Item 1. Financial Statements
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,
2025
2024
2025
2024
Net sales
$
52,496
$
38,512
$
99,242
$
74,822
Cost of goods sold
33,678
23,277
64,780
43,403
Gross profit
18,818
15,235
34,462
31,419
Operating expenses
19,283
16,826
39,561
30,809
Lease impairments
3,577
—
3,577
—
Operating (loss) income
( 4,042
)
( 1,591
)
( 8,676
)
610
Other income, net
38
165
144
177
Interest expense
( 445
)
( 370
)
( 1,028
)
( 542
)
(Loss) income before taxes
( 4,449
)
( 1,796
)
( 9,560
)
245
Income tax benefit
( 5,215
)
( 420
)
( 6,413
)
( 32
)
Net income (loss)
$
766
$
( 1,376
)
$
( 3,147
)
$
277
Net income (loss) per common share:
Basic
$
0.08
$
( 0.19
)
$
( 0.33
)
$
0.04
Diluted
$
0.08
$
( 0.19
)
$
( 0.33
)
$
0.04
Weighted average common shares outstanding:
Basic
9,530,082
7,390,873
9,506,604
7,371,358
Diluted
10,093,855
7,390,873
9,506,604
7,648,300
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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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,
2025
2024
2025
2024
Net income (loss)
$
766
$
( 1,376
)
$
( 3,147
)
$
277
Other comprehensive income (loss):
Foreign currency translation adjustments
2,145
950
2,896
1,108
Comprehensive income (loss)
$
2,911
$
( 426
)
$
( 251
)
$
1,385
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000’s except for share information)
ASSETS
July 31,
2025
January 31,
2025
Current assets
Cash and cash equivalents
$
17,749
$
17,476
Accounts receivable, net of allowance for doubtful accounts of $ 1,028 and $ 1,237 at July 31, 2025 and January 31, 2025, respectively
30,931
27,607
Inventories, net
90,202
82,739
Prepaid VAT and other taxes
1,869
2,598
Assets held for sale
1,384
—
Income tax receivable and other current assets
4,929
6,111
Total current assets
147,064
136,531
Property and equipment, net
13,539
13,948
Operating leases right-of-use
assets
9,031
13,917
Deferred tax assets
14,232
6,270
Other assets
1,384
122
Goodwill
15,047
16,240
Intangible assets, net
26,007
25,503
Total assets
$
226,304
$
212,531
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
18,116
$
15,742
Accrued compensation and benefits
5,136
4,501
Other accrued expenses
10,347
8,130
Income tax payable
1,375
1,993
Current portion of loans payable
1,639
939
Current portion of operating lease liabilities
3,608
3,602
Total current liabilities
40,221
34,907
Deferred income taxes
1,578
3,891
Loans payable – long term
28,100
16,426
Long-term portion of operating lease liabilities
9,143
10,681
Total liabilities
79,042
65,905
Commitments and contingencies (Note 1 2
)
Stockholders’ equity
Preferred stock, $ 0.01 par; authorized 1,500,000 shares ( no ne issued)
—
—
Common stock, $ 0.01 par; authorized 20,000,000 shares Issued 10,909,279 and 10,856,812 ; outstanding 9,551,071 and 9,498,604 at July 31, 2025 and January 31, 2025, respectively
109
109
Treasury stock, at cost; 1,358,208 shares at July 31, 2025 and January 31, 2025, respectively
( 19,979
)
( 19,979
)
Additional paid-in
capital
124,594
123,136
Retained earnings
46,602
50,320
Accumulated other comprehensive loss
( 4,064
)
( 6,960
)
Total stockholders’ equity
147,262
146,626
Total liabilities and stockholders’ equity
$
226,304
$
212,531
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(000’s except for share information)
Six Months Ended July 31, 2025
Common Stock
Treasury Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Shares
Amount
Shares
Amount
Total
($000’s)
($000’s)
($000’s)
($000’s)
($000’s)
($000’s)
Balance, January 31, 2025
10,856,812
$
109
( 1,358,208
)
$
( 19,979
)
$
123,136
$
50,320
$
( 6,960
)
$
146,626
Net loss
—
—
—
—
—
( 3,913
)
—
( 3,913
)
Other comprehensive income
—
—
—
—
—
—
751
751
Dividends ($ 0.03 per share)
—
—
—
—
—
( 285
)
—
( 285
)
Stock-based compensation:
Restricted stock issued
15,739
—
—
—
—
—
—
Restricted stock plan
—
—
—
—
329
—
—
329
Return of shares in lieu of payroll withholding
—
—
—
—
( 126
)
—
—
( 126
)
Balance, April 30, 2025
10,872,551
$
109
( 1,353,208
)
$
( 19,979
)
$
123,339
$
46,122
$
( 6,209
)
$
143,382
Net income
—
—
—
—
—
766
—
766
Other comprehensive income
—
—
—
—
—
—
2,145
2,145
Dividends ($ 0.03 per share)
—
—
—
—
—
( 286
)
—
( 286
)
Stock-based compensation:
Restricted stock issued
36,728
— —
—
—
—
—
—
Restricted stock plan
—
—
—
—
1,411
—
—
1,411
Return of shares in lieu of payroll withholding
—
—
—
—
( 156
)
—
—
( 156
)
Balance, July 31, 2025
10,909,279
$
109
( 1,358,208
)
$
( 19,979
)
$
124,594
$
46,602
$
( 4,064
)
$
147,262
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(000’s except for share information)
Six Months Ended July 31, 2024
Common Stock
Treasury Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Shares
Amount
Shares
Amount
Total
($000’s)
($000’s)
($000’s)
($000’s)
($000’s)
($000’s)
Balance, January 31, 2024
8,722,965
$
87
( 1,358,208
)
$
( 19,979
)
$
79,420
$
69,282
$
( 5,360
)
$
123,450
Net income
—
—
—
—
—
1,653
—
1,653
Other comprehensive income
—
—
—
—
—
—
158
158
Dividends ($ 0.03 per share)
—
—
—
—
—
( 221
)
—
( 221
)
Stock-based compensation:
Restricted stock issued
13,058
—
—
—
—
—
—
Restricted stock plan
—
—
—
—
198
—
—
198
Return of shares in lieu of payroll withholding
—
—
—
—
( 129
)
—
—
( 129
)
Balance, April 30, 2024
8,736,023
$
87
( 1,358,208
)
$
( 19,979
)
$
79,489
$
70,714
$
( 5,202
)
$
125,109
Net (loss)
—
—
—
—
—
( 1,376
)
—
( 1,376
)
Other comprehensive income
—
—
—
—
—
—
950
950
Dividends ($ 0.03 per share)
—
—
—
—
—
( 221
)
—
( 221
)
Stock-based compensation:
Restricted stock issued
18,789
—
—
—
—
—
—
Restricted stock plan
—
—
—
—
428
—
—
428
Return of shares in lieu of payroll withholding
—
—
—
—
( 174
)
—
—
( 174
)
Balance, July 31, 2024
8,754,812
$
87
( 1,358,208
)
$
( 19,979
)
$
79,743
$
69,117
$
( 4,252
)
$
124,716
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000’ S
)
Six Months Ended
July 31,
2025
2024
Cash flows from operating activities:
Net (loss) income
($
3,147
)
$
277
Adjustments to reconcile net (loss) income to net cash (used in) operating activities
