What changed in this filing

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Item 1. Financial Statements

2021-12-09 compared with 2021-09-09 · 63 added, 58 removed, 297 unchanged (29% of the section changed)

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of goods sold

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Other comprehensive income (loss):

8 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 721 and $ 700 at July 31, 2021 and January 31, 2021, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 613 and $ 700 at October 31, 2021 and January 31, 2021, respectively

Prepaid VAT and other taxes

19 unchanged sentences

Common stock, $ 0.01 par;

authorized 20,000,000 shares

Issued 8,542,372 and 8,498,457 ;

outstanding 7,805,676 and 7,984,518 at July 31, 2021 and January 31, 2021, respectively

authorized 20,000,000 shares Issued 8,555,672 and 8,498,457 ;

outstanding 7,775,406 and 7,984,518 at October 31, 2021 and January 31, 2021, respectively

Treasury stock, at cost;

736,696 and 509,242 shares at July 31, 2021 and January 31, 2021, respectively

780,266 and 509,242 shares at October 31, 2021 and January 31, 2021, respectively

Additional paid-in capital

11 unchanged sentences

Balance, January 31, 2020

Other comprehensive loss

Other comprehensive income

Stock-based compensation:

Restricted stock issued

Restricted Stock Plan

Return of shares in lieu of payroll withholding

Balance, October 31, 2020

Balance, July 31, 2020

Balance, April 30, 2020

Other comprehensive income

3 unchanged sentences

Return of shares in lieu of payroll withholding

Balance, July 31, 2020

Balance, October 31, 2020

Balance, January 31, 2021

Other comprehensive income

Other comprehensive loss

Stock-based compensation:

3 unchanged sentences

Treasury stock purchased

Balance, October 31, 2021

Balance, July 31, 2021

Balance, April 30, 2021

Other comprehensive income

4 unchanged sentences

Treasury stock purchased

Balance, July 31, 2021

Balance, October 31, 2021

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

Cash flows from operating activities:

5 unchanged sentences

Loss on disposal of property and equipment

Non-cash operating lease expense

(Increase) decrease in operating assets

27 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Lakeland Industries, Inc.

2 unchanged sentences

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.

In addition, through distributors, 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.

9 unchanged sentences

thus for example, FY22 refers to the fiscal year ending January 31, 2022, (b) “Q” refers to quarter;

thus, for example, Q2 FY22 refers to the second quarter of the fiscal year ending January 31, 2022, (c) “Balance Sheet” refers to the unaudited condensed consolidated balance sheet and (d) “Statement of Income” refers to the unaudited condensed consolidated statement of income.

thus, for example, Q3 FY22 refers to the third quarter of the fiscal year ending January 31, 2022, (c) “Balance Sheet” refers to the unaudited condensed consolidated balance sheet and (d) “Statement of Income” refers to the unaudited condensed consolidated statement of income.

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.

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 and cloud-based analytics, and hardware that includes a patented earpiece for, physiological monitoring and audio communications.

The Series A Shares issued to the Company at the closing represent approximately 11.43 % of Bodytrak’s total share capital.

Under the terms of the Investment Agreement, the Company may also elect, within 30 months of the date of the initial investment, to acquire up to an additional 381,679 Series A Shares of Bodytrak for £1,500,000 (approximately $ 2.0 million at current exchange rates) assuming all 381,679 Series A Shares are acquired by the Company), which would result in the Company owning an aggregate of 18.42 % of Bodytrak’s share capital, assuming no other shares are issued by Bodytrak.

The investment in Bodytrak will be accounted for under the equity method given our board representation and the resulting ability to exercise significant influene.

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.

Inventory is valued at the lower of cost or market using the first-in, first-out (FIFO) method.

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

16 unchanged sentences

Other than the changes described above, the terms and conditions of the Loan Agreement remain in full force and effect.

As of July 31, 2021, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

As of October 31, 2021, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

Prior to the execution of the Loan Agreement with Bank of America, the Company repaid a $ 1.2 million term loan that was outstanding under a similar agreement with SunTrust Bank.

1 unchanged sentence

Borrowings in UK

There were no borrowings outstanding under the Company’s existing credit facility with HSBC Bank at July 31, 2021 and January 31, 2021.

Amounts due the Company, under the facility with HSBC Invoice Finance (UK) Ltd., of $ 1.3 million and $ 2.0 million as of July 31, 2021, and January 31, 2021, respectively, are included in other current assets on the accompanying consolidated balance sheets.

