What changed in this filing

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Item 1. Business

2022-04-21 compared with 2021-04-16 · 67 added, 82 removed, 204 unchanged (42% of the section changed)

We manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market.

We manufacture and sell a comprehensive line of protective clothing and accessories for the industrial and public protective clothing market.

All Lakeland products either protect the wearer from something in their environment, or protect a product or process from the wearer.

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Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a global network of over 1,600 safety and industrial supply distributors.

Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, steel, glass, construction, smelting, heavy and light industry, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industries (electrical, natural gas, and water).

Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, transportation, steel, glass, construction, smelting, heavy and light industry, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industries (electrical, natural gas, and water).

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 US Food and Drug Administration.

Internationally, we sell to a mixture of end users directly, and to industrial distributors depending on the particular country and market.

Sales are made in 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 and Southeast Asia.

Sales are made into more than 50 foreign countries, the majority of which are into China, countries within the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India and countries within Southeast Asia.

For purposes of this Form 10-K, (a) FY refers to a fiscal year ended January 31;

for example, FY21 refers to the fiscal year ended January 31, 2021 and (b) Q refers to a quarter, for examply Q4 FY 21 refers to the fourth quarter of the fiscal year ended January 31, 2021.

for example, FY22 refers to the fiscal year ended January 31, 2022 and (b) Q refers to a quarter, for example Q4 FY 22 refers to the fourth quarter of the fiscal year ended January 31, 2022.

Lakeland regards owning and operating its own manufacturing facilities as a sustainable strategic advantage.

We believe that ownership of manufacturing is the cornerstone to building resilient manufacturing.

Having 6 manufacturing locations in 6 countries, coupled with sourcing core raw materials from multiple suppliers in various countries, affords Lakeland with capabilities and manufacturing resilience that cannot be matched by our competitors who use contractors.

We believe that ownership of manufacturing is the keystone to building a resilient supply chain.

Having five manufacturing locations in five countries, coupled with sourcing core raw materials from multiple suppliers in various countries, affords Lakeland with manufacturing capabilities and supply chain resilience that cannot be matched by our competitors who use contractors.

Owning our manufacturing provides us with the ability to rapidly scale up production to meet emergency demand;

shift production between locations to take advantage of new trade agreements or avoid complications that may arise from trade disputes;

shift production between locations in response to geopolitical threats to take advantage of new trade agreements, or avoid complications that may arise from trade disputes;

and to maintain the highest levels of product quality.

This belief was validated during this year’s COVID-19 pandemic.

Through these events, Lakeland was able to rebalance manufacturing in its facilities and make use of its diversified supplier network to supply its customers without major interruption.

By comparison, our competitors who utilize contractors to sew their garments, lack the ability to respond as quickly to emergency situations because contractor agreements typically require forecast lead-times in excess of 30 days.

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While this works well during normal business conditions, they are at a disadvantage in the event of any changes in tariffs or export restrictions that may result from international trade disputes, or any supply disruptions due to public health emergencies, social unrest, or supply shortages.

Should these issues continue for an extended period of time, an increasing number of our customers may seek sources of supply that are not captive to single-site manufacturing.

Our corporate strategy is to continue diversification of our manufacturing capability and product lines, and leverage it with real-time business intelligence allowing our sales team to focus on products and markets that provide improved margins as well as economic and seasonal insensitivity.

Our corporate strategy is to continue diversification of our manufacturing capability and product lines, and leverage it with real-time business intelligence provided by our new technology and information systems, allowing our sales team to focus on products and markets that provide improved margins as well as economic and seasonal insensitivity.

In this manner we will be able to develop products and services that will differentiate Lakeland well into the future.

The last two weeks of FY20 and all of FY21 were dominated by response to the COVID-19 outbreak.

The virus’ progression into a global pandemic will likely continue to impact our business for the first half of FY22.

We believe that COVID 19 demand will diminish in Q2 FY22, when vaccines become more widely available.

The virus’ progression into a global pandemic continued to impact our business in FY22.

We believe that COVID-19 demand will diminish in FY23, as vaccines continue to be widely available and as COVID-19 transforms from a pandemic threat to endemic.

As COVID-19 demand, currently estimated at approximately 15% of revenue, decreases, we anticipate a continuation of an increase in our core businesses (industrial) that began in Q2 FY22 and continued through Q4 FY22.

The negative impact of lock downs and stay at home orders peaked in Q2 FY21 with core business sales down by approximately 25%.

Through the second half of Q2 and through Q4 FY22 our core business sales have been recovering steadily.

Based on recent, third quarter U.S.