Deferred income taxes
( 10,279
)
( 355
)
Depreciation and amortization
2,406
1,792
Lease impairments
3,577
—
Amortization of step-up
in inventory basis
854
—
Stock based and restricted stock compensation
1,740
627
Gain on disposal of property and equipment
( 3
)
—
Equity in loss of equity investment
—
245
Change in fair value of earnout consideration
—
( 711
)
Change in operating assets and liabilities, net of effect of business acquisitions
Accounts receivable, net
( 2,589
)
475
Inventories
( 6,163
)
( 4,265
)
Prepaid VAT and other taxes
730
735
Other assets
454
( 5,751
)
Accounts payable
1,846
7,063
Accrued expenses and other liabilities
1,146
( 4,251
)
Operating lease liabilities
( 232
)
66
Net cash (used in) operating activities
( 9,660
)
( 4,053
)
Cash flows from investing activities:
Purchases of property and equipment
( 2,130
)
( 842
)
Acquisitions, net of cash acquired
—
( 22,950
)
Investments in convertible debt instruments
—
( 639
)
Net cash (used in) investing activities:
( 2,130
)
( 24,431
)
Cash flows from financing activities:
Term loan borrowings
2,066
2,912
Payments on debt facilities
( 4,101
)
( 3,418
)
Credit line borrowings
13,830
28,300
Dividends paid
( 571
)
( 442
)
Shares returned to pay employee taxes under restricted stock program
( 283
)
( 304
)
Net cash provided by financing activities
10,941
27,048
Effect of exchange rate changes on cash and cash equivalents
1,122
1,094
Net increase (decrease) in cash and cash equivalents
273
( 342
)
Cash and cash equivalents at beginning of period
17,476
25,222
Cash and cash equivalents at end of period
$
17,749
$
24,880
Supplemental disclosure of cash flow information:
Cash paid for interest
$
1,024
$
542
Cash paid for taxes
$
1,692
$
1,972
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
Business
Lakeland Industries, Inc. and Subsidiaries, doing business as “Lakeland Fire + Safety” (“Lakeland,” the “Company,” “we,” “our” or “us”), manufacture and sell a comprehensive line of fire services and industrial protective clothing and accessories for the industrial and first responder markets. Our products are sold globally by our in-house
sales teams, our customer service group, and authorized independent sales representatives to a strategic global network of selective fire safety and industrial distributors and wholesale partners. Our authorized distributors supply end users across various industries, including integrated oil, chemical/petrochemical, automobile, transportation, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical and high-tech electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. We also supply federal, state and local governmental agencies and departments, including 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 mix of end-users
directly and to industrial distributors, depending on the particular country and market. In addition to the United States (U.S.), sales are made into more than 50 foreign countries, the majority of which were into China, the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Uruguay, Middle East, Southeast Asia, Australia, Hong Kong and New Zealand.
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, that management considers necessary 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, 2026, or for any future period. The January 31, 2025, 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 and for the years ended January 31, 2025 and 2024, included in our most recent annual report on Form 10-K
filed on April 17, 2025.
In this Form 10-Q,
(a) “FY” means fiscal year; thus, for example, FY26 refers to the fiscal year ending January 31, 2026, (b) “Q” refers to quarter; thus, for example, Q2 FY26 refers to the second quarter of the fiscal year ending January 31, 2026, (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.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
Segment Reporting
The Company adopted ASU No. 2023-07
(“ASU 2023-07”),
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
for the year ended January 31, 2025 and applied it retrospectively for the prior period presented. See “Note 12. Segment Reporting.”
Income Taxes
In December 2023, the FASB issued ASU 2023-09,
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance requires a public entity to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance also requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and this guidance should be applied prospectively but there is the option to apply it retrospectively. The Company plans to adopt the provisions of this guidance in conjunction with our Form 10-K
for our fiscal year ending January 31, 2026.
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Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03
(“ASU 2024-03”), Disaggregation
of Income Statement Expenses (“DISE”). ASU 2024-03
requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03
does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. As revised by ASU No. 2025-01,
Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, the provisions of ASU 2024-03
are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. With the exception of expanding disclosures to include more granular income statement expense categories, we do not expect the adoption of ASU 2024-03
to have a material effect on our consolidated financial statements taken as a whole.
3.
Acquisitions
Acquisition of Veridian
On December 16, 2024, the Company acquired 100 % of U.S.-based Veridian Limited (Veridian) for cash consideration of approximately $ 26.1 million subject to post-closing adjustments and customary holdback provisions. Founded in 1992, Veridian is a leading provider of firefighter protective apparel, including fire and rescue garments, gloves and boots.
Veridian’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. Veridian’s operating results and assets, including acquired intangibles and goodwill, are reported as part of U.S. in our geographic segment reporting.