There were no borrowings outstanding under the Company’s existing credit facility with HSBC Bank at October 31, 2021 and January 31, 2021.

Amounts due the Company, under the facility with HSBC Invoice Finance (UK) Ltd., of $ 1.1 million and $ 2.0 million as of October 31, 2021, and January 31, 2021, respectively, are included in other current assets on the accompanying consolidated balance sheets.

Concentration of Risk

19 unchanged sentences

There was approximately $ 13.9 million total included in U.S.

bank accounts and approximately $ 44.1 million total in foreign bank accounts as of July 31, 2021, of which $ 59.1 million was uninsured.

bank accounts and approximately $ 41.6 million total in foreign bank accounts as of October 31, 2021, of which $ 54.8 million was uninsured.

Major Customer

No customer accounted for more than 10 % of net sales during the three months and six months ended July 31, 2021 and 2020.

No customer accounted for more than 10 % of net sales during the three months and nine months ended October 31, 2021 and 2020.

Major Supplier

No vendor accounted for more than 10 % of purchases during the three months and six months ended July 31, 2021 and 2020.

No vendor accounted for more than 10 % of purchases during the three months and nine months ended October 31, 2021 and 2020.

Stockholders’ Equity

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Total restricted stock and stock option programs

1 unchanged sentence

Restricted Stock

Under the 2017 Plan, as described above, the Company awarded performance-based shares and service-based shares of restricted stock to eligible employees and directors.

The following table summarizes the activity under the 2017 Plan for the six months ended July 31, 2021.

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 nine months ended October 31, 2021.

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 December 2019, April 2020 and June 2021 grants.

2 unchanged sentences

Outstanding at January 31, 2021

Outstanding at July 31, 2021

Outstanding at October 31, 2021

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 that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and free cash flow for the December 2019, April 2020 and June 2021 grants.

2 unchanged sentences

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, 2021, unrecognized stock-based compensation expense totaled $ 2.1 million pursuant to the 2017 Plan based on outstanding awards under the Plan.

As of October 31, 2021, unrecognized stock-based compensation expense totaled $ 1.7 million pursuant to the 2017 Plan based on outstanding awards under the Plan.

This expense is expected to be recognized over approximately two years.

3 unchanged sentences

On July 6, 2021, the Company’s Board of Directors authorized a $ 5.0 million increase in the Company’s current stock repurchase program.

During the three months ended July 31, 2021, the Company repurchased 227,454 shares for $ 5.0 million leaving $ 5 million remaining under the stock purchase program at July 31, 2021.

The Company's effective tax rate for the second quarter of FY22 was 34.8 % which differs from the U.S.

During the three months ended July 31, 2021, the Company repurchased 227,454 shares for $ 5.0 million leaving $ 5.0 million remaining under the stock repurchase program at July 31, 2021.

During the three months ended October 31, 2021, the Company repurchased 43,570 shares for $ 0.9 million leaving $ 4.1 million remaining under the stock repurchase program at October 31, 2021.

The Company's effective tax rate for the third quarter of FY22 was 31.7 % which differs from the U.S.

federal statutory rate of 21 % primarily due to rate differentials in foreign tax jurisdictions and state income taxes.

In the second quarter of 2022, the Company recorded a discrete item related to the remeasurement of deferred taxes for $762 thousand of tax expense primarily as a result of the statutory change in the State of Alabama apportionment factor.

The Company's effective tax rate for the second quarter of FY21 was 4.3 %, which differs from the U.S.

The Company's effective tax rate for the third quarter of FY21 was 25.9 %, which differs from the U.S.

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 nine months ended October 31, 2021 was 29.8 % 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 recorded a discrete item related to the remeasurement of deferred taxes for $ 0.8 million of tax expense primarily as a result of the statutory change in the State of Alabama apportionment factor.

The Company's effective tax rate for the nine months ended October 31, 2020 was 21.3 % which differs from the U.S.

statutory rate of 21 % primarily due to Global Intangible Low-Taxed Income (“GILTI”) and an adjustment to reflect the recapture of U.S.

net operating losses ("NOL") as a result of applying the GILTI high tax exclusion in tax years FY19 and FY20.

The Company's effective tax rate for the six months ended July 31, 2021 was 29.1 % which differs from the U.S.

federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions, state income taxes and the discrete item discussed above.

The Company's effective tax rate for the six months ended July 31, 2020 was 18.8 % which differs from the U.S.

statutory rate of 21 % primarily due to GILTI and an adjustment to reflect the recapture of U.S.

