 31, 2023, as compared to 6.4% for the three months ended July 31, 2022.

 

Income Tax Expense. Income tax expense consists of federal, state and foreign income taxes. Income tax expense was $1.2 million for the three months ended July 31, 2023, compared to $2.6 million for the three months ended July 31, 2022. The Company changed its permanent reinvestment assertions for its Chinese operations during the second quarter of FY23 due to increased volatility of the Chinese yuan and an updated evaluation of investment strategies. The Company recorded $2 million in withholding taxes for a planned repatriation during FY23 and FY24. The effective rate for the three months ended July 31 2023, was 32.7%. The effective rate for the three months ended July 31, 2022 was 149.9%. Excluding the discrete item above, the effective rate for the three months ended July 31, 2022 was 35.0%.

 

Net Income (Loss). Net income for the three months ended July 31, 2023 was $2.5 million an increase of $3.4 million from net loss of $0.9 million for the three months ended July 31, 2022.  The increase was due to the factors discussed above.

 

Six Months ended July 31, 2023, Compared to the Six Months Ended July 31, 2022

 

Net Sales. Net sales were $61.8 million for the six months ended July 31, 2023 as compared to $55.5 million for the six months ended July 31, 2022, an increase of 11.4%.  Our fire service and wovens product lines increased by $10.0 million in the period due to strengthening in those markets and the impact of Eagle which contributed $5.5 million in sales. Sales of our disposable and chemical product lines declined by $3.9 million in the first half of the year due to reduction in direct container sales driven by diminishing COVID-19 demand and continued softness in demand for industrial applications.

 

 
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Gross Profit. Gross profit was $26.6 million for the six months ended July 31, 2023, an increase of $3.9 million, or 17.2%, from $22.7 million for the six months ended July 31, 2022. Gross profit as a percentage of net sales increased to 43.1% for the six months ended July 31, 2023, from 40.9% for the six months ended July 31, 2022. Major factors driving gross margins were:

 

 

·

Increased sales in our strategic product lines.

 

·

Reduced manufacturing costs due to increased throughput.

 

·

Reduction in freight costs.

Operating Expense. Operating expenses increased $1.6 million, or 8.2%, to $21.0 million for the six months ended July 31, 2023 from $19.4 million for the six months ended July 31, 2022. Operating expenses as a percentage of net sales was 33.9% for the six months ended July 31, 2023, down from 35% for the six months ended July 31, 2022. The decreased percentage is primarily due to increased revenue. Selling expenses were higher by $0.6 million due to increases in sales commissions freight out and higher travel, advertising and trade show expenses as COVID-19 restrictions have lifted.  General and administrative expenses increased by $1.5 million. with currency fluctuations accounting for $0.4 million of the increase due to the strengthening of the U.S. dollar primarily against the Chinese yuan and Argentine peso.  The remaining increase was due to increases in compensation, professional fees and intangibles amortization.  The Company evaluated the earnout consideration accrual related to the Eagle acquisition and reduced the accrual by $1.2 million, which was recorded as a reduction in operating expenses.  Severance costs of $0.7 million were partially offset by $0.3 million of forfeitures of equity awards on equity compensation expense recorded in the six months ended July 31, 2023. 

 

Operating Profit. Operating profit increased to $5.7 million for the six months ended July 31, 2023 from $3.2 million for the six months ended July 31, 2022, due to the impacts detailed above. Operating margins were 9.2% for the six months ended July 31, 2023, as compared to 5.8% for the six months ended July 31, 2022.

 

Income Tax Expense. Income tax expense consists of federal, state and foreign income taxes. Income tax expense was $1.7 million for the six months ended July 31, 2023, compared to $2.9 million for the six months ended July 31, 2022.

 

In Q2 FY23, the Company changed its permanent reinvestment assertions for its Chinese operations due to increased volatility of the Chinese yuan and geopolitical uncertainties.  The Company recorded $2 million in withholding taxes for a planned repatriation during FY23. In Q1 FY23, the Company recorded deferred tax benefits of $0.2 million related to accruals for China social taxes.  Excluding these discrete items the Company’s effective rate was 31.5% and 34.1% for the six months ended July 31, 2023 and 2022, respectively.

 

Net Income (Loss). Net income increased by $3.5 million to $3.8 million for the six months ended July 31, 2023 from $0.3 million for the six months ended July 31, 2022.

 

Significant Balance Sheet Fluctuation July 31, 2023, Compared to January 31, 2023

Cash decreased by $0.3 million due to $3.3 million in investing and financing activities and a reduction in cash of $0.9 million due to currency fluctuations, primarily the Chinese yuan.  The uses of cash were offset by $3.9 million in cash provided by operating activities.

 

The Company invested $1.1 million for the six months ended July 31, 2023 in manufacturing equipment purchases and made an additional investment in Bodytrak of $0.6 million.

 

Net cash used in financing activities was $1.6 million for the six months ended July 31, 2023, due to $0.5 million in dividends paid, $0.3 million in shares repurchased, $0.4 million repayments of short term borrowings and $0.4 million in shares returned to pay income taxes on shares vested under our equity compensation program. 

 

Capital expenditures for the three and six months ended July 31, 2023 were $0.4 million and $1.1 million, respectively.

 

 
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Liquidity and Capital Resources

At July 31, 2023, cash and cash equivalents were approximately $24.3 million and working capital was approximately $87.7 million. Cash and cash equivalents decreased $0.3 million and working capital increased $0.7 million from January 31, 2023.

 

Of the Company’s total cash and cash equivalents of $24.3 million as of July 31, 2023, cash held in Latin America of $2.7 million, cash held in Russia and Kazakhstan of $0.9 million, cash held in the UK of $2.4 million, cash held in India of $0.8 million, cash held in Hong Kong of $0.4 million and cash held in Vietnam of $0.8 million would not be subject to additional US tax in the event such cash was repatriated due to the change in the US tax law as a result of the December 22, 2017 enactment of the 2017 Tax Cuts and Jobs Act (the “Tax Act”). When the Company repatriates cash from China, of the $10.6 million balance at July 31, 2023 there could be an additional 10% withholding tax incurred in that country. The Company expects to repatriate cash from China during FY 24, and in anticipation of doing so, has accrued a withholding tax expense of $0.5 million as of July 31, 2023.

 

Net cash provided by operating activities of $3.9 million for the six months ended July 31, 2023 was primarily due net income of $4.3 million, non-cash items of $0.5 million for deferred taxes, depreciation and amortization, stock compensation and reduction in the accrued Eagle earnout, offset by net increase in working capital of $0.7 million.  Net cash used in investing activities of $1.7 million for the six months ended July 31, 2023 reflects manufacturing equipment purchases and the additional investment in Bodytrak of $0.6 million. Net cash used in financing activities was $1.6 million for the six months ended July 31, 2023, due to $0.5 million in dividends, $0.3 million in shares repurchased under our share repurchase program, $0.4 million of repayment of short-term borrowings, and shares returned to pay income taxes on shares vested under our equity compensation program.

 

We believe our current cash balance and cashflow from operations will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future.  However, our liquidity assumptions may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect.

 

On June 25, 2020, we entered into a Loan Agreement with Bank of America (“Lender”). The Loan Agreement, as amended to date  (the “Loan Agreement”), provides the Company with a secured $25.0 million revolving credit facility, which includes a $5.0 million letter of credit sub-facility. The Company may request from time to time an increase in the revolving credit loan commitment of up to $5.0 million (for a total commitment of up to $30.0 million). Borrowing pursuant to the revolving credit facility is subject to a borrowing base amount calculated as (a) 80% of eligible accounts receivable, as defined, plus (b) 50% of the value of acceptable inventory, as defined, minus (c) certain reserves as the Lender may establish for the amount of estimated exposure, as reasonably determined by the Lender from time to time, under certain interest rate swap contracts. The borrowing base limitation only applies during periods when the Company’s quarterly funded debt to EBITDA ratio, as defined, exceeds 2.00 to 1.00. The Loan Agreement permits, without the prior consent of the Lender, acquisitions of a business or its assets by the Company or its subsidiaries if there is no default under the Loan Agreement and the aggregate consideration does not exceed $7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions. The credit facility will mature on June 25, 2025.

 

Per the terms of the Loan Agreement, borrowings under the revolving credit facility bear interest at a rate per annum equal to the sum of the one-month LIBOR Daily Floating Rate (“LIBOR”) plus 125 basis points. LIBOR is subject to a floor of 100 basis points. On March 3, 2023, the Company changed the benchmark interest rate in our credit facility from LIBOR to the Secured Overnight Financing Rate (“SOFR”). All outstanding principal and unpaid accrued interest under the revolving credit facility is due and payable on the maturity date. On a one-time basis, and subject to there not existing an event of default, the Company may elect to convert up to $5.0 million of the then outstanding principal of the revolving credit facility to a term loan facility with an assumed amortization of 15 years and the same interest rate and maturity date as the revolving credit facility. The Loan Agreement provides for an annual unused line of credit commitment fee, payable quarterly, of 0.25%, based on the difference between the total credit line commitment and the average daily amount of credit outstanding under the facility during the preceding quarter.

 

The Loan Agreement requires the Company to maintain a Funded Debt to EBITDA (as each such term is defined in the Loan Agreement) ratio of 3.0 to 1.0 or less and a Basic Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of at least 1.15 to 1.0. The Loan Agreement also contains customary covenants, including covenants that, among other things, limit or restrict the Company’s and/or the Company’s subsidiaries’ ability, subject to certain exceptions and qualifications, to incur liens or indebtedness, pay dividends, or merge, consolidate or sell or otherwise transfer assets.  The Company was in compliance with all of its debt covenants as of July 31, 2023.

 

 
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Stock Repurchase Program. On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock. On July 6, 2021, the Board of Directors authorized an increase in the Company’s stock repurchase program, under which the Company may repurchase up to an additional $5 million of its outstanding common stock.   On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock, which became effective upon the completion of the prior share repurchase program.  On December 1, 2022, the Board of Directors authorized an increase in the Company’s stock repurchase program, under which the Company may repurchase up to an additional $5 million of its outstanding common stock.