The following table summarizes the preliminary fair values of the Veridian assets acquired and liabilities assumed at the date of the acquisition:
Net working capital acquired, including cash of $0.5 million
$
8,843
Property, plant and equipment
1,287
Right of use assets
768
Customer relationships
9,950
Trade names
1,400
Goodwill
4,956
Backlog
200
Lease liabilities
( 768
)
Other liabilities assumed
( 568
)
Total net assets acquired
$
26,068
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Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges, the relief from royalty method for trade names and trademarks. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Veridian’s pre-acquisition
forecasts and management estimates. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. Amortization of Veridian’s identifiable intangible assets will be deductible for tax purposes.
Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Veridian with our operations. Goodwill related to the Veridian acquisition is deductible for tax purposes.
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 of inventory, customer relationships, tangible assets and intangible assets. 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.
Acquisition of LHD
On July 1, 2024, the Company acquired 100 % of the shares of LHD Group Deutschland GmbH’s fire and rescue business and its subsidiaries in Hong Kong and Australia (collectively, “LHD”) in an all-cash
transaction subject to post-closing adjustments and customary holdback provisions. Total consideration was $ 14.8 million, net of $ 1.5 million cash acquired, of which $ 15.5 million was paid to retire LHD’s debt and $ 0.8 million was paid to the seller at closing. LHD is a leading provider of firefighter turnout gear, accessories, and personal protective equipment, as well as decontamination, repair and maintenance services. LHD has 111 employees worldwide and is headquartered in Wesseling, Germany, with operations in Hong Kong and Australia.
LHD’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. LHD’s operating results and assets, including acquired intangibles and goodwill, are reported as part of Europe in our geographic segment reporting.
In Q2 FY26, the Company finalized the purchase price allocation for the LHD acquisition. Measurement period adjustments totaling $ 2.3 million from the initial preliminary estimates resulted in changes to net working capital, customer relationship intangible assets, lease liabilities, other liabilities and goodwill.
The following table summarizes the fair values of the LHD assets acquired and liabilities assumed at the date of the acquisition and reflective of measurement period adjustments:
Net working capital acquired, including cash of $ 1.5
million
$
5,660
Property, plant and equipment
801
Right of use assets
2,613
Customer relationships
5,021
Trade names and trademarks
1,296
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Technological know-how
270
Other
( 76
)
Goodwill
5,267
Lease liabilities
( 2,613
)
Other liabilities assumed
( 1,947
)
Total net assets acquired
$
16,292
Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges, the relief from royalty method for trade names and trademarks and technological know-how.
Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on LHD’s pre-acquisition
forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, trade names and trademarks and technological know-how
acquired in the LHD transaction are being amortized over periods of 20 years, 10 years and 15 years, respectively, and are not deductible for tax purposes.
Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of LHD with our operations. Goodwill related to the LHD acquisition is not deductible for tax purposes.
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Acquisition of Jolly
On February 5, 2024, the Company acquired 100 % of the shares of Italy and Romania-based Jolly Scarpe S.p.A. and Jolly Scarpe Romania S.R.L. (collectively, “Jolly”) in an all-cash
transaction. Total consideration was $ 9.0 million, of which $ 7.5 million was paid to the seller at closing, and $ 1.5 million remained unpaid subject to post-closing adjustments and customary holdback provisions. Jolly is a leading designer and manufacturer of professional footwear for the firefighting, military, police, and rescue markets. The company is headquartered in Montebelluna, Italy, with manufacturing operations in Bucharest, Romania, and has 150 employees. Jolly’s primary customers are based in Europe.
Jolly’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. Jolly’s operating results and assets, including acquired intangibles and goodwill, are reported as part of Europe in our geographic segment reporting.
The following table summarizes the fair values of the Jolly assets acquired and liabilities assumed at the date of the acquisition and reflective of measurement period adjustments:
Net working capital acquired, including cash of $3.0 million and inventory of $6.0 million
$
9,246
Property, plant and equipment
1,277
Right of use assets
1,783
Customer relationships
425
Trade names and trademarks
610
Technological know-how
272
Goodwill
1,363
Lease liabilities
( 1,783
)
Other liabilities assumed, including debt of $3.7 million
( 4,212
)
Total net assets acquired
$
8,981
Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges, the relief from royalty method for trade names and trademarks and technological know-how.
Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Jolly’s pre-acquisition
forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, trade names and trademarks and technological know-how
acquired in the Jolly transaction are being amortized over periods of 14 years, 10 years and 10 years, respectively, and are not deductible for tax purposes.
Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Jolly with our operations. Goodwill related to the Jolly acquisition is not deductible for tax purposes.
The following unaudited pro forma information presents our combined results as if the Veridian, LHD and Jolly acquisitions had occurred at the beginning of FY25. 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, Veridian, LHD and Jolly during the period 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, 2024
Six Months Ended
July 31, 2024
Net sales
$
45,278
$
95,017
Net (loss) income
$
( 1,520
)
$
260
Basic (loss) earnings per share
$
( 0.16
)
$
0.03
Diluted (loss) earnings per share
$
( 0.16
)
$
0.03
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 period 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,
2025
January 31,
2025
Raw materials
$
44,351
$
39,344
Work-in-process
2,371
2,692
Finished goods
47,648
44,158
Excess and obsolete adjustments
( 4,168
)
( 3,455
)
Total inventories
$
90,202
$
82,739
5.
Assets Held for Sale
According to ASC 360, “Impairment and Disposal of Long-Lived Assets”,
an asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) an active program to locate a buyer and complete the sale has been initiated; (iv) the sale of the asset is probable and expected to be completed within one year; (v) the asset is actively being marketed for a reasonable sales price; and (vi) it is unlikely that the plan will be significantly modified or withdrawn.
During Q2 FY26, the Company determined that it met the held for sale criteria pursuant to ASC 360, “Impairment and Disposal of Long-Lived Assets”
on the Decatur, Alabama warehouse facility. The Company recorded assets held for sale at the lower of their carrying value or fair value less costs to sell. The total carrying value of the assets held for sale at July 31, 2025 was $ 1.4 million and is separately recorded on the condensed consolidated balance sheets. See Note 1
3 for further information.
