Lakeland(LAKE) - 2024 Q4 - Annual Report

PART I ITEM 1. BUSINESS Lakeland Industries is a global provider of safety products, expanding its portfolio through strategic acquisitions - Lakeland Industries is a global provider of quality safety products, including firefighter protective apparel, high-end chemical protective suits, limited use/disposable protective clothing, durable woven garments, high visibility clothing, gloves, and protective sleeves[17] - The company's strategy includes investing in high-growth geographies and product categories, building a global firefighter safety brand, driving profitable growth in high-end chemical and limited-use/disposable protective clothing, and acquiring complementary companies[19] - On November 30, 2023, Lakeland acquired New Zealand-based Pacific Helmets NZ Limited for approximately NZ$14,000,000 ($8.6 million), enhancing its fire service protective helmets portfolio[19] - Effective February 5, 2024, the company acquired Jolly Scarpe S.p.A and Jolly Scarpe Romania S.R.L for approximately $9.3 million, adding a comprehensive range of firefighting and safety boot models[23] - As of January 31, 2024, the Company employed approximately 1,750 people worldwide, with 90 in the U.S and 1,660 outside the U.S[34] - The company holds 14 U.S patents (expiring between 2024 and 2037) and 76 trademarks, actively protecting its intellectual property globally[33] - Operations are moderately seasonal, with higher sales in March-May, though this pattern is shifting due to increased demand from first responders and growth in the southern hemisphere[50][51] ITEM 1A. Risk Factors The company faces risks from international operations, geopolitical instability, competition, and legal challenges - Significant international manufacturing operations (China, Vietnam, Mexico, Argentina, India) expose the company to risks like corruption, war, political instability, tariffs, trade embargoes, and currency fluctuations[62][63][68][69] - Geopolitical crises (e.g., Ukraine invasion) and pandemics (e.g., COVID-19) can disrupt supply chains, manufacturing, and demand, increasing costs and potentially leading to asset impairments[64][65][67] - The safety products market is highly competitive and fragmented, with larger competitors having greater resources[31][32][79][80] - Cybersecurity incidents could disrupt operations, lead to loss of confidential information, and damage reputation, requiring significant resources to mitigate[83][84] - Evolving data privacy and security laws globally may increase compliance costs, lead to legal claims, fines, or reputational damage[85][86] - The company is subject to product liability claims and faces lawsuits related to PFAS in firefighter turnout gear, which could result in substantial damages[118][122] - Foreign currency exchange rate fluctuations can negatively impact profit margins if the U.S dollar strengthens[101][102][105] ITEM 1B. Unresolved Staff Comments There are no unresolved staff comments to report - No unresolved staff comments[126] ITEM 1C. Cybersecurity The company maintains a comprehensive cybersecurity program and has experienced no material incidents recently - The company employs a range of tools and services for cybersecurity risk management, including network and endpoint monitoring, vulnerability assessments, and penetration testing[128][129] - Cybersecurity controls include monitoring emerging data protection laws, regular employee training, multi-factor authentication, system access policies, and annual tabletop exercises[130][137] - A Cyber Security Council, under the oversight of the Audit Committee, is responsible for cybersecurity threat risk oversight[135][136] - In the last three fiscal years, Lakeland Industries has not experienced any material cybersecurity incidents, and related expenses were immaterial[134] ITEM 2. Properties The company operates owned and leased manufacturing facilities globally, all in good repair - Principal executive office is in Huntsville, AL, with owned and leased manufacturing locations in China, Mexico, Argentina, India, and Vietnam[140] ITEM 3. Legal Proceedings No current litigation is expected to have a material adverse effect on the company - The company is not currently involved in any material litigation or legal proceedings[142] ITEM 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[143] PART II ITEM 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on NASDAQ, a quarterly dividend was initiated, and a stock repurchase program is active - Common stock is traded on NASDAQ under the symbol "LAKE"[3] - As of April 10, 2024, there were 7,371,730 shares of common stock outstanding[7] - The company began paying a quarterly cash dividend of $0.03 per share in February 2023[146] - A stock repurchase program allows for repurchases of up to an additional $5 million of outstanding common stock, with $5.0 million remaining under the program as of January 31, 2024[149][210] Issuer Purchases of Equity Securities (November 1 - January 31) | Period | Total Number of Shares Purchased | Average Price Paid per Share | 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 | — | $ — | — | $ 5,030,479 | | December 1 – December 31 | — | $ — | — | $ 5,030,479 | | January 1 – January 31 | — | $ — | — | $ 5,030,479 | | Total | — | $ — | — | $ 5,030,479(1) | ITEM 6. [Reserved] This item is reserved and contains no information ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations FY24 saw increased net sales and improved gross profit, though operating expenses rose due to various costs Overview The company manufactures protective clothing globally, manages costs through diversified operations, and faces inflationary pressures - Lakeland manufactures and sells industrial protective clothing and accessories globally, serving diverse end-users from integrated oil and chemical plants to fire and law enforcement agencies[153] Net Sales (FY24 vs FY23) | Metric | FY24 ($ millions) | FY23 ($ millions) | |:---|:---|:---| | Net Sales | $124.7 | $112.8 | - Manufacturing operations in Mexico, China, Vietnam, and India provide access to lower labor costs and raw materials, with recent expansions in Vietnam and India to offset rising costs in China[155] Net Sales Attributable to Customers Outside US (FY24 vs FY23) | Metric | FY24 ($ millions) | FY23 ($ millions) | |:---|:---|:---| | International Net Sales | $69.4 | $63.9 | - Acquired New Zealand-based Pacific Helmets NZ Limited on November 30, 2023, for approximately $8.6 million, enhancing its fire service protective helmets portfolio[157] - Acquired UK-based Eagle Technical Products Limited on December 2, 2022, for approximately $10.5 million, expanding fire service protective clothing and sales presence in the Middle East and Europe[159] - Experienced continued inflationary pressure and higher costs in FY24 due to increasing raw material, finished goods, labor, and transportation costs[160] Impact of Russia's Invasion of Ukraine on Our Business The Russia-Ukraine conflict creates market uncertainty, though its direct business impact remains limited - The Russia-Ukraine conflict creates substantial uncertainty, leading to market disruptions, supply chain issues, increased cyber incidents, and volatile commodity markets[161] Russia Business Contribution (FY24 vs FY23) | Metric | FY24 | FY23 | |:---|:---|:---| | Consolidated Net Revenues | ~3.0% | ~2.4% | | Consolidated Assets | ~2.6% | ~2.5% | | Net Book Value of Assets (Jan 31, 2024) | $4.0 million | - | | Cash in Russia (Jan 31, 2024) | $0.3 million | - | - No impairment charges related to Russian assets have been recognized to date, but the conflict's outcome could impact asset values[162] Critical Accounting Policies and Estimates Key accounting policies involve significant estimates for revenue, inventory, taxes, and business combinations - Revenue is primarily from product sales to distributors, recognized upon shipment, with estimates for variable consideration like rebates and discounts[164][165] - Inventories are stated at the lower of cost or net realizable value, with allowances for slow-moving or obsolete inventory; FY24 adjustments included $2.3 million for discontinued products[166] - Income taxes require estimating current and deferred taxes, with a valuation allowance applied to deferred tax assets; a change in valuation allowance of $3.1 million was recorded in FY24[167] - Business combinations use the acquisition method, allocating purchase price to acquired assets and liabilities at fair value, involving significant judgment for intangible assets and contingent consideration[169][170] - Equity method investments are evaluated for impairment based on fair value estimates, which involve discounted cash flow models and market-based approaches[172] Recent Developments The company declared a dividend, completed an acquisition, and expanded its credit facility in early FY25 - On February 1, 2024, a quarterly cash dividend of $0.03 per share (approximately $0.2 million) was declared and paid[174] - On February 5, 2024, acquired Jolly Scarpe S.p.A and Jolly Scarpe Romania S.R.L for approximately $9.3 million, funded by drawing $12.3 million from its credit line[175] - On February 13, 2024, made an additional £500,000 ($0.6 million) investment in Bodytrak's convertible notes[176] - On March 28, 2024, amended the Loan Agreement, extending the credit facility to March 28, 2029, increasing availability to $40.0 million (with a $10.0 million accordion feature)[177] Significant Balance Sheet Fluctuation January 31, 2024, as Compared to January 31, 2023 Cash increased due to operating activities and an asset sale, while working