GDP Growth of 33.1%, November 2020 manufacturing Purchasing Manager Index of 57.5%, up from 56.0% at August 2020, and our increased market penetration and new customers, we expect our core business sales to recover fully and continue to grow through FY22.

We anticipate that COVID-19 related sales will continue into the first half of FY23, however not at the levels experienced in FY22 as demand for immediate use diminishes and gives way to stockpiling demand and increased core business sales.

At present, raw materials supply appears to have caught up with demand, albeit at prices well above pre-COVID-19 pricing.

At present, raw materials supply appears to have caught up with demand, albeit at prices above pre-COVID-19 pricing.

We anticipate raw material pricing to continue at inflated levels into FY23.

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As noted, we did experience significant price increases for fabric during FY21 and managed our available manufacturing capacity to lower costs, and increase prices to meet customer demand at these higher input costs.

With the exception of our India export manufacturing operation, which did not qualify for “essential status” due to its export only restrictions, we have not experienced any manufacturing capacity issues due to inability to source raw materials, government quarantine, or shelter-in-place orders, or due to COVID-19 outbreaks in any of our factories;

however, there can be no assurance that this will continue to be the case.

While leading economic indicators indicate a relatively robust industrial market recovery, potential headwinds to revenue as we emerge from pandemic sales include the possibility of a recession and consumer stockpiled inventories, as well as a decline in our oil and gas industrial sector.

Reference is made to “Risk Factors” in Part I, Item 1A.

Offsetting these risks are changes to our sales environment, as a result of COVID-19, that we believe represent considerable potential upside to sales.

We believe that once the pandemic subsides, there will be continued demand establishing PPE stockpiles for the long-term.

This stockpiling will be filled in part by inventory that is in the distribution channels as the pandemic ends.

When specific governments will issue RFQs for additional product is unknown, but some RFQs are already pending release;

others are expected to be released over the next several months.

Additionally, we believe the private sector will also engage in stockpiling of PPE as supply channels catch up to demand.

And finally, we are seeing the emergence of institutional cleaning as a new market segment as countries and states reopen and seek to prevent further infections.

For these reasons we are maximizing our manufacturing capacity in the near-term and evaluating expansion opportunities to allow us to further increase our industrial market penetration.

This strategy combined with new product development, manufacturing expansion, and the addition of key senior personnel also serves to prepare us for any economic slowdown that may occur as COVID 19 business ends and our industry transitions to a more traditional product mix.

The Company is utilizing the business intelligence capability of its new ERP system to reorganize its global sales teams.

We are now organizing our sales personnel into four market-based, vertical teams.

The previous organization, in which sales teams were assigned geographically, selling all Lakeland products, did not allow our sales personnel to properly focus on our sales strategies.

Simply stated, the time allotted for end user meetings, in most cases, was not sufficient for our sales personnel to cover our wide range of products, or to develop the application expertise that many of our customers require.

This reorganization will limit the number of products each sales person focuses on to the specific vertical they work in and allow them to develop expertise in the use of Lakeland products within their specific market.

This will allow the Company to better focus marketing and sales efforts to drive growth in specific markets that are strategic for the Company.

FY20 saw the completion of the first phase of Lakeland’s capital project to diversify and expand its manufacturing footprint into Vietnam and India.

Both our India plant and our Vietnam facility are fully equipped, staffed and making regular delivery of product.

Future capital expenditures, to add additional product manufacturing capabilities and to expand the capacity of these operations, is planned and will be implemented as our growth dictates.

The Company is utilizing the business intelligence capability of its new technology and information systems to reorganize its global sales teams.

We organized our sales personnel into four market-based, vertical teams.

Our organization limits the number of products each salesperson focuses on to the specific vertical they work in and allows them to develop expertise in the use of Lakeland products within their specific market.

This allows the Company to better focus marketing and sales efforts to drive growth in specific markets that are strategic for the Company.

Further we have utilized new Business Intelligence to continue to refine our sales compensation model to increase the percentage of sales compensation that is incentive based, while focusing sales on pricing discipline and margin retention.

Additionally, a major strategic companywide objective to accelerate growth throughout the Company is to push additional products and sales tools that are successful in the key US and China markets to the other international operations, which have traditionally carried smaller lines.

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It is critical that we increase our manufacturing capacity to meet our sales growth targets.

We currently operate six (6) manufacturing facilities in six (6) countries, affording us a unique capability to take advantage of various trade agreements and to adjust our manufacturing as those agreements change.

Diverse manufacturing also allows us to move price sensitive products into lower cost and more efficient operations as labor costs increase in other countries.

Lakeland is also committed to manufacturing R&D and invests in new equipment to improve efficiencies, quality, and maximize manufacturing flexibility.

We currently operate five manufacturing facilities in five countries, affording us a unique capability to take advantage of various trade agreements and to adjust our manufacturing as those agreements change.

Lakeland is also committed to manufacturing R&D and invests in new equipment to improve efficiencies, improve quality, and maximize manufacturing flexibility.

Improve Sales & Marketing in Existing Markets:

We believe that we have significant opportunity to increase market penetration and improve margins in existing markets by focusing our sales and marketing teams on vertical markets.

We believe that we have continued opportunity to increase market penetration and improve margins in existing markets by our sales and marketing focus on vertical markets.

The four vertical markets that we are focusing on are our core industrial (e.g.

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electrical, gas, and water) market, and critical environments (clean rooms) markets.

Focusing on verticals will allow our sales and marketing groups to better provide the expertise in specific applications relative to our products that our customers are seeking.

The result will be an improved ability to focus on specific products and sell multiple product lines to the same accounts affording us the opportunity to bundle products to secure business.

Our focus on verticals allows our sales and marketing groups to better provide the expertise in specific applications relative to our products that our customers are seeking.

The result is an improved ability to focus on specific products and sell multiple product lines to the same accounts affording us the opportunity to bundle products to secure business.

Continued Emphasis on Customer Service .

We continue to offer a high level of customer service to distinguish our products and to create customer loyalty.

The installation of our new enterprise resource planning (ERP) system into the United States and its continued rollout to additional Lakeland markets will provide us with the necessary business intelligence to better anticipate customer demand and improve our planning and customer service.

The extension of our technology and information systems beyond the United States and Canada to all Lakeland subsidiaries will provide us with the necessary business intelligence to better anticipate customer demand and improve our planning and customer service.

We offer well-trained and experienced sales and support personnel, on-time delivery and accommodation of custom and rush orders.

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In 2018 we introduced our CleanMax line of clean and sterile manufactured garments for use in critical and aseptic work environments.

We also continued the development and introduction of our Performance Wear line targeting electrical and gas distribution with a complete layering system designed to improve worker comfort and be worn away from as well as to work.

We also continued the development and introduction of our High Performance Wear line targeting electrical and gas distribution with a complete layering system designed to improve worker comfort and be worn away from as well as to work.

We are continuing to ramp up manufacturing and add products to both of these lines.

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Then, after successful use of our products in one country, the doors open to us in the other.

We have recently begun installation of SalesForce CRM software to facilitiate this strategy globally.

We have installed SalesForce CRM software to facilitate this strategy globally.

We continue to pursue conversion of end users to our core disposable and chemical products, based on our overall performance and prices, however we are working hard to provide our sales teams with the tools needed to increase sales of higher value product lines, specifically fire service, critical environment, and performance wear (utilities).

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The Company plans to continue its efforts to align its global markets in terms of sales collateral, sales software, and e-commerce in the coming year and into the future.

Decrease Manufacturing Expenses by Opening New Manufacturing Facilites:

Decrease Manufacturing Expenses by Opening New Manufacturing Facilities:

We have successfully opened new manufacturing facilities in Vietnam and India in an effort to hedge against ever increasing manufacturing costs in China.

Our China operation will continue for the foreseeable future to service products that are more complex and higher margin and for the manufacture of products for sale into China.

Beginning in 1995, we successfully moved the labor-intensive sewing operations for our limited use/disposable protective clothing lines to Company owned and run facilities in Mexico and China.

Manufacturing expansion is not only necessary to control rising costs, it is also necessary for Lakeland to achieve its growth objectives.

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We are sourcing raw materials and components from most of the countries in which we have operations in order to reduce freight costs and inventory levels.

We are re-engineering many products to reduce the amount of raw materials used and reduce the direct labor required as well as harmonizing designs to meet the requirements of multiple global markets, thereby eliminating a number SKUs based on local certifications or preferences.

We are re-engineering many products to reduce the amount of raw materials used and reduce the direct labor required as well as harmonizing designs to meet the requirements of multiple global markets.

The result is improved manufacturing throughput and reduced inventory levels.

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PermaSure can be used to model response scenarios so that contingency plans for response can be put in place.

Durable Woven Garments

We manufacture and market a line of durable, launderable woven garments that complement our firefighting and heat protective offerings and provide alternatives to our limited use/disposable protective clothing lines.

These products provide us access to the much larger woven industrial and health care-related markets.

