What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-04-11 compared with 2023-04-18 · 265 added, 123 removed, 654 unchanged (37% of the section changed)

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Reports of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Statements of Income for the Years Ended January 31, 2023 and 2022

Consolidated Statements of Operations for the Years Ended January 31, 2024 and 2023

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended January 31, 2024 and 2023

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We have audited the accompanying consolidated balance sheets of Lakeland Industries, Inc.

and subsidiaries (the "Company") as of January 31, 2023 and 2022, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended January 31, 2023, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of January 31, 2024 and 2023, the related statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the two years in the period ended January 31, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 17, 2023, expressed an adverse opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 10, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Inventories – Refer to Notes 1 and 2 to the financial statements

Critical Audit Matter Description

The Company’s inventory includes costs to acquire and produce the goods and is stated at the lower of cost or net realizable value on a first-in, first-out method (FIFO).

The assessment of estimated obsolescence or unmarketable inventory involved judgment and is based upon assumptions about future sales and supply on-hand for certain inventory items.

Total inventory of approximately $58 million is in part composed of products which were deemed to be slow moving based on historical inventory turns and sales history.

An excess and obsolete adjustment of approximately $4.7 million was recorded by the Company.

Given the significant judgments made by management to evaluate the net realizable value of certain of its inventory products, performing audit procedures to evaluate the reasonableness of management’s assumptions related to those inventory adjustments required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to valuation of slow moving, excess and obsolete inventory included, among others:

We tested the effectiveness of controls over management’s process to evaluate the need for adjustments for its slow-moving, obsolete or unusable inventory.

We tested the mathematical accuracy of management’s estimates of the net realizable value for slow-moving, obsolete or unusable inventory.

We evaluated management’s judgments as to the historical lookback period utilized in determining slow-moving, obsolete or unusable inventory.

We evaluated the valuation of slow moving, excess and obsolete inventory in relation to:

Historical results and actions

Communications between management and the board of directors

Industry information related to the market for these products

Subsequent events

Acquisitions — Eagle Technologies —Intangible Assets & Contingent Consideration — Refer to Notes 1 and 5 to the financial statements

Acquisitions — Pacific Helmets NZ Limited —Intangible Assets— Refer to Notes 1 and 6 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Eagle Technologies for $15.1 million (inclusive of estimated contingent consideration) on December 2, 2022.

The Company completed the acquisition of Pacific Helmets NZ Limited (“Pacific”) on November 30, 2023.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Accordingly, the Company allocated the purchase price, on a preliminary basis, to the assets acquired and liabilities assumed based on their estimated fair values.

The Company recorded approximately $13.7 million of intangible assets, including $7.6 million of goodwill as of the acquisition date.

Additionally, the Company recorded within the account Accrued Earnout Agreement an estimated contingent consideration liability of $3.2 million.

Acquired intangible assets, excluding goodwill, were valued using certain discounted cash flow methods based on future cash flows specific to the type of intangible asset acquired.

Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted revenue growth rates, EBITDA margins and resulting forecasted cash flows as well as royalty rate and discount rate.

Management estimated the fair value of the contingent consideration using the Monte Carlo Method.

For this valuation method, management develops projections during the contingent consideration period utilizing various potential pay-out scenarios.

Probabilities are applied to each potential scenario and the resulting values are discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the contingent consideration itself, the related projections, and the overall business.

Given the fair value determination of the contingent consideration and intangible assets for Eagle Technologies requires management to make significant estimates and assumptions related to the forecasts of revenue and future cash flows and the selection of the discount rate and royalty rate, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

The Company recorded intangible assets related to customer relationships, trade names and trademarks and technological know-how.

Acquired intangible assets were valued using certain methods including the excess earnings approach and relief from royalty methods specific to the type of intangible asset acquired.

Given the fair value determination of the intangible assets for Pacific requires management to leverage complex valuation methodologies and make significant estimates and assumptions related to the forecasts of revenue, EBITDA margins and resulting future cash flows and the selection of royalty and discount rates, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future cash flows, the selection of valuation methodologies utilized, the selection of the royalty rate and discount rate for the intangible assets and the selection of the discount rate for the contingent consideration liability included the following, among others:

We evaluated the design and operating effectiveness of controls over the valuation of the intangible assets and contingent consideration, including management’s controls over forecasts of future cash flows and selection of the royalty and discount rates.

We assessed the reasonableness of management’s forecasts of future revenues and cash flows by comparing the projections to historical results, actual results to date, contractual revenue agreements in place, and relevant industry reports and evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

Our audit procedures related to the forecasts of future revenues and EBITDA margins and resulting future cash flows, the selection of valuation methodologies utilized, and the selection of the royalty and discount rates for the intangible assets, included the following, among others:

We evaluated the design and operating effectiveness of controls over the valuation of the intangible assets, including management’s controls over forecasts which estimate future cash flows and selection of the royalty and discount rates.

