What changed in this filing

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Item 1. Financial Statements

2024-06-06 compared with 2023-12-07 · 201 added, 172 removed, 284 unchanged (57% of the section changed)

5 unchanged sentences

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:

4 unchanged sentences

Three Months Ended

Nine Months Ended

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation adjustments

Comprehensive income (loss)

Comprehensive income

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

5 unchanged sentences

Cash and cash equivalents

$ 26,425 $ 24,639

Accounts receivable, net of allowance for doubtful accounts of $ 769 and $ 800 at October 31, 2023 and January 31, 2023, respectively

18,227 17,296

54,350 58,176

Accounts receivable, net of allowance for doubtful accounts of $ 927 and $ 857 at April 30, 2024 and January 31, 2024, respectively

Prepaid VAT and other taxes

1 unchanged sentence

Total current assets

104,020 104,982

Property and equipment, net

2 unchanged sentences

Intangible assets, net

$ 148,315 $ 142,327

Equity investments

Convertible debt instruments

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

Accounts payable

$ 6,803 $ 6,558

Accrued compensation and benefits

5 unchanged sentences

Total current liabilities

15,511 17,988

Deferred income taxes

Loans payable – long term

Long-term portion of operating lease liabilities

Total liabilities

24,726 22,337

Commitments and contingencies

4 unchanged sentences

authorized 20,000,000 shares Issued 8,736,023 and 8,722,965 ;

outstanding 7,364,757 and 7,325,005 at October 31, 2023 and January 31, 2023, respectively

outstanding 7,377,815 and 7,364,757 at April 30, 2024 and January 31, 2024, respectively

Treasury stock, at cost;

1,358,208 and 1,330,694 shares at October 31, 2023 and January 31, 2023, respectively

( 19,979 ) ( 19,646 )

1,358,208 shares at April 30, 2024 and January 31, 2024, respectively

Additional paid-in capital

78,802 78,475

Retained earnings

70,480 64,765

Accumulated other comprehensive loss

( 5,801 ) ( 3,691 )

Total stockholders' equity

123,589 119,990

Total liabilities and stockholders' equity

$ 148,315 $ 142,327

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

6 unchanged sentences

Balance, January 31, 2023

Other comprehensive loss

Stock-based compensation:

Restricted stock issued

Restricted Stock Plan

Return of shares in lieu of payroll withholding

Treasury stock purchased

Balance, October 31, 2022

( 1,330,694 )

Balance, July 31, 2022

( 1,135,855 )

Other comprehensive loss

4 unchanged sentences

Treasury stock purchased

Balance, October 31, 2022

Balance, April 30, 2023

( 1,353,508 )

7 unchanged sentences

Treasury stock purchased

Balance, October 31, 2023

( 1,358,208 )

Balance, July 31, 2023

( 1,358,208 )

Other comprehensive loss

Stock-based compensation:

Restricted stock issued

Restricted stock plan

Return of shares in lieu of payroll withholding

Treasury stock purchased

Balance, October 31, 2023

Balance, April 30, 2024

( 1,358,208 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

Cash flows from operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities

Provision for (recovery of) doubtful accounts

Adjustments to reconcile net income to net cash provided by operating activities

Deferred income taxes

1 unchanged sentence

Stock based and restricted stock compensation

(Gain) loss on disposal of property and equipment

Loss on equity investment

Equity in (earnings) loss of equity investment

Revaluation of earnout consideration

2 unchanged sentences

Prepaid VAT and other taxes

Other current assets

Increase (decrease) in operating liabilities

2 unchanged sentences

Operating lease liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property and equipment

Acquisitions, net of cash acquired

Investments in convertible debt instruments

Net cash (used in) investing activities:

Cash flows from financing activities:

Short-term borrowings (repayments)

Credit facility borrowings

Payments on debt facilities

Purchase of treasury stock under stock repurchase program

1 unchanged sentence

Shares returned to pay employee taxes under restricted stock program

Net cash (used in) financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

16 unchanged sentences

In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control.

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

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

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

8 unchanged sentences

thus, for example, FY25 refers to the fiscal year ending January 31, 2025, (b) “Q” refers to quarter;

thus, for example, Q3 FY24 refers to the third quarter of the fiscal year ending January 31, 2024, (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, Q1 FY25 refers to the first quarter of the fiscal year ending January 31, 2025, (c) “Balance Sheet” refers to the unaudited condensed consolidated balance sheet, and (d) “Statement of Operations” refers to the unaudited condensed consolidated statement of operations.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standards updates (“ASUs”).