 

Shares repurchased in the three months ended July 31, 2023 totaled 4,700 shares at a cost of $57,000, leaving approximately $5.0 million remaining under the share repurchase program at July 31, 2023.  The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time.

 

On February 1, 2023, the Board of Directors declared a quarterly cash dividend as part of initiating a recurring quarterly dividend program. The initial quarterly dividend of $0.03 per share was paid on February 22, 2023, to stockholders of record as of February 15, 2023.

 

On May 1, 2023, the Board of Directors declared a quarterly cash dividend. The quarterly dividend of $0.03 per share was paid on May 22, 2023, to stockholders of record as of May 15, 2023.

 

On August 1, 2023, the Board of Directors declared a quarterly cash dividend. The quarterly dividend of $0.03 per share was paid on August 22, 2023, to stockholders of record as of August 15, 2023.

 

Capital Expenditures. Our capital expenditures for the six months ended July 31, 2023 of $1.1 million principally relate to capital purchases for our new manufacturing facilities in Monterrey, Mexico.  We anticipate FY24 capital expenditures to be approximately $2.0 million as we invest in strategic capacity expansion and replace existing equipment in the normal course of operations.  We expect to fund the capital expenditures from our cash flow from operations.  The Company may also expend funds in connection with potential acquisitions. 

 

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements in our fiscal year 2023 Form 10-K. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult, or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2023 Form 10-K. There have been no significant changes in the application of our critical accounting policies during the six months ended July 31, 2023.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item and therefore, no disclosure is required under Item 3 for the Company.

 

 
25

Table of Contents

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of July 31, 2023. The term “disclosure controls and procedures” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of July 31, 2023, our disclosure controls and procedures were not effective because of the material weakness in internal control over financial reporting described below.

 

Notwithstanding the ineffective disclosure controls and procedures as a result of the identified material weakness described below, management has concluded that the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with U.S. generally accepted accounting principles.

 

Material Weakness in Internal Control over Financial Reporting

 

As previously disclosed in our 2023 Form 10-K, management identified certain deficiencies in the Company’s internal control over financial reporting that aggregated to a material weakness related to its foreign subsidiary currency translation or remeasurement to ensure the foreign subsidiary’s account balances were accurately stated in the consolidated financial statements.

 

Management’s Remediation Plan and Status

 

In response to the material weakness, management has taken the following actions:

 

 

·

Enhanced the existing monthly financial statement management review by including a reconciliation of key account balances on the general ledger back to the originally reported balances from the foreign subsidiary sub-ledgers (translated to USD);

 

·

Reconfigured the trial balance import process for its Argentina subsidiary to import and remeasure account balances in a manner consistent with other foreign subsidiaries; and

 

·

Developed enhancements to the foreign subsidiary financial reporting packages by specifically quantifying and reviewing the currency fluctuation impact on the overall financial statements.

While we have taken steps to substantially remediate the identified material weakness and will continue to complete the remediation process as quickly as possible, we cannot at this time estimate how long it will take to remediate this material weakness. The material weakness will not be considered remediated until the controls are designed, implemented, and operate for a sufficient period of time and management has concluded, through independent testing, that these controls are operating effectively. As management continues to evaluate and work to improve our disclosure controls and procedures and internal control over financial reporting, we may take additional measures to address these control deficiencies or modify certain remediation measures described above.

 

Changes in Internal Control Over Financial Reporting

 

Other than continuing to make progress on the ongoing remediation efforts described above, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended July 31, 2023 that materially affected, or are reasonably likely to affect materially, the Company’s internal control over financial reporting.

 

 
26

Table of Contents

 

PART II. OTHER INFORMATION

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Issuer Purchases of Equity Securities

On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock. On July 6, 2021, the Board of Directors authorized an increase in the Company’s then-current stock repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock.  On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock which became effective upon the completion of the prior share repurchase program.  On December 1, 2022, the Board of Directors authorized an increase in the share repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock. The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time. 

 

The common shares available for repurchase under the authorizations currently in effect may be purchased from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations, general economic conditions and other relevant considerations.  Repurchases may be made on the open market or through privately negotiated transactions.

 

The following table sets forth purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, of shares of the Company’s common stock during the second quarter of fiscal 2024:

 

Period

 

Total Number

of Shares

Purchased (1)

 

 

Average

Price Paid

per Share

 

 

Total Number

of Shares

Purchased

as Part of

Publicly

Announced

Programs

 

 

Maximum Dollar Amount

of Shares that

May Yet Be

Purchased Under

the Programs

 

May 1 – May 31

 

 

4,700

 

 

$12.11

 

 

 

4,700

 

 

$5,030,625

 

June 1 – June 30

 

 

3,134

 

 

$

 

 

 

 

 

$5,030,625

 

July1 – July 31

 

 

 

 

$

 

 

 

 

 

$5,030,625

 

Total

 

 

7,834

 

 

$12.11

 

 

 

4,700

 

 

$5,030,625

 

 

(1) Includes withholding of 3,134 restricted shares to cover taxes on vested restricted shares during the second quarter of FY24.

 

 
27

Table of Contents

 

Item 5. Other Information

 

On August 30, 2023, the Company’s Board of Directors elected James M. Jenkins, the Company’s Board Chair, as the Company’s Executive Chair, effective September 1, 2023 (the “Effective Date”).

 

Mr. Jenkins, age 59, has served as the Company’s Board Chair since February 1, 2023, previously served as Vice Chair of the Board from June 2022 through January 2023, and has served as a director of Lakeland since September 2016.  Mr. Jenkins currently serves as Chief Legal Officer, Corporate Development Officer and Corporate Secretary of Transcat, Inc. (since September 2020).  Prior to joining Transcat, Mr. Jenkins was a partner at Harter Secrest & Emery LLP, a law firm located in New York State, having joined the firm in 1989 and serving as a partner from 1997 until September 2020. 

 

Effective on the Effective Date, Mr. Jenkins will receive compensation of $250,000 per year for his role as Executive Chair and will no longer receive compensation as a non-employee director. The Company’s Compensation Committee recommended and the Board of Directors approved an equity award to Mr. Jenkins under the Company’s 2017 Equity Incentive Plan, as amended, consisting of 15,000 time-based restricted stock units vesting on September 1, 2024, assuming continued service through such date. 

 

Other than as set forth herein, there are no arrangements or understandings between Mr. Jenkins and any other person pursuant to which Mr. Jenkins was appointed as Executive Chair. Mr. Jenkins does not have any family relationship with any director or executive officer of the Company or any person nominated or chosen by the Company to become a director or executive officer. There are no transactions in which Mr. Jenkins has an interest requiring disclosure under Item 404(a) of Regulation S-K.

 

 
28

Table of Contents

 

Item 6. Exhibits:

 

Exhibits:

* Filed herewith

† Furnished herewith

 

3.1

Restated Certificate of Incorporation of Lakeland Industries, Inc., as amended  (incorporated by reference to Exhibit 4.1 of Lakeland Industries, Inc.’s Registration Statement on Form S-8 filed on September 3, 2021)

 

 

3.2

Amended and Restated Bylaws of Lakeland Industries Inc. (incorporated by reference to Exhibit 3.1 of Lakeland Industries, Inc.’s Form 8-K filed April 28, 2017)

 

 

10.1*

Transition to Retirement Agreement and General Release, dated May 11, 2023, by and between Lakeland Industries, Inc. and Steven L. Harvey

 

 

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) under the Securities Exchange Act of 1934

31.2*

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) under the Securities Exchange Act of 1934

32.1†

Certification of Chief Executive Officer as adopted pursuant to 18 U.S.C. Section 1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2†

Certification of Principal Financial Officer as adopted pursuant to 18 U.S.C. Section 1350  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*

The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended July 31, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations,  (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 
29

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements 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 6, 2023

 

/s/ Charles D. Roberson

 

 

 

Charles D. Roberson,

Chief Executive Officer, President and Secretary

 (Principal Executive Officer and Authorized Signatory)

 

 

 

 

 

Date:  September 6, 2023

 

/s/ Roger D. Shannon

 

 

 

Roger D. Shannon,

Chief Financial Officer

(Principal Financial Officer and Authorized Signatory)

 

 

 
30

 