We assessed the reasonableness of management’s forecasts of future revenues, EBITDA margin and cash flows by comparing the projections to historical results, actual results through year-end, and relevant industry reports and evaluated whether the estimated resulting future cash flows were consistent with evidence obtained in other areas of the audit.

With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies and (2) the valuation assumptions used in the fair value analyses by:

Testing the source information underlying the determination of the discount and royalty rates.

Comparing the selected royalty rate to market data for comparable rates.

Testing the mathematical accuracy of the calculation of the discount and royalty rates.

Developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management.

Evaluating the reasonableness of the Monte Carlo methodology utilized, the inputs used in the contingent consideration valuation, and other key judgments made by management as well as independently running the probability-weighted scenario analysis to calculate an independent estimate of fair value.

Testing the mathematical accuracy of the calculations of the royalty and discount rates.

Developing a range of independent estimates for the royalty and discount rates and comparing those to the rates selected by management.

Equity method investment - Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The Company uses the equity method of accounting to account for its $4.7 million investment in the Class A stock of 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”).

The Company also holds $2.2 million of notes receivable from Bodytrak which are convertible into shares of the entity.

The Company evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired.

If the decline in fair value is deemed to be other than temporary, the investment is written down to fair value.

In situations where the fair value of an investment is not evident due to a lack of a public market price or other factors, the Company uses its best estimates and assumptions to arrive at the estimated fair value of such investment based on accepted valuation methods, which require management to make significant estimates and assumptions related to future cash flows and the selection of the discount rate used in the valuation.

We identified the estimation of future cash flows and discount rate associated with the valuation of Bodytrak as a critical audit matter due to the significant judgments required in the estimation of future revenues and resulting cash flows and the selection of the discount rate.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows and the selection of the discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimates and assumptions utilized in the determination of fair value used for the impairment analysis included the following, among others:

We evaluated the design and tested the operating effectiveness of controls related to the accounting for potential impairment of the investment.

We evaluated the reasonableness of the forecasts of future revenues and resulting cash flows by comparing those estimates to historical results, internal communications to management and the Board of Directors, existing arrangements with customers, and relevant industry/market data.

With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:

Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

Developing a range of independent estimates and comparing those to the discount rate selected by management.

Independently testing the guideline public company market valuation prepared by management’s specialist to further evaluate the estimated fair value.

We considered whether other information obtained during the course of our audit represented contradictory evidence in relation to the estimated future revenues and resulting cash flow projections utilized in the model.

/s/ Deloitte & Touche LLP

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and subsidiaries (the “Company”) as of January 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2024, of the Company and our report dated April 10, 2024, expressed an unqualified opinion on those financial statements.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Eagle Technical Products Limited, which was acquired on December 2, 2022, and whose financial statements constitute 1% and 3% of net and total assets, respectively, 1% of revenues, and 12% of net income of the consolidated financial statement amounts as of and for the year ended January 31, 2023.

Accordingly, our audit did not include the internal control over financial reporting at Eagle Technical Products Limited.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Pacific Helmets NZ Limited, which was acquired on November 30, 2023, and whose financial statements constitute 6% and 6% of net and total assets, respectively, less than 1% of revenues, and 4% of net income of the consolidated financial statement amounts as of and for the year ended January 31, 2024.

Accordingly, our audit did not include the internal control over financial reporting at Pacific Helmets NZ Limited.

Basis for Opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management's assessment:

the Company did not design, implement, and/or consistently operate effective controls over its foreign subsidiary currency translation or remeasurement to ensure the foreign subsidiary’s account balances were accurately stated in the consolidated financial statements.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended January 31, 2023, of the Company, and this report does not affect our report on such consolidated financial statements.

/s/ Deloitte & Touche LLP

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and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended January 31, 2024 and 2023

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Intangible assets, net

Equity investments

Convertible debt investments

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Deferred income taxes

Loans payable – long term

Long-term portion of operating lease liability

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Balance, January 31, 2023

( 1,330,694 )

Dividends paid

Other comprehensive income

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Equity in (earnings) loss of equity investment

Revaluation of earnout consideration

(Increase) decrease in operating assets:

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Operating lease liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchases of property and equipment

Proceeds from sale of fixed assets

Acquisition, net of cash acquired

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Short term borrowings

Short term borrowings – repayments

Dividends paid

Purchase of Treasury Stock under stock repurchase program

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Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Leasehold improvements and leasehold costs are amortized over the term of the lease or service lives of the improvements, whichever is shorter.

The costs of additions and improvements which substantially extend the useful life of a particular asset are capitalized.

The costs of additions and improvements that substantially extend the useful life of a particular asset are capitalized.

Repair and maintenance costs are charged to expense.

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Assets classified as held for sale are not depreciated.

Impairment of Long-Lived Assets

The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable.

The Company measures any potential impairment on a projected undiscounted cash flow method.

