What changed in this filing

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Item 1. Financial Statements

2022-12-08 compared with 2022-09-08 · 64 added, 61 removed, 295 unchanged (30% of the section changed)

4 unchanged sentences

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

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended

Nine Months Ended

Cost of goods sold

5 unchanged sentences

Income tax expense

Net income (loss)

Net income (loss) per common share:

Net income per common share:

Weighted average common shares outstanding:

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended July 31,

Six Months Ended July 31,

Net income (loss)

Three 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 $ 728 and $ 666 at July 31, 2022 and January 31, 2022, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 758 and $ 666 at October 31, 2022 and January 31, 2022, respectively

Prepaid VAT and other taxes

21 unchanged sentences

authorized 20,000,000 shares Issued 8,650,580 and 8,555,672 ;

outstanding 7,514,725 and 7,615,967 at July 31, 2022 and January 31, 2022, respectively

outstanding 7,319,886 and 7,615,967 at October 31, 2022 and January 31, 2022, respectively

Treasury stock, at cost;

1,135,855 and 939,705 shares at July 31, 2022 and January 31, 2022, respectively

1,330,694 and 939,705 shares at October 31, 2022 and January 31, 2022, respectively

Additional paid-in capital

17 unchanged sentences

Treasury stock purchased

Balance, October 31, 2021

Balance, July 31, 2021

Balance, April 30, 2021

Other comprehensive loss

Other comprehensive income

Stock-based compensation:

3 unchanged sentences

Treasury stock purchased

Balance, July 31, 2021

Balance, October 31, 2021

Balance, January 31, 2022

5 unchanged sentences

Treasury stock purchased

Balance, October 31, 2022

( 1,330,694 )

Balance, July 31, 2022

( 1,135,855 )

Balance, April 30, 2022

Other comprehensive loss

4 unchanged sentences

Treasury stock purchased

Balance, July 31, 2022

Balance, October 31, 2022

( 1,330,694 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended July 31,

Nine Months Ended

Cash flows from operating activities:

6 unchanged sentences

Equity in loss of equity investment

Non-cash operating lease expense

(Increase) decrease in operating assets

42 unchanged sentences

thus for example, FY23 refers to the fiscal year ending January 31, 2023, (b) “Q” refers to quarter;

thus, for example, Q2 FY23 refers to the second quarter of the fiscal year ending January 31, 2023, (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.

thus, for example, Q3 FY23 refers to the third quarter of the fiscal year ending January 31, 2023, (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.

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).

2 unchanged sentences

On April 28, 2022, the Company, under the terms of the Investment Agreement, acquired an additional 381,679 Series A Shares of Bodytrak for £1,500,000 ($ 1.9 million).

After completion of the additional investment, the Company owns 18.42 % of Bodytrak’s total share capital.

On October 26, 2022, the Company acquired an additional 254,452 Series A Shares of Bodytrak for £1,000,000 ($ 1.2 million).

After completion of the additional investments, the Company owns 22.5 % of Bodytrak’s total share capital.

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

3 unchanged sentences

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.

For the three and six months ended July 31, 2022, the Company recognized a loss of $ 102,000 and $ 129,000 , respectively as the Company’s share of Bodytrak’s net loss.

For the three and nine months ended October 31, 2022, the Company recognized losses of $ 0.1 million and $ 0.3 million, respectively, as the Company’s share of Bodytrak’s net loss.

The loss is reflected in other income (expense), net in the consolidated statements of operations.

17 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, 2022, 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, 2022, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

Borrowings in UK

There were no borrowings outstanding under the Company’s existing credit facility with HSBC Bank at July 31, 2022 and January 31, 2022.

Amounts due to the Company, under the facility with HSBC Invoice Finance (UK) Ltd., of $ 0.8 million and $ 1.2 million as of July 31, 2022, and January 31, 2022, 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, 2022 and January 31, 2022.

Amounts due to the Company, under the facility with HSBC Invoice Finance (UK) Ltd., of $ 0.2 million and $ 1.2 million as of October 31, 2022, and January 31, 2022, respectively, are included in other current assets on the accompanying consolidated balance sheets.

Concentration of Risk

19 unchanged sentences

There was approximately $ 3.3 million total included in the U.S.

bank accounts and approximately $ 37.0 million total in foreign bank accounts as of July 31, 2022, of which $ 40.5 million was uninsured.

bank accounts and approximately $ 31.7 million total in foreign bank accounts as of October 31, 2022, of which $ 34.3 million was uninsured.

Major Customer

No customer accounted for more than 10 % of net sales during the three and six month periods ended July 31, 2022 and 2021.

One customer, Aramsco, accounted for more than 10 % of net sales during the three month period ended October 31, 2022.

No customer accounted for more than 10 % of net sales during the three month period ended October 31, 2021 or the nine month periods ended October 31, 2022 and 2021.

Major Supplier

No vendor accounted for more than 10 % of purchases during the three and six month periods ended July 31, 2022 and 2021.

No vendor accounted for more than 10 % of purchases during the three and nine month periods ended October 31, 2022 and 2021.

Stockholders’ Equity

10 unchanged sentences

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,

Three Months Ended

Nine Months Ended

Total restricted stock and stock option programs

2 unchanged sentences

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, 2022 and 2021.

The following table summarizes the activity under the 2017 Plan for the nine months ended October 31, 2022 and 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, June 2021, April 2022 and June 2022 grants.

Service-Based

Weighted Average Grant Date Fair Value

Outstanding at January 31, 2022

Outstanding at July 31, 2022

Service-Based

Outstanding at October 31, 2022

Weighted Average Grant Date Fair Value

Outstanding at January 31, 2021

Outstanding at July 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 April 2020 and June 2021 grants and revenue growth and EBITDA margin for the April 2022 grants.

