EDGAR 10-K Filing

Company CIK: 798081
Filing Year: 2022
Filename: 798081_10-K_2022_0001654954-22-005270.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Overview
We manufacture and sell a comprehensive line of protective clothing and accessories for the industrial and public protective clothing market. All Lakeland products either protect the wearer from something in their environment, or protect a product or process from the wearer. Our products must meet minimum performance requirements defined by industry best practice, and/or international or local standards.
Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a global network of over 1,600 safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, transportation, steel, glass, construction, smelting, heavy and light industry, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industries (electrical, natural gas, and water). In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the US Food and Drug Administration. Internationally, we sell to a mixture of end users directly, and to industrial distributors depending on the particular country and market. Sales are made into more than 50 foreign countries, the majority of which are into China, countries within the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India and countries within Southeast Asia. For purposes of this Form 10-K, (a) FY refers to a fiscal year ended January 31; for example, FY22 refers to the fiscal year ended January 31, 2022 and (b) Q refers to a quarter, for example Q4 FY 22 refers to the fourth quarter of the fiscal year ended January 31, 2022.
Lakeland regards owning and operating its own manufacturing facilities as a sustainable strategic advantage. We believe that ownership of manufacturing is the keystone to building a resilient supply chain. Having five manufacturing locations in five countries, coupled with sourcing core raw materials from multiple suppliers in various countries, affords Lakeland with manufacturing capabilities and supply chain resilience that cannot be matched by our competitors who use contractors. Owning our manufacturing provides us with the ability to rapidly scale up production to meet emergency demand; shift production between locations in response to geopolitical threats to take advantage of new trade agreements, or avoid complications that may arise from trade disputes; and to maintain the highest levels of product quality.
By comparison, our competitors who utilize contractors to sew their garments, lack the ability to respond as quickly to emergency situations because contractor agreements typically require forecast lead-times in excess of 30 days. They typically deal with only one or two contractors in order to maximize their purchasing power, simplify their purchasing, and reduce freight out costs. While this works well during normal business conditions, they are at a disadvantage in the event of any changes in tariffs or export restrictions that may result from international trade disputes, or any supply disruptions due to public health emergencies, social unrest, or supply shortages.
Our corporate strategy is to continue diversification of our manufacturing capability and product lines, and leverage it with real-time business intelligence provided by our new technology and information systems, allowing our sales team to focus on products and markets that provide improved margins as well as economic and seasonal insensitivity. In this manner we will be able to develop products and services that will differentiate Lakeland well into the future.
The last two weeks of FY20 and all of FY21 were dominated by response to the COVID-19 outbreak. The virus’ progression into a global pandemic continued to impact our business in FY22. We believe that COVID-19 demand will diminish in FY23, as vaccines continue to be widely available and as COVID-19 transforms from a pandemic threat to endemic. As COVID-19 demand, currently estimated at approximately 15% of revenue, decreases, we anticipate a continuation of an increase in our core businesses (industrial) that began in Q2 FY22 and continued through Q4 FY22. Through the second half of Q2 and through Q4 FY22 our core business sales have been recovering steadily. We anticipate that COVID-19 related sales will continue into the first half of FY23, however not at the levels experienced in FY22 as demand for immediate use diminishes and gives way to stockpiling demand and increased core business sales.
At present, raw materials supply appears to have caught up with demand, albeit at prices above pre-COVID-19 pricing. We anticipate raw material pricing to continue at inflated levels into FY23. Our future sales would be affected should there be an industry-wide shortage of necessary raw materials in the event of another rise or surge in COVID-19 cases. As noted, we did experience significant price increases for fabric during FY21 and managed our available manufacturing capacity to lower costs, and increase prices to meet customer demand at these higher input costs. While leading economic indicators indicate a relatively robust industrial market recovery, potential headwinds to revenue as we emerge from pandemic sales include the possibility of a recession and consumer stockpiled inventories.
The Company is utilizing the business intelligence capability of its new technology and information systems to reorganize its global sales teams. We organized our sales personnel into four market-based, vertical teams. Our organization limits the number of products each salesperson focuses on to the specific vertical they work in and allows them to develop expertise in the use of Lakeland products within their specific market. This allows the Company to better focus marketing and sales efforts to drive growth in specific markets that are strategic for the Company. Further we have utilized new Business Intelligence to continue to refine our sales compensation model to increase the percentage of sales compensation that is incentive based, while focusing sales on pricing discipline and margin retention.
Additionally, a major strategic companywide objective to accelerate growth throughout the Company is to push additional products and sales tools that are successful in the key US and China markets to the other international operations, which have traditionally carried smaller lines. To facilitate this, the Company is evaluating and redeploying sales and marketing assets into regions that offer the greatest potential for sales and margin growth.
Business Strategy
Key elements of our strategy include:
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Continued Development of Manufacturing Capability: It is critical that we increase our manufacturing capacity to meet our sales growth targets. We currently operate five manufacturing facilities in five countries, affording us a unique capability to take advantage of various trade agreements and to adjust our manufacturing as those agreements change. Lakeland is also committed to manufacturing R&D and invests in new equipment to improve efficiencies, improve quality, and maximize manufacturing flexibility.
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Improve Sales & Marketing in Existing Markets: We believe that we have continued opportunity to increase market penetration and improve margins in existing markets by our sales and marketing focus on vertical markets. The four vertical markets that we are focusing on are our core industrial (e.g. oil & petrochemicals, manufacturing, and auto) markets, the fire services market, the utilities (e.g. electrical, gas, and water) market, and critical environments (clean rooms) markets. Our focus on verticals allows our sales and marketing groups to better provide the expertise in specific applications relative to our products that our customers are seeking. The result is an improved ability to focus on specific products and sell multiple product lines to the same accounts affording us the opportunity to bundle products to secure business.
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Continued Emphasis on Customer Service. We continue to offer a high level of customer service to distinguish our products and to create customer loyalty. The extension of our technology and information systems beyond the United States and Canada to all Lakeland subsidiaries will provide us with the necessary business intelligence to better anticipate customer demand and improve our planning and customer service. We offer well-trained and experienced sales and support personnel, on-time delivery and accommodation of custom and rush orders. We also seek to advertise our Lakeland branded tradenames and trademarks.
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Introduce New Products: We continued our history of product development and innovation by introducing new proprietary products across all our product lines. In 2018 we introduced our CleanMax line of clean and sterile manufactured garments for use in critical and aseptic work environments. We also continued the development and introduction of our High Performance Wear line targeting electrical and gas distribution with a complete layering system designed to improve worker comfort and be worn away from as well as to work. We are continuing to ramp up manufacturing and add products to both of these lines.
We own 20 patents on fabrics and production machinery, with one application in process, and continue to work on developing fabrics that could potentially lead us into new markets and channels. In North America, our growth strategy is to focus on key target sectors where we have advantages, and to increase our involvement at the end user level by adding sales personnel and enhancing our marketing and product training tools to make it easier for the sales teams of our distributors to be successful promoting our products.
We have integrated the US, Canadian, and Mexican sales teams into one coordinated unit, a strategic recognition that the three countries are increasingly part of a great North American market with inter-related industries and companies throughout, and our sales teams are sharing opportunities with each other. We have experienced situations in which we could not break through with a company in one country, but the team in another country was able to make a conversion to our products. Then, after successful use of our products in one country, the doors open to us in the other. We have installed SalesForce CRM software to facilitate this strategy globally.
We continue to pursue conversion of end users to our core disposable and chemical products, based on our overall performance and prices, however we are working hard to provide our sales teams with the tools needed to increase sales of higher value product lines, specifically fire service, critical environment, and performance wear (utilities). Our marketing is being significantly upgraded in terms of resources, better sales collateral materials, and increasingly effective use of social media. The Company plans to continue its efforts to align its global markets in terms of sales collateral, sales software, and e-commerce in the coming year and into the future.
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Decrease Manufacturing Expenses by Opening New Manufacturing Facilities: We have successfully opened new manufacturing facilities in Vietnam and India in an effort to hedge against ever increasing manufacturing costs in China. Our China operation will continue for the foreseeable future to service products that are more complex and higher margin and for the manufacture of products for sale into China. Manufacturing expansion is not only necessary to control rising costs, it is also necessary for Lakeland to achieve its growth objectives.
We continue to diversify our raw material and component suppliers, qualifying multiple suppliers whenever possible to enable us to press for price reductions and better payment terms, as well as providing for continuity of supply.
We are sourcing raw materials and components from most of the countries in which we have operations in order to reduce freight costs and inventory levels.
We are re-engineering many products to reduce the amount of raw materials used and reduce the direct labor required as well as harmonizing designs to meet the requirements of multiple global markets. The result is improved manufacturing throughput and reduced inventory levels.
Products
The following is a description of our core product offerings:
Limited Use/Disposable Protective Clothing
We manufacture a complete line of limited use/disposable protective garments, including coveralls, laboratory coats, shirts, pants, hoods, aprons, sleeves, arm guards, caps and smocks. Limited use garments can also be coated or laminated to increase splash protection against harmful inorganic acids, bases and other hazardous liquid and dry chemicals. Limited use garments are made from several different nonwoven fabrics. We use spunbonded polypropylene (SBPP), spunbonded meltblow spunbond (SMS), hydroentangled woodpulp/polyester, and needlepunched fabrics. These fabrics can be used alone or in combination with films of varying composition, and/or topical chemical treatments to make our own trademarked fabrics, like Pyrolon® Plus 2, XT, CRFR, CBFR MicroMax®, MicroMax NS, CleanMax, Safegard®, Zonegard®, and ChemMax® 1, 2, 3, and 4, as well as our patented Interceptor fabric. We incorporate many sewing, heat sealing and taping techniques depending on the level of protection needed in the end use application.
Typical users of these garments include integrated oil/petrochemical refineries, chemical plants, automotive manufacturers, pharmaceutical companies, construction companies, coal, gas and oil power generation utilities and telephone utility companies, laboratories, mortuaries and governmental entities. Numerous smaller industries use these garments for specific safety applications unique to their businesses. Additional applications include protection from viruses and bacteria, such as Ebola, AIDS, streptococcus, SARS, hepatitis, and COVID-19 at medical facilities, laboratories, and emergency rescue sites. Clean manufactured and sterilized versions of our MicroMAX NS product, trademarked CleanMax, is used in aseptic laboratories to protect both the wearer and the product from cross contamination.
High-End Chemical Protective Suits
We manufacture and sell heavy duty chemical protective suits and protective apparel from our proprietary CRFR, ChemMax® 3, 4, Interceptor and other fabrics. These suits are worn by individuals on hazardous material teams and within general industry to provide protection from powerful, highly concentrated, toxic and/or potentially lethal chemicals and biological toxins. These suits are useful against toxic wastes at Superfund sites, toxic chemical spills or biological discharges, chemical or biological warfare weapons (such as sarin, anthrax or ricin and mustard gas) and chemicals and petro-chemicals present during the cleaning of refineries and nuclear facilities, and volatile organic compounds (VOCs) in industrial applications, and protection from infectious diseases such as Avian Flu and Ebola.
We believe that we offer the most complete and cost-effective line of chemical protective garments available on the market today. Garments are certified to both NFPA, CE, ISO, as well as other international standards allowing us to offer products composed of these fabrics all over the world.
Our ChemMAX 3, 4 and Interceptor fabrics are supported by PermaSure®, an app based chemical database and permeation modeler that allows our customers to quickly determine the safe use time for supported Lakeland garments, under specific environmental conditions for over 4,000 chemicals. This powerful tool allows Lakeland customers to safely minimize the chemical protective clothing cost by not having to default to the most protective garments available because chemical data is not available, or because there is not time to consult with the manufacturer. PermaSure can be used to model response scenarios so that contingency plans for response can be put in place.
Durable Woven Garments
We manufacture and market a line of durable, launderable woven garments that complement our firefighting and heat protective offerings and provide alternatives to our limited use/disposable protective clothing lines. These products provide us access to the much larger woven industrial and health care-related markets. Woven garments are favored by customers for certain applications because of familiarity with and acceptance of these fabrics. These products allow us to supply and satisfy a wider range of our end users’ safety needs.
Our product lines include the following:
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Electrostatic dissipative apparel used in electronics clean rooms;
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Flame resistant (FR) meta aramid, para aramid and FR Cotton coveralls/pants/jackets used in petrochemical, refining operations, and electrical utilities;
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Cotton and Polycotton coveralls, lab coats, pants and shirts; and
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FR fabrics containing blends of cotton, Modacrylic, meta aramid, para aramid, and viscose.
We manufacture woven garments at our facilities in China, Mexico and Argentina. We are continuing to relocate our woven protective coveralls and flame-retardant coveralls to our facilities in China, Mexico, Vietnam and India where lower fabric and labor costs allow increased profit margins.
Firefighting and Heat Protective Apparel
We manufacture an extensive line of UL certified, NFPA compliant, structural firefighter protective apparel (turnout gear) for domestic and foreign fire departments. Our turnout gear is available both in standard stock patterns and custom configurations.
We offer basic firefighter turnout gear in the Attack (A10) and Battalion (B1) styles. Introduced in 2013 are the Battalion (“B2”) style with advanced ergonomic features and the Stealth style, with innovative features new to the fire industry.
We also manufacture each of the above styles in our UL certified, NFPA compliant, Proximity line for Aircraft Rescue Fire Fighting (“ARFF”) with aluminized shells.
We manufacture full lines of Fire service extrication suits in FR cotton, UL certified, NFPA compliant Wildland firefighting apparel in multiple fabrics and Aluminized Kiln entry/Approach suits to protect industrial workers from extreme heat encountered in foundry’s, boiler rooms, and direct fired ovens.
We manufacture fire suits (turnout gear) at our facilities in China and Mexico. Our Lakeland Fire® brand of firefighting apparel continues to benefit from ongoing research and development investment, as we seek to address the ergonomic needs of stressful occupations.
High Visibility Clothing
Lakeland’s High-Visibility Division manufactures and markets a comprehensive line of reflective apparel meeting the American National Standards Institute (ANSI) requirements as well as multiple national standards around the world. The line includes vests, T-shirts, sweatshirts, jackets, coats, raingear, jumpsuits, hats and gloves.
Fabrics available include solid and mesh fluorescent, polyester, both inherently FR and FR treated fabrics, and Modacrylic materials, which meet the arc flash protective requirements for use by electrical utilities. The mesh modacrylic fabric, with its inherent FR capability, has a strong appeal to utility workers in warmer climates during spring and summer months (heat prostration).
Our High Vis FR/ARC rated rainwear is light-weight, soft, flexible and breathable, providing for a cooler garment. This product is intended for the Gas and Electrical Utility markets. The Lakeland ARC-X FR/PU garment exceeds all of the required ASTM arc flash and flash fire ratings for the Electric and Gas Utility market.
Our vest production occurs in our facilities in Mexico and China. Much of this manufacturing is for custom products. Many corporations and agencies, such as State Departments of Transportation and large electric utilities, develop custom specifications which they feel are more efficient in meeting their specific needs than off-the-shelf product. We can also import significant quantities of product from China and Mexico to meet the demand for items in high volume commodity markets.
In addition to ANSI Reflective items, Lakeland Hi-Visibility manufactures Nomex and FR cotton garments which have reflective trim attached as a part of their design criteria. These garments typically are used in rescue or extrication operations, such as those encountered as a result of vehicular accidents. Garments in this group are not as price sensitive as those in other reflective categories.
Gloves and Sleeves
We manufacture and sell specially designed glove and sleeve products made from Kevlar®, a cut and heat resistant fiber produced by DuPont, Spectra®, a cut resistant fiber made by Honeywell, and our own patented engineered yarns. These gloves offer a better overall level of protection, lower worker injury rate, and are more cost effective than traditional leather, canvas or coated work gloves. These gloves allow workers to safely handle sharp or jagged unfinished sheet metal, are used primarily in the automotive, glass and metal fabrication industries.
We have patents for our Despro® and Despro® Plus products that provide greater cut and abrasion protection to the areas of a glove where injury is most likely to occur. For example, the areas of the thumb, thumb crotch and index fingers are made of heavier yarn than the balance of the glove, providing increased wear protection and longer glove life, reducing overall glove costs. This proprietary manufacturing process allows us to produce our gloves more economically and provide a greater value to the end user.
Quality
All of our manufacturing facilities are ISO 9001 or 9002 certified. ISO standards are internationally recognized manufacturing standards established by the International Organization for Standardization based in Geneva, Switzerland. To obtain ISO registration, our factories were independently audited to test our compliance with the applicable standards and norms. In order to maintain registration, our factories receive regular inspections by an independent certification organization. While ISO certification is advantageous in retaining CE certification of products, we believe that the ISO 9001 and ISO 9002 certifications help make us more competitive in the marketplace, as customers increasingly recognize the standard as an indication of conformity with industry best practices in manufacturing.
As we source more and more of our fabrics internationally and manufacture more products certified to various standards, we have installed laboratories in our China and U.S. facilities. These laboratories are critical for ensuring that our incoming raw materials meet our quality requirements, for research and development of new products or qualification of new fabrics, and evaluation of new products against international standards. We continue to add new capabilities to these facilities to meet the requirements of new products and new standards.