Estimating future cash flows requires the Company’s management to make projections that can differ materially from actual results.

The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the asset is less than its carrying value.

In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset.

Equity Method Investments

Investments in which the Company can exercise significant influence, but do not control, are accounted for using the equity method and are presented on the consolidated balance sheets.

The Company’s share of the net earnings or losses of the investee is presented within the consolidated statements of operations as other income (expense).

The Company evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired.

The primary factors the Company considers in its determination are the length of time that the fair value of the investment is below the Company's carrying value;

the severity of the decline;

and the financial condition, operating performance and near term prospects of the investee.

If the decline in fair value is deemed to be other than temporary, the security is written down to fair value.

In situations where the fair value of an investment is not evident due to a lack of a public market price or other factors, the Company estimates fair value based on a discounted cash flow model and a market-based approach using inputs which include expected cash flows and a discount rate representative of the risks within the underlying business and forecasts to arrive at the estimated fair value of such investment.

Business combinations

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The excess of the purchase price over the estimated fair value of assets and liabilities is recorded as goodwill.

Assigning fair market values to the assets acquired and liabilities assumed at the date of acquisition requires knowledge of current market values and the values of assets in use and often require the application of judgment regarding estimates and assumptions.

Assigning fair market values to the assets acquired and liabilities assumed at the date of acquisition requires knowledge of current market values and the values of assets in use and often requires the application of judgment regarding estimates and assumptions.

While the ultimate responsibility resides with management for material acquisitions, we retain the services of certified valuation specialists to assist with assigning estimated values to certain acquired assets and assumed liabilities, including intangible assets, tangible long-lived assets, and contingent consideration.

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Indefinite lived intangible assets are assessed for possible impairment annually on November 1st or whenever circumstances change such that the recorded value of the asset may not be recoverable.

Prior to the Eagle acquisition completed on December 2, 2022, we did not have any acquired intangible assets.

Goodwill is not amortized, but is subject to impairment assessments.

On November 1st of each year, or more frequently if indicators of impairment exist or if a decision is made to sell a business, we evaluate goodwill for impairment.

Judgment is involved in determining if an indicator of impairment has occurred.

Such indicators may include a decline in expected cash flows, a significant adverse change in the business climate, unanticipated competition, slower growth rates, or negative developments in equity and credit markets, among others.

Prior to the Eagle acquisition we had recorded goodwill totaling $0.9 million related to an acquisition completed in FY05 that is part of our High Visibility product line.

All goodwill is assigned to and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment.

Goodwill is not amortized, but evaluated for impairment at least annually or whenever events or changes in circumstance indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The Company may perform either a qualitative assessment of potential impairment or proceed directly to a quantitative assessment of potential impairment.

If the Company chooses not to perform a qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to conclude that no impairment has occurred qualitatively, then the Company will perform a quantitative assessment.

A quantitative test for goodwill impairment is performed by determining the fair value of the related reporting units.

The Company estimates the fair value of the reporting unit with which the goodwill is associated and compares it to the carrying value.

If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value.

Fair value is measured using on the discounted cash flow method and relative market-based approaches.

There has been no impairment of our goodwill during the years ended January 31, 2024 and 2023.

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The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation.

Shipping and handling costs associated with outbound freight are included in operating expenses, and for the years ended in FY23 and FY22 aggregated approximately $ 3.2 million and $ 2.9 million, respectively.

Shipping and handling costs associated with outbound freight are included in operating expenses, and for FY24 and FY23 aggregated approximately $ 3.4 million and $ 3.2 million, respectively.

Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue.

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These advances are included in Other Accrued Expenses on the Company’s consolidated balance sheet.

The following is a rollforward of the advances from the date of the Eagle acquisition, December 2, 2022 through January 31, 2023 (in $000s):

The following is a roll-forward of the advances from the date of the Eagle acquisition, December 2, 2022 through January 31, 2024 (in $000s):

Contract liability – December 2, 2022

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Contract liability – January 31, 2023

Increases to contract liability

Decreases to contract liability

Contract liability – January 31, 2024

The Company has seven revenue generating reportable geographic segments under ASC Topic 280 “Segment Reporting” and derives its sales primarily from its limited use/disposable protective clothing and secondarily from its sales of reflective clothing, high-end chemical protective suits, firefighting and heat protective apparel, reusable woven garments and gloves and arm guards.

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Advertising Costs

Advertising costs are expensed as incurred and included in operating expenses on the consolidated statement of income.

Advertising costs are expensed as incurred and included in operating expenses on the consolidated statement of operations.

Advertising and co-op costs amounted to $ 0.6 million and $ 0.5 million in FY24 and FY23.

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Foreign Operations and Foreign Currency Translation

The Company maintains manufacturing operations in Mexico, India, Argentina, Vietnam and the People’s Republic of China and can access independent contractors in China, Vietnam, Argentina and Mexico.