Outstanding at October 31, 2021

The performance targets have been set for each of the Minimum, Target, and Maximum levels.

1 unchanged sentence

The compensation cost is based on the fair value at the grant date, recognized over the requisite performance/service period using the straight-line method, and periodically adjusted for the probable number of shares to be awarded.

As of July 31, 2022, unrecognized stock-based compensation expense totaled $ 2.1 million pursuant to the 2017 Plan based on outstanding awards under the 2017 Plan.

As of October 31, 2022, unrecognized stock-based compensation expense totaled $1.8 million pursuant to the 2017 Plan based on outstanding awards under the 2017 Plan.

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

4 unchanged sentences

The New Share Repurchase Program has no expiration date but may be terminated by the Board of Directors at any time.

Shares repurchased in Q2 FY23 totaled 171,133 shares at a cost of $ 2.7 million leaving approximately $ 2.7 million remaining under the stock repurchase programs at July 31, 2022.

The Company’s provision for income taxes for the three and six months ended July 31, 2022 and 2021 is based on the estimated annual effective tax rate, in addition to discrete items.

The Company changed its permanent reinvestment assertions for its Chinese operations during the second quarter due to increased volatility of the Chinese yuan and an updated evaluation of investment strategies.

The Company recorded $ 2 million in withholding taxes for a planned repatriation.

Going forward, any adjustments to this provision will be reflected through current tax expense.

The Company's effective tax rate for the second quarter of FY23 was 149.9 %.

As noted above the Company recorded $ 2 million in withholding taxes due to a change in its’ permanent reinvestment assertion related to China.

Excluding this discrete expense, the effective rate was 35.0 % which differs from the U.S.

Shares repurchased in Q3 FY23 totaled 194,839 shares at a cost of $ 2.3 million leaving approximately $ 0.4 million remaining under the stock repurchase programs at October 31, 2022.

On December 1, 2022, the Board of Directors authorized an increase in the Company’s stock repurchase program under which the Company may repurchase up to an additional $ 5 million of its outstanding common stock.

The Company’s provision for income taxes for the three and nine months ended October 31, 2022 and 2021 is based on the estimated annual effective tax rate, in addition to discrete items.

The Company's effective tax rate for the third quarter of FY23 was 33.3 % which differs from the U.S.

federal statutory rate of 21 % primarily due to rate differentials in foreign tax jurisdictions and Global Intangible Low-Taxed Income (“GILTI”).

The Company's effective tax rate for the second quarter of FY22 was 26.9 % which differs from the U.S.

The Company's effective tax rate for the third quarter of FY22 was 31.4 % which differs from the U.S.

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

The Company's effective tax rate for the six months ended July 31, 2022 was 91.8 %.

In addition to the $ 2 million discrete item above, in Q1 FY23, the Company recorded deferred tax benefits of $ 0.2 million related to accruals for China social taxes based on our evaluation of the deductibility of these items.

In Q2 FY23 the Company changed its permanent reinvestment assertions for its Chinese operations due to increased volatility of the Chinese yuan and an updated evaluation of investment strategies.

The Company recorded $ 2 million in withholding taxes for a planned repatriation.

Going forward, any adjustments to this provision will be reflected through current tax expense.

The Company's effective tax rate for the nine months ended October 31, 2022 was 68.1 %.

In addition to the $2 million in withholding taxes discussed above, in Q1 FY23, the Company recorded deferred tax benefits of $ 0.2 million related to accruals for China social taxes based on our evaluation of the deductibility of these items.

Excluding these discrete items, the effective rate was 33.8 % which differs from the U.S.

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

The Company's effective tax rate for the six months ended July 31, 2021 was 25.4 % which differs from the U.S.

The Company's effective tax rate for the nine months ended October 31, 2021 was 27.1 % 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 records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized.

The valuation allowance was $ 3.7 million and $ 3.2 million at July 31, 2022 and January 31, 2022, respectively.

Net Income (Loss) Per Share

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

Three Months Ended July 31,

Six Months Ended July 31,

Net income (loss)

Denominator for basic net income (loss) per share (weighted-average shares which exclude shares in the treasury, 1,135,855 and 736,696 at July 31, 2022 and 2021, respectively

The valuation allowance was $ 3.7 million and $ 3.2 million at October 31, 2022 and January 31, 2022, respectively.

Net Income Per Share

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

Three Months Ended

Nine Months Ended

Denominator for basic net income per share (weighted-average shares which exclude shares in the treasury, 1,330,694 and 780,266 at October 31, 2022 and 2021, respectively

Effect of dilutive securities from restricted stock plan

12 unchanged sentences

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

As of July 31, 2022, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.

As of October 31, 2022, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.

Segment Reporting

5 unchanged sentences

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

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

Three Months Ended July 31,

Six Months Ended July 31,

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

Three Months Ended

Nine Months Ended

(in millions of dollars)

15 unchanged sentences

Consolidated intersegment sales

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended

Nine Months Ended

(in millions of dollars)

13 unchanged sentences

The table below presents external sales by product line:

Three Months Ended July 31,

Three Months Ended

(in millions of dollars)

Six Months Ended July 31,

Nine Months Ended

(in millions of dollars)

3 unchanged sentences

Consolidated external sales

Subsequent Event

On December 2, 2022 the Company acquired UK-based Eagle Technical Products Limited (“Eagle”) in an all-cash transaction valued at approximately $ 10.8 million subject to post-closing adjustments and potential future earnout payments.

The acquisition enhances Lakeland’s product portfolio, particularly within fire service protective clothing and expands its sales presence in the Middle East and Europe.

Headquartered in Manchester, UK, Eagle is a leading designer and provider of protective apparel to the fire and industrial sectors.

Eagle provides differentiated product offerings through its innovative and technical solutions.

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