Marketing and Sales
Domestically, we employ a field sales force, organized in four vertical sales groups (industrial sales, fire service, critical environment, and utilities), to better support customers and enhance marketing. We further leverage our in-house sales team with independent sales representatives to a global network of over 1,600 safety and industrial supply distributors who buy our products for resale and typically maintain inventory at the local level in order to assure quick response times and the ability to serve their customers properly.
Internationally, Lakeland has sales representatives in 21 countries outside of the US and selling products into more than 50 countries. Our sustainable market advantages continue to be our knowledge of global standards, the diversity of our product offering and the fact that we manufacture our own products. We provide our customers with an exceptionally broad product selection, high quality, and excellent customer service.
Competition
We compete on the basis of our product quality, pricing, product availability, responsiveness to customers and manufacturing capability. Our business is highly competitive due to a few competitors who have monopolistic positions in the fabrics that are standards in the industry for disposable and high-end chemical suits. We believe that the barriers to entry in the disposable and reusable garments and gloves industries are relatively low as evidenced the by increasing availability of distributor private label product in the marketplace. We face competition in some of our other product markets from large established companies that have greater financial, research and development, sales and technical resources. Where larger competitors, such as DuPont, Kimberly Clark, Ansell and Honeywell, offer products that are directly competitive with our products, particularly as part of an established line of products, there can be no assurance that we can successfully compete for sales and customers. Larger competitors outside of our Disposable and Chemical Suit lines also may be able to benefit from economies of scale and technological innovation and may introduce new products that compete with our products.
We are continually seeking sources for our raw materials in or near the various countries where we have manufacturing operations. Not only does this reduce freight costs, but it makes for a more robust supply chain that allows us to respond quickly.
Patents and Trademarks
We own 20 patents and have one patent in the application and approval process with the US Patent and Trademark Office. We own 56 trademarks and have six trademarks in the application and approval process. Our active U.S. patents expire between 2022 and 2037. Intellectual property rights that apply to our various products include patents, trade secrets, trademarks and, to a lesser extent, copyrights. We maintain an active program to protect our technology, filing for patent and trademark protection in multiple countries where our product may be “knocked off” or where there exist significant sales of our products. Information regarding risks associated with our proprietary technology and our intellectual property rights may be found in Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.”
International and Domestic Standards
Globally, standards development continues to challenge Industrial protective clothing manufacturers. The pace of change and adoption of new standards continues to increase as standards for more hazards are added and deficiencies in existing standards are corrected. Complex and changing international standards play to Lakeland’s strengths when compared to most multinationals or smaller manufacturers. Lakeland currently sits on committees and/or works closely with groups involved in writing many international standards such as the American Society for Testing and Materials International (“ASTM”), the National Fire Protection Association (“NFPA”), International Safety Equipment Association (“ISEA”), the European Committee for Standardization (“CEN”), ISO, the China National Standards Board (“GB”) in China, and the Standards Australia and Standards New Zealand (“ASNZ”).
Globally, not only are the standards continuing to change, but the focus of standards activity is shifting. In response to increasing use of certification processes as a technical barrier to trade, standards writing bodies in the US and Europe have both concluded efforts to update and define conformity assessment (ANSI/ISEA 125 and the PPE Regulation respectively) within their own spheres of influence. Unfortunately, these are not “international standards” and can be easily ignored by other countries who wish to impose their own conformity assessment systems on importers. The result is an increasingly dynamic standards environment where not only are the standards changing, but the minimum requirements for conformity with the certification process itself are changing.
A number of developing nations are now becoming active in their own standards development based on existing international standards. However, we believe that the primary goal of their standards writing activity is not focused on worker protection (that is provided for by the use of international standards), rather they are attempting to establish their own certification criteria that will protect their domestic markets or favor specific regional suppliers. This presents a new challenge in that not only are we faced with multiple test methods and standards, but we have the potential for multiple certification processes. While this adds to product development and sales expenses, the additional cost is only incremental. The real challenge is in navigating the certification process itself. This is a significant impediment to entry for companies seeking to expand sales distribution globally. In many cases products preferred in one market are not acceptable in another and multiple conformity assessments are required for the same standard certification. This is both technically challenging and costly. Lakeland, by virtue of its international manufacturing and sales operations, is in a unique position to capitalize on this complex dynamic.
Government Regulation
We are governed by regulations that affect the manufacture, distribution, marketing and sale of its products. These policies differ among and within every country in which we operate. Changes in regulations, guidelines, procedural precedents and enforcement take place frequently and can impact the size, growth potential and profitability of products sold in each market.
Suppliers and Materials
It is our policy, whenever possible, to qualify multiple vendors for our fabrics and bindings. We frequently distribute our purchases among the top two or three suppliers, based on pricing and delivery schedules, in order to keep multiple suppliers qualified and proficient in the manufacture of the raw materials that we require. Materials, such as polypropylene, polyethylene, polyvinyl chloride, spunlaced polyester, melt blown polypropylene and their derivatives and laminates, are available from 30 or more major mills. FR fabrics are also available from a number of both domestic and international mills. The accessories used in the production of our disposable garments, such as thread, boxes, snaps and elastics, are obtained from unaffiliated suppliers. We currently use 25 suppliers located in the U.S. and internationally to supply our key fabrics. We have not experienced difficulty in obtaining our requirements for these commodity component items.
Due to the high cost of freight for our nonwoven fabrics, we also seek to find multiple sources that are local to our manufacturing to emergency demand and shift manufacturing between our locations with greater ease.
Human Capital Management
As of January 31, 2022, the Company employed approximately 1,800 people worldwide, of which approximately 100 were employed in the United States and 1,700 were employed outside of the United States. Approximately 1,400 or 75% of our global workforce is covered by collective bargaining agreements or works councils. Overall, we consider our employee relations to be good. Our culture is important to our success.
Health and Safety The health and safety of our employees is of utmost important to us. We conduct regular self-assessments and audits to ensure compliance with our health and safety guidelines and regulatory requirements. Our ultimate goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety programs. We provide protective gear (e.g. eye protection, masks and gloves) as required by applicable standards and as appropriate given employee job duties. Additionally, during the COVID-19 pandemic, we have invested heavily to help ensure the health of our employees. Through the use of education and awareness, provision of necessary PPE, and changes to our manufacturing sites and screening, we strive to make our workplaces a safe place for employees during the workday.
Hiring Practices We recruit the best people for the job without regard to gender, ethnicity or other protected traits and it is our policy to comply fully with all domestic, foreign and local laws relating to discrimination in the workplace.
Diversity and Inclusion Recognizing and respecting our global presence, we strive to maintain a diverse and inclusive workforce everywhere we operate. Almost 50% of our employees worldwide are female and, in the U.S., non-Caucasian employees account for more than 50% of the employee base. Our diversity and inclusion principles are also reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace.
In addition, to support mental health and emotional well-being, all associates and their dependents worldwide have access to an Employee Assistance Program (“EAP”), at no cost to them. This includes access to visits with mental health care providers through the EAP.
Lakeland’s compensation philosophy strives to provide total compensation for all employees at the market median, utilizing base salary, cash incentives and, in some cases, equity grants to achieve this goal. We further strive to provide above-market compensation opportunities for associates who exceed goals and expectations. This approach to compensation is designed to help Lakeland attract, retain and motivate high-performing individuals who foster an innovative culture and drive business results.
Additional information about how we value our associates’ well-being, including our Global Human Rights Policy and our Global Workplace Health and Safety Policy, can be found in the Corporate Governance section of our corporate website. Nothing on our website, including our policies, or sections thereof, shall be deemed incorporated by reference into this Annual Report on Form 10-K or incorporated by reference into any of our other filings with the Securities and Exchange Commission.
Environmental Matters
We are subject to various foreign, federal, state and local environmental protection, chemical control, and health and safety laws and regulations, and we incur costs to comply with those laws. We own and lease real property, and certain environmental laws hold current or previous owners or operators of businesses and real property responsible for contamination on or originating from property, even if they did not know of, or were not responsible for the contamination. The presence of hazardous substances on any of our properties or the failure to meet environmental regulatory requirements could affect our ability to use or to sell the property, or to use the property as collateral for borrowing, and could result in substantial remediation or compliance costs.
Although we have not in the past had any material costs or damages associated with environmental claims or compliance, and we do not currently anticipate any such costs or damages, we cannot guarantee that we will not incur material costs or damages in the future as a result of the discovery of new facts or conditions, acquisition of new properties, the release of hazardous substances, a change in interpretation of existing environmental laws or the adoption of new environmental laws.
Seasonality
Our operations have historically been moderately seasonal, with higher sales generally occurring in March, April and May when scheduled maintenance on nuclear, coal, oil and gas fired utilities, chemical, petrochemical and smelting facilities, and other heavy industrial manufacturing plants occurs, primarily due to moderate spring temperatures and low Energy demands. Sales decline during the warmer summer vacation months and gradually increase from Labor Day through February with slight declines during holidays, such as Christmas. As a result of this seasonality in our sales, we have historically experienced a corresponding seasonality in our working capital, specifically inventories, with peak inventories occurring between December and May, coinciding with lead times required to accommodate the spring maintenance schedules. Certain of our large customers seek sole sourcing to avoid sourcing their requirements from multiple vendors whose prices, delivery times and quality standards differ.
In recent years, due to increased demand by first responders for our chemical suits and fire gear, our growing sales into the southern hemisphere, and our development of non-seasonal products like CleanMAX, our historical seasonal pattern has shifted. While we doubt that we will ever fully eliminate seasonality in our business, we continue our efforts to diminish its impact on revenues, operational results, working capital and cash flow, by focusing on sales into non-seasonal markets like clean rooms, electric utilities and the fire service markets.
Available Information
Our Internet address is www.Lakeland.com. We make the following filings available free of charge on the Investor Relations page on our website as soon as they have been electronically filed with or furnished to the Securities and Exchange Commission (“SEC”): our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as our proxy statement. Information contained on our website is not part of this annual report on Form 10-K or our other filings with the SEC. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers like us who file electronically with the SEC.
Information about our Executive Officers
The following is a list of the names and ages of all of our executive officers indicating all positions and offices they hold with us as of April 21, 2022.
Name
Age
Position
Charles D. Roberson
Chief Executive Officer, President and Secretary
Allen E. Dillard
Chief Operating Officer and Chief Financial Officer
Steven L. Harvey
Executive Vice President for Global Sales and Marketing
Charles D. Roberson has served as our Chief Executive Officer, President and Secretary since February 2020. Previously he served as Chief Operating Officer from July 2018. From 2009 to July 2018, he was our Senior Vice President, International Sales. Mr. Roberson joined our Company in 2004 as Technical Marketing Manager; was instrumental in development of our ChemMAX and Interceptor fabrics and represented Lakeland to various standards writing bodies, and later served as International Sales Manager. Prior to joining the Company, Mr. Roberson was employed by Precision Fabrics Group, Inc. as a Market Manager from 1995-2001 and as a Nonwovens Manufacturing Manager from 1991-1995. He began his career as a manufacturing manager for Burlington Industries, Inc. in its Menswear Division from 1985-1991.
Allen E. Dillard has served as our Chief Operating Officer since January 1, 2022 and Chief Financial Officer since August 2019. Mr. Dillard was Chief Financial Officer of Digium, Inc., a provider of telecommunications solutions from September 2015 to August 2019. Mr. Dillard served as Chief Executive Officer of Mobular Technologies, Inc., a technology solutions provider from September 2003 to September 2015. Mr. Dillard has also served as CFO/Treasurer for Nichols Research Corporation and Wolverine Tube, Inc. and was a senior manager at Ernst & Young.
Steven L. Harvey has been our Executive Vice President for Global Sales and Marketing since January 2021. From 2007 to 2018, Mr. Harvey was Vice-President of Global Sales and Service of Digium, Inc., a provider of telecommunications solutions. From 2003 to 2007, Mr. Harvey was employed by Adtran, Inc., a provider of networking and communications equipment as the Vice President of Sales, Enterprise and Competitive Service Providers, as the Vice President of Sales, Competitive Service Providers from 1998 to 2002 and as the Vice President of Sales, Enterprise from 1996 to 1998. Mr. Harvey was also an Executive Vice President of, and held various sales positions for, Data Processing Sciences, and began his career at The Procter & Gamble Company.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
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. If any of the events referred to below actually occur, our business, financial condition, liquidity and results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should also refer to the other information in this Form 10-K and in the documents we incorporate by reference into this Form 10-K, including our consolidated financial statements and the related notes.
Risks Related to Our Business and Industry
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 risk 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.
There is inherent risk, based on the complex relationships between China and the U.S., that political, diplomatic, military, or other events could result in business disruptions, including increased regulatory enforcement against companies, tariffs, trade embargoes, and export restrictions. Tariffs increase the cost of our products and the components and raw materials that go into making them. These increased costs adversely impact the gross margin that we earn on our products. Tariffs can also make our products more expensive for customers, which could make our products less competitive and reduce consumer demand. Countries may also adopt other measures, such as controls on imports or exports of goods, technology, or data, that could adversely impact the Company’s operations and supply chain and limit the Company’s ability to offer our products and services as designed. These measures can require us to take various actions, including changing suppliers and restructuring business relationships. 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 effectively mitigate all adverse impacts from such measures. 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 terrorism attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the COVID-19 Coronavirus outbreak, could negatively impact our domestic and/or international operations.
Our global operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political instability, and natural disasters. The occurrence of any of these events could have an adverse effect on our business results and financial condition.
We are also susceptible to a widespread outbreak of an illness or other health issue, such as the COVID-19 coronavirus outbreak first reported in Wuhan, Hubei Province, China in December 2019, resulting in millions of confirmed cases identified around the world and in countries in which we conduct business. The outbreak has caused governments to implement quarantines, implement significant restrictions on travel, closed schools and work places, and implement work restrictions, all of which impaired normal business operations of numerous businesses. Globally air travel has been significantly interrupted as has air freight, ocean freight, and even truck deliveries.
The impact the invasion of Ukraine, including economic sanctions or additional war or military conflict, as well as potential responses to them by Russia, is currently unknown and they could adversely affect the Company’s business, supply chain, suppliers or customers. In addition, the continuation of the invasion of Ukraine by Russia 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.
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. Some laws and directives 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. To date, while we have experienced some loss of employee time and reduced core business sales, we have not suffered significant negative effects due to COVID-19, and our manufacturing facilities have been able to operate without shutdown.
We have significant international operations and are subject to the risks of doing business in foreign countries. We have business operations in approximately 60 foreign countries. In FY22, more than half of our net sales were made by operations located outside the United States. Those operations are subject to various political, economic and other risks and uncertainties, which could have a material adverse effect on our business. These risks include the following:
·
unexpected changes in regulatory requirements;
·
changes in trade policy or tariff regulations;
·
changes in tax laws and regulations;
·
additional valuation allowances on deferred tax assets due to an inability to generate sufficient profit in certain foreign jurisdictions;
·
intellectual property protection difficulties or intellectual property theft;
·
difficulty in collecting accounts receivable;
·
complications in complying with a variety of foreign laws and regulations, some of which may conflict with U.S. laws;
·
foreign privacy laws and regulations;
·
trade protection measures and price controls;
·
trade sanctions and embargoes;
·
nationalization and expropriation;
·
increased international instability or potential instability of foreign governments;
·
effectiveness of worldwide compliance with Lakeland’s anti-bribery policy, the U.S. Foreign Corrupt Practices Act, and similar local laws;
·
difficulty in hiring and retaining qualified employees;
·
the ability to effectively negotiate with labor unions in foreign countries;
·
the need to take extra security precautions for our international operations;
·
costs and difficulties in managing culturally and geographically diverse international operations; and
·
pandemics and similar disasters.
Any one or more of these risks could have a negative impact on the success of our international operations and, thereby, have a material adverse effect our business, consolidated results of operations and financial condition.
Our results of operations may vary widely from quarter to quarter.
Our quarterly results of operations have varied and are expected to continue to vary in the future. These fluctuations may be caused by many factors, including:
·
Currency volatility;
·
Global crises, such as the COVID-19 pandemic, oil spills, or ebola outbreak;
·
Our expansion of international operations;
·
Competitive pricing pressures;
·
Seasonal buying patterns resulting from the cyclical nature of the business of some of our customers;
·
Changes in the mix of products and services sold;
·
The timing of introductions and enhancements of products by us or our competitors;
·
Market acceptance of new products;
·
Technological changes in fabrics or production equipment used to make our products;
·
Availability of raw materials due to unanticipated demand or lack of precursors (oil and gas);
·
Changes in the mix of domestic and international sales; and
·
Personnel changes.
These variations could negatively impact our stock price.
Disruption in our supply chain or our manufacturing or distribution operations could adversely affect our business.
Our ability to manufacture, distribute and sell products is critical to our operations. These activities are subject to inherent risks such as natural disasters, power outages, fires or explosions, labor strikes, terrorism, epidemics, pandemics (including the ongoing COVID-19 pandemic), 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, as well as require additional resources to address.
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 process requires us to make multiple demand forecast assumptions, each of which may introduce error into our estimates, causing excess inventory to accrue or a lack of manufacturing capacity when needed. If we overestimate customer demand, we may allocate resources to manufacturing products that we may not be able to sell when we expect to or not at all. As a result, we would have excess inventory, which would negatively impact our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would lose sales opportunities, lose market share and damage our customer relationships. 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.
We face competition from other companies, a number of which have substantially greater resources than we do.
Four of our competitors, DuPont, Honeywell, Ansell and Kimberly Clark, 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. We cannot assure you that our present competitors or competitors that choose to enter the marketplace in the future will not exert significant competitive pressures.
Our operations are substantially dependent upon key personnel.
Our performance is substantially dependent on the continued services and performance of our senior management and certain other key personnel, including Charles D. Roberson, our Chief Executive Officer, President and Secretary, Allen E. Dillard, our Chief Operating Officer and Chief Financial Officer, and Steven L. Harvey, our Executive Vice President for Global Sales and Marketing. 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. In addition, any future expansion of our business will depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled managerial, marketing, customer service and manufacturing personnel, and our inability to do so could have a material adverse effect on our business, financial condition and results of operations.
Technological change could negatively affect sales of our products and our performance.
The rapid development of fabric technology continually affects our apparel applications and may directly impact the performance of our products. We cannot assure you that we will successfully maintain or improve the effectiveness of our existing products, nor can we assure you that we will successfully identify new opportunities or continue to have the needed financial resources to develop new fabric or apparel manufacturing techniques in a timely or cost-effective manner. In addition, products manufactured by others may render our products obsolete or noncompetitive.
Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations.
We rely on information technology systems to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. These systems may be materially impacted and/or disrupted by information security incidents such as ransomware, malware, viruses, phishing, social engineering, human error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events. 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.
We employ comprehensive measures to prevent, detect, address and mitigate cybersecurity threats (including access controls, data encryption, vulnerability assessments, management training, 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. There are also significant costs associated with a data breach, including investigation costs, remediation and mitigation costs, notification costs, attorneys’ fees, and the potential for reputational harm and lost revenues due to a loss in confidence. We cannot predict the costs to comply with these laws or the costs associated with a potential data breach, which could have a material adverse effect on our business, results of operations, financial position and cash flows, and our business reputation. 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 no cybersecurity attack to date has had a material impact on our financial condition, results of operations or liquidity, the threat remains.
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.
As a global organization, we are subject to data privacy and security laws and regulations in numerous jurisdictions as a result of having access to and processing personal and/or sensitive data in the course of our business.
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 and the District of Columbia 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. Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information. Violation of state privacy, security, and breach notification laws can trigger significant monetary penalties. In addition, certain states’ privacy, security, and data breach laws, including, for example, the California Consumer Privacy Act (“CCPA”)(amended, effective January 1, 2023 as 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. In addition, government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements.
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.
We rely on our portfolio of issued and pending patent applications in the U.S. and other countries to protect a large part of our intellectual property and our competitive position; however, these patents may be insufficient to protect our intellectual property rights because our patents may be challenged, invalidated, held unenforceable, circumvented, or may not be sufficiently broad to prevent third parties from producing competing products similar in design to our products and foreign patents protections may be more limited than those provided under U.S. patents and intellectual property laws.
We may not be afforded the protection of a patent if our currently pending or future patent filings do not result in the issuance of patents or we fail to apply for patent protection. We may fail to apply for a patent if our personnel fail to disclose or recognize new patentable ideas or innovations. Remote working can decrease the opportunities for our personnel to collaborate, thereby reducing the opportunities for effective invention disclosures and patent application filings. We may choose not to file a foreign patent application if the limited protections provided by a foreign patent outweigh the costs to obtain it. Our foreign patent portfolio is less extensive than our U.S. portfolio.
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.
Acquisitions and investments could be unsuccessful.
In the future, subject to capital constraints, we may seek to acquire selected safety products lines or safety-related businesses or other businesses, which will complement our existing products. Our ability to acquire these businesses is dependent upon many factors, including our management’s relationship with the owners of these businesses, many of which are small and closely held by individual stockholders. In addition, we will be competing for acquisition and expansion opportunities with other companies, many of which have greater name recognition, marketing support and financial resources than us, which may result in fewer acquisition opportunities for us, as well as higher acquisition prices. There can be no assurance that we will be able to identify, pursue or acquire any targeted business and, if acquired, there can be no assurance that we will be able to profitably manage additional businesses or successfully integrate acquired business into our Company without substantial costs, delays and other operational or financial problems.
Acquisitions involve a number of special risks in addition to those mentioned above, including the diversion of management’s attention to the assimilation of the operations and personnel of the acquired companies, the potential loss of key employees of acquired companies, potential exposure to unknown liabilities, adverse effects on our reported operating results and the amortization or write-down of acquired intangible assets. We cannot assure you that any acquisition by us will or will not occur, that if an acquisition does occur that it will not materially and adversely affect our results of operations or that any such acquisition will be successful in enhancing our business. 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 October 18, 2021, the Company made a strategic investment of $2.8 million in Inova Design Solutions Ltd. (doing business as Bodytrak®) as a step toward entering the Connected Worker Market for “Smart PPE.”
Financial Risks
Our results of operations could be negatively affected by potential fluctuations in foreign currency exchange rates.
Most of our assembly arrangements with our foreign-based subsidiaries or third-party suppliers require payment to be made in U.S. dollars or the Chinese Renminbi (“RMB”). Any decrease in the value of the US dollar or RMB in relation to foreign currencies could increase the cost of the services provided to us upon contract expirations or supply renegotiations. 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 $70.8 million in FY22. Our sales in these countries are usually denominated in the local currency. If the value of the US dollar increases relative to these local currencies, and we are unable to raise our prices proportionally, then our profit margins could decrease because of the exchange rate change.
We are exposed to changes in foreign currency exchange rates as a result of our purchases and sales in other countries. To manage the volatility relating to foreign currency exchange rates, 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. However, our purchases in China are primarily made in the RMB, the value of which has floated for the last 5 years, 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 in Russia. Our sales to customers in Canada are denominated in Canadian dollars, in Europe in Euros and British pounds, and in China in RMB and US dollars. If the value of the US 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 rate of exchange. We manage the foreign currency risk, when appropriate, through the use of rolling 90-day forward contracts against the Canadian dollar and Euro and through cash flow hedges in the US against the RMB and the Euro. We do not hedge other currencies at this time. In the event that non-US 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 and amended June 18, 2021, we currently have a $25.0 million revolving credit facility, expiring June 25, 2025. 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. 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.
Additionally, in July 2017, the United Kingdom Financial Conduct Authority announced that it would stop compelling banks to submit interest rates for the calculation of the London Interbank Offered Rate (“LIBOR”) after 2021. Although we do not have any outstanding debt under our credit facility, were we to draw on it, the outstanding amounts would bear interest at fluctuating interest rates on an approved replacement benchmark. We continue to monitor this matter and evaluate the related risks and potential impact of LIBOR’s expiration. Any indebtedness that we incur may be indexed to a replacement benchmark, such as the Secured Overnight Financing Rate (“SOFR”). Any such change could cause the effective interest rate under an agreement, including our Loan Agreement, and our overall interest expense to increase, adversely affecting our cash flows and results of operations.
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.
Our operations require significant amounts of cash, and we may be required to seek additional capital, whether from sales of equity or by borrowing money, to fund acquisitions for the future growth and development of our business or to fund our operations and inventory, particularly in the event of a market downturn.
A number of factors could affect our ability to access future debt or equity financing, including:
·
Our financial condition, strength and credit rating;
·
The financial markets’ confidence in our management team and financial reporting;
·
General economic conditions and the conditions in the homeland security and Energy sectors; and
·
Capital markets conditions
Even if available, additional financing may be more costly than our current facility and may have adverse consequences. If additional funds are raised through the incurrence of debt, we will incur increased debt servicing costs and may become subject to additional restrictive financial and other covenants. 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.
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. Some of our competitors and customers in foreign jurisdictions may not adhere to such legislation. As a result, we believe that we lose sales orders due to our strict adherence to such regulations.
We are subject to various U.S. and foreign tax laws and any changes in these laws related to the taxation of businesses and resolutions of tax disputes could adversely affect our results of operations.
The U.S. Congress, the Organization for Economic Co-operation and Development (or, OECD) and other government agencies in jurisdictions in which we invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD has changed numerous long-standing tax principles through its base erosion and profit shifting (“BEPS”) project which could adversely impact our effective tax rate.
We are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ materially from the tax amounts recorded in our consolidated financial statements, which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.
We may be subject to product liability claims, and insurance coverage could be inadequate or unavailable to cover these claims.
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. 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. In such cases, we may be subject to product liability claims arising from the design, manufacture or sale of our products. If these claims are decided against us, and we are found to be liable, we may be required to pay substantial damages, and our insurance costs may increase significantly as a result. We cannot assure you that our insurance coverage would be sufficient to cover the payment of any potential claim. In addition, we cannot assure you that this or any other insurance coverage will continue to be available or, if available, that we will be able to obtain it at a reasonable cost. Any material uninsured loss could have a material adverse effect on our financial condition, results of operations and cash flows.
Environmental laws and regulations may subject us to significant liabilities.
Our US operations, including our manufacturing facilities, are subject to federal, state and local environmental laws and regulations relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes. Any violation of any of those laws and regulations could cause us to incur substantial liability to the Environmental Protection Agency, the state environmental agencies in any affected state or to any individuals affected by any such violation. If hazardous substances are released from or located on any of our properties, we could incur substantial costs and damages. Any such liability could have a material adverse effect on our financial condition and results of operations.
Provisions in our restated certificate of incorporation and by-laws and Delaware law could make a merger, tender offer or proxy contest difficult.
Our restated certificate of incorporation contains classified board provisions, authorized preferred stock that could be utilized to implement various “poison pill” defenses and a stockholder authorized, but as yet unused, Employee Stock Ownership Plan (“ESOP”), all of which may have the effect of discouraging a takeover of Lakeland, which is not approved by our board of directors. Further, we are subject to the antitakeover provisions of Section 203 of the Delaware General Corporation Law, which prohibit us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the prescribed manner.
Risks Relating to Our Common Stock
The market price of our common stock may fluctuate widely.
The market price of our common stock could be subject to significant fluctuations in response to quarter-to-quarter variations in our operating results, announcements of new products or services by us or our competitors and other events or factors. For example, a shortfall in net sales or net income, or an increase in losses, from levels expected by securities analysts or investors, could have an immediate and significant adverse effect on the market price of our common stock. Volume fluctuations that have particularly affected the market prices of many micro and small capitalization companies have often been unrelated or disproportionate to the operating performance of these companies. These fluctuations, as well as general economic and market conditions, may adversely affect the market price for our common stock.
We are precluded from paying and do not anticipate paying any dividends to our common stockholders in the near future.
We are prohibited from declaring or paying any dividends to our common stockholders without the prior consent of our lenders. Further, we have not paid dividends on our common stock since August 2006 and we do not anticipate, if permitted, paying any dividends in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B: UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Our principal executive office is located at 1525 Perimeter Parkway Suite 325, Huntsville, AL 35806 United States. We own or lease our primary facilities. We own our manufacturing locations in AnQui City, China and Jerez, Mexico. We lease our manufacturing locations in Buenos Aires, Argentina, Noida, India, and Xuan Trung Commune, Vietnam.
We believe that all of our facilities, including the manufacturing facilities, are in good repair and in suitable condition for the purposes for which they are used.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are a party to litigation arising in the ordinary course of our business. We are not currently a party to any litigation or other legal proceedings that we believe could reasonably be expected to have a material adverse effect on our results of operations, financial condition or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is currently traded on the Nasdaq Market under the symbol “LAKE.” On April 8, 2022 there were 36 registered holders of our shares of common stock. This number of registered holders does not represent the actual number of beneficial owners of our common stock because shares are frequently held in “street name” by securities dealers and others for the benefit of individual owners who have the right to vote their shares.
Dividend Policy
We have never paid any cash dividends on our common stock, and we currently intend to retain any future earnings for use in our business. We are prohibited from declaring or paying any dividends to our common stockholders without the prior consent of our lenders. The payment and rate of future cash or stock dividends, if any, or stock repurchase programs are subject to the discretion of our board of directors and will depend upon our earnings, financial condition, capital or contractual restrictions under our credit facilities and other factors.
Issuer Purchase of Equity Securities
Period
Total Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Programs
Maximum Dollar Amount
of Shares that
May Yet Be
Purchased Under
the Programs
November 1 - November 30
-
$ -
-
$ 4,105,179
December 1 - December 31
38,505
$ 21.14
38,505
$ 3,289,897
January 1 - January 31
120,934
$ 20.55
120,934
$ 804,106
Total
159,439
$ 20.67
159,439
$ 804,106 (1)
(1)Represents the amount remaining under the Existing Share Repurchase Program (as defined below) as of January 31, 2022. Effective as of April 7, 2022, we are authorized to repurchase an additional $5 million of our common stock upon the repurchase of the remaining amount under the Existing Share Repurchase Program.
On February 17, 2021, the Company’s board of directors approved a stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock. On July 6, 2021, the Board of Directors authorized an increase in the Company’s current stock repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock (the “Existing Share Repurchase Program”). Shares repurchased in FY22 totaled 430,463 shares at a cost of $9.2 million leaving $0.8 million remaining under the stock repurchase program at January 31, 2022. On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock (the “New Share Repurchase Program”). The New Share Repurchase Program will become effective upon the completion of the Existing Share Repurchase Program, which has approximately $800,000 remaining for repurchases as of April 21, 2022. The New Share Repurchase Program has no expiration date but may be terminated by the Board of Directors at any time.
We do not have any other share repurchase programs.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
You should read the following summary together with the more detailed business information and consolidated financial statements and related notes that appear elsewhere in this Form 10-K and in the documents that we incorporate by reference into this Form 10-K. This document may contain certain “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. This information involves risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. In this Form 10-K, (a) “FY” means fiscal year; thus for example, FY22 refers to the fiscal year ended January 31, 2022 and (b) “Q” refers to a quarter; thus, for example, Q4 FY22 refers to the fourth quarter of the fiscal year ended January 31, 2022.
Revision of Prior Period Financial Statements
In connection with the preparation of the consolidated financial statements for the fiscal year ended January 31, 2022, the Company identified errors in its previously filed annual consolidated financial statements and unaudited quarterly consolidated financial statements. The errors were not material to any individual prior quarterly or annual period. For further details, refer to Note 1. Business and Summary of Significant Accounting Policies: Restatement For Correction of Immaterial Errors in Previously Issued Consolidated Financial Statements in our consolidated financial statements included in Part II. Item 8. of this Form 10-K. Accordingly, we have revised prior period financial results contained in this Form 10-K to correct the effect of these errors for the corresponding periods. Management’s discussion and analysis included herein is based on the revised financial results for the year ended January 31, 2021.
Overview
We manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 1,600 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. 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 to a mixture of end users directly, and to industrial distributors depending on the particular country and market. In addition to the United States, sales are made to more than 50 foreign countries, the majority of which were into China, countries within the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India and countries within Southeast Asia.
We are continually monitoring the potential financial impact of the Russian invasion of Ukraine on our operations. For FY22, sales in Russia were approximately 2.5% of our consolidated sales and sales into Ukraine were not significant.
We had net sales of $118.4 million in FY22 and $159.0 million in FY21.
We have operated facilities in Mexico since 1995 and in China since 1996. Beginning in 1995, we moved the labor intensive sewing operation for our limited use/disposable protective clothing lines to these facilities. Our facilities and capabilities in China and Mexico allow access to a less expensive labor pool than is available in the United States and permit us to purchase certain raw materials at a lower cost than they are available domestically. We added manufacturing operations in Vietnam and India in fiscal 2019, to offset increasing manufacturing costs in China and further diversify our manufacturing capabilities. Our China operations will continue primarily manufacturing for the Chinese market and other markets where duty advantages exist. Manufacturing expansion is not only necessary to control rising costs, it is also necessary for Lakeland to achieve its growth objectives.
Our net sales attributable to customers outside the United States were $70.8 million and $88.4 million for the fiscal years ended January 31, 2022 and 2021, respectively.
Response to COVID-19 Outbreak
Our strategy for responding to the COVID-19 outbreak evolved from prior “black swan” events. These events have been disruptive for the users of our products and contributed little in terms of sustainable business improvement or growth for the suppliers. Any business gains attributable to these events were limited to short-term increases in sales volume and price increases associated with capacity expansion and expedited deliveries. In responding to COVID-19 Lakeland sought a new approach. Throughout COVID-19 we focused our attention on our existing business, adding new customers, and increasing market penetration by prioritizing service to our existing industrial end users and seeking new customers who were experiencing supply shortages. We sought to service the COVID-19 market to the extent that Lakeland had excess capacity after servicing existing and new industrial customers. We believe that focusing on the industrial market first and the pandemic market second, is a sound strategy for increasing market penetration in a post COVID-19 environment. Even though we were successful in selling to more than 500 new distributors and end users, 75% of whom were outside of the U.S. market, excess pipeline inventory and freight delays have proven a significant headwind. We anticipate that excess inventory will decline steadily as intermittent surges in COVID-19 cases continue and that industrial growth will continue to improve internationally as we transition from an emergency COVID-19 response to a business environment where COVID-19 is a diminished, but persistent component of sales.
Our manufacturing flexibility allows us to rapidly shift capacity between product lines and alter our product offering so that we can maximize throughput of critical products. In the case of COVID-19 we shifted our sewing capacity heavily to disposable and chemical garments; increased daily working hours; and ran a 7-day work week until market supply caught up with demand. We rationalized our product offerings and eliminated SKUs that did not meet our profitability goals, did not create a competitive advantage or were detrimental to manufacturing efficiencies due to changes over time. Because we own our manufacturing facilities, Lakeland was able to make these changes within the first couple of months of the pandemic.
The last two weeks of FY20 and all of FY21 and FY22, were impacted by our COVID-19 response strategy. As the pandemic progressed in FY21, we saw reductions in industrial activity due to lockdowns and work restrictions that resulted in diminished sales into petrochemicals, the utility sector, and industrial segments like automotive and airlines. Our second and third quarters of FY21 were the peak quarters for Personal Protective Equipment (PPE) pandemic sales. In Q4 FY21 we began to see a softening in demand for COVID-19 related sales, and a return of general industrial demand that continued into Q4 FY22. As the COVID-19 pandemic wanes, demand for associated PPE is falling, but the decline is being offset in part by an increase in industrial activity and associated industrial demand for PPE. COVID-19 related demand was estimated to be approximately 30% to 35% of FY21 revenue and accounted for an estimated 15% of FY22 sales.
While we saw, and noted, an initial recovery in the industrial markets in the U.S. in FY22, we now believe that the strength of the recovery was magnified by freight delays extending order leadtimes leading distributors and end users to place more orders as industrial activity surged. As these delayed shipments arrived throughout FY22, an excess of inventory was created in U.S. distribution channels. As stated earlier, we believe that intermittent surges in COVID-19 cases and the subsequent high rates of hospitalizations in the U.S. will draw down this inventory as freight delays continue. We believe that industrial activity in developed regions of the world is likely to continue to increase as vaccination levels increase and therapeutics improve, lessening reliance on shutdowns or lockdowns to control virus spread. As stated previously, we believe that developing regions of the world that are less prepared and have less robust medical care, will be slower in industrial recovery. We do not anticipate a slower industrial recovery in developing regions to negatively impact our growth potential primarily because the regional dispersion of our sales favors the developed regions of the world by a significant margin.
As noted above, as freight delayed orders arrived through late Q1 and the remainder of FY22, PPE manufacturing has caught up to current COVID-19 demand. Raw materials and finished goods pricing have declined from their pandemic-inflated levels, but increased freight costs and lack of availability of some precursors threaten to limit if not reverse the downward trend. Our future sales would be affected should there be an industry-wide shortage of necessary raw materials in the event of another rise or surge in COVID-19 cases, including any surges due to COVID-19 variants such as the delta or omicron variants. As previously noted, we did experience significant price increases for fabric during FY21 and managed our available manufacturing capacity to lower costs, and increased prices, to meet customer demand.
In FY22 we did not experience any significant manufacturing shutdowns or closures of any of our facilities due to COVID-19. Employee absence due to potential exposure or quarantine of the neighborhood in which they live is a persistent problem, but has not resulted in the shutdown of any facilities. We have not experienced any manufacturing capacity issues due to inability to source raw materials, government quarantine, or shelter-in-place orders, or due to COVID-19 outbreaks in any of our factories, however there can be no assurance that this will continue to be the case. In addition, we cannot predict any potential incremental cost that may be associated with any federal, state or local vaccine mandates or related testing protocol. While current economic indicators and industry data indicate an industrial market recovery, potential headwinds to revenue as we emerge from pandemic sales include the possibility of a recession and consumer stockpiled inventories that may temper demand within our regular markets in FY23.
While we have not experienced any raw materials shortages in our Asian manufacturing operations, we are experiencing some issues with U.S. sourced raw materials due to labor and precursor shortages affecting our higher margin product lines. In both Asia and the U.S., increasing labor and freight costs, as well as inflationary pressures threaten to drive raw material costs up and may negatively impact our gross margins. Where we can, we will seek to recover increased costs with corresponding price increases.
Additionally, we have experienced, along with most other companies across many industries, the macro-economic impact of a challenging employment environment related to hiring and retaining employees and wage inflation. We expect that these hiring, retention, and wage inflation challenges, as well as challenges related to maintaining our current workforce, will continue into FY23. These hiring, retention, and cost challenges may negatively affect our ability to grow our business and keep our best employees or increase our cost of operations.
Critical Accounting Policies and Estimates
Revenue Recognition. Substantially all the Company’s revenue is derived from product sales, which consist of sales of the Company’s personal protective wear products to distributors. The Company considers purchase orders to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year, and virtually all of the Company’s contracts are short-term. The Company recognizes revenue for the transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods. Generally, payment is due from customers within 30 to 90 days of the invoice date, and the contracts do not have significant financing components. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Shipping and handling costs associated with outbound freight are included in operating expenses, and for the years ended in FY22 and FY21 aggregated approximately $2.9 million and $3.9 million, respectively. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue.
The transaction price includes estimates of variable consideration, related to rebates, allowances, and discounts that are reductions in revenue. All estimates are based on the Company’s historical experience, anticipated performance, and the Company’s best judgment at the time the estimate is made. Estimates for variable consideration are reassessed each reporting period and are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur upon resolution of uncertainty associated with the variable consideration. All the Company’s contracts have a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as quantity times price per unit.
Inventories. Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out or moving average basis) or net realizable value. Allowances are recorded for slow-moving, obsolete or unusable inventory. We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future sales and supply on-hand, if necessary. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. In FY22 and FY21, we recorded approximately $0.6 million in write-downs of inventory and $0.1 million in inventory adjustments in FY21.
Income Taxes. The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of preparing the consolidated financial statements. This involves estimating the actual current tax in addition to assessing temporary differences resulting from differing treatments for tax and financial accounting purposes. These differences, together with net operating loss carryforwards and tax credits, are recorded as deferred tax assets or liabilities on the Company’s consolidated balance sheet. A judgment must then be made of the likelihood that any deferred tax assets will be recovered from future taxable income. A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines that it may not be able to realize all or part of its deferred tax asset in the future, or that new estimates indicate that a previously recorded valuation allowance is no longer required, an adjustment to the deferred tax asset is charged or credited to income in the period of such determination. In FY22 and FY21, we recorded a valuation allowance of approximately $0.8 million and $1.0 million, respectively.
The Company recognizes tax positions that meet a “more likely than not” minimum recognition threshold. If necessary, the Company recognizes interest and penalties associated with tax matters as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets.
Net Income Per Share.Basic net income per share is based on the weighted average number of common shares outstanding without consideration of common stock equivalents. Diluted net income per share is based on the weighted average number of common shares and common stock equivalents. The diluted net income per share calculation takes into account unvested restricted shares and the shares that may be issued upon exercise of stock options and warrants, reduced by shares that may be repurchased with the funds received from the exercise, based on the average price during the fiscal year.
Significant Balance Sheet Fluctuation January 31, 2022, as Compared to January 31, 2021
Cash increased by $0.1 million, primarily as a result of $12.8 million of cash generated from operations offset by $9.2 million in share repurchases, $2.8 million in equity investment and $0.8 million in capital improvements. Operating cashflow changes were driven by a decline in accounts receivable of $6.7 million due to collections and reduced revenue in FY22. Inventory increased $4.4 million driven by investment in inventory to reduce the impact on our supply chain of a global slowdown in freight deliveries. Accounts payable, accrued compensation, and other accrued expenses decreased $5.0 million due to a decrease in purchasing activity and lower variable compensation caused by lower sales and profitability in FY22.
On October 18, 2021, the Company made a strategic investment of $2.8 million in Inova Design Solutions Ltd. (doing business as Bodytrak®) as a groundbreaking step toward entering the Connected Worker Market for “Smart PPE.” Bodytrak’s unique ear-based sensor platform uses precise physiological measurements and cloud-based analytics to automate health, safety and performance monitoring, making it an ideal complement to Lakeland’s portfolio of industrial protective solutions.
Results of Operations
The following tables set forth our external sales by our product lines, and geographic regions and our historical results of continuing operations as a percentage of our net sales from operations, for the years and three-months ended January 31, 2022 and 2021.
Three Months Ended January 31,
(Unaudited)
Year Ended January 31,
External Sales by Product Line:
Disposables
$ 14.1
$ 23.1
$ 67.2
$ 103.8
Chemical
5.5
6.4
24.5
31.2
Fire
2.3
2.8
8.2
7.5
Gloves
0.5
1.2
2.2
3.1
High Visibility
1.8
0.8
5.6
4.4
High Performance Wear
0.9
0.7
3.6
2.3
Wovens
1.7
1.9
7.1
6.7
Consolidated external sales
$ 26.8
$ 36.9
$ 118.4
$ 159.0
Three Months Ended January 31,
(Unaudited)
Year Ended January 31,
External Sales by region:
USA
$ 11.2
$ 16.0
$ 47.6
$ 70.6
Other foreign
2.1
2.0
7.1
9.0
Europe (UK)
1.5
4.0
10.3
16.8
Mexico
0.8
1.8
4.1
5.7
Asia
7.4
7.4
29.8
31.2
Canada
1.4
2.7
8.2
13.6
Latin America
2.4
3.0
11.3
12.1
Consolidated external sales
$ 26.8
$ 36.9
$ 118.4
$ 159.0
Three Months Ended January 31,
(Unaudited)
Year Ended January 31,
Net sales
100.0 %
100.0 %
100.0 %
100.0 %
Cost of goods sold
60.8 %
51.6 %
57.0 %
50.1 %
Gross profit
39.2 %
48.4 %
43.0 %
49.9 %
Operating expenses
35.0 %
23.9 %
29.5 %
22.3 %
Operating profit
4.2 %
24.5 %
13.6 %
27.6 %
Other income, net
0.5 %
0.0 %
0.1 %
0.0 %
Interest expense
0.0 %
0.0 %
0.0 %
0.0 %
Income (loss) before tax
4.7 %
24.5 %
13.7 %
27.6 %
Income tax expense
2.8
%
3.6 %
4.1
%
5.4 %
Net income
1.9
%
20.9 %
9.6
%
22.2 %
Net Sales. Net sales decreased to $118.4 million for the year ended January 31, 2022 compared to $159.0 million for the year ended January 31, 2021, a decrease of $40.6 million. Sales in the US decreased $23.0 million or 32.6% primarily due to decreases in the number of direct container shipments in the US, and lower sales driven by COVID-19 demand. Sales to the Asian market decreased by $1.4 million or 4.5% due to lower COVID-19 demand. Sales to the European market decreased by $6.5 million or 38.7% driven by reduced COVID-19 demand and inventory overhang at our customers. Canada sales decreased by $5.4 million or 39.7% due to lower direct container shipments. Latin America sales decreased $0.8 million or 6.6% due to lower COVID-19 demand. Sales into the Mexican market decreased $1.6 million or 28.1% driven by lower COVID-19 demand. Our other foreign markets accounted for $1.9 million of decreased sales or 21.1% due to lower COVID-19 demand. Sales of our disposable and chemical product line were impacted due to a reduction in direct container sales driven by COVID-19 demand and continued softness in demand from our industrial markets. Other product lines such as fire, high performance, and wovens, increased by $2.0 million due to strengthening demand in those markets. Sales were affected by customers over-ordering in prior periods, resulting in excess channel inventories, and shipping delays with ocean freight carriers.
Gross Profit. Gross profit decreased $28.4 million, or 35.8%, to $50.9 million for the year ended January 31, 2022, from $79.3 million for the year ended January 31, 2021. Gross profit as a percentage of net sales decreased to 43.0% for the year ended January 31, 2022 from 49.9% for the year ended January 31, 2021. Gross profit performance in FY 21 benefited from higher volumes including direct container shipments, related factory utilization and an improving product mix with pricing power. Major factors driving the decline in gross margins in FY22, were:
·
Lower level of direct container sales in the current period.
·
Return to competitive pricing pressures as COVID-19 demand decreases.
·
Increases in transportation costs.
Operating Expense. Operating expenses decreased 1.4% from $35.4 million for the year ended January 31, 2021 to $34.9 million for the year ended January 31, 2022. Operating expenses as a percentage of net sales was 29.5% for the year ended January 31, 2022, as compared to 22.3% for the year ended January 31, 2021. Operating expenses were down primarily due to reductions in sales compensation due to lower sales freight out expenses, and currency translation offset by increases in administrative salaries for new staff and technology expenses..
Operating Profit. Operating profit decreased to $16.0 million for the year ended January 31, 2022, from $43.8 million for the year ended January 31, 2021, due to the impacts detailed above. Operating margin decreased to 13.6% for the year ended January 31, 2022, compared to 27.6% for the year ended January 31, 2021.
Interest Expense. Interest expenses was less than $0.1 million for the year ended January 31, 2022 compared to $0.1 million for the year ended January 31, 2021. The Company did not drawdown any of its available line of credit during FY22.
Income Tax Expense. Income tax expense consists of federal, state and foreign income taxes. Income tax expense was $4.8 million and included $0.7 million associated with the GILTI component of the Tax Act of 2017 for the year ended January 31, 2022, as compared to an income tax expense of $8.5 million, including $1.9 million associated with the GILTI component, for the year ended January 31, 2021. All international subsidiaries impacted the GILTI component of income tax expense.
Net Income. Net income decreased to $11.4 million for the year ended January 31, 2022 from $35.3 million for the year ended January 31, 2021.
Fourth Quarter Results
Net sales and net income were $26.8 million and $0.5 million, respectively, for Q4 FY22, as compared to $36.9 million and $7.7 million, respectively, for Q4 FY21.
Factors affecting Q4 FY22 results of operations included:
·
Decreased sales due to COVID-19 demand in the U.S. and Asia.
·
Margins were impacted by lower sales and increased freight costs.
Liquidity and Capital Resources
At January 31, 2022, cash and cash equivalents were approximately $52.7 million and working capital was approximately $108.9 million. Cash and cash equivalents increased $0.1 million and working capital increased $1.7 million from January 31, 2021 reflecting positive earnings and the Company’s focus on working capital efficiencies.
Of the Company’s total cash and cash equivalents of $52.7 million as of January 31, 2022, cash held in Latin America of $1.9 million, cash held in Hong Kong of $2.1 million, cash held in the UK of $1.0 million, cash held in Vietnam of $1.1 million, cash held in India of $0.9 million and cash held in Canada of $1.4 million would not be subject to additional US tax in the event such cash was repatriated due to the change in the US tax law as a result of the 2017 Tax Cuts and Jobs Act (the “Tax Act”). In the event the Company repatriated cash from China, of the $30.0 million balance at January 31, 2022 there would be an additional 10% withholding tax incurred in that country. The Company strategically employs a dividend plan subject to subsidiary profitability, cash requirements and withholding taxes. During FY22 the Company’s subsidiaries in Canada, Uruguay and Hong Kong declared and paid dividends of $2.6 million, $1.0 million and $4.4 million. Withholding taxes totaling $0.2 million are included in income tax expense. No dividends were proposed by management or declared by our Board of Directors for our China subsidiary in FY22 or FY21.
Net cash provided by operating activities of $12.8 million for the year ended January 31, 2022 was primarily due to net income of $11.4 million, non-cash expenses of $4.3 million for deferred taxes, depreciation and amortization, and stock compensation, and decrease in accounts receivable due to lower sales activity of $6.7 million offset by increase in net inventories of $4.4 million and a decrease in accounts payable, accrued expenses and other liabilities of $5.2 million due to lower sales volume. Net cash used in investing activities of $3.6 million for the year ended January 31, 2022 reflects the Company’s $2.8 million investment in Bodytrak®) as a groundbreaking step toward entering the Connected Worker Market for “Smart PPE.” Purchases in property and equipment were $0.8 million as the Company optimized capital expenditures in the year for the ERP project, leasehold improvements for our new corporate headquarters, and equipment purchases in Mexico and China. Net cash used in financing activities was $9.8 million for the year ended January 31, 2022 due to the purchase of $9.2 million of our common stock.
Net cash provided by operating activities of $40.7 million for the year ended January 31, 2021 was primarily due to net income of $35.3 million, non-cash expenses of $6.8 million for deferred taxes, depreciation and amortization, and stock compensation, decrease in net inventories of $0.8 million and an increase in accounts payable, accrued expenses and other liabilities of $3.5 million, offset in part by a $4.0 million increase to accounts receivable due to a higher sales volumes in the fourth quarter as compared to prior year and an increase in other current assets of $1.7 million due to an increase in amounts due from HSBC under the UK factoring agreement. Net cash used in investing activities of $1.7 million for the year ended January 31, 2021 reflects purchases in property and equipment as the Company optimized capital expenditures in the year for the ERP project, the set-up of manufacturing facilities in Vietnam and India, the enhancement of IT infrastructure, and equipment purchases in Mexico and China. Net cash used in financing activities was $1.3 million for the year ended January 31, 2021, primarily due to the repayment of $1.2 million term loan with SunTrust Bank as part of the transition to the new Loan Agreement with Bank of America.
On June 25, 2020, we entered into a Loan Agreement (the “Loan Agreement”) with Bank of America (“Lender”). The Loan Agreement provides the Company with a secured $12.5 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 $17.5 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 credit facility will mature on June 25, 2025. Borrowings under the revolving credit facility bear interest at a rate per annum equal to the sum of the LIBOR Daily Floating Rate (“LIBOR”), plus 125 basis points. LIBOR is subject to a floor of 100 basis points. All outstanding principal and unpaid accrued interest under the revolving credit facility is due and payable on the maturity date. On a one-time basis, and subject to there not existing an event of default, the Company may elect to convert up to $5.0 million of the then outstanding principal of the revolving credit facility to a term loan facility with an assumed amortization of 15 years and the same interest rate and maturity date as the revolving credit facility. The Loan Agreement provides for an annual unused line of credit commitment fee, payable quarterly, of 0.25%, based on the difference between the total credit line commitment and the average daily amount of credit outstanding under the facility during the preceding quarter.