6.
Goodwill and Intangible Assets, Net
Changes in the carrying amount of goodwill for the three and six months ended July 31, 2025 and 2024, are as follows (in $000s):
2025
2024
Balance at January 31,
$
16,240
$
13,669
Currency translation
842
—
Acquisitions
—
1,546
Balance at April 30,
$
17,082
$
15,215
Measurement period adjustments
( 2,340
)
( 359
)
Currency translation
305
—
Acquisitions
—
5,442
Balance at July 31,
$
15,047
$
20,298
Changes in intangible assets, net, during the three and six months ended July 31, 2025 and 2024, are as follows (in $000s):
2025
2024
Balance at January 31,
$
25,503
$
6,830
Acquisitions
—
1,242
Amortization
( 381
)
( 150
)
Currency translation
1,026
—
Balance at April 30,
$
26,148
$
7,922
Amortization
( 404
)
( 197
)
Currency translation
479
—
Acquisitions
—
6,727
Measurement period adjustments
( 216
)
46
Balance at July 31,
$
26,007
$
14,498
Amortization expense was $ 0.4 million and $ 0.2 million in the three months ended July 31, 2025 and 2024, respectively, and $ 0.8 million and $ 0.3 million in the six months ended July 31, 2025 and 2024, respectively and was included in operating expenses on the Condensed Consolidated Statements of Operations.
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7
.
Long-Term Debt
Revolving Credit Facility
On June 25, 2020, the Company entered into a Loan Agreement (the “Original Loan Agreement”) with Bank of America, N.A. (“Lender”), as amended by Amendment No. 1 to the Loan Agreement, dated June 18, 2021 (“Amendment No. 1”), Amendment No. 2 to the Loan Agreement, dated March 3, 2023 (“Amendment No. 2”), Amendment No. 3 to the Loan Agreement, dated November 30, 2023 (“Amendment No. 3”), Amendment No. 4 to the Loan Agreement, dated March 28, 2024 (“Amendment No. 4”), Amendment No. 5 to the Loan Agreement, dated December 12, 2024 (“Amendment No. 5”), and Amendment No. 6 to the Loan Agreement, dated July 7, 2025 (“Amendment No. 6” and, collectively with Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, and Amendment No. 5, the “Loan Agreement Amendments”; and the Original Loan Agreement, as amended by the Loan Agreement Amendments, the “Amended Loan Agreement”).
The Amended Loan Agreement provides the Company with a secured revolving credit facility of up to $ 60.0 million of borrowings from December 12, 2024 through January 31, 2026 and of up to $ 50.0 million of borrowings from February 1, 2026 through January 31, 2027 (in each case, such limits remain subject to a reduction to no less than $ 40.0
million from the net proceeds of equity issuances if the Company raises capital during such periods). The revolving credit facility includes a $ 10.0 million letter of credit sub-facility.
On January 24, 2025, as required by the Amended Loan Agreement, the Company used certain net proceeds of its equity issuance to reduce the principal amount outstanding under the Amended Loan Agreement. As a result thereof, the maximum principal amount under the revolving credit facility was reduced to $ 40.0 million. The credit facility matures on December 12, 2029.
Borrowings under the revolving credit facility bear interest at a rate per annum equal to the sum of (i) the greater of the daily Secured Overnight Financing Rate (“SOFR”) or an index floor of 1% plus (ii) the Applicable Rate (as defined in the Amended Loan Agreement). The Applicable Rate is based upon a funded debt to EBITDA ratio (discussed below) and includes four different levels constituting a SOFR margin range from 1.25 % to 2.00 %. 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 Amended Loan Agreement provides for a fee on any difference between the line of credit commitment and the amount of credit it actually uses, determined by the daily amount of credit outstanding during the specified period. Such fee is calculated at the Applicable Rate and is payable quarterly.
The Company made certain representations and warranties to the Lender in the Amended Loan Agreement that are customary for credit arrangements of this type. The Company also agreed to maintain, as of the end of each fiscal quarter a minimum “basic fixed charge coverage ratio” (as defined in the Amended Loan Agreement) of at least 1.20x and a “funded debt to EBITDA ratio” (as defined in the Amended Loan Agreement) not to exceed 3.5x (with step-downs to 3.25x and 3.0x on February 1, 2026 and February 1, 2027, respectively), in each case for the trailing 12-month
period ending with the applicable quarterly reporting period. In addition, the Company has agreed to maintain a springing “asset coverage ratio” (as defined in the Amended Loan Agreement) of at least 1.10x, but only to the extent that the maximum funded debt to EBITDA ratio exceeds 3.25x at any reporting period. The Company was in compliance with all of its debt covenants as of July 31, 2025.
The Company also agreed to certain negative covenants under the Amended Loan Agreement that are customary for credit arrangements of this type, including restrictions regarding the ability of the Company and/or its subsidiaries to conduct business, grant liens, make certain investments, and incur additional indebtedness, which negative covenants are subject to certain exceptions. Moreover, the Amended Loan Agreement contains restrictions on the Company’s ability to enter into mergers and other business combination transactions and to purchase or acquire other businesses or their assets, although the Company may purchase a business or its assets without the consent of the Lender if the aggregate amount of consideration paid for by the Company is less than
$ 26.0 million for any individual acquisition or $ 36.0 million on a cumulative basis for all such acquisitions or purchases subsequent to the date of Amendment No. 5. The Amended Loan Agreement also authorizes the Company to enter into additional lines of credit or incur liabilities in connection with the acquisitions of foreign subsidiaries in foreign countries where the Lender lacks a physical presence (such amounts not to exceed $ 10.0 million in the aggregate).
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Table of Contents
The Amended Loan Agreement contains customary events of default that include, among other things (subject to any applicable cure periods and materiality qualifier), non-payment
of principal, interest or fees, defaults under related agreements with the Lender, cross-defaults under agreements for other indebtedness, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments and material adverse change. Upon the occurrence of an event of default, the Lender may terminate all loan commitments, declare all outstanding indebtedness owing under the Amended Loan Agreement and related documents to be immediately due and payable, and may exercise its other rights and remedies provided for under the Amended Loan Agreement.