capital decreased - Cash increased by $0.7 million, driven by $10.8 million from operations and $4.6 million from an asset sale, offset by acquisitions and capital expenditures[178] - Working capital decreased by $3.8 million[178] - Financing activities included $3.5 million used for debt paydown, stock repurchases, and dividends[178] Results of Operations FY24 net sales and gross profit increased, driving significant net income growth despite higher operating expenses External Sales by Product Line (FY24 vs FY23, $ millions) | Product Line | FY24 | FY23 | |:---|:---|:---| | Disposables | $49.6 | $55.2 | | Chemical | $20.3 | $22.2 | | Fire Services | $26.5 | $14.7 | | Gloves | $2.2 | $2.3 | | High Visibility | $6.6 | $5.8 | | High Performance Wear | $6.9 | $5.0 | | Wovens | $12.6 | $7.6 | | Consolidated external sales | $124.7 | $112.8 | External Sales by Region (FY24 vs FY23, $ millions) | Region | FY24 | FY23 | |:---|:---|:---| | USA | $55.2 | $49.0 | | Other foreign | $9.9 | $7.2 | | Europe (UK) | $16.3 | $8.3 | | Mexico | $4.0 | $3.7 | | Asia | $13.8 | $24.7 | | Canada | $9.4 | $9.1 | | Latin America | $16.1 | $10.8 | | Consolidated external sales | $124.7 | $112.8 | Consolidated Results of Operations as % of Net Sales (FY24 vs FY23) | Metric | FY24 | FY23 | |:---|:---|:---| | Net sales | 100.0% | 100.0% | | Cost of goods sold | 58.9% | 59.4% | | Gross profit | 41.1% | 40.6% | | Operating expenses | 36.3% | 35.7% | | Operating profit | 4.8% | 4.9% | | Other income, net | 2.7% | 0.0% | | Interest expense | 0.0% | 0.1% | | Income before tax | 7.5% | 4.8% | | Income tax expense | 3.2% | 3.2% | | Net income (loss) | 4.4% | 1.6% | - Net sales increased by $11.9 million (10.5%) to $124.7 million in FY24, driven by growth in the U.S, Europe, and Latin America, while Asia sales decreased by $10.9 million (44.1%)[183] - Gross profit increased by $5.4 million (11.8%) to $51.2 million in FY24, with gross profit margin improving to 41.1% from 40.6%[184] - Operating expenses increased by 12.2% to $45.2 million in FY24, primarily due to currency translation expense, restructuring costs, and acquisition-related expenses[185] - Operating profit increased to $6.0 million in FY24 from $5.5 million in FY23, while operating margin slightly decreased to 4.8%[186] - Other income included a pre-tax gain of approximately $3.8 million from the sale of the Canada office and warehouse facility[187] - Net income increased to $5.4 million in FY24 from $1.9 million in FY23[189] - Q4 FY24 net sales were $31.2 million, with a net loss of ($1.0) million, compared to Q4 FY23 sales of $29.0 million and net income of $0.6 million[190] Liquidity and Capital Resources The company maintains strong liquidity with cash from operations and an expanded credit facility Liquidity Metrics (January 31, 2024) | Metric | Amount ($ millions) | |:---|:---| | Cash and cash equivalents | $25.2 | | Working capital | $83.2 | | Uninsured cash in foreign bank accounts | $21.9 | | Available credit under Loan Agreement | $25.0 | | Remaining under stock repurchase program | $5.0 | - Net cash provided by operating activities was $10.9 million in FY24, primarily due to a $7.7 million decrease in inventories[196] - Net cash used in investing activities was $5.1 million in FY24, including $5.5 million for the Pacific acquisition, offset by $4.6 million from an asset sale[196] - Net cash used in financing activities was $3.5 million in FY24, including $0.9 million in dividends and $0.3 million in stock repurchases[196] - The revolving credit facility was increased to $40.0 million (with a $10.0 million accordion feature) and extended to March 28, 2029[177][205] - Capital expenditures for FY24 were $2.1 million, with $3.0 million anticipated for FY25[211][212] Recently Adopted and Recently Issued Accounting Standards The company is evaluating new accounting standards for income taxes and segment reporting for future adoption - ASU 2023-09 (Income Taxes) requires additional disclosures and will be adopted in FY26[213] - ASU 2023-07 (Segment Reporting) requires disclosure of significant expense categories for each reportable segment and will be adopted in FY25[214] - The OECD's Pillar Two Model Rules for a global minimum tax are not expected to have a significant impact on the company's effective tax rate or financial results[215] ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, these disclosures are not required - As a smaller reporting company, Lakeland Industries is not required to provide quantitative and qualitative disclosures about market risk[216] ITEM 8. Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements and supplementary data for FY24 and FY23 Reports of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued unqualified opinions on the financial statements and internal controls - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements for the years ended January 31, 2024 and 2023[220] - An unqualified opinion was also expressed on the effectiveness of the company's internal control over financial reporting as of January 31, 2024[221] - Critical audit matters included the fair value determination of intangible assets from the Pacific Helmets NZ Limited acquisition[225][226][227] - Another critical audit matter was the estimation of future cash flows and discount rate for the equity method investment in Bodytrak[228][229] Consolidated Statements of Operations Net income increased significantly in FY24, driven by higher net sales and gross profit Consolidated Statements of Operations (FY24 vs FY23, $000's) | Metric | 2024 | 2023 | |:---|:---|:---| | Net sales | $124,688 | $112,846 | | Cost of goods sold | $73,496 | $66,997 | | Gross profit | $51,192 | $45,849 | | Operating expenses | $45,200 | $40,308 | | Operating profit | $5,993 | $5,541 | | Other income (expense), net | $3,415 | ($33) | | Interest expense | ($52) | ($37) | | Income before taxes | $9,356 | $5,471 | | Income tax expense | $3,930 | $3,598 | | Net income | $5,425 | $1,873 | | Basic EPS | $0.74 | $0.25 | | Diluted EPS | $0.72 | $0.24 | | Basic Weighted average common shares outstanding | 7,352,356 | 7,562,187 | | Diluted Weighted average common shares outstanding | 7,539,705 | 7,737,963 | Consolidated Statements of Comprehensive Income (Loss) Comprehensive income improved significantly in FY24 due to higher net income Consolidated Statements of Comprehensive Income (Loss) (FY24 vs FY23, $000's) | Metric | 2024 | 2023 | |:---|:---|:---| | Net income | $5,425 | $1,873 | | Foreign currency translation adjustments | ($1,669) | ($2,193) | | Comprehensive income (loss) | $3,756 | ($320) | Consolidated Balance Sheets Total assets and stockholders' equity increased in FY24, reflecting growth from recent acquisitions Consolidated Balance Sheets (January 31, 2024 vs 2023, $000's) | Asset/Liability/Equity | 2024 | 2023 | |:---|:---|:---| | ASSETS | | | | Cash and cash equivalents | $25,222 | $24,639 | | Accounts receivable, net | $19,169 | $17,296 | | Inventories | $51,250 | $58,176 | | Total current assets | $101,505 | $105,591 | | Property and equipment, net | $10,685 | $9,140 | | Operating leases right-of-use assets | $10,969 | $5,472 | | Goodwill | $13,669 | $8,473 | | Intangible assets, net | $6,830 | $6,042 | | Equity investments | $4,719 | $5,354 | | Convertible debt investments | $2,161 | - | | Total assets | $153,745 | $142,936 | | LIABILITIES | | | | Accounts payable | $7,378 | $6,558 | | Accrued compensation and benefits | $3,922 | $2,522 | | Accrued earnout agreement | $643 | $3,182 | | Total current liabilities | $18,346 | $18,597 | | Deferred income taxes | $2,097 | $769 | | Loans payable – long term | $731 | - | | Long-term portion of operating lease liability | $9,121 | $3,580 | | Total liabilities | $30,294 | $22,946 | | STOCKHOLDERS' EQUITY | | | | Common stock | $87 | $87 | | Treasury stock | ($19,979) | ($19,646) | | Additional paid-in capital | $79,420 | $78,475 | | Retained earnings | $69,282 | $64,765 | | Accumulated other comprehensive loss | ($5,360) | ($3,691) | | Total stockholders' equity | $123,450 | $119,990 | Consolidated Statements of Stockholders' Equity Stockholders' equity increased in FY24, driven by net income and offset by dividends and share repurchases Consolidated Statements of Stockholders' Equity (FY24 vs FY23, $000's) | Metric | 2024 | 2023 | |:---|:---|:---| | Balance, January 31, 2023 | $119,990 | $125,100 | | Net Income | $5,425 | $1,873 | | Dividends paid | ($908) | — | | Other comprehensive income (loss) | ($1,669) | ($2,193) | | Stock-based compensation (Restricted stock plan) | $1,365 | $1,491 | | Return of shares in lieu of payroll tax withholding | ($420) | ($842) | | Treasury stock purchased | ($333) | ($5,440) | | Balance, January 31, 2024 | $123,450 | $119,990 | Consolidated Statements of Cash Flows Cash from operations improved significantly in FY24 due to effective inventory management Consolidated Statements of Cash Flows (FY24 vs FY23, $000's) | Cash Flow Activity | 2024 | 2023 | |:---|:---|:---| | Net cash provided by (used in) operating activities | $10,912 | ($5,451) | | Net cash used in investing activities | ($5,116) | ($14,768) | | Net cash used in financing activities | ($3,452) | ($5,876) | | Effect of exchange rate changes on cash and cash equivalents | ($1,761) | ($1,985) | | Net increase (decrease) in cash and cash equivalents | $583 | ($28,080) | | Cash and cash equivalents at end of year | $25,222 | $24,639 | | Cash paid for interest | $63 | $37 | | Cash paid for taxes | $2,169 | $3,151 | | Leased assets obtained in exchange for operating lease liabilities | $6,110 | $1,148 | - Operating cash flow improved significantly due to a $7.7 