On June 18, 2021, the Company entered into an Amendment No. 1 to Loan Agreement (the “Amendment”) with the Lender, which modifies certain terms of the Company’s existing Loan Agreement with the Lender. The Amendment increases the credit limit under the Loan Agreement’s senior secured revolving credit facility from $12.5 million to $25.0 million. The Amendment also amends the covenant in the Loan Agreement that restricts acquisitions by the Company or its subsidiaries in order to allow, without the prior consent of the Lender, acquisitions of a business or its assets if there is no default under the Loan Agreement and the aggregate consideration does not exceed $7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions.
The Loan Agreement requires the Company to maintain a Funded Debt to EBITDA (as each such term is defined in the Loan Agreement) ratio of 3.0 to 1.0 or less and a Basic Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of at least 1.15 to 1.0. The Loan Agreement also contains customary covenants, including covenants that, among other things, limit or restrict the Company’s and/or the Company’s subsidiaries ability, subject to certain exceptions and qualifications, to incur liens or indebtedness, or merge, consolidate or sell or otherwise transfer assets. The Company was in compliance with all of its debt covenants as of January 31, 2022. As of January 31, 2022, the Company had no borrowings under the Loan Agreement, and there was $25 million of additional available credit under the Loan Agreement.
We believe that our current cash, cash equivalents, borrowing capacity under our Loan Agreement and the cash to be generated from expected product sales will be sufficient to meet our projected operating and investing requirements for at least the next twelve months. However, our liquidity assumptions may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect.
Stock Repurchase Program. On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock. On July 6, 2021, the Board of Directors authorized an increase in the Company’s current stock repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock (the “Existing Share Repurchase Program”). Shares repurchased in FY22 totaled 430,463 shares at a cost of $9.2 million leaving $0.8 million remaining under the Existing Share Repurcahse Program at January 31, 2022.
On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock (the “New Share Repurchase Program”). The New Share Repurchase Program will become effective upon the completion of the Existing Share Repurchase Program, which has approximately $800,000 remaining for repurchases as of April 21, 2022. The New Share Repurchase Program has no expiration date but may be terminated by the Board of Directors at any time.
Capital Expenditures. Our capital expenditures for FY22 of $0.8 million principally relate to capital purchases for our manufacturing facilities in Vietnam and India, the enhancement of IT infrastructure, and equipment purchases in Mexico and the US. We anticipate FY23 capital expenditures to be approximately $3.0 million as we continue to deploy our ERP solution globally, invest in strategic capacity expansion, and replace existing equipment in the normal course of operations. We expect to fund the capital expenditures from our cash flow from operations.
Recent Accounting Pronouncements
See Note 1 - Business and Significant Accounting Policies of the consolidated financial statements in Part II Item 8 of this Form 10-K.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, the Company is not required to provide the information required by this Item and therefore, no disclosure is required under Item 7A for the Company.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page No.
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Statements of Income for the Years Ended January 31, 2022 and 2021
Consolidated Statements of Comprehensive Income for the Years Ended January 31, 2022 and 2021
Consolidated Balance Sheets as of January 31, 2022 and 2021
Consolidated Statements of Stockholders’ Equity for the Years Ended January 31, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended January 31, 2022 and 2021
Notes to Consolidated Financial Statements
40-60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Lakeland Industries, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Lakeland Industries, Inc. and subsidiaries (the “Company”) as of January 31, 2022 and 2021, the related statements of income, comprehensive income, stockholders’ equity, and cash flows, for each of the two years in the period ended January 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 21, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventories - Refer to Notes 1 and 2 to the financial statements
Critical Audit Matter Description
The Company’s inventory includes costs to acquire and produce the goods and is stated at the lower of cost or net realizable value on a first-in, first-out method (FIFO). The assessment of estimated obsolescence or unmarketable inventory involved judgment and is based upon assumptions about future sales and supply on-hand for certain inventory items. Total inventory of approximately $48 million is in part composed of products which were deemed to be slow moving based on historical inventory turns and sales history. An excess and obsolete adjustment of approximately $3 million was recorded by the Company.
Given the significant judgments made by management to evaluate the net realizable value of certain of its inventory products, performing audit procedures to evaluate the reasonableness of management’s assumptions related to those inventory adjustments required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to valuation of slow moving, excess and obsolete inventory included, among others:
·
We tested the effectiveness of controls over management’s process to evaluate the need for adjustments for its slow-moving, obsolete or unusable inventory.
·
We tested the mathematical accuracy of management’s estimates of the net realizable value for slow-moving, obsolete or unusable inventory.
·
We evaluated management’s judgments as to the historical lookback period utilized in determining slow-moving, obsolete or unusable inventory.
·
We evaluated the valuation of slow moving, excess and obsolete inventory in relation to:
○
Historical results and actions
○
Communications between management and the board of directors
○
Industry information related to the market for these products
○
Subsequent events
/s/ Deloitte & Touche LLP
Memphis, Tennessee
April 21, 2022
We have served as the Company’s auditor since 2020.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Lakeland Industries, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Lakeland Industries, Inc. and subsidiaries (the “Company”) as of January 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2022, of the Company and our report dated April 21, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Memphis, Tennessee
April 21, 2022
Lakeland Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended January 31, 2022 and 2021
($000’s) except share information
Net sales
$ 118,386
$ 159,000
Cost of goods sold
67,473
79,717
Gross profit
50,913
79,283
Operating expenses
34,866
35,397
Operating profit
16,047
43,886
Other income, net
Interest expense
(15 )
(23 )
Income before taxes
16,153
43,913
Income tax expense
4,781
8,583
Net income
$ 11,372
$ 35,330
Net income per common share:
Basic
$ 1.44
$ 4.43
Diluted
$ 1.41
$ 4.34
Weighted average common shares outstanding:
Basic
7,900,131
7,977,683
Diluted
8,053,876
8,141,189
The accompanying notes are an integral part of these consolidated financial statements.
Lakeland Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended January 31, 2022 and 2021
($000)’s
Net income
$ 11,372
$ 35,330
Other comprehensive income:
Foreign currency translation adjustments
1,150
Comprehensive income
$ 11,486
$ 36,480
The accompanying notes are an integral part of these consolidated financial statements.
Lakeland Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
January 31, 2022 and 2021
($000’s) except share information
ASSETS
Current assets
Cash and cash equivalents
$ 52,719
$ 52,596
Accounts receivable, net of allowance for doubtful accounts of $666 and $700 at January 31, 2022 and 2021, respectively
14,771
21,702
Inventories
47,711
43,566
Prepaid VAT and other taxes
1,675
1,343
Other current assets
3,770
4,134
Total current assets
120,646
123,341
Property and equipment, net
8,714
9,819
Operating leases right-of-use assets
5,296
2,347
Deferred tax assets
2,072
2,731
Other assets
1,361
1,312
Investments
2,704
-
Total assets
$ 140,793
$ 139,550
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$ 5,855
$ 7,397
Accrued compensation and benefits
3,225
4,694
Other accrued expenses
1,372
1,793
Income tax payable
1,534
Current maturity of long-term debt
-
-
Current portion of operating lease liability
1,242
Total current liabilities
12,015
16,185
Long-term portion of operating lease liability
3,678
1,613
Total liabilities
15,693
17,799
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par; authorized 1,500,000 shares (none issued)
-
-
Common stock, $0.01 par; authorized 20,000,000 shares,
Issued 8,555,672 and 8,498,457; outstanding 7,615,967 and 7,984,518 at January 31, 2022 and 2021, respectively
Treasury stock, at cost; 939,705 and 509,242 shares at January 31, 2022 and 2021, respectively
(14,206 )
(5,023 )
Additional paid-in capital
77,826
76,781
Retained earnings
62,892
51,520
Accumulated other comprehensive loss
(1,498 )
(1,612 )
Total stockholders’ equity
125,100
121,751
Total liabilities and stockholders’ equity
$ 140,793
$ 139,550
The accompanying notes are an integral part of these consolidated financial statements.
Lakeland Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Years Ended January 31, 2022 and 2021
Accumulated
Additional
Other
Common Stock
Treasury Stock
Paid-in
Retained
Comprehensive
Shares
Amount
Shares
Amount
Capital
Earnings
Loss
Total
($000’s)
($000’s)
($000’s)
($000’s)
($000’s)
($000’s)
Balance, January 31, 2020 as previously reported
8,481,665
$ 85
(509,242 )
$ (5,023 )
$ 75,171
$ 17,581
$ (2,762 )
$ 85,052
Impact of immaterial restatement (see Note 1)
-
-
-
-
(1,391 )
-
(1,391 )
Balance, January 31, 2020 as restated
8,481,665
$ 85
(509,242 )
$ (5,023 )
$ 75,171
$ 16,190
$ (2,762 )
$ 83,661
Net Income
-
-
-
-
-
35,330
-
35,330
Other comprehensive loss
-
-
-
-
-
-
1,150
1,150
Stock-based compensation:
Restricted stock issued
16,792
-
-
-
-
-
-
-
Restricted stock plan
-
-
-
-
1,726
-
-
1,726
Return of shares in lieu of payroll tax withholding
-
-
-
-
(116 )
-
-
(116 )
Treasury stock purchased
-
-
--
-
-
-
-
-
Balance, January 31, 2021
8,498,457
$ 85
(509,242 )
$ (5,023 )
$ 76,781
$ 51,520
$ (1,612 )
$ 121,751
Net Income
-
-
-
-
-
11,372
-
11,372
Other comprehensive income
-
-
-
-
-
-
Stock-based compensation:
Restricted stock issued
57,215
-
-
-
-
-
Restricted stock plan
-
-
-
-
1,667
-
-
1,667
Return of shares in lieu of payroll tax withholding
-
-
-
-
(622 )
-
-
(622 )
Treasury stock purchased
-
-
(430,463 )
(9,183 )
-
-
-
(9,183 )
Balance, January 31, 2022
8,555,672
$ 86
(939,705 )
$ (14,206 )
$ 77,826
$ 62,892
$ (1,498 )
$ 125,100
Lakeland Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended January 31, 2022 and 2021
($000’s)
Cash flows from operating activities:
Net income
$ 11,372
$ 35,330
Adjustments to reconcile net income to net cash provided by operating activities
Provision for (recovery of) doubtful accounts
(34 )
Deferred income taxes
2,909
Depreciation and amortization
1,868
1,965
Stock based and restricted stock compensation
1,667
1,727
Loss on disposal of property and equipment
Equity in (earnings) loss of equity investment
-
(Increase) decrease in operating assets:
Accounts receivable
6,732
(3,980 )
Inventories
(4,413 )
Prepaid VAT and other taxes
(333 )
(115 )
Other current assets
(1,698 )
Increase (decrease) in operating liabilities:
Accounts payable
(1,533 )
Accrued expenses and other liabilities
(3,178 )
3,283
Operating lease liabilities
(411 )
Net cash provided by operating activities
12,782
40,666
Cash flows from investing activities:
Purchases of property and equipment
(801 )
(1,662 )
Investments
(2,783 )
Net cash used in investing activities
(3,584 )
(1,662 )
Cash flows from financing activities
Loan repayments, short-term
-
(1,161 )
Purchase of Treasury Stock under stock repurchase program
(9,183 )
-
Shares returned to pay employee taxes under restricted stock program
(622 )
(116 )
Net cash used in financing activities
(9,805 )
(1,277 )
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
37,990
Cash and cash equivalents at beginning of year
52,596
14,606
Cash and cash equivalents at end of year
$ 52,719
$ 52,596
Cash paid for interest
$ 15
$ 23
Cash paid for taxes
$ 5,315
$ 3,561
Noncash investing and financing activities
Leased assets obtained in exchange for operating lease liabilities
$ 3,368
$ 437
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Lakeland Industries, Inc. and Subsidiaries (“Lakeland,” the “Company,” “we,” “our” or “us”), a Delaware corporation organized in April 1986, manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 1,600 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. 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 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 and countries within Southeast Asia. For purposes of this Form 10-K, FY refers to a fiscal year ended January 31; for example, FY22 refers to the fiscal year ended January 31, 2022.
Basis of Presentation
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The following is a description of the Company’s significant accounting policies.
Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is reasonably possible that events could occur during the upcoming year that could change such estimates.
Cash and Cash Equivalents
The Company considers highly liquid temporary cash investments with original maturities of three months or less to be cash equivalents. Cash equivalents consist of money market funds.
Accounts Receivable, Net.Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company estimates credit losses by considering historical credit losses, the current economic environment, customer credit ratings or bankruptcies.
Inventories
Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out or moving average basis) or net realizable value. Adjustments are recorded for slow-moving, obsolete or unusable inventory. We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future sales and supply on-hand, if necessary. If actual market conditions are less favorable than those projected by management, additional inventory adjustments may be required.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives on a straight-line basis. Leasehold improvements and leasehold costs are amortized over the term of the lease or service lives of the improvements, whichever is shorter. The costs of additions and improvements which substantially extend the useful life of a particular asset are capitalized. Repair and maintenance costs are charged to expense. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the account, and the gain or loss on disposition is reflected in operating income.
Assets held for sale are measured at the lower of carrying value or fair value less cost to sell. Gains or losses are recognized for any subsequent changes to fair value less cost to sell. However, gains are limited to cumulative losses previously recognized. Assets classified as held for sale are not depreciated.
Impairment of Long-Lived Assets
The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. The Company measures any potential impairment on a projected undiscounted cash flow method. Estimating future cash flows requires the Company’s management to make projections that can differ materially from actual results. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset.
Revenue Recognition
Substantially all the Company’s revenue is derived from product sales, which consist of sales of the Company’s personal protective wear products to distributors. The Company considers purchase orders to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year, and virtually all of the Company’s contracts are short-term. The Company recognizes revenue for the transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods. Generally, payment is due from customers within 30 to 90 days of the invoice date, and the contracts do not have significant financing components. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Shipping and handling costs associated with outbound freight are included in operating expenses, and for the years ended in FY22 and FY21 aggregated approximately $2.9 million and $3.9 million, respectively. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue.
The transaction price includes estimates of variable consideration, related to rebates, allowances, and discounts that are reductions in revenue. All estimates are based on the Company’s historical experience, anticipated performance, and the Company’s best judgment at the time the estimate is made. Estimates for variable consideration are reassessed each reporting period and are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur upon resolution of uncertainty associated with the variable consideration. All the Company’s contracts have a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as quantity times price per unit.
The Company has seven revenue generating reportable geographic segments under ASC Topic 280 “Segment Reporting” and derives its sales primarily from its limited use/disposable protective clothing and secondarily from its sales of reflective clothing, high-end chemical protective suits, firefighting and heat protective apparel, reusable woven garments and gloves and arm guards. The Company believes disaggregation of revenue by geographic region and product line best depicts the nature, amount, timing, and uncertainty of its revenue and cash flows (see table below). Net sales by geographic region and by product line are included below:
Year Ended
January 31,
(in millions of dollars)
External Sales by product lines:
Disposables
$ 67.2
$ 103.8
Chemical
24.5
31.2
Fire
8.2
7.5
Gloves
2.2
3.1
High Visibility
5.6
4.4
High Performance Wear
3.6
2.3
Wovens
7.1
6.7
Consolidated external sales
$ 118.4
$ 159.0
Year Ended
January 31,
(in millions of dollars)
External Sales by region:
USA
$ 47.6
$ 70.6
Other foreign
7.1
9.0
Europe (UK)
10.3
16.8
Mexico
4.1
5.7
Asia
29.8
31.2
Canada
8.2
13.6
Latin America
11.3
12.1
Consolidated external sales
$ 118.4
$ 159.0
Advertising Costs
Advertising costs are expensed as incurred and included in operating expenses on the consolidated statement of income. Advertising and co-op costs amounted to $0.5 million and $0.7 million in FY22 and FY21, respectively, net of a co-op advertising allowance received from a supplier.
Stock-Based Compensation
The Company records the cost of stock-based compensation plans based on the fair value of the award on the grant date. For awards that contain a vesting provision, the cost is recognized over the requisite service period (generally the vesting period of the equity award) which approximates the performance period. For awards based on services already rendered, the cost is recognized immediately.
Income Taxes
The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of preparing the consolidated financial statements. This involves estimating the actual current tax in addition to assessing temporary differences resulting from differing treatments for tax and financial accounting purposes. These differences, together with net operating loss carryforwards and tax credits, are recorded as deferred tax assets or liabilities on the Company’s consolidated balance sheet. A judgment must then be made of the likelihood that any deferred tax assets will be recovered from future taxable income. A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines that it may not be able to realize all or part of its deferred tax asset in the future, or that new estimates indicate that a previously recorded valuation allowance is no longer required, an adjustment to the deferred tax asset is charged or credited to income in the period of such determination.
The Company recognizes tax positions that meet a “more likely than not” minimum recognition threshold. If necessary, the Company recognizes interest and penalties associated with tax matters as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets.
Foreign Operations and Foreign Currency Translation
The Company maintains manufacturing operations in Mexico, India, Argentina, Vietnam and the People’s Republic of China and can access independent contractors in China, Vietnam, Argentina and Mexico. It also maintains sales and distribution entities located in India, Canada, the U.K., Chile, China, Argentina, Russia, Kazakhstan, Uruguay, Australia and Mexico. The Company is vulnerable to currency risks in these countries. The functional currency for the United Kingdom subsidiary is the Euro; the trading company in China, the RMB; the Russian operation, the Russian Ruble, and the Kazakhstan operation the Kazakhstan Tenge. All other operations have the US dollar as its functional currency.
Pursuant to US GAAP, assets and liabilities of the Company’s foreign operations with functional currencies, other than the US dollar, are translated at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average rates prevailing during the periods. Translation adjustments are reported in accumulated other comprehensive loss, a separate component of stockholders’ equity. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the consolidated statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Foreign currency transaction income (loss) included in net income for the years ended January 31, 2022 and 2021, were approximately $0.3 million and ($0.5) million, respectively.
Fair Value of Financial Instruments
US GAAP defines fair value, provides guidance for measuring fair value and requires certain disclosures utilizing a fair value hierarchy which is categorized into three levels based on the inputs to the valuation techniques used to measure fair value.
The following is a brief description of those three levels:
Level1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level2:
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level3:
Unobservable inputs that reflect management’s own assumptions.
There were no foreign currency forward or hedge contracts at January 31, 2022 or January 31, 2021.
The financial instruments of the Company classified as current assets or liabilities, including cash and cash equivalents, accounts receivable, short-term borrowings, borrowings under revolving credit facility, accounts payable and accrued expenses, are recorded at carrying value, which approximates fair value based on the short-term nature of these instruments.
Net Income Per Share
Net income per share are based on the weighted average number of common shares outstanding without consideration of common stock equivalents. Diluted net income per share are based on the weighted average number of common shares and common stock equivalents. The diluted net income per share calculation takes into account unvested restricted shares and the shares that may be issued upon exercise of stock options, reduced by shares that may be repurchased with the funds received from the exercise, based on the average price during the fiscal year.
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.
Recently Adopted Accounting Standards
In 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the tax basis of goodwill after a business combination, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also changes the calculation of the income tax impact of hybrid taxes and the methodology for calculating income taxes in an interim period. We adopted this standard as of January 31, 2021 on either a prospective basis, or through a modified retrospective approach, as required by the standard. There was no cumulative effect adjustment recorded to retained earnings as the amount was not material. The effects of this standard on our financial position, results of operations and cash flows were not material.
New Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting in response to the risk of cessation of the London Interbank Offered Rate (LIBOR). This amendment provides for optional expedients and exceptions for applying generally accepted accounting principles to contracts and hedging relationships that are affected by LIBOR and other reference rates. The ASU generally allows for a hedge accounting to continue if the hedge was highly effective or met other standards prior to reference rate reform. Entities are permitted to apply the amendments to all contracts, cash flow and net investment hedge relationships that exist as of March 12, 2020. The relief provided in this ASU is only available for a limited time, generally through December 31, 2022. Our debt agreement that utilizes LIBOR has not yet discontinued the use of LIBOR and, therefore, this ASU is not yet effective for us. To the extent our debt arrangements change to another accepted rate, we will utilize the relief available in this ASU.
No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated financial statements.
Restatement For Correction of Immaterial Errors in Previously Issued Consolidated Financial Statements
In connection with the preparation of the consolidated financial statements for the fiscal year ended January 31, 2022, the Company identified errors in its previously filed annual consolidated financial statements and unaudited quarterly consolidated financial statements. The errors were not material to any individual prior quarterly or annual period. The prior period errors were related to assumptions and estimates made related to intercompany profit in ending inventory, use of a blended rate to calculate state net operating losses within the income tax provision and assumptions made concerning compensation information used to calculate employee benefits in one of our foreign entities. These errors accumulated over time and prior to the beginning of FY 2022.
In accordance with SEC Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (codified as Topic 1-N), the Company concluded that the correction of the errors was not material to any of its previously issued annual or interim financial statements. The Company has revised its previously issued consolidated financial statements contained in this Annual Report on Form 10-K to correct the effect of these immaterial errors for the corresponding periods. Accordingly, for these prior periods we revised the affected line items of our consolidated balance sheets, consolidated statements of income and comprehensive income, consolidated statements of stockholders’ equity, and consolidated statements of cash flows. The correction of the errors resulted in a $1.4 million decrease in retained earnings as of January 31, 2020.
The effects of the correction of immaterial errors on the impacted accounts within the Consolidated Balance Sheets were as follows (in thousands):
January 31, 2021
As Previously Reported
Adjustment
As Revised
Inventories
$ 43,833
($267)
$ 43,566
Deferred tax assets
2,839
(108 )
2,731
Total Assets
139,925
(375 )
139,550
Accrued compensation and benefits
3,902
4,694
Total Liabilities
17,007
17,799
Retained earnings
52,687
(1,167 )
51,520
Total Stockholders’ Equity
$ 122,918
($1,167)
$ 121,751
The effects of the correction of immaterial errors on the impacted accounts within the Consolidated Statements of Income were as follows (in thousands):
Year ended January 31, 2021
As Previously Reported
Adjustment
As Revised
Cost of goods sold
$ 79,750
($33)
$ 79,717
Income before taxes
43,880
(33 )
43,913
Income tax expense
8,774
(191 )
8,583
Net income
35,106
35,330
Basic net income per common share
$ 4.40
$ 0.03
$ 4.43
Diluted income per common share
$ 4.31
$ 0.03
$ 4.34
The effects of the correction of immaterial errors on the impacted accounts within the Consolidated Statements of Cash Flows were as follows (in thousands):
Year ended January 31, 2021
As Previously Reported
Adjustment
As Revised
Net income
$ 35,106
$ 224
$ 35,330
Deferred taxes
3,103
(194 )
2,909
Inventory
Accrued expenses and other liabilities
3,580
(297 )
3,283
Net cash provided by operating activities
40,666
---
40,666
2. INVENTORIES
Inventories consist of the following (in $000s):
January 31,
Raw materials
$ 20,231
$ 18,941
Work-in-process
Finished goods
29,910
26,780
Excess and obsolete adjustments
(3,056 )
(2,564 )
$ 47,711
$ 43,566
3. PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following:
Useful Life in Years
January 31,
(000’s)
(000’s)
Machinery and equipment
3-10
$ 4,826
$ 5,095
Furniture and fixtures
3-10
1,067
1,065
Leasehold improvements
Lease term
2,237
1,735
Computer hardware and software
4,741
4,652
Land and building
20-30
9,183
9,183
22,054
21,730
Less accumulated depreciation and amortization
(13,372 )
(12,007 )
Construction-in-progress
$ 8,714
$ 9,819
Depreciation and amortization expense for FY22 and FY21 amounted to $1.9 million and $2.0 million, respectively.
4. INVESTMENTS
On October 18, 2021, the Company entered into an Investment Agreement (the “Investment Agreement”) with Inova Design Solutions Ltd, a private limited company incorporated under the laws of England and Wales and headquartered in the United Kingdom, doing business as Bodytrak® (“Bodytrak”), and the other parties thereto, pursuant to which Bodytrak agreed to issue and sell to the Company 508,905 cumulative convertible series A shares of Bodytrak (“Series A Shares”) in exchange for a payment by the Company of £2,000,000 ($2.8 million). The closing of this minority investment transaction occurred on October 18, 2021.
Bodytrak provides wearable monitoring solutions for customers in industrial health, safety, defense and first responder markets wanting to achieve better employee health and performance. Bodytrak’s solution is provided as a platform as a service (PaaS), delivering real-time data and cloud-based analytics, and hardware that includes a patented earpiece for, physiological monitoring and audio communications.
The Series A Shares issued to the Company at the closing represent approximately 11.43% of Bodytrak’s total share capital. Under the terms of the Investment Agreement, the Company may also elect, within 30 months of the date of the initial investment, to acquire up to an additional 381,679 Series A Shares of Bodytrak for £1,500,000 (approximately $2.0 million at current exchange rates) assuming all 381,679 Series A Shares are acquired by the Company), which would result in the Company owning an aggregate of 18.42% of Bodytrak’s share capital, assuming no other shares are issued by Bodytrak. The investment in Bodytrak will be accounted for under the equity method given our board representation and the resulting ability to exercise significant influene. A substantial portion of our investment represents differences in our investment and our share of the underlying recognized net assets of Bodytrak. These differences are predominately attributable to non-amortizing intangible assets, including internally developed intellectual property, of Bodytrak.
For the period October 18, 2021 (date of investment) through January 31, 2022, the Company recognized a loss of $0.1 million as the Company’s share of Bodytrak’s net loss. The loss is reflected in other income (expense), net in the consolidated statements of income.
5. LONG-TERM DEBT
Revolving Credit Facility
On June 25, 2020, the Company entered into a Loan Agreement (the “Loan Agreement”) with Bank of America (“Lender”). The Loan Agreement provides the Company with a secured (i) $12.5 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 $17.5 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 credit facility will mature on June 25, 2025.
Borrowings under the revolving credit facility bear interest at a rate per annum equal to the sum of the LIBOR Daily Floating Rate (“LIBOR”), plus 125 basis points. LIBOR is subject to a floor of 100 basis points. All outstanding principal and unpaid accrued interest under the revolving credit facility is due and payable on the maturity date. On a one-time basis, and subject to there not existing an event of default, the Company may elect convert up to $5 million of the then outstanding principal of the revolving credit facility to a term loan facility with an assumed amortization of 15 years and the same interest rate and maturity date as the revolving credit facility. The Loan Agreement provides for an annual unused line of credit commitment fee, payable quarterly, of 0.25%, based on the difference between the total credit line commitment and the average daily amount of credit outstanding under the facility during the preceding quarter.
On June 18, 2021, the Company entered into an Amendment No. 1 to Loan Agreement (the “Amendment”) with the Lender, which modifies certain terms of the Company’s existing Loan Agreement with the Lender. The Amendment increases the credit limit under the Loan Agreement’s senior secured revolving credit facility from $12.5 million to $25.0 million. The Amendment also amends the covenant in the Loan Agreement that restricts acquisitions by the Company or its subsidiaries in order to allow, without the prior consent of the Lender, acquisitions of a business or its assets if there is no default under the Loan Agreement and the aggregate consideration does not exceed $7.5 million for any individual acquisition or $15.0 million on a cumulative basis for all such acquisitions.
The Loan Agreement requires the Company to maintain a Funded Debt to EBITDA (as each such term is defined in the Loan Agreement) ratio of 3.0 to 1.0 or less and a Basic Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of at least 1.15 to 1.0. The Loan Agreement also contains customary covenants, including covenants that, among other things, limit or restrict the Company’s and/or the Company’s subsidiaries’ ability, subject to certain exceptions and qualifications, to incur liens or indebtedness, pay dividends, or merge, consolidate or sell or otherwise transfer assets. The Company was in compliance with all of its debt covenants as of January 31, 2022.
The Company made certain representations and warranties to the Lender in the Loan Agreement that are customary for credit arrangements of this type. The Company also agreed to maintain, as of the end of each fiscal quarter, a minimum “basic fixed charge coverage ratio” (as defined in the Loan Agreement) of at least 1.15 to 1.00 and a “funded debt to EBITDA ratio” (as defined in the Loan Agreement) not to exceed 3.00 to 1.00, in each case for the trailing 12-month period ending with the applicable quarterly reporting period. The Company also agreed to certain negative covenants that are customary for credit arrangements of this type, including restrictions on the Company’s ability to enter into mergers, acquisitions or other business combination transactions, conduct its business, grant liens, make certain investments, make substantial change in the present executive or management personnel and incur additional indebtedness, which negative covenants are subject to certain exceptions.
The Loan Agreement contains customary events of default that include, among other things (subject to any applicable cure periods and materiality qualifier), non-payment of principal, interest or fees, defaults under related agreements with the Lender, cross-defaults under agreements for other indebtedness, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgements and material adverse change. Upon the occurrence of an event of default, the Lender may terminate all loan commitments, declare all outstanding indebtedness owing under the Loan Agreement and related documents to be immediately due and payable, and may exercise its other rights and remedies provided for under the Loan Agreement.
In connection with the Loan Agreement, the Company entered into with the Lender (i) a security agreement dated June 25, 2020, pursuant to which the Company granted to the Lender a first priority perfected security interest in substantially all of the personal property and the intangibles of the Company, and (ii) a pledge agreement, dated June 25, 2020, pursuant to which the Company granted to the Lender a first priority perfected security interest in the stock of its subsidiaries (limited to 65% of those subsidiaries that are considered “controlled foreign subsidiaries” as set forth in the Internal Revenue Code and regulations). The Company’s obligations to the Lender under the Loan Agreement are also secured by a negative pledge evidenced by a Non-encumbrance Agreement covering the real property owned by the Company in Decatur, Alabama
As of January 31, 2022, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.
Prior to the execution of the Loan Agreement with Bank of America, the Company repaid a $1.2 million term loan that was outstanding under a similar agreement with SunTrust Bank. The Company has terminated the borrowing agreement with SunTrust Bank.
Borrowings in UK
On December 31, 2014, the Company and Lakeland Industries Europe, Ltd, (“Lakeland UK”), a wholly owned subsidiary of the Company, amended the terms of its existing line of credit facility with HSBC Bank to provide for (i)a one-year extension of the maturity date of the existing financing facility to December 19, 2016, (ii) an increase in the facility limit from £1,250,000 (approximately USD $1.9 million, based on exchange rates at time of closing) to £1,500,000 (approximately USD $2.3 million, based on exchange rates at time of closing), and (iii) a decrease in the annual interest rate margin from 3.46% to 3.0%. In addition, pursuant to a letter agreement dated December 5, 2014, the Company agreed that £400,000 (approximately USD $0.6 million, based on exchange rates at time of closing) of the note payable by the UK subsidiary to the Company shall be subordinated in priority of payment to the subsidiary’s obligations to HSBC under the financing facility. On December 31, 2016, Lakeland UK entered into an extension of the maturity date of its existing facility with HSBC Invoice Finance (UK) Ltd. to December 19, 2017. Other than the extension of the maturity date and a reduction of the service charge from 0.9% to 0.85%, all other terms of the facility remained the same. On December 4, 2017 the facility was extended to March 31, 2018 for the next review period. On March 9, 2019 the facility was extended to March 31, 2020 and on March 6, 2020 further extended to March 31, 2021 with no additional changes to the terms. On April 6, 2021 the facility was extended to March 31, 2022 and to reflect a reduction of the service charge from 0.85% to 0.765%. The agreement can be terminated with three months notice. There were no borrowings outstanding under this facility at January 31, 2022 and January 31, 2021. The amounts due from HSBC of $1.2 million and $2.0 million as of January 31, 2022, and January 31, 2021, respectively, is included in other current assets on the accompanying consolidated balance sheets.
6. CONCENTRATION OF RISK
Credit Risk
Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents, and trade receivables. Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. The Company does not require customers to post collateral.
The Company’s foreign financial depositories are Bank of America; China Construction Bank; Bank of China; China Industrial and Commercial Bank; HSBC (UK); Rural Credit Cooperative of Shandong; Postal Savings Bank of China; Punjab National Bank; HSBC in India, Argentina and UK; Raymond James in Argentina; TD Canada Trust; Banco Itaú S.A., Banco Credito Inversione in Chile; Banco Mercantil Del Norte SA in Mexico; ZAO KB Citibank Moscow in Russia, and JSC Bank Centercredit in Kazakhstan. 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 $13.3 million total included in the U.S. bank accounts and approximately $39.9 million total in foreign bank accounts as of January 31, 2022, of which $52.0 million was uninsured.
Major Customer
No customer accounted for more than 10% of net sales during FY22 and FY21.
Major Supplier
No vendor accounted for more than 10% of purchases during FY22 and FY21.
7. STOCKHOLDERS’ EQUITY
On June 21, 2017, the stockholders of the Company approved the Lakeland Industries, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). 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 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”).
On June 16, 2021, the stockholders of the Company approved Amendment No. 1 (the “Amendment”) to the 2017 Plan. The Amendment increases the number of shares of common stock, par value $0.01 per share (the “Common Stock”), of the Company reserved for issuance under the Plan by 480,000 shares.
An aggregate of 840,000 shares of the Company’s common stock are authorized for issuance under the 2017 Plan, subject to adjustment as provided in the 2017 Plan for stock splits, dividends, distributions, recapitalizations and other similar transactions or events. 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.
The Company recognized total stock-based compensation costs, which are reflected in operating expenses (in 000’s):
Year Ended January 31,
2017 Plan:
Total restricted stock and stock option programs
$ 1,667
$ 1,727
Total income tax expense recognized for stock-based compensation arrangements
$ 350
$ 363
Restricted Stock
Under the 2017 Plan, as described above, the Company awarded performance-based and service-based shares of restricted stock and restricted stock units to eligible employees and directors. The following table summarizes the activity under the 2017 Plan for the year ended January 31, 2022. This table reflects the amount of awards granted at the number of shares that would be vested if the Company were to achieve the maximum performance level under the December 2019, April 2020 and June 2021 grants.