Woven garments are favored by customers for certain applications because of familiarity with and acceptance of these fabrics.

These products allow us to supply and satisfy a wider range of our end users’ safety needs.

Our product lines include the following:

Electrostatic dissipative apparel used in electronics clean rooms;

Flame resistant (FR) meta aramid, para aramid and FR Cotton coveralls/pants/jackets used in petrochemical, refining operations, and electrical utilities;

Cotton and Polycotton coveralls, lab coats, pants and shirts;

FR fabrics containing blends of cotton, Modacrylic, meta aramid, para aramid, and viscose.

We manufacture woven garments at our facilities in China, Mexico and Argentina.

We are continuing to relocate our woven protective coveralls and flame-retardant coveralls to our facilities in China, Mexico, Vietnam and India where lower fabric and labor costs allow increased profit margins.

Firefighting and Heat Protective Apparel

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Our Lakeland Fire® brand of firefighting apparel continues to benefit from ongoing research and development investment, as we seek to address the ergonomic needs of stressful occupations.

Gloves and Sleeves

We manufacture and sell specially designed glove and sleeve products made from Kevlar®, a cut and heat resistant fiber produced by DuPont, Spectra®, a cut resistant fiber made by Honeywell, and our own patented engineered yarns.

These gloves offer a better overall level of protection, lower worker injury rate, and are more cost effective than traditional leather, canvas or coated work gloves.

These gloves allow workers to safely handle sharp or jagged unfinished sheet metal, are used primarily in the automotive, glass and metal fabrication industries.

We have patents for our Despro ® and Despro ® Plus products that provide greater cut and abrasion protection to the areas of a glove where injury is most likely to occur.

For example, the areas of the thumb, thumb crotch and index fingers are made of heavier yarn than the balance of the glove, providing increased wear protection and longer glove life, reducing overall glove costs.

This proprietary manufacturing process allows us to produce our gloves more economically and provide a greater value to the end user.

High Visibility Clothing

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Garments in this group are not as price sensitive as those in other reflective categories.

Durable Woven Garments

These products provide us access to the much larger woven industrial and health care-related markets.

Woven garments are favored by customers for certain applications because of familiarity with and acceptance of these fabrics.

These products allow us to supply and satisfy a wider range of our end users’ safety needs.

Our product lines include the following:

Electrostatic dissipative apparel used in electronics clean rooms;

Flame resistant (FR) meta aramid, para aramid and FR Cotton coveralls/pants/jackets used in petrochemical, refining operations, and electrical utilities;

Cotton and Polycotton coveralls, lab coats, pants and shirts;

FR fabrics containing blends of cotton, Modacrylic, meta aramid, para aramid, and viscose.

We manufacture woven garments at our facilities in China, Mexico and Argentina.

Gloves and Sleeves

These gloves offer a better overall level of protection, lower worker injury rate, and are more cost effective than traditional leather, canvas or coated work gloves.

These gloves allow workers to safely handle sharp or jagged unfinished sheet metal, are used primarily in the automotive, glass and metal fabrication industries.

We have patents for our Despro ® and Despro ® Plus products that provide greater cut and abrasion protection to the areas of a glove where injury is most likely to occur.

This proprietary manufacturing process allows us to produce our gloves more economically and provide a greater value to the end user.

All of our manufacturing facilities are ISO 9001 or 9002 certified.

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We provide our customers with an exceptionally broad product selection, high quality, and excellent customer service.

We seek to maximize the efficiency of our established distribution network through direct promotion of our products at the end user level.

To this end, we have organized our sales teams into the previously mentioned vertical market teams to increase our ability to focus on sales of specific products and into specific markets.

Additionally, we are motivating our distributors to engage in promotional activities aligned with our sales strategies via coop incentives.

We advertise primarily through trade publications, and our promotional activities include sales brochures, emails and our website.

We exhibit at both regional and national trade shows, such as the National Safety Congress, the American Industrial Hygiene Association (“AIHA”), the American Society of Safety Engineers (“ASSE”), the CIOSH, the COS+H and the A+A show in Dusseldorf, Germany.We believe that future international growth is sustainable in excess of the estimated industry organic growth rate of 7.0% to 7.5% (per Allied Market Research, “Global Disposable Protective Clothing Market 2019-2026”) in the coming year, but there can be no assurance in that regard, particularly in view of the disruptions due to the COVID-19 outbreak.

This belief is based on our current estimates of market penetration, the introduction of higher value products and improved business intelligence and better planning afforded to us by our new ERP system.

We compete on the basis of our product quality, pricing, product availability, responsiveness to customers and manufacturing capability.