million decrease in inventories and a $2.4 million increase in accounts payable and accrued expenses[196] - Investing cash flow included $5.5 million for the Pacific acquisition and $2.2 million for Bodytrak investment, offset by $4.6 million from the sale of the Canadian facility[196] Notes to Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, acquisitions, and financial statement components 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The company manufactures protective clothing globally, with key accounting policies for revenue, inventory, and acquisitions - Lakeland Industries manufactures and sells industrial protective clothing and accessories globally, with sales in over 50 countries[257] - Revenue is recognized for product sales to distributors upon shipment, with contracts typically short-term and payment due within 30-90 days[272] - Inventories are valued at the lower of cost (FIFO or moving average) or net realizable value, with allowances for obsolescence[263] - Business combinations are accounted for using the acquisition method, allocating purchase price to assets and liabilities based on estimated fair values[267][268] - Foreign operations' assets and liabilities are translated at balance sheet date exchange rates, with adjustments reported in accumulated other comprehensive loss[281] External Sales by Product Lines (FY24 vs FY23, $ millions) | Product Line | 2024 | 2023 | |:---|:---|:---| | Disposables | $49.6 | $55.2 | | Chemical | $20.3 | $22.2 | | Fire | $26.5 | $14.7 | | Gloves | $2.2 | $2.3 | | High Visibility | $6.6 | $5.8 | | High Performance Wear | $6.9 | $5.0 | | Wovens | $12.6 | $7.6 | | Consolidated external sales | $124.7 | $112.8 | External Sales by Region (FY24 vs FY23, $ millions) | Region | 2024 | 2023 | |:---|:---|:---| | USA | $55.3 | $49.0 | | Other foreign | $9.9 | $7.2 | | Europe (UK) | $16.3 | $8.3 | | Mexico | $4.0 | $3.7 | | Asia | $13.8 | $24.7 | | Canada | $9.3 | $9.1 | | Latin America | $16.1 | $10.8 | | Consolidated external sales | $124.7 | $112.8 | 2. INVENTORIES Total inventories decreased in FY24, reflecting a reduction in finished goods and raw materials Inventories (January 31, 2024 vs 2023, $000s) | Category | 2024 | 2023 | |:---|:---|:---| | Raw materials | $27,417 | $29,036 | | Work-in-process | $668 | $952 | | Finished goods | $29,719 | $32,855 | | Excess and obsolete adjustments | ($6,554) | ($4,668) | | Total Inventories | $51,250 | $58,176 | 3. PROPERTY AND EQUIPMENT, NET Net property and equipment increased due to additions in machinery, equipment, and computer hardware Property and Equipment, Net (January 31, 2024 vs 2023, $000s) | Category | 2024 | 2023 | |:---|:---|:---| | Machinery and equipment | $10,773 | $5,436 | | Furniture and fixtures | $988 | $492 | | Leasehold improvements | $2,388 | $2,094 | | Computer hardware and software | $5,430 | $5,015 | | Land and building | $7,625 | $9,508 | | Less accumulated depreciation and amortization | ($17,600) | ($14,406) | | Construction-in-progress | $1,081 | $1,001 | | Total Property and Equipment, Net | $10,685 | $9,140 | - Depreciation and amortization expense for FY24 was $1.9 million, up from $1.4 million in FY23[291] 4. INVESTMENTS The company holds a strategic equity investment in Bodytrak® and has provided convertible loan notes - The company holds a 22.5% equity stake in Bodytrak®, a UK-based wearable monitoring solutions provider, accounted for using the equity method[292][293] - Additional investments in Bodytrak's convertible notes totaled £1,700,000 ($2.2 million) in FY24, bearing interest at 12% (cash) or 15% (payment in kind)[294][295] - Recognized losses from the Bodytrak investment were $0.6 million in FY24 and $0.4 million in FY23[297] 5. GOODWILL AND INTANGIBLE ASSETS Goodwill and intangible assets increased due to recent acquisitions, with no impairment recognized Changes in Goodwill ($000s) | Metric | 2024 | 2023 | |:---|:---|:---| | Balance at February 1 | $8,473 | $871 | | Measurement period adjustment | $1,447 | ---- | | Acquisitions | $3,749 | $7,602 | | Balance at January 31 | $13,669 | $8,473 | Intangible Assets, Net (January 31, 2024 vs 2023, $000s) | Category | Weighted Average Life (Years) | Gross Carrying Amount (2024) | Accumulated Amortization (2024) | Net Carrying Amount (2024) | Gross Carrying Amount (2023) | Accumulated Amortization (2023) | Net Carrying Amount (2023) | |:---|:---|:---|:---|:---|:---|:---|:---| | Customer relationships | 15 | $3,558 | ($267) | $3,291 | $3,283 | ($37) | $3,246 | | Trade names and trademarks | 15 | $1,773 | ($109) | $1,664 | $1,333 | ($15) | $1,318 | | Technological know-how | 15 | $1,989 | ($114) | $1,875 | $1,493 | ($15) | $1,478 | | Total | | $7,320 | ($490) | $6,830 | $6,109 | ($67) | $6,042 | - Intangible asset amortization expense is expected to be approximately $0.5 million per