The Company maintains manufacturing operations in Mexico, India, Argentina, New Zealand, Vietnam and the People’s Republic of China and can access independent contractors in China, Vietnam, Argentina and Mexico.

It also maintains sales and distribution entities in India, Canada, the U.K., Chile, China, Argentina, Russia, Kazakhstan, Uruguay, Australia and Mexico.

The Company is vulnerable to currency risks in these countries.

The functional currency for the United Kingdom subsidiary is the Euro;

The functional currency for the United Kingdom subsidiaries is the Pound;

the trading company in China, the RMB;

the Russian operation, the Russian Ruble, and the Kazakhstan operation, the Kazakhstan Tenge.

the Russian operation, the Russian Ruble;

the New Zealand Dollar in New Zealand, and the Kazakhstan operation, the Kazakhstan Tenge.

All other operations have the U.S.

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Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Foreign currency transaction income (loss) included in net income for the years ended January 31, 2023 and 2022, were approximately $ 0.9 million and $ 0.3 million, respectively.

Fair Value of Financial Instruments

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Management periodically reviews new accounting standards that are issued.

No recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated financial statements.

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.

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” This guidance requires a public entity to disclose for each reportable segment, on an interim and annual basis, the significant expense categories and amounts that are regularly provided to the chief operating decision-maker (“CODM”) and included in each reported measure of a segment’s profit or loss.

Additionally, it requires a public entity to disclose the title and position of the individual or the name of the group or committee identified as the CODM.

This guidance is effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted and the guidance should be applied retrospectively to all periods presented in the financial statements, unless it is impracticable.

The Company plans to adopt the provisions of this guidance in conjunction with our Form 10-K for the fiscal year ending January 31, 2025.

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

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PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:

Useful Life in

Property and equipment consist of the following (in $000s):

Machinery and equipment

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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.

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

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

A substantial portion of our investment represents differences in our investment and our share of the underlying recognized net assets of Bodytrak.

These differences are predominately attributable to non-amortizing intangible assets, including internally developed intellectual property, of Bodytrak.

These differences are predominately attributable to non-amortizing intangible assets of Bodytrak, including internally developed intellectual property.

On May 19, 2023, the Company entered into an agreement with Bodytrak to provide an additional investment of up to an aggregate of £1,500,000 ($ 1.9 million on the date of initial investment) in the form of a secured convertible loan with an option for an additional £1,000,000 investment at the Company’s discretion.

An initial investment funding of £500,000 ($ 0.6 million on the date of investment) was made on May 19, 2023.

Additional investment fundings of £700,000 ($ 0.9 million on the date of investment) and £500,000 ($ 0.6 million on the date of investment) were made on September 8, 2023 and December 15, 2023, respectively.

The loaned amounts are due twenty-four months from the issue date, which can be extended upon mutual agreement.

The convertible note bears interest at either an annual rate of 12% for cash interest or 15% for payment in kind interest on the outstanding amount under the note, such rate being selected by Bodytrak.

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

The convertible note is secured by Bodytrak’s intellectual property.

Bodytrak provides wearable monitoring solutions for customers in industrial health, safety, defense and first responder markets wanting to achieve better employee health and performance.

Bodytrak’s solution is provided as a platform as a service (PaaS), delivering real-time data and cloud-based analytics and hardware that includes a patented earpiece for physiological monitoring and audio communications.

For FY23, the Company recognized a loss of $ 0.4 million as the Company’s share of Bodytrak’s net loss.

For the period October 18, 2021 (date of investment) through January 31, 2022, the Company recognized a loss of $ 0.1 million as the Company’s share of Bodytrak’s net loss.

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

Bodytrak’s solution is provided as a platform as a service (PaaS), delivering real-time data, cloud-based analytics, and hardware that includes a patented earpiece for physiological monitoring and audio communications.

For FY24 and FY23, the Company recognized losses of $ 0.6 and $ 0.4 million, respectively.

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

GOODWILL AND INTANGIBLE ASSETS

Changes in goodwill during the fiscal years ended January 31, 2024 and 2023, were as follows (in $000s):

Balance at February 1

Measurement period adjustment

Balance at January 31

During FY24 , a measurement period adjustment was recorded to recognize deferred tax liabilities of $ 1.4 million associated with the finite-lived intangibles acquired in the Eagle acquisition, with a corresponding increase to goodwill.

Changes in intangible assets during the fiscal years ended January 31, 2024 and 2023, were as follows (in $000s):

Balance at February 1

Balance at January 31

January 31, 2024

January 31, 2023

Intangible Assets (in $000s)

Weighted Average Life in Years

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Customer relationships

Trade names and trademarks

Technological know-how

Intangible asset amortization expense over the next five years is expected to be approximately $ 0.5 million per year.

Acquisition of Pacific

On November 30, 2023 the Company acquired New Zealand-based Pacific Helmets NZ Limited (“Pacific”) in an all-cash transaction valued at approximately NZ$14.000,000 ($ 8.5 million at the closing date exchange rate) including assumption of debt, subject to post-closing adjustments and customary holdback provisions.