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We own 56 trademarks and have six trademarks in the application and approval process.

Our active U.S.

patents expire between 2022 and 2037.

Intellectual property rights that apply to our various products include patents, trade secrets, trademarks and, to a lesser extent, copyrights.

We maintain an active program to protect our technology, filing for patent and trademark protection in multiple countries where our product may be “knocked off” or where there exist significant sales of our products.

Information regarding risks associated with our proprietary technology and our intellectual property rights may be found in Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.”

International and Domestic Standards

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Globally, not only are the standards continuing to change, but the focus of standards activity is shifting.

In response to increasing use of certification processes as a technical barrier to trade, standards writing bodies in the US and Europe have both concluded efforts to update and define conformity assessment (ANSI/ISEA 125 and the PPE Regulation respectively) within their own spheres of influence, unfortunately, these are not “international standards” and can be easily ignored by other countries who wish to impose their own conformity assessment systems on importers.

Unfortunately, these are not “international standards” and can be easily ignored by other countries who wish to impose their own conformity assessment systems on importers.

The result is an increasingly dynamic standards environment where not only are the standards changing, but the minimum requirements for conformity with the certification process itself are changing.

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Lakeland, by virtue of its international manufacturing and sales operations, is in a unique position to capitalize on this complex dynamic.

Government Regulation

We are governed by regulations that affect the manufacture, distribution, marketing and sale of its products.

These policies differ among and within every country in which we operate.

Changes in regulations, guidelines, procedural precedents and enforcement take place frequently and can impact the size, growth potential and profitability of products sold in each market.

Suppliers and Materials

It is our policy, whenever possible, to qualify multiple vendors for our fabrics and bindings.

We frequently distribute our purchases among the top two or three suppliers, based on pricing and delivery schedules, in order to keep multiple suppliers qualified and proficient in the manufacture of the raw materials that we require.Materials, such as polypropylene, polyethylene, polyvinyl chloride, spunlaced polyester, melt blown polypropylene and their derivatives and laminates, are available from 30 or more major mills.FR fabrics are also available from a number of both domestic and international mills.

Materials, such as polypropylene, polyethylene, polyvinyl chloride, spunlaced polyester, melt blown polypropylene and their derivatives and laminates, are available from 30 or more major mills.

FR fabrics are also available from a number of both domestic and international mills.

The accessories used in the production of our disposable garments, such as thread, boxes, snaps and elastics, are obtained from unaffiliated suppliers.

We currently use 25 suppliers located in the U.S.

and internationally to supply our key fabrics.

We have not experienced difficulty in obtaining our requirements for these commodity component items.

Due to the high cost of freight for our nonwoven fabrics, we also seek to find multiple sources that are local to our manufacturing to emergency demand and shift manufacturing between our locations with greater ease.

Human Capital

Human Capital Management

As of January 31, 2022, the Company employed approximately 1,800 people worldwide, of which approximately 100 were employed in the United States and 1,700 were employed outside of the United States.

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This approach to compensation is designed to help Lakeland attract, retain and motivate high-performing individuals who foster an innovative culture and drive business results.

Additional information about how we value our associates’ well-being, including our Global Human Rights Policy and our Global Workplace Health and Safety Policy, can be found in the Corporate Governance section of our corporate website.

Nothing on our website, including our policies, or sections thereof, shall be deemed incorporated by reference into this Annual Report on Form 10-K or incorporated by reference into any of our other filings with the Securities and Exchange Commission.

Environmental Matters

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Chief Executive Officer, President and Secretary

Chief Financial Officer

Chief Operating Officer and Chief Financial Officer

Executive Vice President for Global Sales and Marketing

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From 2009 to July 2018, he was our Senior Vice President, International Sales.

Roberson joined our Company in 2004 as Technical Marketing Manager;was instrumental in development of our ChemMAX and Interceptor fabrics and represented Lakeland to various standards writing bodies, and later served as International Sales Manager.

Roberson joined our Company in 2004 as Technical Marketing Manager;

was instrumental in development of our ChemMAX and Interceptor fabrics and represented Lakeland to various standards writing bodies, and later served as International Sales Manager.

Prior to joining the Company, Mr.

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in its Menswear Division from 1985-1991.

Dillard has served as our Chief Financial Officer since August 2019.

Dillard has served as our Chief Operating Officer since January 1, 2022 and Chief Financial Officer since August 2019.

Dillard was Chief Financial Officer of Digium, Inc., a provider of telecommunications solutions from September 2015 to August 2019.

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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-K

Item 1. Business