year over the next five years[299] - No impairment of goodwill was recognized during FY24 and FY23[271] 6. ACQUISITIONS The company completed acquisitions of Pacific Helmets and Eagle Technical Products, expanding its product portfolio - Acquired Pacific Helmets NZ Limited on November 30, 2023, for approximately $8.5 million, enhancing fire service protective helmets[300] Preliminary Fair Values of Pacific Assets Acquired and Liabilities Assumed ($000s) | Category | Amount | |:---|:---| | Net working capital acquired (including cash of $0.1 million) | $1,694 | | Property, plant and equipment | $2,265 | | Customer relationships | $275 | | Trade names and trademarks | $440 | | Technological know-how | $495 | | Goodwill | $3,749 | | Total assets acquired | $8,918 | | Less liabilities assumed | ($2,787) | | Net assets acquired | $6,131 | - Acquired Eagle Technical Products Limited on December 2, 2022, for approximately $10.5 million, expanding protective apparel in fire and industrial sectors[306] - The estimated earnout payment for Eagle was reduced by $2.5 million in FY24 due to not reaching revenue thresholds[309] Preliminary Fair Values of Eagle Assets Acquired and Liabilities Assumed ($000s) | Category | Amount | |:---|:---| | Current assets acquired (including cash of $2.2 million) | $3,729 | | Property, plant and equipment | $41 | | Customer relationships | $3,283 | | Trade names and trademarks | $1,333 | | Technological know-how | $1,493 | | Goodwill | $7,602 | | Total assets acquired | $17,481 | | Less liabilities assumed | ($2,334) | | Net assets acquired | $15,147 | Pro Forma Combined Financial Information (Unaudited, $ millions) | Metric | Year Ended January 31, 2024 | Year Ended January 31, 2023 | |:---|:---|:---| | Net sales | $129.8 | $122.3 | | Net income | $5.8 | $1.6 | | Basic earnings per share | $0.79 | $0.22 | | Diluted earnings per share | $0.77 | $0.21 | 7. LONG-TERM DEBT The company amended and expanded its revolving credit facility, maintaining compliance with all covenants - The revolving credit facility with Bank of America was amended on March 28, 2024, extending its expiration to March 28, 2029[325] - The credit facility's availability was increased to $40.0 million, with an accordion feature for an additional $10.0 million[325] - Interest rate is based on Daily SOFR plus an Applicable Rate (1.25% to 2.00% margin), with a SOFR floor of 1.00%[325] - Financial covenants include a Funded Debt to EBITDA Ratio not exceeding 3.5x and a Basic Fixed Charge Coverage Ratio of at least 1.20x[325] - As of January 31, 2024, the company had no borrowings outstanding under the Loan Agreement and was in compliance with all debt covenants[324] - Pacific Helmets has a trade finance facility and two term loans with the Bank of New Zealand, secured by real property[328] 8. CONCENTRATION OF RISK Credit risk is diversified, with no single customer or vendor representing over 10% of sales or purchases - No single customer accounted for more than 10% of net sales in FY24 and FY23[331] - No single vendor accounted for more than 10% of purchases in FY24 and FY23[332] - As of January 31, 2024, approximately $22.0 million of cash was held in foreign bank accounts, of which $24.4 million was uninsured[330] 9. STOCKHOLDERS' EQUITY The company manages an equity incentive plan and an active stock repurchase program - The 2017 Equity Incentive Plan authorizes 840,000 shares for equity-based compensation, including stock options, restricted stock, and SARs[335] Stock-Based Compensation Costs ($000s) | Metric | 2024 | 2023 | |:---|:---|:---| | Total restricted stock and stock option programs | $1,365 | $1,491 | | Total income tax expense recognized | $287 | $313 | Restricted Stock Activity (Shares) | Metric | Performance Based | Service Based | Total | |:---|:---|:---|:---| | Outstanding at January 31, 2023 | 127,480 | 40,665 | 168,145 | | Awarded | 64,953 | 130,390 | 195,343 | | Vested | (71,202) | (26,336) | (97,538) | | Forfeited | (38,901) | (31,829) | (70,730) | | Outstanding at January 31, 2024 | 82,330 | 112,890 | 195,220 | - Unrecognized stock-based compensation expense totaled $1.0 million as of January 31, 2024, expected to be recognized over approximately two years[339] - Shares repurchased in FY24 totaled 27,514 shares at a cost of $0.3 million, leaving $5.0 million remaining under the share repurchase program[341] 10. INCOME TAXES The FY24 effective tax rate was 42.01%, impacted by valuation allowance changes and foreign tax credits Domestic and Foreign Pretax Income (Loss) ($000s) | Category | 2024 | 2023 | |:---|:---|:---| | Domestic | $8,648 | $15,322 | | Foreign | $708 | ($9,851) | | Total | $9,356 | $5,471 | Income Tax Expense (Benefit) ($000s) | Category | 2024 | 2023 | |:---|:---|:---| | Current Federal | $17 | $2 | | Current State and other taxes | $58 | $68 | | Current Foreign | $4,674 | $3,450 | | Total Current Tax Expense | $4,749 | $3,520 | | Deferred Domestic | ($186) | ($756) | | Deferred Foreign | ($633) | $834 | | Total Deferred Tax Expense | ($819) | $78 | | Total Income Taxes | $3,930 | $3,598 | Effective Income Tax Rate Reconciliation | Item | 2024 | 2023 | |:---|:---|:---| | Statutory rate | 21.00% | 21.00% | | State Income Taxes, Net of Federal Tax Benefit | 0.49% | 0.05% | | Adjustment to Deferred | (23.26)% | 13.54% | | GILTI | 9.07% | 24.84% | | Foreign Tax Credit – GILTI | (2.42)% | (14.86)% | | Section 250 Deduction | (4.92)% | (15.74)% | | Permanent Differences | 0.20% | 0.07% | | Valuation Allowance-Deferred Tax Asset | 33.29% | 6.41% | | Foreign Tax Credit | (15.24)% | (9.74)% | | Section 78 Gross-up | 0.77% | 6.64% | | Argentina Flow Through Loss | 7.20% | 1.09% | | Withholding Taxes | 5.72% | 36.55% | | Foreign Rate Differential | 18.25% | 2.11% | | Change in State Apportionment Rate | (1.48)% | (1.38)% | | Foreign employee benefits | (1.58)% | (3.58)% | | Foreign Dividends Paid to U.S. | 25.69% | 73.01% | | Foreign Dividends Received Deduction | (25.69)% | (73.01)% | | Earnout Adjustment | (5.70)% | --- | | Other | 0.62% | (1.25)% | | Effective Rate | 42.01% | 65.74% | - The valuation allowance for deferred tax assets increased to $6.7 million in FY24 from $3.6 million in FY23[351] - Repatriated $4.5 million from Canada and $7.0 million from China in FY24[348] 11. NET INCOME PER SHARE Basic and diluted net income per share increased significantly in FY24 Net Income Per Share (FY24 vs FY23) | Metric | 2024 | 2023 | |:---|:---|:---| | Numerator – Net Income ($000s) | $5,425 | $1,873 | | Denominator for basic net income per share (weighted-average shares) | 7,352,356 | 7,562,187 | | Effect of dilutive securities | 187,349 | 175,776 | | Denominator for diluted net income per share | 7,539,705 | 7,737,963 | | Basic net income per share | $0.74 | $0.25 | | Diluted net income per share | $0.72 | $0.24 | 12. DERIVATIVE INSTRUMENTS AND FOREIGN CURRENCY EXPOSURE The company uses forward contracts to manage foreign currency risk, though none were outstanding at year-end - The company uses forward contracts to manage foreign currency exposure, primarily for Canadian Dollars and Euros[355] - These forward contracts are not designated as hedging instruments, with gains and losses recognized in current earnings[355][357] - There were no outstanding forward contracts at January 31, 2024, or 2023[357] 13. COMMITMENTS AND CONTINGENCIES The company manages various operating leases and does not expect current litigation to have a material effect - The company assesses contingent liabilities, accruing estimated losses when probable and estimable[359][360] - No significant outstanding claims or litigation are expected to have a material effect on the company's financial position as of January 31, 2024[363] - All real estate leases are classified as operating leases, with renewal options evaluated for reasonable certainty[365][366] Operating Lease Cost ($000s) | Classification | 2024 | 2023 | |:---|:---|:---| | Cost of goods sold | $1,092 | $272 | | Operating expenses | $1,402 | $1,035 | | Short-term lease cost | $221 | $169 | Maturity of Lease Liabilities (January 31, 2024, $000s) | Year ending January 31, | Operating Leases | |:---|:---| | 2025 | $2,164 | | 2026 | $2,092 | | 2027 | $1,876 | | 2028 | $1,805 | | 2029 | $1,490 | | Thereafter | $5,547 | | Total lease payments | $14,974 | | Less: Interest | $3,689 | | Present value of lease liability | $11,285 | - Weighted-average remaining lease term for operating leases was 8.0 years, with a weighted-average discount rate of 10.4% as of January 31, 2024[368] 14. SEGMENT REPORTING The company operates through seven geographic segments, with strong sales growth in the USA and Latin America - The company has seven revenue-generating reportable geographic segments: USA Operations, Other Foreign, Europe (UK), Mexico, Asia, Canada, and Latin America[21][375] Domestic and International Sales ($ millions) | Category | 2024 | 2023 | |:---|:---|:---| | Domestic | $55.3 | $49.0 | | International | $69.4 | $63.8 | | Total | $124.7 | $112.8 | Net Sales by Segment ($ millions) | Segment | 2024 | 2023 | |:---|:---|:---| | USA Operations (including Corporate) | $60.9 | $53.8 | | Other foreign | $14.0 | $9.5 | | Europe (UK) | $16.4 | $8.3 | | Mexico | $6.7 | $5.2 | | Asia | $46.2 | $63.7 | | Canada | $9.3 | $9.0 | | Latin America | $16.3 | $10.9 | | Less intersegment sales | ($45.1) | ($47.6) | | Consolidated sales | $124.7 | $112.8 | Operating Profit (Loss) by Segment ($ millions) | Segment | 2024 | 2023 | |:---|:---|:---| | USA Operations (including Corporate) | ($3.5) | ($6.4) | | Other foreign | $2.0 | $0.4 | | Europe (UK) | $0.1 | ($1.3) | | Mexico | ($2.1) | ($1.4) | | Asia | $4.6 | $10.9 | | Canada | $1.5 | $1.5 | | Latin America | $2.8 | $1.9 | | Less intersegment (profit) loss | $0.3 | ($0.1) | | Consolidated operating profit | $5.7 | $5.5 | Total Assets by Segment (Less Intersegment, $ millions) | Segment | 2024 | 2023 | |:---|:---|:---| | USA Operations (including Corporate) | $47.1 | $65.2 | | Other foreign | $19.6 | $9.2 | | Europe (UK) | $27.2 | $12.5 | | Mexico | $10.2 | $5.3 | | Asia | $29.0 | $35.6 | | Canada | $8.3 | $5.8 | | Latin America | $12.3 | $9.3 | | Consolidated assets | $153.7 | $142.9 | 15. SUBSEQUENT EVENTS The company completed two acquisitions and amended its loan agreement after the fiscal year-end - On February 5, 2024, acquired Jolly Scarpe S.p.A and Jolly Scarpe Romania S.R.L for approximately $9.3 million, adding professional footwear for firefighting, military, police, and rescue markets[374] - On March 28, 2024, the Loan Agreement was amended, extending the credit facility and increasing its availability[375] - On April 2, 2024, Lakeland Global Safety, Ltd agreed to acquire the fire and rescue business of LHD Group Deutschland GmbH for EUR 15.4 million (approximately $16.7 million), expected to close in May 2024[376][377] ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants to report - No changes in or disagreements with accountants on accounting and financial disclosure[378] ITEM 9A. Controls and Procedures Disclosure controls and internal controls were deemed effective, and a prior material weakness was remediated - Disclosure controls and procedures were effective as of January 31, 2024[379] - A material weakness in internal control over financial reporting related to foreign subsidiary currency translation was remediated through enhanced review and process reconfiguration[380][381] - Management concluded that the company maintained effective internal control over financial reporting as of January 31, 2024, excluding the recently acquired Pacific Helmets NZ Limited[385][386] ITEM 9B. Other Information There is no other information to report under this item - No other information to report[388] ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections There are no disclosures regarding foreign jurisdictions that prevent inspections - No disclosures regarding foreign jurisdictions that prevent inspections[389] PART III ITEM 10. Directors, Executive Officers and Corporate Governance This information is incorporated by reference from the company's upcoming proxy statement - Information is incorporated by reference from the definitive proxy statement for the June 2024 Annual Meeting of Stockholders[390] - Executive officer information is also presented in Item 1 of this report[390] ITEM 11. Executive Compensation This information is incorporated by reference from the company's upcoming proxy statement - Information is incorporated by reference from the definitive proxy statement for the June 2024 Annual Meeting of Stockholders[391] - Executive officer information is also presented in Item 1 of this report[391] ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters Security ownership information is incorporated by reference, with details on equity compensation plans provided - Information regarding security ownership is incorporated by reference from the definitive proxy statement for the June 2024 Annual Meeting of Stockholders[392] Equity Compensation Plans (January 31, 2024) | Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (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 (c) | |:---|:---|:---|:---| | Equity Compensation plans approved by security holders | 193,151 | $15.92 | 190,466 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 193,151 | $15.92 | 190,466 | ITEM 13. Certain Relationships and Related Transactions, and Director Independence This information is incorporated by reference from the company's upcoming proxy statement - Information is incorporated by reference from the definitive proxy statement for the June 2024 Annual Meeting of Stockholders[396] ITEM 14. Principal Accountant Fees and Services This information is incorporated by reference from the company's upcoming proxy statement - Information is incorporated by reference from the definitive proxy statement for the June 2024 Annual Meeting of Stockholders[397] PART IV ITEM 15. Exhibit and Financial Statement Schedules This section lists the financial statements and exhibits filed with the Form 10-K - Includes Consolidated Statements of Operations, Comprehensive Income, Balance Sheets, Stockholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements[399] - Exhibits include acquisition agreements, corporate governance documents, employment agreements, loan agreements, and certifications[400][401][402][403][404][405] ITEM 16. Form 10-K Summary This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[406]