nullnullnullnullnullv3.23.2
Cover - shares
6 Months Ended
Jul. 31, 2023
Aug. 31, 2023
Cover [Abstract]    
Entity Registrant Name LAKELAND INDUSTRIES, INC.  
Entity Central Index Key 0000798081  
Document Type 10-Q  
Amendment Flag false  
Current Fiscal Year End Date --01-31  
Entity Small Business true  
Entity Shell Company false  
Entity Emerging Growth Company false  
Entity Current Reporting Status Yes  
Document Period End Date Jul. 31, 2023  
Entity Filer Category Accelerated Filer  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024  
Entity Common Stock Shares Outstanding   7,364,757
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 0-15535  
Entity Incorporation State Country Code DE  
Entity Tax Identification Number 13-3115216  
Entity Address Address Line 1 1525 Perimeter Parkway  
Entity Address Address Line 2 Suite 325  
Entity Address City Or Town Huntsville  
Entity Address State Or Province AL  
Entity Address Postal Zip Code 35806  
City Area Code 256  
Local Phone Number 350-3873  
Security 12b Title Common Stock  
Trading Symbol LAKE  
Security Exchange Name NASDAQ  
Entity Interactive Data Current Yes  
v3.23.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2023
Jul. 31, 2022
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)        
Net sales $ 33,071 $ 28,184 $ 61,771 $ 55,462
Cost of goods sold 18,888 16,557 35,144 32,779
Gross profit 14,183 11,627 26,627 22,683
Operating expenses 10,453 9,832 20,959 19,440
Operating profit 3,730 1,795 5,668 3,243
Other income (expense), net (65) (42) (134) (67)
Interest expense (1) (13) (9) (22)
Income before taxes 3,664 1,740 5,525 3,154
Income tax expense 1,199 2,610 1,740 2,895
Net income (loss) $ 2,465 $ (870) $ 3,785 $ 259
Net income (loss) per common share:        
Basic $ 0.33 $ (0.11) $ 0.52 $ 0.03
Diluted $ 0.32 $ (0.11) $ 0.50 $ 0.03
Weighted average common shares outstanding:        
Basic 7,409,305 7,670,636 7,340,914 7,656,470
Diluted 7,591,786 7,670,636 7,523,395 7,841,281
v3.23.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2023
Jul. 31, 2022
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)        
Net income (loss) $ 2,465 $ (870) $ 3,785 $ 259
Other comprehensive income (loss):        
Foreign currency translation adjustments (909) (412) (1,627) (1,172)
Comprehensive income (loss) $ 1,556 $ (1,282) $ 2,158 $ (913)
v3.23.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jul. 31, 2023
Jan. 31, 2023
Current assets    
Cash and cash equivalents $ 24,306 $ 24,639
Accounts receivable, net of allowance for doubtful accounts of $938 and $800 at July 31, 2023 and January 31, 2023, respectively 17,680 17,296
Inventories 57,368 58,176
Prepaid VAT and other taxes 2,523 1,963
Income tax receivable and other current assets 4,454 2,908
Total current assets 106,331 104,982
Property and equipment, net 9,131 9,140
Operating leases right-of-use assets 9,086 5,472
Deferred tax assets 2,762 2,764
Other assets 115 100
Goodwill 8,473 8,473
Intangible assets, net 5,838 6,042
Investments 5,699 5,354
Total assets 147,435 142,327
Current liabilities    
Accounts payable 8,376 6,558
Accrued compensation and benefits 3,173 2,522
Other accrued expenses 2,857 4,068
Income tax payable 696 0
Short-term borrowings 0 405
Accrued earnout agreement 2,004 3,182
Current portion of operating lease liabilities 1,538 1,253
Total current liabilities 18,644 17,988
Deferred income taxes 474 769
Long-term portion of operating lease liabilities 6,932 3,580
Total liabilities 26,050 22,337
Stockholders' equity    
Preferred stock, $0.01 par; authorized 1,500,000 shares (none issued) 0 0
Common stock, $0.01 par; authorized 20,000,000 shares Issued 8,721,232 and 8,655,699; outstanding 7,363,024 and 7,325,005 at July 31, 2023 and January 31, 2023, respectively 87 87
Treasury stock, at cost; 1,358,208 and 1,330,694 shares at July 31, 2023 and January 31, 2023, respectively (19,979) (19,646)
Additional paid-in capital 78,511 78,475
Retained earnings 68,084 64,765
Accumulated other comprehensive loss (5,318) (3,691)
Total stockholders' equity 121,385 119,990
Total liabilities and stockholders' equity $ 147,435 $ 142,327
v3.23.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Jul. 31, 2023
Jan. 31, 2023
CONDENSED CONSOLIDATED BALANCE SHEETS    
Allowance for doubtful accounts $ 938 $ 800
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 1,500,000,000 1,500,000,000
Preferred stock, shares issued 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 20,000,000,000 20,000,000,000
Common stock, shares issued 8,721,232,000 8,655,699,000
Common stock, shares outstanding 7,363,024,000 7,325,005,000
Treasury stock, shares 1,358,208,000 1,330,694,000
v3.23.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (UNAUDITED) - USD ($)
Total
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Accumulated other comprehensive loss
Treasury Stock
Balance, shares at Jan. 31, 2022   8,555,672       939,705
Balance, amount at Jan. 31, 2022 $ 125,100,000 $ 86,000 $ 77,826,000 $ 62,892,000 $ (1,498,000) $ (14,206,000)
Net income 259,000 0 0 259,000 0 0
Other comprehensive loss (1,172,000) $ 0 0 0 (1,172,000) 0
Restricted stock issued shares   94,908        
Restricted Stock Plan 790,000 $ 0 790,000 0 0 0
Return of shares in lieu of payroll withholding (805,000) 0 (805,000) 0 0 $ 0
Treasury stock purchased shares           (196,150)
Treasury stock purchased amount (3,126,000)   0 0 0 $ (3,126,000)
Restricted stock issued amount 1,000 $ 1,000 0 0 0 $ 0
Balance, shares at Jul. 31, 2022   8,650,580       1,135,855
Balance, amount at Jul. 31, 2022 121,047,000 $ 87,000 77,811,000 63,151,000 (2,670,000) $ (17,332,000)
Balance, shares at Apr. 30, 2022   8,635,358       964,722
Balance, amount at Apr. 30, 2022 124,792,000 $ 86,000 77,555,000 64,021,000 (2,258,000) $ (14,612,000)
Net income (870,000) 0 0 (870,000)   0
Other comprehensive loss (412,000) $ 0 0 0 (412,000) 0
Restricted stock issued shares   15,222        
Restricted Stock Plan 384,000 $ 0 384,000 0 0 0
Return of shares in lieu of payroll withholding (128,000) 0 (128,000) 0 0 0
Treasury stock purchased amount (2,720,000) 0 $ 0 0 0 (2,720,000)
Restricted stock issued amount 1,000 $ 1,000   0 0 $ 0
Treasury stock purchased, shares     (171,133)      
Balance, shares at Jul. 31, 2022   8,650,580       1,135,855
Balance, amount at Jul. 31, 2022 121,047,000 $ 87,000 $ 77,811,000 63,151,000 (2,670,000) $ (17,332,000)
Balance, shares at Jan. 31, 2023   8,655,699       1,330,694
Balance, amount at Jan. 31, 2023 119,990,000 $ 87,000 78,475,000 64,765,000 (3,691,000) $ (19,646,000)
Net income 3,785,000 0 0 3,785,000 0 0
Other comprehensive loss (1,627,000) 0 0 0 (1,627,000) 0
Restricted Stock Plan 445,000 0 445,000 0 0 0
Return of shares in lieu of payroll withholding (409,000) 0 (409,000) 0 0 0
Treasury stock purchased amount (333,000) 0 0 0 0 (333,000)
Restricted stock issued amount 0 0 0 0 0 $ 0
Treasury stock purchased, shares           (27,514)
Dividends 466,000 $ 0 0 466,000 0 $ 0
Restricted stock issued shares   65,533        
Balance, shares at Jul. 31, 2023   8,721,232       1,358,208
Balance, amount at Jul. 31, 2023 121,385,000 $ 87,000 78,511,000 68,084,000 (5,318,000) $ (19,979,000)
Balance, shares at Apr. 30, 2023   8,709,256       1,353,508
Balance, amount at Apr. 30, 2023 120,138,000 $ 87,000 78,543,000 65,839,000 (4,409,000) $ (19,922,000)
Net income 2,465,000 0 0 2,465,000 0 0
Other comprehensive loss (909,000) $ 0 0 0 (909,000) 0
Restricted stock issued shares   11,976        
Restricted Stock Plan 38,000 $ 0 38,000 0 0 0
Return of shares in lieu of payroll withholding (70,000) 0 (70,000) 0 0 0
Treasury stock purchased amount (57,000) 0 0 0 0 (57,000)
Restricted stock issued amount 0 0   0 0 $ 0
Treasury stock purchased, shares           (4,700)
Dividends 220,000 $ 0 0 220,000 0 $ 0
Balance, shares at Jul. 31, 2023   8,721,232       1,358,208
Balance, amount at Jul. 31, 2023 $ 121,385,000 $ 87,000 $ 78,511,000 $ 68,084,000 $ (5,318,000) $ (19,979,000)
v3.23.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
$ in Thousands
6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Cash flows from operating activities:    
Net income $ 3,785 $ 259
Adjustments to reconcile net income to net cash (used in) provided by operating activities    
Provision for (recovery of) doubtful accounts 139 63
Deferred income taxes (293) 1,783
Depreciation and amortization 1,122 779
Stock based and restricted stock compensation 445 790
(Gain) loss on disposal of property and equipment 0 (4)
Equity in loss of equity investment 275 129
Revaluation of earnout consideration (1,178) 0
(Increase) decrease in operating assets    
Accounts receivable (347) (1,266)
Inventories 565 (9,531)
Prepaid VAT and other taxes (562) (48)
Other assets (1,683) (1,062)
Increase (decrease) in operating liabilities    
Accounts payable 1,499 3,013
Accrued expenses and other liabilities 114 517
Operating lease liabilities 23 4
Net cash provided by (used in) operating activities 3,904 (4,574)
Cash flows from investing activities:    
Purchases of property and equipment (1,092) (449)
Investments (620) (1,891)
Net cash (used in) investing activities: (1,712) (2,340)
Cash flows from financing activities:    
Short-term borrowings (repayments) (405) 0
Purchase of treasury stock under stock repurchase program (333) (3,126)
Dividends paid (466) 0
Shares returned to pay employee taxes under restricted stock program (409) (805)
Net cash (used in) financing activities (1,613) (3,931)
Effect of exchange rate changes on cash and cash equivalents (912) (663)
Net (decrease) in cash and cash equivalents (333) (11,508)
Cash and cash equivalents at beginning of period 24,639 52,719
Cash and cash equivalents at end of period 24,306 41,211
Supplemental disclosure of cash flow information:    
Cash paid for interest 9 22
Cash paid for taxes 1,266 1,872
Noncash investing and financing activities    
Leased assets obtained in exchange for operating lease liabilities $ 4,099 $ 0
v3.23.2
Business
6 Months Ended
Jul. 31, 2023
Business  
Business

1.Business

 

Lakeland Industries, Inc. and Subsidiaries (“Lakeland,” the “Company,” “we,” “our,” or “us”), a Delaware corporation organized in April 1986, manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 1,600 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. Internationally, we sell directly to a mixture of end users and industrial distributors depending on the particular country and market. Sales are made to more than 50 countries, the majority of which were into China, countries within the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Middle East and countries within Southeast Asia.

v3.23.2
Basis of Presentation
6 Months Ended
Jul. 31, 2023
Basis of Presentation  
Basis of Presentation

2.Basis of Presentation

 

The condensed consolidated financial statements of the Company are unaudited. These condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company’s results. Intercompany accounts and transactions have been eliminated. The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire fiscal year ending January 31, 2024, or for any future period. The January 31, 2023, Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Balance Sheet, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto as of January 31, 2023 and 2022, and for each of the two years in the period ended January 31, 2023, included in our most recent annual report on Form 10-K filed on April 18, 2023.

 

In this Form 10-Q, (a) “FY” means fiscal year; thus for example, FY24 refers to the fiscal year ending January 31, 2024, (b) “Q” refers to quarter; thus, for example, Q2 FY24 refers to the second quarter of the fiscal year ending January 31, 2024, (c) “Balance Sheet” refers to the unaudited condensed consolidated balance sheet, and (d) “Statement of Operations” refers to the unaudited condensed consolidated statement of operations.

v3.23.2
Investments and Acquisitions
6 Months Ended
Jul. 31, 2023
Investments and Acquisitions  
Investments and Acquisitions

3.Investments and Acquisitions

 

Bodytrak

 

On October 18, 2021, the Company entered into an Investment Agreement (the “Investment Agreement”) with Inova Design Solutions Ltd, a private limited company incorporated under the laws of England and Wales and headquartered in the United Kingdom, doing business as Bodytrak® (“Bodytrak”), and the other parties thereto, pursuant to which Bodytrak agreed to issue and sell to the Company 508,905 cumulative convertible series A shares of Bodytrak (“Series A Shares”) in exchange for a payment by the Company of £2,000,000 ($2.8 million). The closing of this minority investment transaction occurred on October 18, 2021. The Series A Shares issued to the Company at the closing represented approximately 11.43% of Bodytrak’s total share capital.

 

On April 28, 2022, the Company, under the terms of the Investment Agreement, acquired an additional 381,679 Series A1 Shares of Bodytrak for £1,500,000 ($1.9 million). On October 26, 2022, the Company acquired an additional 254,452 Series A Shares of Bodytrak for £1,000,000 ($1.2 million). After completion of the additional investments, the Company owns 22.5% of Bodytrak’s total share capital. The investment in Bodytrak is accounted for under the equity method, given our board representation and the resulting ability to exercise significant influence. A substantial portion of our investment represents differences in our investment and our share of the underlying recognized net assets of Bodytrak. These differences are predominately attributable to non-amortizing intangible assets, including internally developed intellectual property, of Bodytrak.

On May 19, 2023, the Company entered into an agreement with Bodytrak to provide an additional investment up to an aggregate of £1,500,000 ($1.9 million on the date of initial investment) in the form of a secured convertible loan. An initial investment funding of £500,000 ($0.6 million on the date of investment) was made on May 19, 2023. The loaned amounts are due twenty-four months from the issue date, which can be extended upon mutual agreement. The convertible note bears interest at either an annual rate of 12% for cash interest or 15% for payment in kind interest on the outstanding amount under the note, such rate being selected by Bodytrak.

 

The notes can be converted into equity shares of Bodytrak under a number of conditions, including a qualified equity financing as defined in the agreement, a change of control, an IPO, default or conversion at the discretion of the Company and upon the occurrence of the specified event. The convertible note is secured by Bodytrak’s intellectual property.

 

Bodytrak provides wearable monitoring solutions for customers in industrial health, safety, defense and first responder markets wanting to achieve better employee health and performance. Bodytrak’s solution is provided as a platform as a service (PaaS), delivering real-time data, cloud-based analytics, and hardware that includes a patented earpiece for physiological monitoring and audio communications.

 

The Company recognized losses of $0.13 million and $0.1 million for the three months ended July 31, 2023 and 2022, respectively, and recognized losses of $0.3 million and $0.13 million for the six months ended July 31, 2023 and 2022, respectively, as the Company’s share of Bodytrak’s net loss. The loss is reflected in other income (expense), net in the consolidated statements of operations.

 

Acquisition of Eagle

 

On December 2, 2022, the Company acquired 100% of Eagle Technical Products Limited’s (Eagle) common stock in an all-cash transaction valued at $10.5 million, net of net working capital acquired.

 

Headquartered in Manchester, UK, Eagle is a leading designer and provider of protective apparel to the fire and industrial sectors. Eagle provides differentiated product offerings through its innovative and technical solutions.

 

Eagle’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.

 

As part of the Eagle acquisition agreement, the Company agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6 million GBP for the period May 1, 2022 through April 30, 2023. The Company also agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6.3 million GBP for the period May 1, 2023 through April 30, 2024. The estimated amount of the earnout payment developed using a Monte Carlo simulation included in the preliminary valuation was $3.2 million.

 

Eagle did not reach the revenue threshold for the period May 1, 2022 through April 30, 2023 and received no payment for that period. Based on the revised forecast for the period May 1, 2023 through April 30, 2024, the estimated amount of the earnout payment developed using a Monte Carlo simulation is $2.0 million. The adjustment to the accrued earnout payment of $0.7 million was recorded in the quarter ended July 31, 2023 and an adjustment of $1.2 million was recorded in the six months ended July 31, 2023, and reflected as a reduction in operating expenses.

 

Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals and valuations related to contingent consideration, inventory, contractual relationships and intangible assets. These changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date. There were no material changes to the valuation during the quarter ended July 31, 2023.

The following unaudited pro forma information presents our combined results as if the Eagle acquisition had occurred at the beginning of FY22. The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the combined company’s results. There were no material transactions between the Company and Eagle during the periods presented that are required to be eliminated. The unaudited pro forma combined financial information does not reflect cost savings, operating synergies or revenue enhancements that the combined companies may achieve or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies or revenue enhancements.

 

Pro forma combined financial information (Unaudited)

 

(in millions, except per share amounts)

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$28,534

 

 

$28,212

 

 

$56,602

 

 

$63,051

 

Net income (loss)

 

$

(971

)

 

$2,965

 

 

$168

 

 

$7,964

 

Basic earnings per share

 

$

(0.13

)

 

$0.37

 

 

$0.02

 

 

$1.00

 

Diluted earnings per share

 

$

(0.13

)

 

$0.36

 

 

$0.02

 

 

$0.98

 

 

The unaudited pro forma combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that we would have reported had the acquisition been completed as of the date and for the periods presented and should not be taken as representative of our consolidated results of operations or financial condition following the acquisition. In addition, the unaudited pro forma combined financial information is not intended to project the future results of the combined company.

 

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting under existing U.S. GAAP. The Company has been treated as the acquirer.

v3.23.2
Inventories
6 Months Ended
Jul. 31, 2023
Inventories  
Inventories

4.Inventories

 

Inventories consist of the following (in $000s):

 

 

 

July 31, 2023

 

 

January 31, 2023

 

 

 

 

 

 

 

 

Raw materials

 

$29,566

 

 

$29,036

 

Work-in-process

 

 

968

 

 

 

952

 

Finished goods

 

 

32,015

 

 

 

32,855

 

Excess and obsolete adjustments

 

 

(5,181)

 

 

(4,667)

 

 

$57,368

 

 

$58,176

 

v3.23.2
Goodwill and Intangible Assets Net
6 Months Ended
Jul. 31, 2023
Goodwill and Intangible Assets Net  
Goodwill and Intangible Assets, Net

5. Goodwill and Intangible Assets, Net

 

Changes in intangible assets, net, during the three and six months ended July 31, 2023, were as follows (in $000s):

 

Balance at February 1, 2023

 

$6,042

 

Amortization expense

 

 

(102)

Balance at April 30, 2023

 

$5,940

 

Amortization expense

 

 

(102)

Balance at July 31, 2023

 

$5,838

 

 

There were no material changes to goodwill during the three and six month periods ended July 31, 2023.

v3.23.2
Contract Advances
6 Months Ended
Jul. 31, 2023
Contract Advances  
Contract Advances

6. Contract Advances

 

The Company receives advances under certain of its contracts for products sold by Eagle.  Those advances are considered contract liabilities with revenues recorded upon delivery of promised goods to customers.  These advances are included in Other Accrued Expenses on the Company’s consolidated balance sheet.  The following is a roll-forward of the advances from January 31, 2023 through July 31, 2023 (in $000s):

 

Contract liability – January 31, 2023

 

$1,627

 

Increases to contract liability

 

 

271

 

Decreases to contract liability

 

 

(1,672)

Contract liability – July 31, 2023

 

$226

 

v3.23.2
LongTerm Debt
6 Months Ended
Jul. 31, 2023
LongTerm Debt  
Long-Term Debt

7. Long-Term Debt

 

Revolving Credit Facility

On June 25, 2020, the Company entered into a Loan Agreement with Bank of America (“Lender”). The Loan Agreement, as amended to date (the “Loan Agreement”), provides the Company with a secured $25.0 million revolving credit facility, which includes a $5.0 million letter of credit sub-facility. The Company may request from time to time an increase in the revolving credit loan commitment of up to $5.0 million (for a total commitment of up to $30.0 million). Borrowing pursuant to the revolving credit facility is subject to a borrowing base amount calculated as (a) 80% of eligible accounts receivable, as defined, plus (b) 50% of the value of acceptable inventory, as defined, minus (c) certain reserves as the Lender may establish for the amount of estimated exposure, as reasonably determined by the Lender from time to time, under certain interest rate swap contracts. The borrowing base limitation only applies during periods when the Company’s quarterly funded debt to EBITDA ratio, as defined, exceeds 2.00 to 1.00. The Loan Agreement permits, without the prior consent of the Lender, acquisitions of a business or its assets by the Company or its subsidiaries if there is no default under the Loan Agreement and the aggregate consideration does not exceed $7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions. On March 3, 2023, the Company changed the benchmark interest rate in the credit facility from LIBOR to the Secured Overnight Financing Rate (“SOFR”). The credit facility will mature on June 25, 2025.