In connection with the Amended Loan Agreement, the Company entered into with the Lender (i) a security agreement dated June 25, 2020, pursuant to which the Company granted to the Lender a first priority perfected security interest in substantially all of the personal property and the intangibles of the Company, and (ii) a pledge agreement, dated June 25, 2020, pursuant to which the Company granted to the Lender a first priority perfected security interest in the stock of its subsidiaries (limited to 65 % of those subsidiaries that are considered “controlled foreign subsidiaries” as set forth in the Internal Revenue Code and regulations).
As of July 31, 2025, the Company had no borrowings outstanding on the letter of credit sub-facility
and borrowings of $ 24.9 million outstanding under the revolving credit facility, and there was $ 15.1 million of additional available credit under the Loan Agreement. As of January 31, 2025, the Company had no borrowings outstanding on the letter of credit sub-facility
and borrowings of $ 13.2 million outstanding under the revolving credit facility, and there was $ 26.8 million of additional available credit under the Loan Agreement. The interest rate on outstanding borrowings was 6.47 % at July 31, 2025 and January 31, 2025.
Lakeland UK Borrowings
On December 31, 2014, the Company and Lakeland Industries Europe, Ltd. (“Lakeland UK”), a wholly owned subsidiary of the Company, amended the terms of its existing line of credit facility with HSBC Bank to provide for (i) a one-year
extension of the maturity date of the existing financing facility to December 19, 2016, (ii) an increase in the facility limit from £ 1.3 million (approximately $ 1.9 million, based on exchange rates at time of closing) to £ 1.5 million (approximately $ 2.3 million, based on exchange rates at time of closing), and (iii) a decrease in the annual interest rate margin from 3.46 % to 3.0 %. In addition, pursuant to a letter agreement dated December 5, 2014, the Company agreed that £ 0.4 million (approximately $ 0.6 million, based on exchange rates at the time of closing) of the note payable by Lakeland UK to the Company shall be subordinated in priority of payment to the subsidiary’s obligations to HSBC under the financing facility. This agreement has been subsequently amended with the most recent amendment dated March 8, 2022. The cumulative result of the amendments through March 8, 2022, reflects a reduction of the service charge to 0.765 %. The agreement can be terminated with three months’ notice. There were no borrowings outstanding under this facility at July 31, 2025 and January 31, 2025.
Pacific Helmets Borrowings
Pacific Helmets has a term loan facility with the Bank of New Zealand. The facility includes two term loans. The first term loan of 1.5 million NZD matures on December 17, 2025 , carries an interest rate of 2.3 % per annum and requires monthly payments of 19,350.27 NZD with the outstanding balance due upon maturity. The second term loan of
0.5 million NZD matures on November 18, 2026, carries an interest rate of
8.07 % per annum and requires monthly payments of 10,545 NZD with the outstanding balance due upon maturity. As of July 31, 2025 and January 31, 2025, the outstanding balance under the term loans was
$ 0.4 million and $ 0.5 million, respectively.
Jolly Borrowings
On May 9, 2024, Jolly entered into a term loan agreement for 1.5 million EUR to support working capital requirements with Banca Intesa Spa. The term loan matures on March 31, 2027 , and carries an interest rate of 5.42 %. The term loan is being repaid in 11 quarterly installments of 0.1 million EUR. The loan is guaranteed by SACE S.p.A., the Italian state-owned export credit finance agency.
On March 6, 2025, Jolly entered into a term loan agreement for 2.0 million EUR to support working capital requirements with Banca Intesa Spa. The term loan matures on September 30, 2028 , and carries an interest rate with a fixed rate portion of 1.45 % and a
variable rate portion based on the three-month EURIBOR rate. The interest rate at July 31, 2025 was 3.935 %. The term loan will be repaid in 11 quarterly installments of 0.2 million EUR, beginning September 30, 2025. Interest payments are made quarterly. The loan is guaranteed by SACE S.p.A., the Italian state-owned export credit finance agency.
15
Table of Contents
During the three months ended July 31, 2025, Jolly repaid the advance of 1.2 million EUR to BNL Bank which was used as an advance on an Italian firefighters’ contract
that was shipped during the quarter. Interest on the advance was Euribor plus 1.0%.
As of July 31, 2025 and January 31, 2025, the outstanding balance under the term loans was $ 3.4 million and $ 2.5 million, respectively.
LHD Borrowings
Prior to the Company’s acquisition, LHD secured a federally guaranteed term loan of 0.8 million EUR from Commerzbank AG under the “KfW Quick Loan 2020” program, launched by the German government in 2020 to support small and medium-sized
enterprises affected by the COVID-19
crisis. Repayments of the loan, which matures on June 30, 2030, are made in quarterly installments of 25,000 EUR. The loan carries an interest rate of 3 % per annum, with interest payments being due in arrears at the end of each quarter. As of July 31, 2025 and January 31, 2025, the outstanding balance was $ 0.7 million.
Veridian Borrowings
Prior to the Company’s acquisition, in February 2024, Veridian secured a term loan with U.S. Bank for a piece of equipment. The loan is for 60 months with monthly payments of approximately $8,000. The interest rate on the loan is 5.13 %. As of July 31, 2025 and January 31, 2025, the outstanding balance was $ 0.3 million and $ 0.4 million, respectively.
Approximate maturities of our term loans over the next five years from July 31, 2025, are $1.2 million in FY26, $1.7 million in FY27, $1.2 million in FY28, $0.4 million in FY29, and $25.2 million thereafter.
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. The 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 U.S. 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); Royal Bank of Scotland, Rural Credit Cooperative of Shandong; Postal Savings Bank of China; Punjab National Bank; HSBC in India, Argentina, Australia 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; ALFA Bank and Bank Uralsib in Russia, JSC Bank Centercredit in Kazakhstan; Bank of New Zealand in New Zealand; BNL Gruppo Paribas, Banca Monti Dei ‘Paschi and Banca Intesa Spa in Italy; BCR in Romania; NAB in Australia: and Commerzbank AG in Germany. The Company monitors its financial depositories by their credit rating, which varies by country. Additionally, cash balances in banks in the U.S. are insured by the Federal Deposit Insurance Corporation subject to certain limitations. As of July 31, 2025, approximately $ 2.2 million was h
e l
d in U.S. bank accounts ,
and approximately $ 15.5 million was h
e l
d in foreign bank accounts, of which $ 17.0 million was uninsured. As of January 31, 2025, approximately $ 1.3 million was h
e l
d in U.S. bank accounts and approximately $ 16.2 million was h
e l
d in foreign bank accounts, of which $ 16.7 million was uninsured.
16
Table of Contents
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”).
An aggregate of 1,240,000 shares of the Company’s common stock are currently 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,
2025
2024
202 5
202 4
2017 Plan:
Total restricted stock and stock option programs
$
1,411
$
428
$
1,740
$
627
Total income tax expense recognized for stock-based compensation arrangements
$
296
$
90
$
365
$
132
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, 2025 and 2024, respectively. The tables below reflect the amount of awards granted and the number of shares that would be vested if the Company were to achieve the maximum performance level under the then-outstanding grants.
Changes in performance-based and service-based shares outstanding during the six months ended July 31, 2025 are as follows:
Performance-
Based
Service-
Based
Unrestricted
Stock
Awards
Total
Weighted
Average
Grant Date
Fair Value
Outstanding at January 31, 2025
69,670
182,135
—
251,805
$
17.36
Awarded
265,874
127,076
27,258
420,208
$
16.12
Vested
( 3,304
)
( 31,393
)
( 27,258
)
( 61,955
)
$
16.18
Forfeited
( 29,485
)
( 16,801
)
—
( 46,286
)
Outstanding at July 31, 2025
302,755
261,017
—
563,772
$
17.62
17
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Changes in performance-based and service-based shares outstanding during the six months ended July 31, 2024 are as follows:
Performance-
Based
Service-
Based
Total
Weighted
Average
Grant Date
Fair Value
Outstanding at January 31, 2024
82,330
112,890
195,220
$
16.61
Awarded
27,042
112,256
139,298
$
19.18
Vested
—
( 39,062
)
( 39,062
)
$
20.27
Forfeited
( 4,281
)
( 14,234
)
( 18,515
)
Outstanding at July 31, 2024
105,091
171,850
276,941
$
17.08
For performance-based awards granted in FY23, FY24 and FY25, 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 on measures determined in advance by the Compensation Committee of the Board of Directors of the Company. For the 2022 grants, the performance measures include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and return on invested capital. Performance measures for the 2023 grants are revenue growth, EBITDA margin and return on invested capital. The performance measures for the April 2024 grants are aggregate revenue during FY25, FY26, and FY27, EBITDA margin and free cash flow margin.
With respect to performance-based awards granted in May 2025, the performance measures are the Company’s total revenue, the Company’s fire segment revenue, and its adjusted EBITDA. Each of these metrics will be independently measured against Minimum, Target, and Maximum performance targets established by the Compensation Committee, against which the Company’s performance will be measured on an annual basis at the end of each fiscal year beginning January 31, 2029 through January 31, 2031. With respect to performance-based awards granted in July 2025, the performance measures are annual revenue, adjusted EBITDA, free cash flow margin, and individual executive goals.
For all performance-based awards, the performance targets have been set for each of the Minimum, Target, and Maximum levels. The actual performance amount achieved is determined by the Compensation Committee and may be adjusted for items determined to be unusual in nature or infrequent in occurrence, at the discretion of the Compensation Committee.
The compensation cost is based on the fair value at the grant date, is recognized over the requisite performance/service period using the straight-line method and is periodically adjusted for the probable number of shares to be awarded. As of July 31, 2025, unrecognized stock-based compensation expense totaled $ 8.0 million pursuant to the 2017 Plan based on outstanding awards under the Plan. This expense is expected to be recognized over approximately three years.
Stock Repurchase Program
On April 7, 2022, the Board of Directors authorized a stock repurchase program under which the Company may repurchase up to $ 5.0 million of its outstanding common stock, which became effective upon the completion of a 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 $ 5.0 million of its outstanding common stock.
No shares were repurchased during Q2 FY26, leaving $ 5.0 million remaining under the share repurchase program at July 31, 2025. 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 months ended July 31, 2025 and 2024 is based on the estimated annual effective tax rate, in addition to discrete items.
The Company’s effective tax rate for the three months ended July 31, 2025 was 117.2 % and 67.08 % for the six months ended July 31, 2025. Both differ from the U.S. federal statutory rate of 21 % primarily due to rate differentials in foreign tax jurisdictions. The Company’s effective tax rate for the three months ended July 31, 2024 was 23.4 % and ( 13.1 )% for the six months ended July 31, 2024. Both differ from the U.S. federal statutory rate of 21 %, primarily due to the mix of income in various foreign tax jurisdictions, the impacts from Global Intangible Low-Taxed
Income (“GILTI”) and stock compensation vestings, partially offset by foreign withholding taxes accrued during the respective periods.
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 $ 10.5 million and $ 6.6 million as of July 31, 2025 and January 31, 2025, respectively.
18
Table of Contents
With the exception of our UK and China subsidiaries for which we accrue relevant deferred tax impacts related to non-indefinitely
reinvested cash, we consider the excess of the amount for financial reporting over the tax basis (including undistributed and previously taxed earnings) of investments in our other foreign subsidiaries as of July 31, 2025 to be indefinitely reinvested in the foreign jurisdictions on the basis of our specific plan for reinvestment and estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. Therefore, we have not provided for deferred taxes related to such excess or the relevant portions thereof and disclosed that the determination of any deferred taxes related to this exces s i
s not practicable in those permanently reinvested jurisdictions. We have made no changes to our policy on indefinite reinvestment during the six months ended July 31, 2025.
1 1
.