The acquisition enhances Lakeland’s product portfolio, particularly within fire service protective helmets.

Headquartered in Whanganui, New Zealand, Pacific is a leading designer and provider of structural firefighting, wildland firefighting, and technical rescue helmets.

The transaction was funded through the revolving credit facility and cash balances.

Pacific’s operating results are included in our consolidated financial statements from the acquisition date.

The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.

As part of the acquisition agreement, Pacific will pay from the holdback an amount equal to the amount by which Pacific’s revenue falls below NZ$ 11.1 million for Pacific’s fiscal year ending March 31, 2024 subject to certain conditions.

The estimated amount of the reduction to the holdback to be paid by the Company is less than $0.1 million.

The estimate was developed using a Monte Carlo simulation.

If Pacific exceeds the revenue target of NZ$11.1 million, Pacific will not receive any additional consideration .

The following table summarizes the preliminary fair values of the Pacific assets acquired and liabilities assumed at the date of the acquisition:

Net working capital acquired (including cash of $0.1 million)

Property, plant and equipment

Customer relationships

Trade names and trademarks

Technological know-how

Total assets acquired

Less liabilities assumed

Net assets acquired

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;

and the cost method for the assembled workforce was included in goodwill.

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 Pacific’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 Pacific transaction are being amortized over periods of 14 years, 15 years and 10 years, respectively.

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 Pacific with our operations.

Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals and valuations related to contingent consideration, inventory, contractual relationships, tangible assets and intangible assets.

These changes to the purchase price allocation could be significant.

The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date.

Acquisition of Eagle

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The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.

As part of the acquisition agreement, the Company will pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6 million GBP for the period May 1, 2022 through April 30, 2023.

The Company will also pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6.3 million GBP for the period May 1, 2023 through April 30, 2024.

The estimated amount of the earnout payment included in the valuation above is $ 3.2 million.

The estimate was developed using a Monte Carlo simulation.

The following table summarizes the preliminary fair values of the Eagle assets and liabilities assumed at the date of the acquisition:

As part of the Eagle acquisition agreement, the Company agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6 million GBP for the period May 1, 2022 through April 30, 2023.

The Company also agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6.3 million GBP for the period May 1, 2023 through April 30, 2024.

The estimated amount of the earnout payment developed using a Monte Carlo simulation included in the preliminary valuation was $ 3.2 million.

Eagle did not reach the revenue threshold for the period May 1, 2022 through April 30, 2023 and received no payment for that period.

Based on the revised forecast for the period May 1, 2023 through April 30, 2024, the estimated amount of the earnout payment developed using a Monte Carlo simulation is $0.6 million.

The adjustment to the accrued earnout payment of $2.5 million was recorded in FY24, and reflected as a reduction in operating expenses .

The following table summarizes the preliminary fair values of the Eagle assets acquired and liabilities assumed at the date of the acquisition:

Current assets acquired (including cash of $2.2 million)

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These changes to the purchase price allocation could be significant.

The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date

The following unaudited pro forma information presents our combined results as if the Eagle acquisition had occurred at the beginning of FY22.

During FY24 , a measurement period adjustment was recorded to recognize deferred tax liabilities of $ 1.4 million associated with the finite-lived intangibles acquired, with a corresponding increase to goodwill.

The following unaudited pro forma information presents our combined results as if the Pacific and Eagle acquisitions had occurred at the beginning of FY23.

The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition;

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and (3) expected to have a continuing impact on the combined company's results.

There were no material transactions between the Company and Eagle during the periods presented that are required to be eliminated.

There were no material transactions between the Company and the acquired entities during the periods presented that are required to be eliminated.

The unaudited pro forma combined financial information does not reflect cost savings, operating synergies or revenue enhancements that the combined companies may achieve or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies or revenue enhancements.

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The Company has been treated as the acquirer.

Total acquisition-related costs were $ 0.6 million for the year ended January 31, 2023.

Transactional costs and acquisition-related amortization is included in operating expenses in the Consolidated Statements of Income.

Total acquisition-related costs were $ 0.5 million and $ 0.6 million for the years ended January 31, 2024 and 2023, respectively.

Transactional costs and acquisition-related amortization is included in operating expenses in the Consolidated Statements of Operations.

LONG-TERM DEBT

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The borrowing base limitation only applies during periods when the Company’s quarterly funded debt to EBITDA ratio, as defined, exceeds 2.00 to 1.00 .

The credit facility will mature on June 25, 2025 .

The credit facility was to mature on June 25, 2025 .

Borrowings under the revolving credit facility bear interest at a rate per annum equal to the sum of the LIBOR Daily Floating Rate (“LIBOR”), plus 125 basis points.

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On June 18, 2021, the Company entered into Amendment No.