 

As of July 31, 2023, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

 

Borrowings in UK

There were $0 and $0.4 million in borrowings outstanding under the Company’s credit facility with HSBC Bank at July 31, 2023 and January 31, 2023.

v3.23.2
Concentration of Risk
6 Months Ended
Jul. 31, 2023
Concentration of Risk  
Concentration of Risk

8. Concentration of Risk

 

Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents and trade receivables. Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas, principally within the United States. The Company routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. The Company does not require customers to post collateral.

The Company’s foreign financial depositories are Bank of America; China Construction Bank; Bank of China; China Industrial and Commercial Bank; HSBC (UK); Rural Credit Cooperative of Shandong; Postal Savings Bank of China; Punjab National Bank; HSBC in India, Argentina and UK; Raymond James in Argentina; TD Canada Trust; Banco Itaú S.A., Banco Credito Inversione in Chile; Banco Mercantil Del Norte SA in Mexico; ZAO KB Citibank Moscow in Russia, and JSC Bank Centercredit in Kazakhstan. The Company monitors its financial depositories by their credit rating, which varies by country. In addition, cash balances in banks in the United States of America are insured by the Federal Deposit Insurance Corporation, subject to certain limitations. There was approximately $1.6 million total included in the U.S. bank accounts and approximately $22.6 million total in foreign bank accounts as of July 31, 2023, of which $23.5 million was uninsured.

 

Major Customer

No customer accounted for more than 10% of net sales during the three and six-month periods ended July 31, 2023 and 2022.

 

Major Supplier

No vendor accounted for more than 10% of purchases during the three and six-month periods ended July 31, 2023 and 2022.

v3.23.2
Stockholders Equity
6 Months Ended
Jul. 31, 2023
Stockholders Equity  
Stockholders' Equity

9. Stockholders’ Equity

 

On June 21, 2017, the stockholders of the Company approved the Lakeland Industries, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The executive officers and all other employees and directors of the Company, including its subsidiaries, are eligible to participate in the 2017 Plan. The 2017 Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), except that with respect to all non-employee directors, the Committee shall be deemed to include the full Board. The 2017 Plan provides for the grant of equity-based compensation in the form of stock options, restricted stock, restricted stock units, performance shares, performance units, or stock appreciation rights (“SARs”).

 

On June 16, 2021, the stockholders of the Company approved Amendment No. 1 (the “Amendment”) to the 2017 Plan. The Amendment increases the number of shares of common stock, par value $0.01 per share, of the Company reserved for issuance under the 2017 Plan by 480,000 shares.

 

An aggregate of 840,000 shares of the Company’s common stock are authorized for issuance under the 2017 Plan, as amended, subject to adjustment as provided in the 2017 Plan for stock splits, dividends, distributions, recapitalizations and other similar transactions or events. If any shares subject to an award are forfeited, expire, lapse or otherwise terminate without issuance of such shares, such shares shall, to the extent of such forfeiture, expiration, lapse or termination, again be available for issuance under the 2017 Plan.

 

The Company recognized total stock-based compensation costs, which are reflected in operating expenses (in $000’s):

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

2017 Plan:

 

 

 

 

 

 

 

 

 

 

 

 

Total restricted stock and stock option programs

 

$38

 

 

$384

 

 

$445

 

 

$790

 

Total income tax expense recognized for stock-based compensation arrangements

 

$8

 

 

$81

 

 

$94

 

 

$166

 

Restricted Stock and Restricted Stock Units

 

Under the 2017 Plan, as described above, the Company awarded performance-based and service-based shares of restricted stock and restricted stock units to eligible employees and directors. The following table summarizes the activity under the 2017 Plan for the six months ended July 31, 2023 and 2022. This table reflects the amount of awards granted at the number of shares that would be vested if the Company were to achieve the maximum performance level under the June 2021, April 2022, June 2022 and April 2023 grants.

 

 

 

Performance-

Based

 

 

Service-Based

 

 

Total

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at January 31, 2023

 

 

127,480

 

 

 

40,665

 

 

 

168,145

 

 

$22.95

 

Awarded

 

 

64,953

 

 

 

105,818

 

 

 

170,771

 

 

$14.20

 

Vested

 

 

(71,202)

 

 

(24,603)

 

 

(95,805)

 

$

 14.90

 

Forfeited

 

 

(32,112)

 

 

(28,518)

 

 

(60,630)

 

 

 

 

Outstanding at July 31, 2023

 

 

89,119

 

 

 

93,362

 

 

 

182,481

 

 

$19.49

 

 

 

 

Performance-

Based

 

 

Service-Based

 

 

Total

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at January 31, 2022

 

 

232,838

 

 

 

14,970

 

 

 

247,808

 

 

$20.89

 

Awarded

 

 

33,492

 

 

 

53,082

 

 

 

86,574

 

 

$18.17

 

Vested

 

 

(119,164)

 

 

(22,669)

 

 

(141,833)

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at July 31, 2022

 

 

147,166

 

 

 

45,383

 

 

 

192,549

 

 

$19.66

 

 

The actual number of shares of common stock of the Company, if any, to be earned by the award recipients is determined over a three-year performance measurement period based in part on measures that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and free cash flow for the June 2021 grants and revenue growth and EBITDA margin for the April 2022 and June 2022 grants and revenue growth, EBITDA margin and return on invested capital for the April 2023 grants. The performance targets have been set for each of the Minimum, Target, and Maximum levels. The actual performance amount achieved is determined by the Committee and may be adjusted for items determined to be unusual in nature or infrequent in occurrence at the discretion of the Committee.

 

The compensation cost is based on the fair value at the grant date, recognized over the requisite performance/service period using the straight-line method, and periodically adjusted for the probable number of shares to be awarded. As of July 31, 2023, unrecognized stock-based compensation expense totaled $1.9 million pursuant to the 2017 Plan based on outstanding awards under the 2017 Plan. This expense is expected to be recognized over approximately two years.

 

Stock Repurchase Program

On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock. On July 6, 2021, the Board of Directors authorized an increase in the Company’s stock repurchase program of up to an additional $5 million of its outstanding common stock. On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock, which became effective upon the completion of the prior share repurchase program. On December 1, 2022, the Board of Directors authorized an increase in the Company’s stock repurchase program, under which the Company may repurchase up to an additional $5 million of its outstanding common stock.

Shares repurchased during the three months ended July 31, 2023 totaled 4,700 shares at a cost of $57,000, leaving $5.0 million remaining under the share repurchase program at July 31, 2023. The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time.

v3.23.2
Income Taxes
6 Months Ended
Jul. 31, 2023
Income Taxes  
Income Taxes

10. Income Taxes

 

The Company’s provision for income taxes for the three and six months ended July 31, 2023 and 2022 is based on the estimated annual effective tax rate, in addition to discrete items.

 

The Company’s effective tax rate for the second quarter of FY24 was 32.7% which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and Global Intangible Low-Taxed Income (“GILTI”). The Company’s effective tax rate for the second quarter of FY23 was 149.9%. The Company changed its permanent reinvestment assertions for its Chinese operations during the second quarter of FY23 due to increased volatility of the Chinese yuan and an updated evaluation of investment strategies. The Company recorded $2 million in withholding taxes for a planned repatriation. Excluding this discrete expense, the effective rate was 35.0%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and state income taxes.

 

The Company’s effective tax rate for the six months ended July 31, 2023 was 31.5%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI. The Company’s effective tax rate for the six months ended July 31, 2022 was 91.8%. In addition to the $2 million discrete item above, in Q1 FY23, the Company recorded deferred tax benefits of $0.2 million related to accruals for China social taxes based on our evaluation of the deductibility of these items. Excluding these discrete items, the effective rate was 34.1%, which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and GILTI.

 

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. The valuation allowance was $3.6 million at July 31, 2023 and January 31, 2023.

v3.23.2
Net Income (Loss) Per Share
6 Months Ended
Jul. 31, 2023
Net income (loss) per common share:  
Net Income (Loss) Per Share

11. Net Income (Loss) Per Share

 

The following table sets forth the computation of basic and diluted net income (loss) per share as follows (in $000s except per share amounts):

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$2,465

 

 

$(870)

 

$3,785

 

 

$259

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic net income (loss) per share (weighted-average shares which exclude shares in the treasury, 1,358,208 and 1,135,855 at July 31, 2023 and  2022, respectively

 

 

7,409,305

 

 

 

7,670,636

 

 

 

7,340,914

 

 

 

7,656,470

 

Effect of dilutive securities from restricted stock plan

 

 

182,481

 

 

 

 

 

 

182,481

 

 

 

184,811

 

Denominator for diluted net income (loss) per share (adjusted weighted average shares)

 

 

7,591,786

 

 

 

7,670,636

 

 

 

7,523,395

 

 

 

7,841,281

 

Basic net income (loss) per share

 

$0.33

 

 

$(0.11)

 

$0.52

 

 

$0.03

 

Diluted net income (loss) per share 

 

$0.32

 

 

$(0.11)

 

$0.50

 

 

$0.03

 

v3.23.2
Contingencies
6 Months Ended
Jul. 31, 2023
Contingencies  
Contingencies

12. Contingencies

 

Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s management and legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been or is probable of being incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

 

General litigation contingencies

The Company is involved in various litigation proceedings arising during the normal course of business which, in the opinion of the management of the Company, will not have a material effect on the Company’s financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these matters. As of July 31, 2023, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.

v3.23.2
Segment Reporting
6 Months Ended
Jul. 31, 2023
Segment Reporting  
Segment Reporting

13. Segment Reporting

 

We manage our operations by evaluating each of our geographic locations. Our US operations include a facility in Alabama (primarily the distribution to customers of the bulk of our products). The Company also maintains one manufacturing company in China (primarily disposable and chemical suit production), a manufacturing facility in Mexico (primarily disposable, reflective, fire service and chemical suit production), a manufacturing facility in Vietnam (primarily disposable production) and a small manufacturing facility in India. Our China facilities produce the majority of the Company’s products, and China generates a significant portion of the Company’s international revenues. 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 sales forces in the USA, Canada, Mexico, Europe, Latin America, India, Russia, Kazakhstan and China, which sell and distribute products shipped from the United States, Mexico, India or China.