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 share and per share amounts):
Three Months Ended
July 31,
Six Months Ended
July 31,
2025
2024
2025
2024
Numerator:
Net income (loss)
$
766
$
( 1,376
)
$
( 3,147
)
$
277
Denominator:
Denominator for basic net income (loss) per share (weighted-average shares which exclude 1,358,208
treasury shares for the periods ended July 31, 2025 and 2024)
9,530,082
7,390,873
9,506,604
7,371,358
Effect of dilutive securities from restricted stock plan
563,773
—
—
276,942
Denominator for diluted net income (loss) per share (adjusted weighted average shares)
10,093,855
7,390,873
9,506,604
7,648,300
Basic net income (loss) per share
$
0.08
$
( 0.19
)
$
( 0.33
)
$
0.04
Diluted net income (loss) per share
$
0.08
$
( 0.19
)
$
( 0.33
)
$
0.04
There were no shares of unvested restricted stock awards excluded from the calculation of diluted earnings per share for the three months ended July 31, 2025. For the six months ended July 31, 2025, 0.4 million shares of unvested restricted stock awards were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect. For the three months ended July 31, 2024, 0.3 million shares of unvested restricted stock awards were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect. There were no shares of unvested restricted stock awards excluded from the calculation of diluted earnings per share for the six months ended July 31, 2024.
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Table of Contents
1 2
.
Contingencies
Certain conditions may exist as of the date the 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 legal counsel assess such contingent liabilities, which inherently involve 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 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 consolidated financial statements. If the assessment indicates that a potential 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.
In June 2025, the Company initiated legal action against the landlord seeking rescission of the lease due to unremediated structural defects on the newly constructed facility in Monterrey, Mexico that prevented the Company from effectively utilizing the facility for its intended purpose. The case was dismissed by the Court and the Company is appealing the ruling. During the three months ended July 31, 2025, the Company assessed the carrying value of the right-of-use asset associated with the lease and concluded the asset was impaired given that (i) the space is not usable for its intended purpose; (ii) no economic benefits are expected to be derived during the appeal process; and (iii) the likelihood of recovery of the carrying value of the right-of-use asset is remote. A lease impairment charge of
$ 3.6 million was recorded during the three months ended July 31, 2025 on the condensed consolidated statement of operations.
The Company is involved in various claims, actions, and legal proceedings arising in the ordinary course of business, including multiple lawsuits pending in the aqueous film forming foam (“AFFF”) multi-district litigation consolidated in the United States District Court of South Carolina, Charleston Division. These cases involve allegations that plaintiffs were exposed to Per- and polyfluoroalkyl substances (“PFAS”) in the course of their careers as firefighters. Plaintiffs allege they were exposed to PFAS contained in AFFF and firefighter turnout gear. The Company is also named alongside several defendants in a class action regarding firefighter turnout gear pending in the United States District Court of Connecticut, styled as Uniformed Professional Fire Fighters Association of Connecticut et al. v. 3M Company et al., Case No. 3:24-CV-01101. The case seeks certification of a fire fighter class, a nationwide purchaser class, and a Connecticut purchaser subclass. The Company’s exposure in these matters to losses, if any, is not reasonably estimable at this time.
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, 2025 and January 31, 2025, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.
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1 3
.
Segment Reporting
Domestic and international sales are as follows in millions of dollars:
(in millions)
Three Months Ended
July 31,
Six Months Ended
July 31,
2025
2024
2025
2024
Domestic
$
22.1
$
12.4
$
42.8
$
26.6
International
30.4
26.1
56.4
48.2
Total Sales
$
52.5
$
38.5
$
99.2
$
74.8
The Company is organized into seven geographical operating segments that are based on management responsibilities: U.S. Operations (including the Corporate office), Europe, Mexico, Asia, Canada, Latin America and Other Foreign.
The Company adopted ASU No. 2023-07
(“ASU 2023-07”),
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
for the year ended January 31, 2025 and applied it retrospectively for the prior periods presented.
Gross profit and Operating income (loss) are the measures used by the chief operating decision maker, identified as our President and Chief Executive Officer, to evaluate segment performance and identify opportunities when allocating resources. The accounting principles applied at the reportable segment level in determining the segment measure of profit or loss are the same as those applied at the consolidated financial statement level. Sales and transfers between operating segments are accounted for at market-based transaction prices and are eliminated in consolidation.
Our U.S. operations include a facility in Alabama (primarily the distribution to customers of the bulk of our products and the light manufacturing of our chemical, wovens, reflective, and fire products) and facilities in Iowa and Arkansas (fire services). The Company also maintains one manufacturing facility in China (primarily disposable and chemical suit production), a manufacturing facility in Mexico (primarily disposable, reflective, fire and chemical suit production), a manufacturing facility in Vietnam (primarily disposable production), a manufacturing facility in Argentina (primarily wovens production), a manufacturing facility in Romania (boots), a manufacturing facility in New Zealand (helmets) and two small manufacturing facilities in India (primarily disposable and wovens production). Our China and Vietnam facilities produce a significant portion of the Company’s products. We evaluate the performance of these entities based on gross profit, which is defined as net sales less cost of goods sold, and operating income (loss), which is defined as income before income taxes, interest expense and other income and expenses. We have sales forces in the U.S., Canada, Mexico, Europe, Latin America, India, Russia, Kazakhstan, Australia, New Zealand and China, which sell and distribute products shipped from the U.S., Mexico, China, Vietnam or India.