1 to the Loan Agreement (the “Amendment”) with the Lender, which modifies certain terms of the Company’s existing Loan Agreement with the Lender.

The Amendment increases the credit limit under the Loan Agreement’s senior secured revolving credit facility from $ 12.5 million to $ 25.0 million.

The Amendment also amends the covenant in the Loan Agreement that restricts acquisitions by the Company or its subsidiaries in order to allow, without the prior consent of the Lender, acquisitions of a business or its assets if there is no default under the Loan Agreement and the aggregate consideration does not exceed $ 7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions.

1 to the Loan Agreement (the “Amendment”) with the Lender, which modified certain terms of the Company’s existing Loan Agreement with the Lender.

The Amendment increased the credit limit under the Loan Agreement’s senior secured revolving credit facility from $ 12.5 million to $ 25.0 million.

The Amendment also amended the covenant in the Loan Agreement that restricts acquisitions by the Company or its subsidiaries in order to allow, without the prior consent of the Lender, acquisitions of a business or its assets if there is no default under the Loan Agreement and the aggregate consideration does not exceed $ 7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions.

The Loan Agreement requires the Company to maintain a Funded Debt to EBITDA (as each such term is defined in the Loan Agreement) ratio of 3.0 to 1.0 or less and a Basic Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of at least 1.15 to 1.0.

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The Company’s obligations to the Lender under the Loan Agreement are also secured by a negative pledge evidenced by a Non-encumbrance Agreement covering the real property owned by the Company in Decatur, Alabama

On November 30, 2023, the Company entered into Amendment No.

3 to the Loan Agreement by and between Bank of America, N.A.

(the “Lender”) and the Company (the “Third Amendment”).

Pursuant to the Third Amendment, the Lender consented to the Company’s acquisition of one hundred percent (100%) of the equity interests of Pacific.

The Third Amendment further provided for certain amendments to the Loan Agreement to permit additional indebtedness to be made available to Pacific, to exempt Pacific from certain requirements of the Loan Agreement pertaining to subsidiary guaranty and asset pledges that would otherwise be required under the Loan Agreement and to waive the Company’s borrowing base limitations through January 31, 2024.

The Third Amendment also provided for the reaffirmation of representations, warranties and covenants under the Loan Agreement as are customary in connection with similar amendments of credit documents.

As of January 31, 2024, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

On March 28, 2024, the Company entered into Amendment No.

4 to the Loan Agreement by and between Bank of America, N.A.

(the “Lender”) and the Company (the “Fourth Amendment”).

Pursuant to the Fourth Amendment, the Lender and the Company agreed to, among other things, (i) extend the expiration date of the credit facility to March 28, 2029, (ii) increase the availability under the revolving credit facility to $40.0 million with an accordion feature providing for the potential funding of an additional $10.0 million, (iii) remove the borrowing base component of the credit facility;

and (iv) modify the interest rate based on Daily SOFR plus the Applicable Rate .

The Applicable Rate is based upon a Funded Debt to EBITDA Ratio and includes four (4) different levels constituting a SOFR margin range from 1.25 % to 2.00 %.

In addition, the Fourth Amendment (i) modified the Funded Debt to EBITDA Ratio covenant so as not to exceed 3.5x (with step-downs to 3.25 and 3.0 in 2025 and 2026), (ii) modified the Basic Fixed Charge Coverage Ratio covenant to a minimum of 1.20x, (iii) includes a springing Asset Coverage Ratio covenant of at least 1.10x, but only to the extent that the maximum Total Leverage Ratio exceeds 3.00x at any reporting period, (iv) increases the sublimit for letters of credit to $10.0 million, and (v) imposes a floor to Daily SOFR of one percent (1.00%).

The Fourth Amendment provides for additional indebtedness or the assumption of existing indebtedness for acquisitions of foreign subsidiaries (not to exceed $10.0 million in USD) and increased the size of Permitted Acquisitions, without prior approval from the Lender, to $17.5 million per occurrence and $35.0 million in the aggregate .

Borrowings in UK

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 £1,250,000 (approximately USD $ 1.9 million, based on exchange rates at time of closing) to £1,500,000 (approximately USD $ 2.3 million, based on exchange rates at the 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 £400,000 (approximately USD $ 0.6 million, based on exchange rates at time of closing) of the note payable by the UK subsidiary to the Company shall be subordinated in priority of payment to the subsidiary’s obligations to HSBC under the financing facility.

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 £1,250,000 (approximately USD $ 1.9 million, based on exchange rates at time of closing) to £1,500,000 (approximately USD $ 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 £400,000 (approximately USD $ 0.6 million, based on exchange rates at the time of closing) of the note payable by the UK subsidiary 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 on March 8, 2022.

The cumulative result of the amendments through March 8, 2022 reflect a reduction of the service chargeto 0.765%.

The cumulative result of the amendments through March 8, 2022 reflect a reduction of the service charge to 0.765%.

The agreement can be terminated with three months’ notice.