 

The table below represents information about reported segments for the three and six month periods noted therein:

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

(in millions of dollars)

 

 

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$16.55

 

 

$13.43

 

 

$30.16

 

 

$25.68

 

Other foreign

 

 

3.22

 

 

 

2.43

 

 

 

6.30

 

 

 

4.62

 

Europe (UK)

 

 

5.40

 

 

 

1.88

 

 

 

9.42

 

 

 

3.85

 

Mexico

 

 

2.37

 

 

 

1.50

 

 

 

3.61

 

 

 

2.74

 

Asia

 

 

10.91

 

 

 

19.32

 

 

 

22.03

 

 

 

33.98

 

Canada

 

 

2.03

 

 

 

2.26

 

 

 

4.56

 

 

 

4.53

 

Latin America

 

 

4.61

 

 

 

2.55

 

 

 

7.79

 

 

 

4.45

 

Less intersegment sales

 

 

(12.02)

 

 

(15.19)

 

 

(22.10)

 

 

(24.39)

Consolidated sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

External Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$15.21

 

 

$11.90

 

 

$27.49

 

 

$23.13

 

Other foreign

 

 

1.97

 

 

 

1.83

 

 

 

4.24

 

 

 

3.64

 

Europe (UK)

 

 

5.31

 

 

 

1.88

 

 

 

9.33

 

 

 

3.85

 

Mexico

 

 

1.09

 

 

 

1.06

 

 

 

1.89

 

 

 

1.91

 

Asia

 

 

2.96

 

 

 

6.74

 

 

 

6.63

 

 

 

13.98

 

Canada

 

 

2.04

 

 

 

2.26

 

 

 

4.56

 

 

 

4.53

 

Latin America

 

 

4.49

 

 

 

2.51

 

 

 

7.63

 

 

 

4.42

 

Consolidated external sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

Intersegment Sales:

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$1.32

 

 

$1.53

 

 

$2.66

 

 

$2.55

 

Other foreign

 

 

1.25

 

 

 

0.60

 

 

 

2.07

 

 

 

0.98

 

Europe (UK)

 

 

0.09

 

 

 

 

 

 

0.09

 

 

 

 

Mexico

 

 

1.28

 

 

 

0.44

 

 

 

1.72

 

 

 

0.83

 

Asia

 

 

7.96

 

 

 

12.58

 

 

 

15.40

 

 

 

20.00

 

Canada

 

 

 

 

 

 

 

 

0.01

 

 

 

 

Latin America

 

 

0.12

 

 

 

0.04

 

 

 

0.15

 

 

 

0.03

 

Consolidated intersegment sales

 

$12.02

 

 

$15.19

 

 

$22.10

 

 

$24.39

 

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

(in millions of dollars)

 

 

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating Profit (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$1.16

 

 

$(1.24)

 

$(0.65)

 

$(3.30)

Other foreign

 

 

0.56

 

 

 

(0.07)

 

 

1.22

 

 

 

0.14

 

Europe (UK)

 

 

0.38

 

 

 

(0.36)

 

 

0.59

 

 

 

(0.62)

Mexico

 

 

(0.47)

 

 

(0.07)

 

 

(0.86)

 

 

(0.61)

Asia

 

 

1.03

 

 

 

3.40

 

 

 

1.88

 

 

 

5.95

 

Canada

 

 

0.21

 

 

 

0.32

 

 

 

0.66

 

 

 

0.95

 

Latin America

 

 

1.19

 

 

 

0.54

 

 

 

2.07

 

 

 

0.84

 

Intersegment profit (loss)

 

 

(0.33)

 

 

(0.72)

 

 

0.76

 

 

 

(0.11)

Consolidated operating profit

 

$3.73

 

 

$1.80

 

 

$5.67

 

 

$3.24

 

 

 

 

July 31, 2023

 

 

January 31, 2023

 

 

 

(in millions of dollars) 

 

Total Assets Less Intersegment:

 

 

 

 

 

 

USA Operations (including Corporate)

 

$70.18

 

 

$64.33

 

Other foreign

 

 

9.76

 

 

 

9.24

 

Europe (UK)

 

 

11.42

 

 

 

12.53

 

Mexico

 

 

5.54

 

 

 

5.32

 

Asia

 

 

32.15

 

 

 

35.64

 

Canada

 

 

7.62

 

 

 

5.81

 

Latin America

 

 

10.77

 

 

 

9.30

 

Consolidated assets

 

$147.44

 

 

$142.17

 

The table below presents external sales by product line:

 

 

 

Three Months Ended

July 31,

(in millions of dollars)

 

 

Six Months Ended

July 31,

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

External Sales by product lines:

 

 

 

 

 

 

 

 

 

 

 

 

Disposables

 

$12.55

 

 

$12.72

 

 

$24.91

 

 

$27.22

 

Chemical

 

 

5.26

 

 

 

7.16

 

 

 

10.71

 

 

 

12.27

 

Fire Service

 

 

9.00

 

 

 

2.98

 

 

 

14.47

 

 

 

5.67

 

Gloves

 

 

0.49

 

 

 

0.55

 

 

 

1.20

 

 

 

1.09

 

High Visibility

 

 

1.58

 

 

 

1.34

 

 

 

2.73

 

 

 

2.94

 

High Performance Wear

 

 

1.47

 

 

 

1.11

 

 

 

2.74

 

 

 

2.48

 

Wovens

 

 

2.72

 

 

 

2.32

 

 

 

5.01

 

 

 

3.79

 

Consolidated external sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

v3.23.2
Subsequent Events
6 Months Ended
Jul. 31, 2023
Subsequent Events  
Subsequent Events

14. Subsequent Events

 

On August 1, 2023, the Company’s Board of Directors declared a quarterly cash dividend. The quarterly dividend of $0.03 per share or approximately $0.2 million, was paid on August 22, 2023, to stockholders of record as of August 15, 2023.

v3.23.2
Investments and Acquisitions (Tables)
6 Months Ended
Jul. 31, 2023
Investments and Acquisitions  
Schedule of Pro forma combined financial information

(in millions, except per share amounts)

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$28,534

 

 

$28,212

 

 

$56,602

 

 

$63,051

 

Net income (loss)

 

$

(971

)

 

$2,965

 

 

$168

 

 

$7,964

 

Basic earnings per share

 

$

(0.13

)

 

$0.37

 

 

$0.02

 

 

$1.00

 

Diluted earnings per share

 

$

(0.13

)

 

$0.36

 

 

$0.02

 

 

$0.98

 

v3.23.2
Inventories (Tables)
6 Months Ended
Jul. 31, 2023
Inventories  
Schedule of inventory

 

 

July 31, 2023

 

 

January 31, 2023

 

 

 

 

 

 

 

 

Raw materials

 

$29,566

 

 

$29,036

 

Work-in-process

 

 

968

 

 

 

952

 

Finished goods

 

 

32,015

 

 

 

32,855

 

Excess and obsolete adjustments

 

 

(5,181)

 

 

(4,667)

 

 

$57,368

 

 

$58,176

 

v3.23.2
Goodwill and Intangible Assets Net (Tables)
6 Months Ended
Jul. 31, 2023
Goodwill and Intangible Assets Net  
Schedule of changes in intangible assets

Balance at February 1, 2023

 

$6,042

 

Amortization expense

 

 

(102)

Balance at April 30, 2023

 

$5,940

 

Amortization expense

 

 

(102)

Balance at July 31, 2023

 

$5,838

 

v3.23.2
Contract Advances (Tables)
6 Months Ended
Jul. 31, 2023
Contract Advances  
Schedule of contract Advances

Contract liability – January 31, 2023

 

$1,627

 

Increases to contract liability

 

 

271

 

Decreases to contract liability

 

 

(1,672)

Contract liability – July 31, 2023

 

$226

 

v3.23.2
Stockholders Equity (Tables)
6 Months Ended
Jul. 31, 2023
Stockholders Equity  
Schedule of share-based compensation, restricted stock units award activity

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

2017 Plan:

 

 

 

 

 

 

 

 

 

 

 

 

Total restricted stock and stock option programs

 

$38

 

 

$384

 

 

$445

 

 

$790

 

Total income tax expense recognized for stock-based compensation arrangements

 

$8

 

 

$81

 

 

$94

 

 

$166

 

Schedule of restricted stock units

 

 

Performance-

Based

 

 

Service-Based

 

 

Total

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at January 31, 2023

 

 

127,480

 

 

 

40,665

 

 

 

168,145

 

 

$22.95

 

Awarded

 

 

64,953

 

 

 

105,818

 

 

 

170,771

 

 

$14.20

 

Vested

 

 

(71,202)

 

 

(24,603)

 

 

(95,805)

 

$

 14.90

 

Forfeited

 

 

(32,112)

 

 

(28,518)

 

 

(60,630)

 

 

 

 

Outstanding at July 31, 2023

 

 

89,119

 

 

 

93,362

 

 

 

182,481

 

 

$19.49

 

 

 

Performance-

Based

 

 

Service-Based

 

 

Total

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at January 31, 2022

 

 

232,838

 

 

 

14,970

 

 

 

247,808

 

 

$20.89

 

Awarded

 

 

33,492

 

 

 

53,082

 

 

 

86,574

 

 

$18.17

 

Vested

 

 

(119,164)

 

 

(22,669)

 

 

(141,833)

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at July 31, 2022

 

 

147,166

 

 

 

45,383

 

 

 

192,549

 

 

$19.66

 

v3.23.2
Net Income Per Share (Tables)
6 Months Ended
Jul. 31, 2023
Net income (loss) per common share:  
Schedule of earnings per share, basic and diluted