Management periodically reviews new accounting standards that are issued.

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.

Investments and Acquisitions

4 unchanged sentences

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

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.

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 of Bodytrak, including internally developed intellectual property.

On May 19, 2023, the Company entered into an agreement with Bodytrak to provide an additional investment 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.

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

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.

An additional investment funding of £700,000 ($ 0.9 million on the date of investment) was made on September 8, 2023.

Additional investment fundings of £700,000 ($ 0.9 million on the date of investment), £500,000 ($ 0.6 million on the date of investment) and £500,000 ($ 0.6 million on the date of investment) were made on September 8, 2023, December 15, 2023 and February 13, 2024, respectively.

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

4 unchanged sentences

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.

The Company recognized losses of $ 0.1 and $ 0.1 million for the three months ended October 31, 2023 and 2022, respectively, and recognized losses of $ 0.4 million and $ 0.3 million for the nine months ended October 31, 2023 and 2022, respectively, as the Company’s share of Bodytrak’s net loss.

The Company recognized losses of $ 0.1 million for each of the three months ended April 30, 2024 and 2023, 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.

Acquisition of Eagle

On December 2, 2022, the Company acquired 100 % of Eagle Technical Products Limited’s (Eagle) common stock in an all-cash transaction valued at $ 10.5 million, net of net working capital acquired.

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.

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

Acquisition of Jolly

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 Total consideration was $ 9.6 million, of which $ 7.5 million was paid to the seller at closing, $ 0.6 million paid to retire the remainder of Jolly’s debt and $ 1.5 million remained unpaid subject to post-closing adjustments and customary holdback provisions.

Jolly is a leading designer and manufacturer of professional footwear for the firefighting, military, police, and rescue markets.

The company is headquartered in Montebelluna, Italy, with manufacturing operations in Bucharest, Romania, and has 150 employees.

Jolly’s primary customers are based in Europe.

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

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

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 $0.5 million .

The adjustment to the accrued earnout payment of $ 1.5 million was recorded in the quarter ended October 31, 2023 and an adjustment of $ 2.7 million was recorded in the nine months ended October 31, 2023, and reflected as a reduction in operating expenses.

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

The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) expected to have a continuing impact on the combined company's results.

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

Jolly’s operating results and assets including acquired intangibles and goodwill will be reported as part of Europe in our geographic segment reporting.

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

Net working capital acquired

Property, plant and equipment

Customer relationships

Trade names and trademarks

Technological know-how

Total 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 Jolly’s pre-acquisition forecasts.

Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives.

The customer relationships, trade names and trademarks and technological know-how acquired in the Jolly transaction are being amortized over periods of 14 years, 10 years and 10 years, respectively.

Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Jolly with our operations.

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, 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 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$14,000,000 ($ 8.6 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 fell below NZ$ 11.1 million for Pacific’s fiscal year ended March 31, 2024 subject to certain conditions.

The amount of the reduction to the holdback to be paid by Pacific is $0.3 million .

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 Jolly and Pacific acquisitions had occurred at the beginning of FY24.

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

(2) factually supportable;

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

There were no material transactions between the Company, Jolly and Pacific 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.

Pro forma combined financial information (Unaudited)

(in millions, except per share amounts)

Three Months Ended

October 31, 2022

Nine Months Ended

October 31, 2022

Net income (loss)

(in millions, except per share amount)

Quarter Ended April 30,

Basic earnings per share

4 unchanged sentences

The Company has been treated as the acquirer.

Acquisition of Eagle

On December 2, 2022, the Company acquired 100% of Eagle Technical Products Limited’s (Eagle) common stock in an all-cash transaction valued at $ 10.5 million, net of net working capital acquired.

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.

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

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

At January 31, 2024, the Company had recorded $0.6 million for the earnout payment for the period May 1, 2023 through April 30, 2024, using a Monte Carlo simulation.

Based on Eagle’s revenue for the period May 1, 2023 through April 30, 2024, the earnout payment was $0.2 million.

The adjustment to the accrued earnout payment of $0.4 million was recorded in the quarter ended April 30, 2024 and reflected as a reduction in operating expenses .