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The table below represents information about reportable segments for the three and six month periods noted therein (amounts may not foot due to rounding):
(in millions of dollars)
Three Months Ended
July 31,
Six Months Ended
July 31,
2025
2024
2025
2024
Net Sales:
U.S. Operations
$
24.5
$
14.2
$
47.0
$
30.1
Other foreign
5.2
4.9
9.9
9.4
Europe
15.7
7.3
27.8
13.4
Mexico
2.0
2.5
3.8
4.1
Asia
14.3
13.5
26.3
23.9
Canada
2.9
2.5
5.3
5.5
Latin America
4.6
7.4
8.9
12.2
Less intersegment sales
( 16.7
)
( 13.8
)
( 29.8
)
( 23.8
)
Consolidated sales
$
52.5
$
38.5
$
99.2
$
74.8
External Sales:
U.S. Operations
$
22.1
$
12.4
$
42.8
$
26.6
Other foreign
3.3
3.9
6.3
7.8
Europe
15.1
7.1
26.9
13.1
Mexico
1.1
1.7
2.3
2.8
Asia
3.7
3.5
7.3
6.8
Canada
2.9
2.5
5.2
5.5
Latin America
4.3
7.4
8.4
12.2
Consolidated external sales
$
52.5
$
38.5
$
99.2
$
74.8
Intersegment Sales:
U.S. Operations
$
2.3
$
1.8
$
4.1
$
3.5
Other foreign
1.9
1.0
3.6
1.6
Europe
0.6
0.2
0.9
0.3
Mexico
0.9
0.8
1.5
1.3
Asia
10.7
10.0
19.1
17.1
Canada
0.1
—
0.2
—
Latin America
0.2
—
0.4
—
Consolidated intersegment sales
$
16.7
$
13.8
$
29.8
$
23.8
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The table below represents information about reportable segments for the three and six month periods noted therein (amounts may not foot due to rounding):
(in millions of dollars)
Three Months Ended
July 31,
Six Months Ended
July 31,
2025
2024
2025
2024
Cost of Goods Sold:
U.S. Operations
$
15.5
$
9.0
$
30.8
$
18.1
Other foreign
3.5
2.8
6.6
5.5
Europe
12.2
5.9
21.1
10.4
Mexico
2.1
2.1
3.9
3.6
Asia
11.4
10.2
21.0
18.4
Canada
2.0
1.4
3.9
3.1
Latin America
3.0
3.8
5.9
6.0
Less intersegment cost of goods sold
( 16.0
)
( 11.9
)
( 28.4
)
( 21.7
)
Consolidated cost of goods sold
$
33.7
$
23.3
$
64.8
$
43.4
Gross Profit:
U.S. Operations
$
9.0
$
5.2
$
16.2
$
12.0
Other foreign
1.7
2.2
3.2
4.0
Europe
3.5
1.5
6.7
3.0
Mexico
( 0.1
)
0.3
( 0.1
)
0.4
Asia
2.9
3.3
5.4
5.5
Canada
0.9
1.1
1.4
2.4
Latin America
1.6
3.5
3.0
6.2
Less intersegment loss
( 0.7
)
( 1.9
)
( 1.3
)
( 2.1
)
Consolidated gross profit
$
18.8
$
15.2
$
34.5
$
31.4
Operating Expenses (1)
:
U.S. Operations
$
14.3
$
8.6
$
25.0
$
16.1
Other foreign
1.6
1.5
3.0
2.7
Europe
3.4
3.0
7.4
4.9
Mexico
0.6
0.1
1.3
0.6
Asia
1.4
1.2
2.9
2.4
Canada
0.5
1.4
1.2
2.5
Latin America
1.4
1.2
3.0
2.1
Less intersegment operating expenses
( 0.4
)
( 0.2
)
( 0.7
)
( 0.5
)
Consolidated operating expenses
$
22.9
$
16.8
$
43.1
$
30.8
Operating (Loss) Income:
U.S. Operations
$
( 5.3
)
$
( 3.4
)
$
( 8.9
)
$
( 4.1
)
Other foreign
0.1
0.7
0.3
1.3
Europe
0.1
( 1.5
)
( 0.7
)
( 1.9
)
Mexico
( 0.7
)
0.2
( 1.4
)
( 0.2
)
Asia
1.5
2.1
2.4
3.1
Canada
0.4
( 0.3
)
0.2
( 0.1
)
Latin America
0.2
2.3
—
4.1
Less intersegment loss (income)
( 0.3
)
( 1.7
)
( 0.6
)
( 1.6
)
Operating (loss) income
$
( 4.0
)
$
( 1.6
)
$
( 8.7
)
$
0.6
(1)
Includes lease impairments
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The table below represents information about reported segments for the three and six month periods noted therein (amounts may not foot due to rounding):
As of July 31,
As of January 31,
(in millions of dollars)
2025
2025
Total Assets:
U.S. Operations
$
180.2
$
167.4
Europe
64.0
60.3
Mexico
10.8
13.7
Asia
50.9
48.0
Canada
6.8
6.4
Latin America
22.4
21.7
Other foreign
19.5
18.3
Less intersegment
( 128.3
)
( 123.3
)
Consolidated assets
$
226.3
$
212.5
Total Assets Less Intersegment:
U.S. Operations
$
95.6
$
85.6
Europe
58.2
55.3
Mexico
8.0
11.2
Asia
23.8
21.3
Canada
4.7
4.6
Latin America
18.7
18.0
Other foreign
17.3
16.5
Consolidated assets
$
226.3
$
212.5
Total Goodwill and Intangible Assets
U.S. Operations
$
16.9
$
17.1
Europe
22.4
22.7
Other foreign
1.8
1.9
Consolidated goodwill and intangible assets
$
41.1
$
41.7
The table below presents external sales by product line:
(in millions of dollars)
Three Months Ended
July 31,
Six Months Ended
July 31,
2025
2024
2025
2024
External Sales by product lines:
Disposables
$
13.9
$
12.3
$
27.0
$
25.4
Chemical
5.6
5.3
11.7
11.6
Fire Service
25.6
12.0
46.6
22.5
Gloves
0.4
0.5
0.7
1.1
High Visibility
1.5
1.2
2.5
2.4
High Performance Wear
2.2
1.4
3.8
2.6
Wovens
3.3
5.8
6.9
9.2
Consolidated external sales
$
52.5
$
38.5
$
99.2
$
74.8
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Subsequent Events
Third Quarter Dividend
On August 1, 2025, the Company’s Board of Directors declared a quarterly cash dividend. The quarterly dividend of $ 0.03 per share or approximately $ 0.3 million, was paid on August 22, 2025, to stockholders of record as of August 15, 2025.
Sale of Decatur, Alabama Warehouse Facility
On August 27, 2025
, the Company completed the sale of the Decatur, Alabama warehouse facility to an unrelated party for $ 6.1 million, less commissions and closing expenses. The sale of the Decatur facility includes a short-term leaseback on one of the three property warehouses while the Company continues to explore alternative sites.
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