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$2,465

 

 

$(870)

 

$3,785

 

 

$259

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic net income (loss) per share (weighted-average shares which exclude shares in the treasury, 1,358,208 and 1,135,855 at July 31, 2023 and  2022, respectively

 

 

7,409,305

 

 

 

7,670,636

 

 

 

7,340,914

 

 

 

7,656,470

 

Effect of dilutive securities from restricted stock plan

 

 

182,481

 

 

 

 

 

 

182,481

 

 

 

184,811

 

Denominator for diluted net income (loss) per share (adjusted weighted average shares)

 

 

7,591,786

 

 

 

7,670,636

 

 

 

7,523,395

 

 

 

7,841,281

 

Basic net income (loss) per share

 

$0.33

 

 

$(0.11)

 

$0.52

 

 

$0.03

 

Diluted net income (loss) per share 

 

$0.32

 

 

$(0.11)

 

$0.50

 

 

$0.03

 

v3.23.2
Segment Reporting (Tables)
6 Months Ended
Jul. 31, 2023
Segment Reporting  
Schedule of segment information

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

(in millions of dollars)

 

 

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$16.55

 

 

$13.43

 

 

$30.16

 

 

$25.68

 

Other foreign

 

 

3.22

 

 

 

2.43

 

 

 

6.30

 

 

 

4.62

 

Europe (UK)

 

 

5.40

 

 

 

1.88

 

 

 

9.42

 

 

 

3.85

 

Mexico

 

 

2.37

 

 

 

1.50

 

 

 

3.61

 

 

 

2.74

 

Asia

 

 

10.91

 

 

 

19.32

 

 

 

22.03

 

 

 

33.98

 

Canada

 

 

2.03

 

 

 

2.26

 

 

 

4.56

 

 

 

4.53

 

Latin America

 

 

4.61

 

 

 

2.55

 

 

 

7.79

 

 

 

4.45

 

Less intersegment sales

 

 

(12.02)

 

 

(15.19)

 

 

(22.10)

 

 

(24.39)

Consolidated sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

External Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$15.21

 

 

$11.90

 

 

$27.49

 

 

$23.13

 

Other foreign

 

 

1.97

 

 

 

1.83

 

 

 

4.24

 

 

 

3.64

 

Europe (UK)

 

 

5.31

 

 

 

1.88

 

 

 

9.33

 

 

 

3.85

 

Mexico

 

 

1.09

 

 

 

1.06

 

 

 

1.89

 

 

 

1.91

 

Asia

 

 

2.96

 

 

 

6.74

 

 

 

6.63

 

 

 

13.98

 

Canada

 

 

2.04

 

 

 

2.26

 

 

 

4.56

 

 

 

4.53

 

Latin America

 

 

4.49

 

 

 

2.51

 

 

 

7.63

 

 

 

4.42

 

Consolidated external sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

Intersegment Sales:

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$1.32

 

 

$1.53

 

 

$2.66

 

 

$2.55

 

Other foreign

 

 

1.25

 

 

 

0.60

 

 

 

2.07

 

 

 

0.98

 

Europe (UK)

 

 

0.09

 

 

 

 

 

 

0.09

 

 

 

 

Mexico

 

 

1.28

 

 

 

0.44

 

 

 

1.72

 

 

 

0.83

 

Asia

 

 

7.96

 

 

 

12.58

 

 

 

15.40

 

 

 

20.00

 

Canada

 

 

 

 

 

 

 

 

0.01

 

 

 

 

Latin America

 

 

0.12

 

 

 

0.04

 

 

 

0.15

 

 

 

0.03

 

Consolidated intersegment sales

 

$12.02

 

 

$15.19

 

 

$22.10

 

 

$24.39

 

 

 

Three Months Ended

July 31,

 

 

Six Months Ended

July 31,

 

 

 

(in millions of dollars)

 

 

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating Profit (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

USA Operations (including Corporate)

 

$1.16

 

 

$(1.24)

 

$(0.65)

 

$(3.30)

Other foreign

 

 

0.56

 

 

 

(0.07)

 

 

1.22

 

 

 

0.14

 

Europe (UK)

 

 

0.38

 

 

 

(0.36)

 

 

0.59

 

 

 

(0.62)

Mexico

 

 

(0.47)

 

 

(0.07)

 

 

(0.86)

 

 

(0.61)

Asia

 

 

1.03

 

 

 

3.40

 

 

 

1.88

 

 

 

5.95

 

Canada

 

 

0.21

 

 

 

0.32

 

 

 

0.66

 

 

 

0.95

 

Latin America

 

 

1.19

 

 

 

0.54

 

 

 

2.07

 

 

 

0.84

 

Intersegment profit (loss)

 

 

(0.33)

 

 

(0.72)

 

 

0.76

 

 

 

(0.11)

Consolidated operating profit

 

$3.73

 

 

$1.80

 

 

$5.67

 

 

$3.24

 

 

 

July 31, 2023

 

 

January 31, 2023

 

 

 

(in millions of dollars) 

 

Total Assets Less Intersegment:

 

 

 

 

 

 

USA Operations (including Corporate)

 

$70.18

 

 

$64.33

 

Other foreign

 

 

9.76

 

 

 

9.24

 

Europe (UK)

 

 

11.42

 

 

 

12.53

 

Mexico

 

 

5.54

 

 

 

5.32

 

Asia

 

 

32.15

 

 

 

35.64

 

Canada

 

 

7.62

 

 

 

5.81

 

Latin America

 

 

10.77

 

 

 

9.30

 

Consolidated assets

 

$147.44

 

 

$142.17

 

Schedule of external sales by product line

 

 

Three Months Ended

July 31,

(in millions of dollars)

 

 

Six Months Ended

July 31,

(in millions of dollars)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

External Sales by product lines:

 

 

 

 

 

 

 

 

 

 

 

 

Disposables

 

$12.55

 

 

$12.72

 

 

$24.91

 

 

$27.22

 

Chemical

 

 

5.26

 

 

 

7.16

 

 

 

10.71

 

 

 

12.27

 

Fire Service

 

 

9.00

 

 

 

2.98

 

 

 

14.47

 

 

 

5.67

 

Gloves

 

 

0.49

 

 

 

0.55

 

 

 

1.20

 

 

 

1.09

 

High Visibility

 

 

1.58

 

 

 

1.34

 

 

 

2.73

 

 

 

2.94

 

High Performance Wear

 

 

1.47

 

 

 

1.11

 

 

 

2.74

 

 

 

2.48

 

Wovens

 

 

2.72

 

 

 

2.32

 

 

 

5.01

 

 

 

3.79

 

Consolidated external sales

 

$33.07

 

 

$28.18

 

 

$61.77

 

 

$55.46

 