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

October 31, 2023

January 31, 2023

Raw materials

3 unchanged sentences

Goodwill and Intangible Assets, Net

Changes in intangible assets, net, during the three and nine months ended October 31, 2023, were as follows (in $000s):

Balance at February 1, 2023

Amortization expense

Changes in goodwill during the quarters ended April 30, 2024 and 2023, were as follows (in $000s):

Balance at January 31

Measurement period adjustment

Balance at April 30

Amortization expense

Balance at July 31, 2023

Amortization expense

Balance at October 31, 2023

There were no material changes to goodwill during the three and nine month periods ended October 31, 2023.

Changes in intangible assets during the quarters ended April 30, 2024 and 2023, were as follows (in $000s):

Balance at January 31

Balance at April 30

Contract Advances

2 unchanged sentences

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

The following is a roll-forward of the advances from January 31, 2023 through October 31, 2023 (in $000s):

The following is a roll-forward of the advances from January 31, 2024 through April 30, 2024 and from January 31, 2023 through April 30, 2023 (in $000s):

Contract liability – January 31

1 unchanged sentence

Decreases to contract liability

Contract liability – October 31, 2023

Contract liability – April 30

Long-Term Debt

Revolving Credit Facility

On June 25, 2020, the Company entered into a Loan Agreement with Bank of America (“Lender”).

The Loan Agreement, as amended to date (the “Loan Agreement”), provides the Company with a secured $25.0 million revolving credit facility, which includes a $ 5 .0 million letter of credit sub-facility.

The Company may request from time to time an increase in the revolving credit loan commitment of up to $5.0 million (for a total commitment of up to $30.0 million).

Borrowing pursuant to the revolving credit facility is subject to a borrowing base amount calculated as (a) 80% of eligible accounts receivable, as defined, plus (b) 50% of the value of acceptable inventory, as defined, minus (c) certain reserves as the Lender may establish for the amount of estimated exposure, as reasonably determined by the Lender from time to time, under certain interest rate swap contracts.

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 Loan Agreement permits, without the prior consent of the Lender, acquisitions of a business or its assets by the Company or its subsidiaries 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.

On June 25, 2020, the Company entered into a Loan Agreement (the “Loan Agreement”) with Bank of America (the “Lender”).

The Loan Agreement provided the Company with a secured $ 25.0 million revolving credit facility, which included a $ 5.0 million letter of credit sub-facility.

The Company could request from time to time an increase in the revolving credit loan commitment of up to $5.0 million (for a total commitment of up to $30.0 million).

Borrowing pursuant to the revolving credit facility was subject to a borrowing base amount calculated as (a) 80% of eligible accounts receivable, as defined, plus (b) 50% of the value of acceptable inventory, as defined, minus (c) certain reserves as the Lender may establish for the amount of estimated exposure, as reasonably determined by the Lender from time to time, under certain interest rate swap contracts.

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

The Loan Agreement permitted, without the prior consent of the Lender, acquisitions of a business or its assets by the Company or its subsidiaries if there was no default under the Loan Agreement and the aggregate consideration did not exceed $ 7.5 million for any individual acquisition or $ 15.0 million on a cumulative basis for all such acquisitions.

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

The credit facility will mature on June 25, 2025 .

As of October 31, 2023, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

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

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

3 to the Loan Agreement.

See Note 14, Subsequent Events, for additional information.

3 to the Loan Agreement by and between 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.

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

4 to the Loan Agreement by and between 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 .

We were in compliance with all financial covenants of the Loan Agreement as of April 30, 2024.

As of April 30, 2024, the Company had no borrowings outstanding on the letter of credit sub-facility and borrowings of $ 12.3 million outstanding under the revolving credit facility.

Borrowings in UK

There were $ 0 and $ 0.4 million in borrowings outstanding under the Company’s credit facility with HSBC Bank at October 31, 2023 and January 31, 2023.

There were no borrowings outstanding under the Company’s credit facility with HSBC Bank at April 30, 2024 and 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 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.

There were no borrowings under this facility at April 30, 2024 and $ 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 and $ 0.7 million at April 30, 3024 and January 31, 2024, respectively.

Concentration of Risk

7 unchanged sentences

China Industrial and Commercial Bank;

Rural Credit Cooperative of Shandong;

Royal Bank of Scotland, Rural Credit Cooperative of Shandong;

Postal Savings Bank of China;

5 unchanged sentences

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, BNL Banca Nazionale del Lavoro, Monte Dei Paschi di Siena and Banca delle Terre Venete in Italy 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 $ 6.3 million total included in the U.S.

bank accounts and approximately $ 20.1 million total in foreign bank accounts as of October 31, 2023, of which $ 25.6 million was uninsured.