There were $0.4 million in borrowings outstanding under this facility at January 31, 2023.

There were no borrowings outstanding under this facility at January 31, 2024.

Pacific Borrowings

Pacific has two facilities with the Bank of New Zealand.

Pacific has a trade finance facility where the lender finances vendor purchases.

The trade finance facility has a limit of 500,000 New Zealand dollars and caries an interest rate at the prevailing base rate for the relevant currency of the vendor plus a margin of 3.00% per annum.

The facility includes two term loans.

The first term loan of 1,500,000 New Zealand dollars matures on December 17, 2025, carries an interest rate of 2.3% per annum and requires monthly payments of $19,350.27 New Zealand dollars .

The second term loan of 550,000 New Zealand dollars matures on November 18, 2024, carries an interest rate of 3.5% per annum and requires monthly payments of 10,005 New Zealand dollars.

The facilities expire in August 2026 and are secured by a security interest in Pacific’s real property.

Borrowings under the trade finance facility and amounts due in FY25 under the term loans are reported as short-term borrowings and were $ 0.3 million at January 31, 2024.

Borrowings under the term loans due after FY25 are reported as long-term borrowings and were $ 0.7 million at January 31, 2024.

CONCENTRATION OF RISK

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Banco Mercantil Del Norte SA in Mexico;

ZAO KB Citibank Moscow in Russia, and JSC Bank Centercredit in Kazakhstan.

ZAO KB Citibank Moscow in Russia, JSC Bank Centercredit in Kazakhstan and Bank of New Zealand in New Zealand.

The Company monitors its financial depositories by their credit rating, which varies by country.

In addition, cash balances in banks in the United States of America are insured by the Federal Deposit Insurance Corporation subject to certain limitations.

There was approximately $ 1.3 million total included in the U.S.

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

bank accounts and approximately $ 22.0 million total in foreign bank accounts as of January 31, 2024, of which $ 24.4 million was uninsured.

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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 year ended January 31, 2023.

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 April 2020, June 2021 and June 2022 grants.

The following table summarizes the activity under the 2017 Plan for the years ended January 31, 2024 and 2023.

This table reflects the amount of awards granted at the number of shares that would be vested if the Company were to achieve the maximum performance level under the June 2021, June 2022 and March 2023 grants.

Service-Based

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Outstanding at January 31, 2023

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, June 2021 and June 2022 grants.

Outstanding at January 31, 2024

Performance measures for the April 2022 grants are revenue growth and EBITDA margin.

Performance measures for the March 2023 grants are revenue growth, EBITDA margin and return on invested capital.

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

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On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $ 5 million of its outstanding common stock.

On July 6, 2021, the Board of Directors authorized an increase in the Company’s stock repurchase program under which the Company may repurchase up to an additional $ 5 million of its outstanding common stock.

On July 6, 2021, the Board of Directors authorized an increase in the Company’s stock repurchase program of up to an additional $ 5 million of its outstanding common stock.

On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $ 5 million of its outstanding common stock, which became effective upon the completion of the prior share repurchase program.

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Domestic and Foreign Pretax Income (Loss)

The domestic and foreign pretax income in the schedule above reflects intercompany dividends paid to the U.S.

from international subsidiaries of $ 11.4 million and $ 19.0 million for fiscal years ended January 31, 2024 and 2023, respectively.

Income Tax Expense (Benefit)

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Argentina Flow Through Loss

Foreign Dividend & Subpart F

Withholding Taxes

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Foreign Dividends Paid to U.S.

Foregin Dividends Received Deduction

Foreign Dividends Received Deduction

Earnout Adjustment

Effective Rate

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Prepaid expenses

Brazil write-down

Right-of-use asset

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The benefit relating to capital loss, operating loss, and credit carryforwards included in the above table at January 31, 2024, consisted of:

Operating Loss

Gross Carryforward

Benefit Amount

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Mexico operating loss carryforwards

Significant net operating loss carryforwards were generated in the state of Alabama prior to the change in apportionment factor in 2021 which decreased the amount of income to be apportioned to Alabama in the future and therefore decreasing carryforward benefit available related to state operating losses.

Chile operating loss carryforwards

UK operating loss carryforwards

A significant portion of our net operating loss carryforwards were generated in the state of Alabama prior to the change in apportionment factor rules for that state in 2021 which moved the state to a single sales factor apportionment method.

The impact of the state law change significantly reduced our apportionment factor in that state, making it unlikely that we will generate sufficient income allocated to that state in order to utilize the full amount of our net loss carryforwards prior to their expiration.

Indefinite Reinvestment Assertion

We previously considered substantially all of the earnings in our non-U.S.

subsidiaries to be indefinitely reinvested outside the U.S.

and, accordingly, recorded no deferred income taxes on such earnings.

At this time, the applicable provisions of the Tax Act have been fully analyzed and our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S.

those earnings needed for working capital or additional foreign investment.