v3.23.2
Investments and Acquisitions (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2021
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2021
Net income $ 2,465 $ (870)   $ 3,785 $ 259  
Basic $ 0.33 $ 0.11   $ 0.52 $ 0.03  
Diluted $ 0.32 $ 0.11   $ 0.50 $ 0.03  
Pro forma combined financial information [Member]            
Net income   $ (971,000) $ 2,965,000   $ 168,000 $ 7,964,000
Net sales   $ 28,534,000 $ 28,212,000   $ 56,602,000 $ 63,051,000
Basic   $ (0.13) $ 0.37   $ 0.02 $ 1.00
Diluted   $ (0.13) $ 0.36   $ 0.02 $ 0.98
v3.23.2
Investments and Acquisitions (Details Narrative) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 6 Months Ended
Dec. 02, 2022
May 19, 2023
Oct. 26, 2022
Oct. 18, 2021
Jul. 31, 2023
Jul. 31, 2022
Apr. 28, 2022
Jul. 31, 2023
Jul. 31, 2022
Jan. 31, 2023
Recognized losses         $ 130 $ 100   $ 300 $ 130  
Convertible series A shares issued         0     0   0
Investment Agreement [Member] | Bodytrak's [Member]                    
Payment of related party shares exchanged       $ 2,800            
Percentages of total share capital       11.43%            
Ownership percentage     22.50%              
Additional shares of Series A, shares     254,452              
Additional shares of Series A, amount     $ 1,200              
Investment amount   $ 1,900                
Investment funding amount   $ 600                
Agreement interest rate description   The notes bear interest at either an annual rate of 12% for cash interest or 15% for payment in kind interest on the outstanding notes, such rate being selected by Bodytrak                
Series A shares acquired, shares             381,679      
Series A shares acquired, amount             $ 1,900      
Convertible series A shares issued       508,905            
Investment Agreement [Member] | Acquisition of Eagle [Member]                    
Adjustment to the accrued earnout payment         $ 700     $ 1,200    
Net working capital acquired $ 10,500                  
Acquired of Eagle Technical Products Limited ownership 100.00%                  
Eagle acquisition agreement, Description               the Company agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6 million GBP for the period May 1, 2022 through April 30, 2023. The Company also agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6.3 million GBP for the period May 1, 2023 through April 30, 2024. The estimated amount of the earnout payment developed using a Monte Carlo simulation included in the preliminary valuation was $3.2 million    
v3.23.2
Inventories (Details) - USD ($)
$ in Thousands
Jul. 31, 2023
Jan. 31, 2023
Inventories    
Raw materials $ 29,566 $ 29,036
Work-in-process 968 952
Finished goods 32,015 32,855
Excess and obsolete reserves (5,181) (4,667)
Inventories, net $ 57,368 $ 58,176
v3.23.2
Goodwill and Intangible Assets Net (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2023
Goodwill and Intangible Assets Net    
Balance at February 1, 2023 $ 5,940 $ 6,042
Amortization expense (102) (102)
Balance at July 31, 2023 $ 5,838 $ 5,838
v3.23.2
Contract Advances (Details)
$ in Thousands
6 Months Ended
Jul. 31, 2023
USD ($)
Contract Advances  
Contract liability - January 31, 2023 $ 1,627
Increases to contract liability 271
Decreases to contract liability (1,672)
Contract liability - July 31, 2023 $ 226
v3.23.2
LongTerm Debt (Details Narrative) - USD ($)
$ in Millions
6 Months Ended
Jul. 31, 2023
Jan. 31, 2023
HSBC Bank [Member]    
Outstanding borrowings $ 0.0 $ 0.4
Loan Agreement | Bank Of America    
Warranties to the Lender in the Loan Agreement The Company may request from time to time an increase in the revolving credit loan commitment of up to $5.0 million (for a total commitment of up to $30.0 million). Borrowing pursuant to the revolving credit facility is subject to a borrowing base amount calculated as (a) 80% of eligible accounts receivable, as defined, plus (b) 50% of the value of acceptable inventory, as defined, minus (c) certain reserves as the Lender may establish for the amount of estimated exposure, as reasonably determined by the Lender from time to time, under certain interest rate swap contracts. The borrowing base limitation only applies during periods when the Company’s quarterly funded debt to EBITDA ratio, as defined, exceeds 2.00 to 1.00  
Revolving credit facility $ 25.0  
Individual acquisitions amount 15.0  
Credit sub facility $ 5.0  
Credit facility mature date Jun. 25, 2025  
Acquisition description Loan Agreement and the aggregate consideration does not exceed $7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions  
Maximum | Loan Agreement    
Aggregate cumulative consideration $ 7.5  
v3.23.2
Concentration of Risk (Details Narrative) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jul. 31, 2022
Jul. 31, 2023
Cash balances in banks in the United States of America   $ 1.6
Cash balances in foreign bank accounts   22.6
Uninsured amount   $ 23.5
Major Customer [Member]    
Concentration risk of net sales 10.00% 10.00%
Major Supplier [Member]    
Concentration risk of net sales 10.00% 10.00%
v3.23.2
Stockholders Equity (Details) - 2017 Plan [Member] - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2023
Jul. 31, 2022
Total restricted stock and stock option programs $ 38 $ 384 $ 445 $ 790
Total income tax benefit recognized for stock-based compensation arrangements $ 8 $ 81 $ 94 $ 166
v3.23.2
Stockholders Equity (Details 1) - $ / shares
6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Total Segment [Member]    
Outstanding at beginning balance 168,145 247,808
Awarded 170,771 86,574
Vested (95,805) (141,833)
Forfeited (60,630) 0
Outstanding at ending balance 182,481 192,549
Performance Based [Member]    
Outstanding at beginning balance 127,480 232,838
Awarded 64,953 33,492
Vested (71,202) 0
Forfeited (32,112)  
Outstanding at ending balance 89,119 147,166
Service Based [Member]    
Outstanding at beginning balance 40,665 14,970
Awarded 105,818 53,082
Vested (24,603) (22,669)
Forfeited (28,518) 0
Outstanding at ending balance 93,362 45,383
Weighted Average Grant Date Fair Value [Member]    
Weighted Average Grant Date Fair Value, Outstanding at beginning balance $ 22.95 $ 20.89
Weighted Average Grant Date Fair Value, Awarded 14.20 18.17
Weighted Average Grant Date Fair Value, Vested 14.90  
Weighted Average Grant Date Fair Value, Forfeited 0 0
Weighted Average Grant Date Fair Value, Outstanding at ending balance $ 19.49 $ 19.66
v3.23.2
Stockholders Equity (Details Narrative) - USD ($)
$ / shares in Units, $ in Millions
1 Months Ended 6 Months Ended
Apr. 07, 2022
Dec. 01, 2021
Jul. 06, 2021
Jun. 16, 2021
Jul. 31, 2023
Jan. 31, 2023
Feb. 17, 2021
Common stock, shares authorized         20,000,000,000 20,000,000,000  
2017 Plan [Member]              
Common stock, shares authorized         840,000    
Price per share       $ 0.01      
Repurchase of outstanding common stock       480,000      
Unrecognized stock-based compensation expense         $ 1.9    
Stock Repurchase Program [Member]              
Remaining value of repurchase of outstanding common stock         $ 5.0   $ 5.0
Additional shares of common oitstanding 5,000,000 5,000,000 5,000,000        
Repurchase of outstanding common stock         4,700    
Repurchase of outstanding common stock, amount         $ 5,700.0    
v3.23.2
Income Taxes (Details Narrative) - USD ($)
6 Months Ended 12 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jan. 31, 2023
Change in valuation allowance $ 3,600,000   $ 3,600,000.0
Effective tax rates 31.50% 91.80%  
Tax rate 21.00% 21.00%  
Deferred tax benefits $ (293,000) $ 1,783,000  
China Social Taxes [Member]      
Tax rate 21.00%    
Deferred tax benefits $ 200,000    
Federal tax statutory rate 35.00%    
China Social Taxes 1 [Member]      
Tax rate 21.00%    
Deferred tax benefits $ 2,000,000    
Federal tax statutory rate 34.10%    
2024 Plan [Member]      
Effective tax rates 32.70%    
Tax rate 21.00%    
2023 Plan [Member]      
Effective tax rates 149.90%    
Tax rate 21.00%    
v3.23.2
Net Income (Loss) Per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2023
Jul. 31, 2022
Net income (loss) per common share:        
Net income $ 2,465 $ (870) $ 3,785 $ 259
Denominator for basic net income per share (weighted-average shares which exclude shares in the treasury, 1,353,508 and 964,722 at April 30, 2023 and 2022, respectively 7,409,305 7,670,636 7,340,914 7,656,470
Effect of dilutive securities from restricted stock plan 182,481 0 182,481 184,811
Denominator for diluted net income per share (adjusted weighted average shares) 7,591,786 7,670,636 7,523,395 7,841,281
Basic net income (loss) per share $ 0.33 $ 0.11 $ 0.52 $ 0.03
Diluted net income (loss) per share $ 0.32 $ 0.11 $ 0.50 $ 0.03
v3.23.2
Segment Reporting (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2023
Jul. 31, 2022
Jan. 31, 2023
Operating Profit (Loss) $ 3,730 $ 1,795 $ 5,668 $ 3,243  
Total assets 147,435   147,435   $ 142,327
Intersegment [Member]          
Net sales (12,020) (15,190) (22,100) (24,390)  
Operating Profit (Loss) (330) (720) 760 110  
Total Segment [Member]          
Net sales 33,070 28,180 61,770 55,460  
External sales 33,070 28,180 61,770 55,460  
Intersegment sales 12,020 15,190 22,100 24,390  
Operating Profit (Loss) 3,730 5,670 1,800 3,240  
Total assets 147,440 142,170 147,440 142,170  
USA          
Net sales 16,550 13,430 30,160 25,680  
External sales 15,210 11,900 27,490 23,130  
Intersegment sales 1,320 1,530 2,660 2,550  
Operating Profit (Loss) 1,160 (1,240) (650) (3,300)  
Total assets 70,180 64,330 70,180 64,330  
Mexico          
Net sales 2,370 1,500 3,610 2,740  
External sales 1,090 1,060 1,890 1,910  
Intersegment sales 1,280 440 1,720 830  
Operating Profit (Loss) (470) (70) (860) (610)  
Total assets 5,540 5,320 5,540 5,320  
Canada          
Net sales 2,030 2,260 4,560 4,530  
External sales 2,040 2,260 4,560 4,530  
Intersegment sales 0 0 10 0  
Operating Profit (Loss) 210 320 660 950  
Total assets 7,620 5,810 7,620 5,810  
Other Foreign [Member]          
Net sales 3,220 2,430 6,300 4,620  
External sales 1,970 1,830 4,240 3,640  
Intersegment sales 1,250 600 2,070 980  
Operating Profit (Loss) 560 (70) 1,220 140  
Total assets 9,760 9,240 9,760 9,240  
Europe UK          
Net sales 5,400 1,880 9,420 3,850  
External sales 5,310 1,880 9,330 3,850  
Intersegment sales 90 0 90 0  
Operating Profit (Loss) 380 (360) 590 (620)  
Total assets 11,420 12,530 11,420 12,530  
Asia          
Net sales 10,910 19,320 22,030 33,980  
External sales 2,960 6,740 6,630 13,980  
Intersegment sales 7,960 12,580 15,400 20,000  
Operating Profit (Loss) 1,030 3,400 1,880 5,950  
Total assets 32,150 35,640 32,150 35,640  
Latin America          
Net sales 4,610 2,550 7,790 4,450  
External sales 4,490 2,510 7,630 4,420  
Intersegment sales 120 40 150 30  
Operating Profit (Loss) 1,190 540 2,070 840  
Total assets $ 10,770 $ 9,300 $ 10,770 $ 9,300  
v3.23.2
Segment Reporting (Details 1) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2023
Jul. 31, 2022
Jul. 31, 2023
Jul. 31, 2022
External sales $ 33,070 $ 28,180 $ 61,770 $ 55,460
Fire Service Member        
External sales 9,000 2,980 14,470 5,670
Disposables        
External sales 12,550 12,720 24,910 27,220
Chemical        
External sales 5,260 7,160 10,710 12,270
Gloves Member        
External sales 490 550 1,200 1,090
High Visibility Member        
External sales 1,580 1,340 2,730 2,940
High Performance Wear        
External sales 1,470 1,110 2,740 2,480
Wovens        
External sales $ 2,720 $ 2,320 $ 5,010 $ 3,790
v3.23.2
Subsequent Event (Details Narrative) - Bodytrak [Member] - Subsequent Event [Member]
$ / shares in Units, $ in Millions
1 Months Ended
Aug. 22, 2023
USD ($)
$ / shares
Dividend per share | $ / shares $ 0.03
Payment to party | $ $ 0.2

Lakeland Industries (NASDAQ:LAKE)
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Lakeland Industries (NASDAQ:LAKE)
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부터 12월(12) 2023 으로 12월(12) 2024 Lakeland Industries 차트를 더 보려면 여기를 클릭.