Performance-
Based
Service-Based
Total
Weighted Average Grant Date Fair Value
Outstanding at January 31, 2021
245,210
30,930
276,140
$ 13.24
Awarded
46,202
14,970
61,172
$ 24.84
Vested
(58,574 )
(30,930 )
(89,504 )
Forfeited
----
----
----
Outstanding at January 31, 2022
232,838
14,970
247,808
$ 20.89
The actual number of shares of common stock of the Company, if any, to be earned by the award recipients is determined over a three year performance measurement period based on measures that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and free cash flow for the December 2019, April 2020 and June 2021 grants. 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, 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 January 31, 2022, unrecognized stock-based compensation expense totaled $1.6 million pursuant to the 2017 Plan based on outstanding awards under the Plan. This expense is expected to be recognized over approximately two years.
Stock Repurchase Program
On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock. On July 6, 2021, the Board of Directors authorized an increase in the Company’s current stock repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock (the "Existing Shares Repurchase Program") Shares repurchased in FY22 totaled 430,463 shares at a cost of $9.2 million leaving $0.8 million remaining under the stock repurchase program at January 31, 2022.
On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock (the “New Share Repurchase Program”). The New Share Repurchase Program will become effective upon the completion of the Existing Share Repurchase Program, which has approximately $800,000 remaining for repurchases as of April 21, 2022. The New Share Repurchase Program has no expiration date but may be terminated by the Board of Directors at any time.
8. INCOME TAXES
The provision for income taxes is based on the following pretax income (loss):
Years Ended January 31,
Domestic and Foreign Pretax Income
Domestic
$ 1,519
$ 8,147
Foreign
14,634
35,766
Total
$ 16,153
$ 43,913
Years Ended January 31,
Income Tax Expense (Benefit)
Current:
Federal
($171)
$ 41
State and other taxes
88 54
Foreign
4,205 5,483
Total Current Tax Expense
$ 4,122 $ 5,578
Deferred:
Domestic
$ 526 $ 3,005
Foreign
----
Total Deferred Tax Expense
$
$
3,005
Total Income Taxes
$ 4,781 $ 8,583
The following is a reconciliation of the effective income tax rate to the Federal statutory rate:
Years Ended January 31,
Statutory rate
21.00 %
21.00 %
State Income Taxes, Net of Federal Tax Benefit
(0.01 )
0.90
Adjustment to Deferred
(0.26 )
0.29
GILTI
4.11
4.43
Permanent Differences
(0.83 )
(0.09 )
Valuation Allowance-Deferred Tax Asset
4.81
2.20
Foreign Tax Credit
(7.34 )
(7.61 )
Argentina Flow Through Loss
1.36
0.58
Foreign Dividend & Subpart F
(5.27
)
2.14
Foreign Rate Differential
9.22
(4.01 )
Change in State Apportionment Rate
3.52
-
Other
(0.71 )
(0.28 )
Effective Rate
29.60 %
19.55 %
The tax effects of temporary cumulative differences which give rise to deferred tax assets are summarized as follows:
Years Ended January 31,
Deferred tax assets:
Inventories
$ 806
$ 955
US tax loss carryforwards, including work opportunity credit
Accounts receivable and accrued rebates
Accrued compensation and other
India reserves - US deduction
Equity based compensation
Foreign tax credit carry-forward
3,209
2,430
State and local carry-forwards
Depreciation and amortization
(186 )
(265 )
Prepaid expenses
(219 )
(121 )
Brazil write-down
Right-of-use asset
(738 )
(239 )
Operating lease liability
Other
Deferred tax asset
5,282
5,170
Less valuation allowance
(3,210 )
(2,439 )
Net deferred tax asset
$ 2,072
$ 2,731
Tax Reform
On December 22, 2017, federal tax reform legislation was enacted in the United States, resulting in significant changes from previous tax law. The 2017 Tax Cuts and Jobs Act (the Tax Act) reduced the federal corporate income tax rate to 21% from 35% effective January 1, 2018. The Tax Act requires us to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, re-measuring our US deferred tax assets as well as reassessing the net realizability of our deferred tax assets. The Company completed this re-measurement and reassessment in FY18. While the Tax Act provides for a modified territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Re-measurement and reassessment of the GILTI tax resulted in a charge to tax expense of $0.7 million and $1.1 million in FY22 and FY21, respectively. The Company intends to account for the GILTI tax in the period in which it is incurred. Though this non-cash expense (due to available NOL’s) had a materially negative impact on FY22 earnings, the Tax Act also changes the taxation of foreign earnings, and companies generally will not be subject to United States federal income taxes upon the receipt of dividends from foreign subsidiaries.
We previously considered substantially all of the earnings in our non-U.S. subsidiaries to be indefinitely reinvested outside the U.S. and, accordingly, recorded no deferred income taxes on such earnings. At this time, the applicable provisions of the Tax Act have been fully analyzed and our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. The Company strategically employs a dividend plan with respect to our non-U.S. subsidiaries subject to subsidiary profitability, cash requirements and withholding taxes. During FY22 the Company’s subsidiaries in Canada, Uruguay and Hong Kong declared and paid dividends of $2.6 million, $1.0 million and $4.4 million respectively. Withholding taxes totaling $0.2 million are included in income tax expense. No dividends were proposed by management or declared by our Board of Directors for our China subsidiary in FY22 or FY21.
Income Tax Audits
The Company is subject to US federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions. Returns for the years since FY18 are still open based on statutes of limitation only.
Chinese tax authorities have performed limited reviews on all Chinese subsidiaries as of tax years 2008 through 2018 with no significant issues noted and we believe our tax positions are reasonably stated as of January 31, 2022. Weifang Meiyang Products Co., Ltd. (“Meiyang”), one of our Chinese operations, was changed to a trading company from a manufacturing company in Q1 FY16 and all direct workers and equipment were transferred from Meiyang to Weifang Lakeland Safety Products Co., Ltd., (“WF”), another entity of our Chinese operation thereby reducing our tax exposure. The 2021 tax review will be performed before May 30, 2022 in China.
Change in Valuation Allowance
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. The valuation allowance for the year ended January 31, 2022 and January 31, 2021 was $3.2 million and $2.4 million, respectively.
9. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income per share as follows:
Years Ended January 31,
(000’s except share information)
Numerator - Net Income
$ 11,372
$ 35,330
Denominator for basic net income per share (weighted-average shares which reflect 939,705 and 509,242 treasury shares at January 31, 2022 and 2021, respectively)
7,900,131
7,977,683
Effect of dilutive securities from restricted stock plan and from dilutive effect of stock options
153,745
163,506
Denominator for diluted net income per share (adjusted weighted average shares)
8,053,876
8,141,189
Basic net income per share
$ 1.44
$ 4.43
Diluted net income per share
$ 1.41
$ 4.34
10. Derivative Instruments and Foreign Currency Exposure
The Company is exposed to foreign currency risk. Management has commenced a derivative instrument program to partially offset this risk by purchasing forward contracts to sell the Canadian Dollar and the Euro other than the cash flow hedge discussed below. Such contracts are largely timed to expire with the last day of the fiscal quarter, with a new contract purchased on the first day of the following quarter, to match the operating cycle of the Company. We designated the forward contracts as derivatives but not as hedging instruments, with loss and gain recognized in current earnings.
The Company accounts for its foreign exchange derivative instruments by recognizing all derivatives as either assets or liabilities at fair value, which may result in additional volatility in current period earnings or other comprehensive income, depending whether the instrument was designated as a cash flow hedge, as a result of recording recognized and unrecognized gains and losses from changes in the fair value of derivative instruments.
We have one type of derivatives to manage the risk of foreign currency fluctuations. We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies. Those forward contract derivatives, not designated as hedging instruments, were generally settled quarterly. Gain and loss on those forward contracts are included in current earnings. There were no outstanding forward contracts at January 31, 2022 or 2021.
11. COMMITMENTS AND CONTINGENCIES
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 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 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 consolidated financial statements. 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.
General litigation contingencies
The Company is involved in various litigation proceedings arising during the normal course of business which, in the opinion of the management of the Company, will not have a material effect on the Company’s financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these matters. As of January 31, 2022, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.
Leases
We lease real property, equipment and automobiles. The Company made the accounting policy election to account for short-term leases as described herein. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.
The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of the Company’s real estate leases are classified as operating leases.
Most of our real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term for an additional four to five years. The exercise of lease renewal options is at the Company’s discretion. The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.
Lease cost
The components of lease expense are included on the consolidated statement of operations as follows (in 000’s):
Classification
Year Ended
January 31, 2022
Year Ended
January 31, 2021
Operating lease cost
Cost of goods sold
$ 656
$ 727
Operating expenses
$ 908
$ 625
Short-term lease cost
$ 114
$ 176
Weighted-average lease terms and discount rates are as follows:
January 31,
January 31,
Weighted-average remaining lease term (years)
Operating leases
8.25
3.96
Weighted-average discount rate
Operating leases
4.32 %
7.15 %
Supplemental cash flow information related to leases were as follows (in 000’s):
Year Ended
January 31,
Year Ended
January 31,
Cash paid for amounts included in the measurement of lease liabilities;
Operating cash flows from operating leases
$ 406
$ 1,154
Leased assets obtained in exchange for new operating lease liabilities
$ 3,368
$ 981
Maturity of Lease Liabilities
Maturity of lease liabilities as of January 31, 2022 was as follows (in $000’s):
Year ending January 31,
Operating Leases
$ 1,242
Thereafter
2,215
Total lease payments
5,689
Less: Interest
Present value of lease liability
$ 4,920
12. SEGMENT REPORTING
Domestic and international sales from continuing operations are as follows in millions of dollars:
Domestic
$ 47.61
$ 70.59
International
70.78
88.41
Total
$ 118.39
$ 159.00
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 and the light manufacturing of our chemical, wovens, reflective, and fire products). The Company also maintains one manufacturing company in China (primarily disposable and chemical suit production), a manufacturing facility in Mexico (primarily disposable, reflective, fire and chemical suit production), a manufacturing facility in Vietnam (primarily disposable production) and a small manufacturing facility in India. Our China facilities produce the majority of the Company’s products and China generates a significant portion of the Company’s international revenues. We evaluate the performance of these entities based on operating profit, which is defined as income before income taxes, interest expense and other income and expenses. We have sales forces in the USA, Canada, Mexico, Europe, Latin America, India, Russia, Kazakhstan and China, which sell and distribute products shipped from the United States, Mexico, India or China. The table below represents information about reported segments for the years noted therein:
Year Ended January 31,
(in millions of dollars)
Net Sales
USA Operations (including Corporate)
$ 51.44
$ 73.91
Other foreign
9.73
11.89
Europe (UK)
10.31
16.80
Mexico
5.23
6.80
Asia
75.82
91.03
Canada
8.20
13.61
Latin America
11.80
12.40
Less intersegment sales
(54.14 )
(67.44 )
Consolidated sales
$ 118.39
$ 159.00
External Sales
USA Operations (including Corporate)
$ 47.61
$ 70.59
Other foreign
7.07
9.03
Europe (UK)
10.31
16.80
Mexico
4.06
5.70
Asia
29.80
31.22
Canada
8.20
13.61
Latin America
11.34
12.05
Consolidated external sales
$ 118.39
$ 159.00
Intersegment Sales
USA Operations (including Corporate)
$ 3.83
$ 3.32
Other foreign
2.66
2.87
Mexico
1.17
1.10
Asia
46.02
59.80
Canada
-
-
Latin America
0.46
0.35
Consolidated intersegment sales
$ 54.14
$ 67.44
Year Ended January 31,
(in millions of dollars)
Operating Profit (Loss):
USA Operations (including Corporate)
$ (4.09 )
$ 8.38
Other foreign
1.84
4.68
Europe (UK)
1.18
4.83
Mexico
(1.01 )
-
Asia
13.89
21.95
Canada
1.07
2.28
Latin America
2.35
3.59
Less intersegment (profit) loss
0.82
(1.82 )
Consolidated operating profit
$ 16.05
$ 43.89
Depreciation and Amortization Expense:
USA Operations (including Corporate)
$ 0.88
$ 0.87
Other foreign
0.07
0.05
Europe (UK)
-
0.01
Mexico
0.20
0.18
Asia
0.58
0.73
Canada
0.11
0.09
Latin America
0.03
0.04
Less intersegment
----
(0.01 )
Consolidated depreciation and amortization expense
$ 1.87
$ 1.96
Year Ended January 31,
(in millions of dollars)
Total Assets:
USA Operations (including Corporate)
$ 77.76
$ 76.22
Other foreign
9.32
8.74
Europe (UK)
8.79
11.33
Mexico
5.24
5.68
Asia
66.97
64.39
Canada
4.99
8.03
Latin America
7.46
7.07
Less intersegment
(39.74 )
(41.91 )
Consolidated assets
$ 140.79
$ 139.55
Total Assets Less Intersegment:
USA Operations (including Corporate)
$ 53.36
$ 51.74
Other foreign
8.92
8.37
Europe (UK)
8.79
11.33
Mexico
5.06
5.62
Asia
52.26
47.49
Canada
4.99
8.03
Latin America
7.41
6.97
Consolidated assets
$ 140.79
$ 139.55
Property and Equipment:
USA Operations (including Corporate)
$ 2.78
$ 3.05
Other foreign
0.25
0.25
Europe (UK)
-
-
Mexico
2.15
2.34
Asia
2.42
2.94
Canada
0.95
1.06
Latin America
0.07
0.08
Less intersegment
0.09
0.09
Consolidated long-lived assets
$ 8.71
$ 9.81
Capital Expenditures:
USA Operations (including Corporate)
$ 0.64
$ 0.59
Other foreign
0.04
0.15
Europe (UK)
----
-
Mexico
0.03
0.35
Asia
0.06
0.49
Canada
0.03
-
Latin America
----
0.08
Consolidated capital expenditure
$ 0.80
$ 1.66
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The unaudited quarterly financial information reflects all normal and recurring accruals and adjustments necessary for a fair presentation of net income for interim periods including, the result of the correction of immaterial errors discussed in Note 1. “Business and Summary of Significant Accounting Policies.”
These corrections decreased cost of goods sold by $0.1 million for the quarters ended October 31, 2021 and July 31, 2021 and $0.4 million for the quarter ended April 30, 2021. These corrections increased income tax expense by $0.03 million for the quarter ended October 31, 2021, decreased income tax expense by $0.3 million for the quarter ended July 31, 2021 and increased income tax expense by $0.03 million for the quarter ended April 30, 2021. These corrections increased net income by $0.1 million for the quarter ended October, 31, 2021 and increased net income by $0.4 million for the quarters ended July 31, 2021 and April 30, 2021. Basic EPS increased $0.01 for the quarter ended October 31, 2021,by $0.05 for the quarters ended July 31, 2021 and April 30, 2021. Diluted EPS increased $0.01 for quarter ended October 31, 2021, increased $0.05 for the quarter ended July 31, 2021 and increased $0.04 for the quarter April 30, 2021. These corrections decreased cost of goods sold by $0.1 million for the quarters ended October 31, 2020, July 31, 2020 and April 30, 2020. These corrections increased cost of goods sold by $0.2 million for the quarter ended January 31, 2021. These corrections decreased income tax expense by $0.05 million for the quarters ended January 31, 2021, October, 31, 2020, July 31, 2020 and April 30, 2020. These corrections decreased net income by $0.1 million for the quarter ended January 31, 2021. These corrections increased net income by $0.1 million for the quarters ended October, 31, 2020, July 31, 2020 and April 30, 2020. Basic EPS decreased $0.02 for the quarter ended January 31, 2021. Basic EPS increased $0.02 for the quarters ended October 31, 2020, July 31, 2020 and April 30, 2020. Diluted EPS decreased $0.02 for the quarter ended January 31, 2021. Diluted EPS increased $0.02 for the quarters ended October 31, 2020 and April 30, 2020 and increased $0.01 for the quarter ended July 31, 2020. Quarterly results are not necessarily indicative of a full year’s operations because of various factors. The following tables present unaudited quarterly financial information for the periods presented:
Fiscal Year 2022
In thousands except EPS
Fourth Quarter Ended January 31, 2022
Third Quarter Ended October 31, 2021
Second Quarter Ended July 31, 2021
First Quarter Ended April 30, 2021
Net sales
$ 26,796
$ 30,032
$ 27,466
$ 34,092
Cost of goods sold
16,289
17,262
14,609
19,313
Operating profit
1,124
4,226
4,066
6,631
Income tax expense
1,328
1,094
1,615
Net income
2,895
2,968
5,002
Weighted average shares used in computing basic EPS
7,832,621
7,849,591
7,982,995
7,989,215
Weighted average shares used in computing diluted EPS
7,992,499
7,998,965
8,141,107
8,143,805
Basic EPS
$ 0.06
$ 0.37
$ 0.37
$ 0.63
Diluted EPS
$ 0.06
$ 0.36
$ 0.36
$ 0.61
Fiscal Year 2021
In thousands except EPS
Fourth Quarter Ended January 31, 2021
Third Quarter Ended October 31, 2020
Second Quarter Ended July 31, 2020
First Quarter Ended April 30, 2020
Net sales
$ 36,946
$ 41,451
$ 35,021
$ 45,582
Cost of goods sold
19,060
19,688
17,606
23,363
Operating profit
9,064
12,568
9,809
12,445
Income tax expense
1,340
3,189
3,677
Net income
7,725
9,387
9,461
8,757
Weighted average shares used in computing basic EPS
7,982,018
7,979,902
7,976,275
7,972,423
Weighted average shares used in computing diluted EPS
8,182,337
8,123,848
8,079,744
8,044,849
Basic EPS
$ 0.97
$ 1.18
$ 1.19
$ 1.10
Diluted EPS
$ 0.94
$ 1.16
$ 1.17
$ 1.09

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on their evaluation as of the end of the period covered by this Form 10-K, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including the principal executive officer and principle financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting (ICOFR), as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process, under the supervision of the CEO and CFO, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the disposition of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on our assessment and those criteria, management has concluded that the Company maintained effective internal control over financial reporting as of January 31, 2022.