During 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’s plans are to repatriate a total of $20.0 million from China and recorded withholding taxes of $ 2 .0 million which are included in income tax expense.

During FY23 the Company’s subsidiaries in Canada, China and Hong Kong declared and paid total dividends of $ 15.5 million of which $ 12.5 million came from China.

The Company generally considers all earnings generated outside of the U.S.

to be permanently reinvested offshore, with the exception to countries where cash can be repatriated without withholding taxes, and in China in which the Company previously determined excess cash over what was required to fund operations and growth existed.

During FY24, the Company repatriated $4.5 million and $7.0 million from Canada and China, respectively.

The Company also identified an additional $3.8 million in excess cash in its Chinese operations for which it plans to repatriate in the future .

A withholding tax liability has been established for the expected withholding taxes in the amount of $ 0.4 million as of the period ended January 31, 2024.

The distribution from Canada received during FY24 was a result of the sale of real estate during the year.

The sale resulted in after tax excess cash that the Company determined was not needed to fund local operations and repatriated back to the US in a one-time action.

The Company still currently maintains a permanently reinvestment assertion on its future Canada operations.

Income Tax Audits

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We record net deferred tax assets to the extent we believe these assets will more likely than not be realized.

The valuation allowance for the year ended January 31, 2023 and January 31, 2022 was $ 3.6 million and $ 3.2 million, respectively.

The valuation allowance for the years ended January 31, 2024 and January 31, 2023 was $ 6.7 million and $ 3.6 million, respectively.

OECD and Pillar Two

In 2021 the Organization for Economic Cooperation and Development (OECD) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%.

Subsequently multiple sets of administrative guidance have been issued.

Many non-U.S.

tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years.

Although we expect increased tax compliance efforts as a result of new legislation, we do not expect Pillar Two to have a significant impact on our effective tax rate or our consolidated results of operations, financial position and cash flows.

NET INCOME PER SHARE

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

During the third quarter of FY24, the Company sent a letter to the landlord outlining certain structural defects on the newly constructed facility in Monterrey, Mexico that would inhibit the Company from effectively utilizing the facility for its intended purpose.

The Company has initiated discussions with the landlord as to potential remedies which may inform our decision-making process with respect to this property.

Changes in our long-term intended use for the building may impact the carrying value of the currently recorded right of use asset.

General litigation contingencies

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Classification

January 31, 2024

January 31, 2023

Operating lease cost

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Weighted-average lease terms and discount rates are as follows:

January 31, 2024

January 31, 2023

Weighted-average remaining lease term (years)

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Cash paid for amounts included in the measurement of lease liabilities:

January 31, 2024

January 31, 2023

Operating cash flows from operating leases

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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).

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.

We evaluate the performance of these entities based on operating profit, which is defined as income before income taxes, interest expense and other income and expenses.

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

We have sales forces in the USA, Canada, Mexico, Europe, Latin America, India, Russia, Kazakhstan, Australia, New Zealand 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 years noted therein:

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All appropriate subsequent event disclosures have been made in the consolidated financial statements.

On March 3, 2023 the Company changed the benchmark interest rate in its credit facility from the LIBOR to the Secured Overnight Financing Rate (“SOFR”).

On February 1, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend as part of the initiation of a recurring quarterly dividend program.

The initial quarterly dividend of $0.03 per share was paid on February 22, 2023, to stockholders of record as of February 15, 2023.

On February 5, 2024, the Company acquired Italy and Romania-based Jolly Scarpe S.p.A.

and Jolly Scarpe Romania S.R.L.

(collectively, "Jolly") in an all-cash transaction valued at approximately $ 9.3 million 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 provides a differentiated product portfolio through its continued investment in research and development and use of modern materials and cutting-edge technologies in the production of its footwear.

On March 28, 2024, the Company entered into Amendment No.

4 to Loan Agreement by and between Bank of America, N.A.

(the “Lender”) and the Company (the “Fourth Amendment”).

See Note 7, “Long-Term Debt” for additional information.

On April 2, 2024, Lakeland Global Safety, Ltd.

(“Lakeland Global”), a wholly-owned subsidiary the Company, entered into a Share Sale and Purchase Agreement (the “Purchase Agreement”), by and between Kantaras Investments Pte.

Ltd., Lakeland Global, and the Company, pursuant to which Lakeland Global acquired all of the shares of the fire and rescue business of LHD Group Deutschland GmbH, LHD Group Australia Pty Ltd and LHD Group Hong Kong Ltd., wholly-owned entities of Kantaras Investments Pte.

(collectively, the “LHD Group”) for a purchase price of EUR 15.4 million (approximately USD $ 16.7 million), subject to post-closing adjustments and customary holdback provisions.

The LHD Group is a leader in firefighter turnout gear, accessories, and Total Care services, including laundry, repair, and maintenance.

The transaction will be funded through the Company’s credit facility.

The acquisition is expected to close in May subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data