There was approximately $ 2.6 million total included in U.S.

bank accounts and approximately $ 25.8 million total in foreign bank accounts as of April 30, 2024, of which $ 27.6 million was uninsured.

Major Customer

No customer accounted for more than 10 % of net sales during the three and nine-month periods ended October 31, 2023 and 2022.

No customer accounted for more than 10 % of net sales during the three-month periods ended April 30, 2024 and 2023.

Major Supplier

No vendor accounted for more than 10 % of purchases during the three and nine-month periods ended October 31, 2023 and 2022.

No vendor accounted for more than 10 % of purchases during the three-month periods ended April 30, 2024 and 2023.

Stockholders’ Equity

2 unchanged sentences

The executive officers and all other employees and directors of the Company, including its subsidiaries, are eligible to participate in the 2017 Plan.

The 2017 Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), except that with respect to all non-employee directors, the Committee shall be deemed to include the full Board.

The 2017 Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), except that with respect to all non-employee directors, the 2017 Plan is administered by the full Board.

The 2017 Plan provides for the grant of equity-based compensation in the form of stock options, restricted stock, restricted stock units, performance shares, performance units, or stock appreciation rights (“SARs”).

4 unchanged sentences

If any shares subject to an award are forfeited, expire, lapse or otherwise terminate without issuance of such shares, such shares shall, to the extent of such forfeiture, expiration, lapse or termination, again be available for issuance under the 2017 Plan.

On June 13, 2024, the stockholders of the Company will vote on a proposed Amendment No.

2 to the 2017 Plan, which would increase the number of shares of common stock, par value $ 0.01 per share, of the Company reserved for issuance under the 2017 Plan by 400,000 shares.

The Company recognized total stock-based compensation costs, which are reflected in operating expenses (in $000’s):

Three Months Ended

Nine Months Ended

Three Months Ended April 30,

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 nine months ended October 31, 2023 and 2022.

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

The following table summarizes the activity under the 2017 Plan for the three months ended April 30, 2024 and 2023.

This table reflects the amount of awards granted and the number of shares that would be vested if the Company were to achieve the maximum performance level under the June 2021, June 2022, March 2023 and April 2024 grants.

Service-Based

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Outstanding at January 31, 2024

Outstanding at October 31, 2023

Outstanding at April 30, 2024

Service-Based

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Outstanding at January 31, 2023

Outstanding at October 31, 2022

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 in part on measures that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and free cash flow for the June 2021 grants and revenue growth and EBITDA margin for the April 2022 and June 2022 grants and revenue growth, EBITDA margin and return on invested capital for the March 2023 grants.

Outstanding at April 30, 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 revenue growth and Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin for the April 2022 grants.

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

Performance measures for the April 2024 grants are revenue growth, EBITDA margin and free cash flow margin.

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

The actual performance amount achieved is determined by the Committee and may be adjusted for items determined to be unusual in nature or infrequent in occurrence, at the discretion of the Committee.

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 October 31, 2023, unrecognized stock-based compensation expense totaled $ 1.9 million pursuant to the 2017 Plan based on outstanding awards under the 2017 Plan.

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

As of April 30, 2024, unrecognized stock-based compensation expense totaled $ 1.7 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.

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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.

As of October 31, 2023, there was $ 5.0 million remaining under the share repurchase program.

No shares were repurchased during the three months ended April 30, 2024, leaving $ 5.0 million remaining under the share repurchase program at April 30, 2024.

The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time.

The Company’s provision for income taxes for the three and nine months ended October 31, 2023 and 2022 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 FY24 was 26.4 %, 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 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 state income taxes.

The Company's effective tax rate for the nine months ended October 31, 2023 was 29.5 %, 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 nine months ended October 31, 2022 was 68.1 %.

The Company recorded $ 2 million in withholding taxes for a planned repatriation of cash from our China operations.

In addition to the $ 2 million discrete item, 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.

The Company’s provision for income taxes for the three months ended April 30, 2024, and 2023 is based on the estimated annual effective tax rate, in addition to discrete items.

The Company’s effective tax rate for the first quarter of FY25 was 19.0%, 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”) and impacts from the final earn-out adjustments related to the Pacific and Eagle acquisitions.

The Company's effective tax rate for the first quarter of FY24 was 29.1% which differs from the U.S.

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

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 $ 4.0 million and $ 3.6 million at October 31, 2023 and January 31, 2023, 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):

The valuation allowance was $ 6.9 million and $ 6.7 million as of April 30, 2024 and January 31, 2024, respectively.

With the exception of our UK and China subsidiaries for which we accrue relevant deferred tax impacts related to non-indefinitely reinvested cash, we consider the excess of the amount for financial reporting over the tax basis (including undistributed and previously taxed earnings) of investments in our other foreign subsidiaries as of April 30, 2024 to be indefinitely reinvested in the foreign jurisdictions on the basis of our specific plan for reinvestment and estimates that future domestic cash generation will be sufficient to meet future domestic cash needs.

Therefore, we have not provided for deferred taxes related to such excess or the relevant portions thereof and disclosed that the determination of any deferred taxes related to this excess is not practicable in those permanently reinvested jurisdictions.

We have made no changes to our policy on indefinite reinvestment during the quarter ended April 30, 2024.

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

Net income (loss)

Denominator for basic net income (loss) per share (weighted-average shares which exclude shares in the treasury, 1,358,208 and 1,330,694 at October 31, 2023 and 2022, respectively

Denominator for basic net income per share (weighted-average shares which exclude shares in the treasury, 1,358,208 and 1,353,508 at April 30, 2024 and 2023, respectively

Effect of dilutive securities from restricted stock plan

Denominator for diluted net income (loss) per share (adjusted weighted average shares)

Basic net income (loss) per share

Diluted net income (loss) per share

For the current and prior year periods presented, there were no securities excluded from the calculation of diluted earnigs per share because they were anti-dilutive.

Denominator for diluted net income per share (adjusted weighted average shares)

Basic net income per share

Diluted net income per share

Contingencies

Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.

The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s management and legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been or is probable of being incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements.

Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.

The Company’s management and legal counsel assess such contingent liabilities, which inherently involve an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

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, 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.

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.

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

As of October 31, 2023, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.

As of April 30, 2024, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.

Segment Reporting

We manage our operations by evaluating each of our geographic locations.

Our US operations include a facility in Alabama (primarily the distribution to customers of the bulk of our products).

The Company also maintains one manufacturing company in China (primarily disposable and chemical suit production), a manufacturing facility in Mexico (primarily disposable, reflective, fire service and chemical suit production), a manufacturing facility in Vietnam (primarily disposable production) and a small manufacturing facility in India.

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), a manufacturing facility in New Zealand (helmets) 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.

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

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 three-month periods noted therein:

Three Months Ended

Nine Months Ended

(in millions of dollars)

USA Operations (including Corporate)

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Three Months Ended

Nine Months Ended

(in millions of dollars)

Operating Profit (Loss):

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Consolidated operating profit

April 30, 2024

January 31, 2024

(in millions of dollars)

Total Assets Less Intersegment:

Total Assets:

USA Operations (including Corporate)

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(in millions of dollars)

Nine Months Ended

(in millions of dollars)

External Sales by product lines:

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Subsequent Events

On November 1, 2023, the Company’s Board of Directors declared a quarterly cash dividend.

The quarterly dividend of $ 0.03 per share or approximately $ 0.2 million, was paid on November 22, 2023, to stockholders of record as of November 15, 2023.

On November 27, 2023, the Company sold its office and warehouse facility in Brantford, Ontario to an unrelated party for $ 4.9 million.

The sale will result in a pre-tax gain, after selling expenses, of approximately $ 3.8 million.

Going forward, the Company will utilize third party logistics providers for customer fulfillment in Canada.

On November 30, 2023 the Company acquired New Zealand-based Pacific Helmets NZ Limited (“Pacific”) in an all-cash transaction valued at approximately NZ$14.000,000 ($ 8.6 million), 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.

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

3 to 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.

Acquisition of LHD Group

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 will acquire 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 and is expected to close in June 2024.

Second Quarter Dividend

On May 1, 2024, the Company’s Board of Directors declared a quarterly cash dividend.

The quarterly dividend of $ 0.03 per share or approximately $ 0.2 million, was paid on May 22, 2024, to stockholders of record as of May 15, 2024.

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