Changes in Internal Control over Financial Reporting
There were no other changes in the Company’s internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act during the quarter ended January 31, 2022 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by Part III: Item 10, Directors, Executive Officers and Corporate Governance; Item 11, Executive Compensation; Item 13, Certain Relationships and Related Transactions and Director Independence; and Item 14, Principal Accountant Fees and Services is included in and incorporated by reference to Lakeland’s definitive proxy statement in connection with its Annual Meeting of Stockholders scheduled to be held in June 2022, to be filed with the Securities and Exchange Commission within 120 days following the end of Lakeland’s fiscal year ended January 31, 2022. Information relating to the executive officers of the Registrant appears under Item 1 of this report.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
The information regarding security ownership of certain beneficial owners and management that is required to be included pursuant to this Item 12 is included in and incorporated by reference to Lakeland’s definitive proxy statement in connection with its Annual Meeting of Stockholders scheduled to be held in June 2022.
Equity Compensation Plans
The following sets forth information relating to Lakeland’s equity compensation plans as of January 31, 2022:
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)
(a)
Weighted-average exercise price per share of outstanding options, warrants and rights
(b)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)(1)
(c)
Equity Compensation plans approved by security holders
302,903
$ 14.89
454,449
Equity compensation plans not approved by security holders
-
-
-
Total
302,903
$ 14.89
454,449
(1) The total reflected in column (c) includes shares available for grant as any type of equity award under our 2017 Equity Incentive Plan.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14, PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Part III: Item 10, Directors, Executive Officers and Corporate Governance; Item 11, Executive Compensation; Item 13, Certain Relationships and Related Transactions and Director Independence; and Item 14, Principal Accountant Fees and Services is included in and incorporated by reference to Lakeland’s definitive proxy statement in connection with its Annual Meeting of Stockholders scheduled to be held in June 2022, to be filed with the Securities and Exchange Commission within 120 days following the end of Lakeland’s fiscal year ended January 31, 2022.
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
a.
(1) Financial Statements - Covered by Report of Independent Registered Public Accounting Firm
(A)
Consolidated Statements of Income for the years ended January 31, 2022 and 2021
(B)
Consolidated Statements of Comprehensive Income for the years ended January 31, 2022 and 2021
(C)
Consolidated Balance Sheets at January 31, 2022 and 2021
(D)
Consolidated Statements of Stockholders’ Equity for the years ended January 31, 2022 and 2021
(E)
Consolidated Statements of Cash Flows for the years ended January 31, 2022 and 2021
(F)
Notes to Consolidated Financial Statements
(4)
Exhibits - See (b) below
b.
Exhibits
Exhibit No.
Description
3.1
Restated Certificate of Incorporation of Lakeland Industries, Inc., as amended (incorporated by reference to Exhibit 4.1 of Lakeland Industries, Inc.’s Registration Statement on Form S-8 filed on September 3, 2021).
3.2
Amended and Restated Bylaws of Lakeland Industries Inc., (incorporated by reference to Exhibit 3.1 of Lakeland Industries, Inc.’s Form 8-K filed April 28, 2017).
10.1
Employment Agreement dated February 11, 2021, between Allen E. Dillard and the Company (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed January 16, 2021).*
10.2
Employment Agreement dated January 27, 2020, between Charles D. Roberson and the Company (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed January 29, 2020).*
10.3
Form of Stock Option Certificate and Agreement (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 10-Q filed September 9, 2019).*
10.4
Lakeland Industries, Inc. Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form 8-K filed June 29, 2012).
10.5
Lease Agreement dated April 4, 2011, between Wallingfen Park Limited, as lessor, and Lakeland Industries, Inc., as lessee (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 10-Q for fiscal quarter ended April 30, 2015).
10.6
Agreement for the Purchase of Debts dated January 29, 2013 between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form 8-K filed February 25, 2013).
10.7
Fixed Charge on Non-vesting Debts and Floating Charge dated January 29, 2013 between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.2 to Lakeland Industries, Inc. Form 8-K filed February 25, 2013).
10.8
Standard Terms & Conditions dated May 15, 2018, for the debt provided by between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.20 of Lakeland Industries, Inc.’s Form 10-K filed April 10, 2019).
10.9
Amendment to Agreement for Purchase of Debts, dated effectively as of December 3, 2014 between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed December 8, 2014).
Exhibit No.
Description
10.10
Letter Agreement dated December 5, 2014, between Lakeland Industries, Inc. and HSBC Invoice Finance (UK) Ltd. (incorporated by reference to Exhibit 10.2 of Lakeland Industries, Inc.’s Form 8-K filed December 8, 2014).
10.11
Lease Agreement dated February 10, 2016, between Safety Pro, LLC, as lessor and Lakeland Industries, Inc. as lessee (incorporated by reference to Exhibit 10.55 of Lakeland Industries, Inc. Form 10-K filed April 21, 2016).
10.12
Shares Transfer Agreement, dated as of June 19, 2015, by and among Lakeland Industries, Inc., Brasil Industria E Comercio de Roupas E Equipamentos de Protecao Individual Ltda, Zap Comércio de Brindes Corporativos Ltda and Jack Nemer (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed June 25, 2015).
10.13
Lease Agreement dated December 1, 2018, between Tamash S.A., as lessor and Lakeland Argentina S.R.L, as lessee (incorporated by reference to Exhibit 10.20 of Lakeland Industries, Inc.’s Form 10-K filed April 10, 2019)
10.14
Loan Agreement, dated as of June 25, 2020, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.15
Security Agreement, dated as of June 25, 2020, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.16
Pledge Agreement, dated as of June 25, 2020, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.3 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.17
Non-encumbrance Agreement, dated as of June 25, 2020, by Lakeland Industries, Inc. for the benefit of Bank of America, N.A. (incorporated by reference to Exhibit 10.4 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.18
Employment Agreement, dated December 30, 2020, between Lakeland Industries, Inc. and Steven L. Harvey (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed January 5, 2021).*
10.19
Amendment No. 1 to Loan Agreement, dated as of June 18, 2021, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed June 24, 2021).
10.20
Lakeland Industries, Inc. 2017 Equity Incentive Plan, inclusive of all amendments through June 16, 2021 (incorporated by reference to Exhibit 4.3 of Lakeland Industries, Inc.’s Registration Statement on Form S-8 filed on September 3, 2021).*
10.21
Lakeland Industries, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed June 21, 2021).*
10.22
Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 of Lakeland Industries, Inc. Form 10-Q for fiscal quarter ended July 31, 2021).*
10.23
Amendment to Employment Letter Agreement of Charles D. Roberson (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed January 6, 2022).*
14.1
Lakeland Industries, Inc. Code of Ethics, as amended on September 29, 2017 (incorporated by reference to Exhibit 14.1 of Lakeland Industries, Inc.’s Form 10-K filed April 10, 2019).
16.1
Letter of Friedman LLP to the Securities and Exchange Commission, dated July 13, 2020. (incorporated by reference to Exhibit 14.1 of Lakeland Industries, Inc.’s Form 8-K filed July 14, 2020).
Subsidiaries of Lakeland Industries, Inc. (wholly owned) and jurisdictions of incorporation:
Lakeland Protective Wear, Inc. (Ontario, Canada)
Weifang Meiyang Protective Products Co., Ltd. (China)
Weifang Lakeland Safety Products Co., Ltd. (China)
Lakeland (Beijing) Safety Products Co., Ltd. (Beijing & Shanghai China)
Lakeland Industries Europe Ltd. (Cardiff, United Kingdom)
Industrias Lakeland S.A. de C.V. (Zacatecas, Mexico)
Lakeland Industries Chile Limitado (Santiago, Chile)
Indian Pan-Pacific Sales Ltd. (Hong Kong, China)
Lakeland (Hong Kong) Trading Co., Ltd. (Hong Kong, China)
Lakeland Argentina, SRL (Buenos Aires, Argentina)
Lakeland Glove and Safety Apparel Private, Ltd. (Noida, India)
Lakeland India Private Limited, New Delhi, India)
RussIndProtection, Ltd. (Moscow, Russia)
Art Prom, LLC (Kazakhstan, Russia)
SpecProtect LLC (St. Petersburg, Russia)
Lakeland (Vietnam) Industries Co., Ltd. (Nam Dinh, Vietnam)
Lakeland Industries Australia Pty Ltd. (Mornington, Australia)
23.1
Consent of Deloitte & Touche LLP, independent registered public accounting firm (filed herewith)
31.1
Certification of the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2
Certification of the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
Interactive Data Files for the Registrant’s Form 10-K for the period ended January 31, 2022, formatted in Inline XBRL.
Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).
*
Indicates a management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
_________________SIGNATURES_________________
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LAKELAND INDUSTRIES, INC.
Dated: April 21, 2022
By:
/s/ Charles D. Roberson
Charles D. Roberson,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Christopher J. Ryan
Executive Chairman of the Board
April 21, 2022
Christopher J. Ryan
/s/ Charles D. Roberson
Chief Executive Officer, President,
April 21, 2022
Charles D. Roberson
Secretary and Director
(Principal Executive Officer)
/s/ Allen E. Dillard
Chief Operating and Financial Officer
April 21, 2022
Allen E. Dillard
(Principal Financial and Accounting Officer)
/s/ A. John Kreft
Director
April 21, 2022
A. John Kreft
/s/ Jeffrey Schlarbaum
Director
April 21, 2022
Jeffrey Schlarbaum
/s/ Thomas McAteer
Director
April 21, 2022
Thomas McAteer
/s/ James Jenkins
Director
April 21, 2022
James Jenkins
/s/ Nikki Hamblin
Director
April 21, 2022
Nikki Hamblin

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
a.
(1) Financial Statements - Covered by Report of Independent Registered Public Accounting Firm
(A)
Consolidated Statements of Income for the years ended January 31, 2022 and 2021
(B)
Consolidated Statements of Comprehensive Income for the years ended January 31, 2022 and 2021
(C)
Consolidated Balance Sheets at January 31, 2022 and 2021
(D)
Consolidated Statements of Stockholders’ Equity for the years ended January 31, 2022 and 2021
(E)
Consolidated Statements of Cash Flows for the years ended January 31, 2022 and 2021
(F)
Notes to Consolidated Financial Statements
(4)
Exhibits - See (b) below
b.
Exhibits
Exhibit No.
Description
3.1
Restated Certificate of Incorporation of Lakeland Industries, Inc., as amended (incorporated by reference to Exhibit 4.1 of Lakeland Industries, Inc.’s Registration Statement on Form S-8 filed on September 3, 2021).
3.2
Amended and Restated Bylaws of Lakeland Industries Inc., (incorporated by reference to Exhibit 3.1 of Lakeland Industries, Inc.’s Form 8-K filed April 28, 2017).
10.1
Employment Agreement dated February 11, 2021, between Allen E. Dillard and the Company (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed January 16, 2021).*
10.2
Employment Agreement dated January 27, 2020, between Charles D. Roberson and the Company (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed January 29, 2020).*
10.3
Form of Stock Option Certificate and Agreement (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 10-Q filed September 9, 2019).*
10.4
Lakeland Industries, Inc. Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form 8-K filed June 29, 2012).
10.5
Lease Agreement dated April 4, 2011, between Wallingfen Park Limited, as lessor, and Lakeland Industries, Inc., as lessee (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 10-Q for fiscal quarter ended April 30, 2015).
10.6
Agreement for the Purchase of Debts dated January 29, 2013 between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form 8-K filed February 25, 2013).
10.7
Fixed Charge on Non-vesting Debts and Floating Charge dated January 29, 2013 between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.2 to Lakeland Industries, Inc. Form 8-K filed February 25, 2013).
10.8
Standard Terms & Conditions dated May 15, 2018, for the debt provided by between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.20 of Lakeland Industries, Inc.’s Form 10-K filed April 10, 2019).
10.9
Amendment to Agreement for Purchase of Debts, dated effectively as of December 3, 2014 between HSBC Invoice Finance (UK) Limited and Lakeland Industries Europe Limited (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed December 8, 2014).
Exhibit No.
Description
10.10
Letter Agreement dated December 5, 2014, between Lakeland Industries, Inc. and HSBC Invoice Finance (UK) Ltd. (incorporated by reference to Exhibit 10.2 of Lakeland Industries, Inc.’s Form 8-K filed December 8, 2014).
10.11
Lease Agreement dated February 10, 2016, between Safety Pro, LLC, as lessor and Lakeland Industries, Inc. as lessee (incorporated by reference to Exhibit 10.55 of Lakeland Industries, Inc. Form 10-K filed April 21, 2016).
10.12
Shares Transfer Agreement, dated as of June 19, 2015, by and among Lakeland Industries, Inc., Brasil Industria E Comercio de Roupas E Equipamentos de Protecao Individual Ltda, Zap Comércio de Brindes Corporativos Ltda and Jack Nemer (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed June 25, 2015).
10.13
Lease Agreement dated December 1, 2018, between Tamash S.A., as lessor and Lakeland Argentina S.R.L, as lessee (incorporated by reference to Exhibit 10.20 of Lakeland Industries, Inc.’s Form 10-K filed April 10, 2019)
10.14
Loan Agreement, dated as of June 25, 2020, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.15
Security Agreement, dated as of June 25, 2020, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.16
Pledge Agreement, dated as of June 25, 2020, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.3 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.17
Non-encumbrance Agreement, dated as of June 25, 2020, by Lakeland Industries, Inc. for the benefit of Bank of America, N.A. (incorporated by reference to Exhibit 10.4 of Lakeland Industries, Inc.’s Form 8-K filed June 30, 2020).
10.18
Employment Agreement, dated December 30, 2020, between Lakeland Industries, Inc. and Steven L. Harvey (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed January 5, 2021).*
10.19
Amendment No. 1 to Loan Agreement, dated as of June 18, 2021, by and between Lakeland Industries, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed June 24, 2021).
10.20
Lakeland Industries, Inc. 2017 Equity Incentive Plan, inclusive of all amendments through June 16, 2021 (incorporated by reference to Exhibit 4.3 of Lakeland Industries, Inc.’s Registration Statement on Form S-8 filed on September 3, 2021).*
10.21
Lakeland Industries, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed June 21, 2021).*
10.22
Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 of Lakeland Industries, Inc. Form 10-Q for fiscal quarter ended July 31, 2021).*
10.23
Amendment to Employment Letter Agreement of Charles D. Roberson (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed January 6, 2022).*
14.1
Lakeland Industries, Inc. Code of Ethics, as amended on September 29, 2017 (incorporated by reference to Exhibit 14.1 of Lakeland Industries, Inc.’s Form 10-K filed April 10, 2019).
16.1
Letter of Friedman LLP to the Securities and Exchange Commission, dated July 13, 2020. (incorporated by reference to Exhibit 14.1 of Lakeland Industries, Inc.’s Form 8-K filed July 14, 2020).
Subsidiaries of Lakeland Industries, Inc. (wholly owned) and jurisdictions of incorporation:
Lakeland Protective Wear, Inc. (Ontario, Canada)
Weifang Meiyang Protective Products Co., Ltd. (China)
Weifang Lakeland Safety Products Co., Ltd. (China)
Lakeland (Beijing) Safety Products Co., Ltd. (Beijing & Shanghai China)
Lakeland Industries Europe Ltd. (Cardiff, United Kingdom)
Industrias Lakeland S.A. de C.V. (Zacatecas, Mexico)
Lakeland Industries Chile Limitado (Santiago, Chile)
Indian Pan-Pacific Sales Ltd. (Hong Kong, China)
Lakeland (Hong Kong) Trading Co., Ltd. (Hong Kong, China)
Lakeland Argentina, SRL (Buenos Aires, Argentina)
Lakeland Glove and Safety Apparel Private, Ltd. (Noida, India)
Lakeland India Private Limited, New Delhi, India)
RussIndProtection, Ltd. (Moscow, Russia)
Art Prom, LLC (Kazakhstan, Russia)
SpecProtect LLC (St. Petersburg, Russia)
Lakeland (Vietnam) Industries Co., Ltd. (Nam Dinh, Vietnam)
Lakeland Industries Australia Pty Ltd. (Mornington, Australia)
23.1
Consent of Deloitte & Touche LLP, independent registered public accounting firm (filed herewith)
31.1
Certification of the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2
Certification of the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
Interactive Data Files for the Registrant’s Form 10-K for the period ended January 31, 2022, formatted in Inline XBRL.
Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).
*
Indicates a management contract or compensatory plan or arrangement.