NOL as a result of applying the GILTI high tax exclusion in tax years FY19 and FY20.

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 $ 2.3 million and $ 2.7 million at July 31, 2021 and January 31, 2021, respectively.

The valuation allowance was $ 3.0 million and $ 2.7 million at October 31, 2021 and January 31, 2021, respectively.

Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share at July 31, 2021 and 2020 as follows (in $000s except per share amounts):

The following table sets forth the computation of basic and diluted net income per share at October 31, 2021 and 2020 as follows (in $000s except per share amounts):

Three Months Ended

Six Months Ended

Denominator for basic net income per share (weighted-average shares which exclude shares in the treasury, 736,696 and 509,242 at July 31, 2021 and 2020, respectively

Nine Months Ended

Denominator for basic net income per share (weighted-average shares which exclude shares in the treasury, 780,266 and 509,242 at October 31, 2021 and 2020, respectively

Effect of dilutive securities from restricted stock plan

11 unchanged sentences

On July 31, 2015, Lakeland and Lakeland Brazil completed a conditional closing of a Shares Transfer Agreement (the “Shares Transfer Agreement”) with Zap Comércio de Brindes Corporativos Ltda (“Transferee”), a company owned by an existing Lakeland Brazil manager, entered into on June 19, 2015.

Pursuant to the Shares Transfer Agreement, the Transferee has acquired all of the shares of Lakeland Brazil owned by the Company.

Pursuant to the Shares Transfer Agreement, the Transferee acquired all of the shares of Lakeland Brazil owned by the Company.

Although the Company formally completed the terms of the Shares Transfer Agreement, pursuant to which our entire equity interest in Lakeland Brazil was transferred, during the fiscal year ended January 31, 2016, we may continue to be exposed to certain liabilities arising in connection with the operations of Lakeland Brazil, which was shut down in late March 2019.

4 unchanged sentences

As disclosed in our periodic filings with the Securities and Exchange Commission (the “SEC”), we agreed to make certain payments in connection with ongoing labor litigation involving our former Brazilian subsidiary.

While the vast majority of these labor suits have been resolved, two significant claims remain;

one labor claim and one civil claim filed by separate former officers of our former Brazilian subsidiary.

While Lakeland was initially named as a co-defendant in the labor suit, Lakeland was dismissed from the case by the labor judge.

While the vast majority of these labor suits have been resolved, one significant claim remains;

a civil claim filed by separate former officers of our former Brazilian subsidiary.

Lakeland is a named co-defendant in the civil matter.

In the labor case filed in 2014, the former Brazilian manager was initially awarded USD $ 100,000 and appealed the award amount.

Having recently completed that appeals process, the case has been returned to the initial hearing phase for witness testimony and collection of evidence before the same judge that previously dismissed Lakeland.

Currently, Lakeland is not a co-defendant in this case, but that could change should the judge change his prior ruling.

In the civil matter filed five years ago in 2016, a former Lakeland Brazil manager is seeking approximately USD $ 700,000 he alleges is due to him against an unpaid promissory note.

Lakeland has not been served with process and no decision on the merits has been issued in this case yet.

These two cases are the only two cases filed within the last 5 years against the parent company Lakeland Industries, Inc.

and represent the majority of the remaining exposure for Lakeland.

Lakeland Brazil may face new labor lawsuits in the short term as a result of the shutdown of its operations in March 2019.

5 unchanged sentences

however, there can be no assurance as to the ultimate outcome of these matters.

As of July 31, 2021, to the best of the Company’s knowledge, there were no outstanding claims or litigation, except for the labor contingencies in Brazil described above.

As of October 31, 2021, to the best of the Company’s knowledge, there were no outstanding claims or litigation, except for the labor contingencies in Brazil described above.

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 and the light manufacturing of our chemical, wovens, reflective, and fire products).

Our US operations include a facility in Alabama (primarily distribution to customers of the bulk of our products and light manufacturing of our chemical, wovens, reflective, and fire 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 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.

Our China facility produces 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 gross profit less operating expenses.

We have sales forces in the United States, Canada, Mexico, Europe, Latin America, India, Russia, Kazakhstan, Australia and China, which sell and distribute products shipped from the United States, Mexico, India, Vietnam or China.

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

(in millions of dollars)

16 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in millions of dollars)

6 unchanged sentences

Consolidated operating profit

July 31, 2021

October 31, 2021

January 31, 2021

8 unchanged sentences

(in millions of dollars)

Six Months Ended

Nine Months Ended

(in millions of dollars)

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements