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Item 1A. Risk Factors

2025-04-17 compared with 2024-04-11 · 97 added, 73 removed, 261 unchanged (39% of the section changed)

ITEM 1A RISK FACTORS

You should carefully consider the following risks before investing in our common stock.

These are not the only risks that we may face.

The risks and uncertainties described below are those that we have identified as material, but they are not the only risks that we may face.

If any of the events referred to below actually occur, our business, financial condition, liquidity and results of operations could suffer.

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We are subject to risk as a result of our international manufacturing operations.

Because most of our products are manufactured at our facilities located in China, Vietnam, Mexico, Argentina and India, our operations are subject to risks inherent in doing business internationally.

Such risks include the adverse effects on operations from corruption, war, international terrorism, civil disturbances, political instability, government activities such as border taxes and renegotiation of treaties, deprivation of contract and property rights and currency valuation changes.

Because most of our products are manufactured at our facilities located in China, Vietnam, Mexico, Argentina, New Zealand, Romania and India, our operations are subject to risks inherent in doing business internationally.

Such risks include the adverse effects on operations from corruption, war, international terrorism, civil disturbances, political instability, trade wars, government activities such as border taxes and renegotiation of treaties, deprivation of contract and property rights and currency valuation changes.

Based on the complex relationships between China and the U.S., there is an inherent risk that political, diplomatic, military, or other events could result in business disruptions, including increased regulatory enforcement against companies, tariffs, trade embargoes, and export restrictions.

In recent years, the United States has imposed tariffs on various products imported into the United States.

These tariffs have resulted in, and may continue to trigger, retaliatory actions by affected countries, including the imposition of tariffs on the United States by other countries.

Under the current administration, trade policy has been a central focus, with renewed scrutiny on trade relationships with China and efforts to renegotiate or withdraw from key agreements such as the United States-Mexico-Canada Agreement (USMCA).

This shift has included the introduction of additional tariffs, including on Mexican, Canadian, Chinese, Vietnamese, European Union and Indian goods, targeted sanctions, and restrictions on investments linked to industries deemed critical to U.S.

national security.

Certain foreign governments, such as China, Canada, Mexico and the European Union, have instituted or are considering imposing trade sanctions on certain U.S.

goods and denying U.S.

companies access to critical raw materials.

The extent and duration of increased tariffs, which we are unable to predict, and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S.

and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets.

Tariffs increase the cost of our products and the components and raw materials that go into making them.

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Changing our operations in accordance with new or changed trade restrictions can be expensive, time-consuming, disruptive to our operations and distracting to management.

Such restrictions can be announced with little or no advance notice, and we may not be able to mitigate all adverse impacts from such measures, effectively.

Such restrictions have been, and in the future may be announced, amended, paused, reinstated or rescinded with little or no advance notice, and we may not be able to mitigate all adverse impacts from such measures, effectively.

Political uncertainty surrounding trade and other international disputes could also have a negative effect on consumer confidence and spending.

Any of these events could reduce customer demand, increase the cost of our products and services, or otherwise have a materially adverse impact on our customers’ and suppliers’ businesses and results of operations.

A terrorist attack or other geopolitical crisis could negatively impact our domestic and/or international operations.

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The occurrence of any of these events could have an adverse effect on our business results and financial condition.

The impact of the invasion of Ukraine, including economic sanctions or additional war or military conflict, as well as potential responses to them by Russia, could adversely affect the Company’s business, supply chain, suppliers or customers and potentially heighten our risk of cyber-attacks.

In addition, the continuation of Russia's invasion of Ukraine could lead to other disruptions, instability, and volatility in global markets and industries that could negatively impact the Company’s operations.

The impact of the invasion of Ukraine, including economic sanctions or expansions of the war or other military conflicts, as well as potential responses to them by Russia, could adversely affect the Company’s business, supply chain, suppliers or customers and potentially heighten our risk of cyber-attacks.

In addition, although negotiations for a potential ceasefire are ongoing, there is no certainty as to whether, when, or for how long any such ceasefire would have effect, and the continuation of Russia's invasion of Ukraine could lead to other disruptions, instability, and volatility in global markets and industries that could negatively impact the Company’s operations.

It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability of raw materials, supplies, freight and labor, currency exchange rates and financial markets, all of which could impact the Company’s business, financial condition and results of operations.

Further escalation of specific trade tensions, including those between the U.S.

and China, or more broadly in global trade conflicts, could adversely impact the Company's business and operations.

and China, and those between the U.S.

and Mexico and Canada, or more broadly in global trade conflicts, could adversely impact the Company's business and operations.

The Company's business is also impacted by social, political, and labor conditions in locations in which the Company or its suppliers or customers operate;

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For example, changes in local economic conditions or outlooks, such as lower economic growth rates in China, Europe, or other key markets, impact the demand or profitability of the Company's products.

Pandemics or disease outbreaks, such as COVID-19, may cause unfavorable economic or market conditions, which could impact demand patterns and/or disrupt global supply chains and manufacturing operations.

Collectively, these outcomes could materially and adversely affect our business, results of operations and financial condition.

Pandemics or disease outbreaks such as COVID-19 could result in a widespread health crisis that could adversely affect the economies of developed and emerging markets, potentially resulting in an economic downturn that could affect customers’ demand for our products in certain industrial-based end-markets.

The spread of pandemics or disease outbreaks may also disrupt the Company’s manufacturing operations, supply chain, or logistics necessary to import, export and deliver products to our customers.

During a pandemic or crisis, applicable laws and response directives could, in some circumstances, adversely affect our ability to operate our plants, or to deliver our products in a timely manner.

The enactment of laws and directives aimed at mitigating health crises may also hinder our ability to move certain products across borders.

Economic conditions can also influence order patterns.

These factors could negatively impact our consolidated results of operations and cash flow.

We have significant international operations and are subject to the risks of doing business in foreign countries, particularly in China and Vietnam, which could affect our ability to manufacture or sell our products, obtain products from foreign suppliers or control the costs of our products.

We have business operations in approximately 60 foreign countries.

We have business operations in 16 foreign countries.

In FY25, more than half of our net sales were made by operations outside the United States.

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unexpected changes in regulatory requirements;

changes in trade policy or tariff regulations;

changes in trade policy or tariff regulations, including the current U.S.

presidential administration’s announced policy of increasing tariffs on all imports and threatening heightened tariffs in specific circumstances, including on certain goods imported from China, Vietnam, India, Mexico and other countries;

changes in tax laws and regulations;

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pandemics and similar disasters.

In particular, because a majority of our products are manufactured in China and Vietnam, the possibility of adverse changes in trade or political relations with China or Vietnam, political instability in China or Vietnam, increases in labor costs, the occurrence of prolonged adverse weather conditions or a natural disaster such as an earthquake or typhoon in China or Vietnam, or the outbreak of a pandemic disease in China or Vietnam could severely interfere with the manufacturing and/or shipment of our products and would have a material adverse effect on our operations.

In particular, because a majority of our products are manufactured in China and Vietnam, the possibility of further adverse changes in trade or political relations with China or Vietnam, political instability in China or Vietnam, increases in labor costs, the occurrence of prolonged adverse weather conditions or a natural disaster such as an earthquake or typhoon in China or Vietnam, or the outbreak of a pandemic disease in China or Vietnam could severely interfere with the manufacturing and/or shipment of our products and would have a material adverse effect on our operations.

Our business operations may be adversely affected by the current and future political environment in the People’s Republic of China (“PRC”).

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Accordingly, any adverse change in the Chinese economy, the PRC legal system or the PRC governmental, economic or other policies could have a material adverse effect on our entities in the PRC and our prospects generally.

The ongoing trade war between the U.S.

and China could exacerbate these risks.

We face additional risks in the PRC due to the country’s historically limited recognition and enforcement of contractual and intellectual property rights.

We may experience difficulty enforcing our intellectual property rights in the PRC.

We may have trouble enforcing our intellectual property rights in the PRC.

Unauthorized use of our technologies and intellectual property rights by partners or competitors may dilute or undermine the strength of our brands.

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Currency volatility;

Global crises, such as the COVID-19 pandemic, oil spills, or Ebola outbreak;

Global crises, such as pandemics, oil spills, or Ebola outbreaks;

Our expansion of international operations;

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These activities are subject to inherent risks such as natural disasters, power outages, fires or explosions, labor strikes, terrorism, epidemics, pandemics, import restrictions, regional economic, business, environmental or political events, governmental regulatory requirements or nongovernmental voluntary actions in response to global climate change or other concerns regarding the sustainability of our business, which could disrupt our supply chain and impair our ability to manufacture or sell our products.

This interruption, if not mitigated in advance or otherwise effectively managed, could adversely impact our business, financial condition and results of operations and require additional resources to address.

If not mitigated in advance or otherwise effectively managed, this interruption could adversely impact our business, financial condition and results of operations and require additional resources to address.

Climate change and other sustainability matters may adversely affect our business and operations.

There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters.

We have transition risks related to the transition to a lower-carbon economy and physical risks related to the physical impacts of climate change.

We have transition risks related to the transition to a lower-carbon economy and physical risks associated with the physical impacts of climate change.

Transition risks include increased costs of carbon emission, increased cost to produce products in compliance with future regulations, increased raw materials cost, shifts in customer/consumer values and other legal, regulatory and technological risks.

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Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to sustainability matters, which could adversely affect our business.

The spread of pandemics or disease outbreaks may also disrupt the Company’s manufacturing operations, supply chain, or logistics necessary to import, export and deliver products to our customers.

During a pandemic or crisis, applicable laws and response directives could, in some circumstances, adversely affect our ability to operate our plants or to deliver our products in a timely manner.

The enactment of laws and directives aimed at mitigating health crises may also hinder our ability to move certain products across borders.

Economic conditions can also influence order patterns.

Collectively, these outcomes could materially and adversely affect our business, results of operations and financial condition.

Because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could negatively impact our inventory levels and net sales.

Our sales are generally made on the basis of individual purchase orders, which may later be modified or canceled by the customer rather than on long-term commitments.

We have historically been required to place firm orders for fabrics and components with our suppliers prior to receiving an order for our products based on our forecasts of customer demands.

Our sales are generally made based on individual purchase orders, which may later be modified or canceled by the customer rather than on long-term commitments.

We have historically been required to place firm orders for fabrics and components with our suppliers before receiving an order for our products based on our forecasts of customer demands.

Our sales process requires us to make multiple demand forecast assumptions, each of which may introduce errors in our estimates, causing excess inventory to accrue or a lack of manufacturing capacity when needed.

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On occasion, we have been unable to adequately respond to delivery dates required by our customers because of the lead time needed for us to obtain required materials or to send fabrics to our assembly facilities in China, Vietnam, India, and Mexico.

The markets in which we compete are highly competitive, and some of our competitors have greater financial and other resources than we do.

The markets we compete in are highly competitive, and some of our competitors have greater financial and other resources than we do.

Some of our competitors have greater financial and other resources than we do, and our business could be adversely affected by competitors’ new product innovations, technological advances made to competing products and pricing changes made by us in response to competition from existing or new competitors.

We may not be able to compete successfully against current and future competitors, and the competitive pressures faced by us could have a material adverse effect on our business, consolidated results of operations and financial condition.

We may not be able to compete successfully against current and future competitors, and the competitive pressures we face could have a material adverse effect on our business, consolidated results of operations and financial condition.

In addition, e-business is a rapidly developing area, and the execution of a successful e-business strategy involves significant time, investment, and resources.

Five of our competitors, DuPont, Honeywell, Ansell, MSA and Kimberly Clark, have substantially greater financial, marketing and sales resources than we do.

Three of our competitors, DuPont, Ansell, and MSA, have substantially greater financial, marketing and sales resources than we do.

In addition, we believe that the barriers to entry in the disposable and reusable garments and gloves markets are relatively low.

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Our performance is substantially dependent on the continued services and performance of our senior management and certain other key personnel, including James M.

Jenkins, our Acting President and Chief Executive Officer and Executive Chairman;

Jenkins, our President and Chief Executive Officer and Executive Chairman;

Shannon, our Chief Financial Officer and Secretary;

Helena An, our Chief Operating Officer, and Joshua Sletten our Vice President of Corporate Development and Strategy.

Helena An, our Chief Operating Officer, Laurel A.

Yartz, our Chief Human Resources Officer;

Phillips, our Chief Revenue Officer – Fire;

and Cameron S.

Stokes our Chief Commercial Officer – Global Industrials.

The loss of services of any of our executive officers or other key employees could have a material adverse effect on our business, financial condition, and results of operations.

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Such incidents can range from individual attempts to gain unauthorized access to information technology systems through phishing emails to more sophisticated security threats.

These events can also result from internal compromises, such as human error or rogue employees or contractors, and can occur on our systems or on the systems of our partners and subcontractors.

These events can also result from internal compromises, such as human error or rogue employees or contractors, and can occur on our systems or the systems of our partners and subcontractors.

In addition, the number and frequency of cybersecurity events globally may be heightened during times of geopolitical tension or instability between countries, including, for example, the ongoing war between Russia and Ukraine.

Security breaches of our systems or security breaches of third parties’ systems on which we rely to process, store, or transmit electronic information could result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data, as well as material disruptions to our operations that could impact services.

We employ various measures to prevent, detect, address and mitigate cybersecurity threats (including access controls, vulnerability assessments, training for all employees, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems).

We employ various measures to prevent, detect, address and mitigate cybersecurity threats (including access controls, vulnerability assessments, training for employees with electronic access to confidential information, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems).

However, our security measures may be inadequate to prevent security breaches, and our business operations and reputation could be materially adversely affected by these events and any resulting federal and state fines and penalties, legal claims or proceedings.

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As cyber threats continue to evolve, we may be required to expend significant capital and other resources to protect against the threat of security breaches or to mitigate and alleviate problems caused by security incidents.

While risks from identified cybersecurity threats or previous cybersecurity incidents to date have not materially affected our business strategy, results of operations or financial condition to date, there can be no assurance that such risks will not have a material adverse effect in the future.

While there have been no identified cybersecurity incidents, in the last three years that have materially affected our business strategy, results of operations or financial condition to date, there can be no assurance that such risks will not have a material adverse effect in the future.

Data privacy and security laws relating to the handling of personal information are evolving across the world and may be drafted, interpreted, or applied in a manner that results in increased costs, legal claims, fines against us, or reputational damage.

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and international data privacy, security and data breach notification laws, as well as contractual requirements that may govern the collection, use, disclosure and protection of personal data.

For example, in the United States, individual states regulate data breach notification requirements as well as more general privacy and security requirements.

Certain of these laws grant individuals various rights with respect to personal information, and we may be required to expend significant resources to comply with these laws.

Further, all 50 states, the District of Columbia and U.S.

For example, in the United States, individual state statutes establish mandatory data breach notification requirements as well as more general privacy and security requirements.

All 50 states, the District of Columbia and U.S.

territories have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected persons and/or state regulators in the event of a data breach or compromise, including when their personal information has or may have been accessed by an unauthorized person.

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Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information.

In addition, certain states’ privacy, security, and data breach laws, including, for example, the California Consumer Privacy Act (“CCPA”) (as amended by the California Privacy Rights Act), include private rights of action that may expose us to private litigation regarding our privacy and security practices and significant damages awards or settlements in civil litigation.

Compliance with the varying data privacy regulations across the United States and around the world may require expenditures and changes in our business models.

Failure to comply with these statutory requirements, or even the occurrence of a data breach, can subject us to legal, regulatory, and reputational risks, as well as the financial risks that can accompany regulatory investigations and enforcement actions and private litigation.

In addition, various state privacy laws grant individuals various rights with respect to personal information and may require significant expense and resources to comply with these laws.

For example, the California Consumer Privacy Act (“CCPA”) (as amended by the California Privacy Rights Act) is one of a few state privacy laws that include private rights of action that may expose us to private litigation regarding our privacy and security practices and significant damages awards or settlements in civil litigation.

Outside the United States, as our company continues to grow internationally through acquisitions as well as expanded business operations, we may be subject to established and continuously evolving international laws and regulations regarding individual rights around personal information and the cross-border transfers thereof.

For example, Regulation (EU) 2016/679 (General Data Protection Regulation) (“GDPR”) and its counterpart in the United Kingdom, the Personal Information Protection Law of the People's Republic of China, adopted August 20, 2021, effective November 1, 2021 (“PIPL”), the Personal Information Protection and Electronic Documents Act in Canada (“PIPEDA”), and other such international privacy laws around the world, as well as their implementing regulations, contain data breach notification requirements, outline certain obligations and restrictions around the collection, processing, and cross-border transfers of personal information, and may also grant individuals certain consumer rights over their personal information.

Given our organization’s international locations and global distribution networks, compliance with the varying data privacy requirements in effect across the United States and around the world, particularly as they continue to evolve in many countries, may necessitate expenditures and changes in our business models.

Failure to comply with these requirements can subject us to legal, regulatory, and reputational risks, as well as the financial risks that can accompany regulatory investigations, enforcement actions and private litigation.

Our success depends in part on our proprietary technology, and if we fail to successfully obtain or enforce our intellectual property rights, our competitive position may be harmed.

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Our inability to maintain the proprietary nature of our technology through patents, copyrights or trade secrets would impair our competitive advantages and could have a material adverse effect on our operating results, financial condition and future growth prospects.

In particular, a failure to protect our intellectual property rights might allow competitors to copy our technology or create counterfeit or pirated versions of our products, which could adversely affect our reputation, pricing and market share.

A failure to protect our intellectual property rights might allow competitors to copy our technology or create counterfeit or pirated versions of our products, which could adversely affect our reputation, pricing and market share.

Our inability to successfully identify, consummate and integrate current and future acquisitions and strategic investments or to realize anticipated cost savings and other benefits could adversely affect our business.

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To the extent that we are unable to manage growth efficiently and effectively or are unable to attract and retain additional qualified management personnel, our business, financial condition and results of operations could be materially and adversely affected.

On November 30, 2023, the Company acquired New Zealand-based Pacific Helmets NZ Limited ("Pacific") in an all-cash transaction valued at approximately $8.5 million, subject to post-closing adjustments and customary holdback provisions.

Pacific Helmets is a leading designer and manufacturer of helmets for the structural firefighting, wildland firefighting, and rescue markets.

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

Beginning in October 2021, the Company has made a series of strategic investments totaling $8.0 million in Inova Design Solutions Ltd.

(doing business as Bodytrak®) (“Bodytrak”) as a step toward entering the Connected Worker Market for “Smart PPE.” Through January 31, 2024, the Company has recognized a total of $1.1 million in losses from its investment in Bodytrak.

The Company may incur additional losses.

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 the use of modern materials and cutting-edge technologies in the production of its footwear.

See Note 15, “Subsequent Events,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information.

Changes in financial accounting standards or policies have affected, and in the future may affect, our reported financial condition or results of operations;

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As a result, there can be no assurance that our system of internal and disclosure controls and procedures will be successful in preventing all errors, theft and fraud or in informing management of all material information in a timely manner.

For example, as disclosed in Item 9A of this annual report, we have remediated a material weakness related to controls over our foreign subsidiary currency translation or remeasurement to ensure the foreign subsidiary’s account balances were accurately stated in the consolidated financial statements.

For example, as disclosed in Item 9A of this annual report, we are in the process of remediating a material weakness related to inconsistencies in enterprise-wide controls over financial reporting resulting from our acquisition of several subsidiaries over the past two years.

We can give no assurance that additional material weaknesses will not arise in the future.

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Increasing regulatory burdens and corporate governance requirements could make it more difficult for us to attract and retain qualified members of our Board of Directors and qualified executive officers.

We are implementing a new enterprise resource planning system, and challenges with the planning or implementation of the system may impact our internal control over financial reporting, business and operations.

We are undertaking a multi-year process of implementing a complex new SAP enterprise resource planning system (“ERP”), which is a major undertaking that will replace most of our existing operating and financial systems.

An ERP system is used to maintain financial records, enhance data security and operational functionality and resiliency, and provide timely information to management related to the operation of a business.

The SAP ERP implementation will require the integration of the new ERP with existing information systems and business processes.

Our ERP planning has required, and the ongoing planning and future implementation of the new ERP will continue to require, investment of significant capital and human resources, requiring the attention of members of our management team.

Any deficiencies in the design, or delays or issues encountered in the implementation, of the new SAP ERP could result in significantly greater capital expenditures and employee time and attention than currently contemplated and could adversely affect our ability to operate our business, including effective management of our invoicing and accounts receivable and collections processes, file timely reports with the SEC or otherwise affect the proper and efficient operation of our controls.

If the system as implemented, or after necessary investments, does not result in our ability to maintain accurate books and records, our financial condition, results of operations, and cash flows could be materially adversely impacted.

Additionally, conversion from our old system to the new ERP may also cause inefficiencies until the ERP is stabilized and mature.

The implementation of our new ERP will require new procedures and many new controls over financial reporting.

If we are unable to adequately plan, implement and maintain procedures and controls relating to our ERP, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and impact the effectiveness of our internal control over financial reporting.

All of the above could result in harm to our reputation or our customers, as well as expose us to regulatory actions or claims, any of which could materially impact our business, results of operations, financial condition and stock price.

We have identified a material weakness in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in a loss of investor confidence and adversely impact the trading price of our securities.

As disclosed in Part II - Item 9A.

Controls and Procedures, management has identified a material weakness in our internal control over financial reporting relating to controls over the completeness and accuracy of the Company’s foreign reporting packages which are the basis preparation of our consolidated financial statements.

As a result, management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of January 31, 2025.

The material weakness did not result in any material misstatements to the Company’s consolidated financial statements, and the Company is currently working to remediate the material weakness.

However, there can be no assurance that these remediation efforts will be successful.

In addition, these remediation efforts will place a burden on management and may result in additional expenses.

If we are unable to remediate this material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within the required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, result in violations of applicable securities laws, result in an inability to meet Nasdaq listing requirements, negatively affect investor confidence in the accuracy and completeness of our financial statements, and adversely impact the trading price of our securities.

Financial Risks

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There can be no assurance that we will be able to increase product prices to offset any such cost increases, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.

We are also exposed to foreign currency exchange rate risks as a result of our sales to customers in foreign countries in the amount of $69.3 million in FY24.

We are also exposed to foreign currency exchange rate risks due to our sales to customers in foreign countries in the amount of $106.8 million in FY25.

Our sales in these countries are usually denominated in the local currency.

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To manage this volatility, we seek to limit, to the extent possible, our non-US dollar-denominated purchases and sales.

In connection with our operations in China, we purchase a significant amount of products from outside of the United States.

In connection with our operations in China, we purchase a significant number of raw materials and components from outside of the United States.

However, our purchases in China are primarily made in the RMB, the value of which has floated for the last 7 years, and therefore, we have been exposed to additional foreign exchange rate risk on our Chinese raw material and component purchases.

Our primary risk from foreign currency exchange rate changes is presently related to non-US dollar-denominated sales in China, Canada and Europe and, to a smaller extent, in South American countries and Russia.

Our sales to customers in Canada are denominated in Canadian dollars, Europe in Euros and British pounds, and China in RMB and U.S.

Our primary risk from foreign currency exchange rate changes is related to non-US dollar-denominated sales in China, Canada, South America and Europe and, to a lesser extent Mexico and Russia.

Our sales to customers in Canada are denominated in Canadian dollars, South America in Argentine Pesos, Europe in Euros and British Pounds, and China in RMB and U.S.

If the value of the U.S.

dollar increases relative to the Canadian dollar, the Pound, the Euro, or the RMB, then our net sales could decrease as our products would be more expensive to these international customers because of changes in the rate of exchange.

When appropriate, we manage the foreign currency risk through forward contracts against the Canadian dollar, Australian dollar, New Zealand dollar and Euro and through cash flow hedges in the U.S.

dollar increases relative to the Canadian dollar, the Argentine Peso, the Pound, the Euro, or the RMB, then our net sales could decrease as our products would be more expensive to these international customers because of changes in the exchange rate.

When appropriate, we manage the foreign currency risk through forward contracts against the Canadian dollar, Australian dollar, New Zealand dollar and Euro, as well as through cash flow hedges in the U.S.

against the RMB and the Euro.

We do not hedge other currencies at this time.

In the event that non-U.S.

dollar-denominated international purchases and sales grow, exposure to volatility in exchange rates could have a material adverse impact on our financial results.

Covenants in our credit facilities may restrict our financial and operating flexibility.

As a result of the Loan Agreement the Company entered into on June 25, 2020, as amended to date, we currently have a $40.0 million revolving credit facility, expiring March 25, 2029.

As a result of the Loan Agreement the Company entered into on June 25, 2020, as amended to date, we currently have a $40.0 million revolving credit facility, which matures on December 12, 2029.

Our credit facility requires, and any future credit facilities may also require, among others, that we comply with specified financial covenants relating to fixed charge coverage and investment in acquisitions.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Loan Agreement” for more information.

Our ability to satisfy these financial covenants can be affected by events beyond our control, and we cannot guarantee that we will meet the requirements of these covenants.

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

At January 31, 2024, we did not have any outstanding debt under our credit facility.

At January 31, 2025, we had $13.2 million outstanding debt under our credit facility.

We may need additional funds, and if we are unable to obtain these funds, we may not be able to expand or operate our business as planned.

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The financial markets’ confidence in our management team and financial reporting;

General economic conditions and the conditions in the homeland security and energy sectors;

General economic conditions;

Capital markets conditions.

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We can give no assurance as to the terms or availability of additional capital.

Although management believes it currently has sufficient capital, if we do need additional capital in the future and are unsuccessful, it could reduce our net sales and materially adversely impact our earning capability and financial position.

Although management believes it currently has sufficient capital, if we need additional capital in the future and are unsuccessful, it could reduce our net sales and materially adversely impact our earning capability and financial position.

Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations.

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Goodwill and indefinite-lived intangible assets are required to be assessed for impairment at least annually.

Factors that may be considered a change in circumstances, indicating that the carrying amount of our goodwill, indefinite-lived intangible assets or long-lived assets may not be recoverable, include slower growth rates in our markets, reduced expected future cash flows, increased country risk premiums as a result of political uncertainty and a decline in stock price and market capitalization.

Factors that may be considered a change in circumstances, indicating that the carrying amount of our goodwill, indefinite-lived intangible assets or long-lived assets may not be recoverable, include slower growth rates in our markets, reduced expected future cash flows, increased country risk premiums because of political uncertainty and a decline in stock price and market capitalization.

We consider available current information when calculating our impairment charge.

If there are indicators of impairment, our long-term cash flow forecasts for our operations deteriorate or discount rates increase, we may be required to recognize additional impairment charges in later periods.

The Company recognized goodwill impairment charges of $3.0 million, representing the entire amount of goodwill related to the Pacific reporting unit in the Other Foreign geographic segment and $7.5 million, representing 83% of the goodwill related to the Eagle reporting unit in the Europe geographic segment, during the year ended January 31, 2025.

Legal and Regulatory Risks

We deal in countries where corruption is an obstacle.

We must comply with American laws such as the Foreign Corrupt Practices Act (FCPA) and Sarbanes-Oxley and also with anticorruption legislation in the U.K.

We must comply with American laws such as the Foreign Corrupt Practices Act (FCPA) and Sarbanes-Oxley as well as anticorruption legislation in the U.K.

Some of our competitors and customers in foreign jurisdictions may not adhere to such legislation.

8 unchanged sentences

We manufacture products used for protection from hazardous or potentially lethal substances, such as chemical and biological toxins, fire, viruses and bacteria.

The products that we manufacture are typically used in applications and situations that involve high levels of risk of personal injury.

The products we manufacture are typically used in applications and situations that involve high levels of risk of personal injury.

Failure to use our products for their intended purposes, failure to use our products properly or the malfunction of our products could result in serious bodily injury or death of the user.

15 unchanged sentences

Environmental Protection Agency released its PFAS Strategic Roadmap, which identified a comprehensive approach to addressing PFAS.

In August 2022, the U.S.

EPA proposed to designate perfluorooctanesulfonic acid (PFOS) and perfluorooctanoic acid (PFOA), two of the most common PFAS chemicals, as hazardous substances, which could have wide-ranging impacts on companies across various industries, including ours.

In April 2024, the U.S.

EPA designated perfluorooctanesulfonic acid (PFOS) and perfluorooctanoic acid (PFOA), two of the most common PFAS chemicals, as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act, which could have wide-ranging impacts on companies across various industries, including ours.

We may incur costs in connection with any obligations to transition away from the usage of PFAS-containing products, to dispose of PFAS-containing waste or to remediate any PFAS contamination, which could have a negative effect on our financial position, results of operations and cash flows.

16 unchanged sentences

These fluctuations and general economic and market conditions may adversely affect the market price for our common stock.

In February 2023, the Company began paying a quarterly cash dividend.

We presently pay a quarterly cash dividend.

Future quarterly dividends are subject to declaration by the Company’s Board of Directors, and the Company’s share repurchase programs do not obligate it to acquire any specific number of shares.

1 unchanged sentence

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 1A. Risk Factors