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What changed in LAKELAND INDUSTRIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LAKELAND INDUSTRIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+286 added−224 removedSource: 10-K (2023-04-18) vs 10-K (2022-04-21)

Top changes in LAKELAND INDUSTRIES INC's 2023 10-K

286 paragraphs added · 224 removed · 153 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

47 edited+23 added−16 removed67 unchanged
Biggest changeIn 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.
Biggest changeIn 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. · Increased Focus on Fire Service: We believe a global trend, outside of North America, towards CE certified products, and the complexity of supply chain management and manufacturing make the global fire service market a place where we can leverage our certification and product knowledge to aid our customers in understanding the differences between these competing standards and to utilize our broad manufacturing base and supply chain/vendor relationships to provide reduced lead-times and superior products for our customers.
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 includes access to visits with mental health care providers through the EAP. Compensation. 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.
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.
Where larger competitors, such as DuPont, Kimberly Clark, Ansell, MSA 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.
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.
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.
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.
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 U.S. Patent and Trademark Office. We own 56 trademarks and have six trademarks in the application and approval process.
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.
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, Middle East and countries within Southeast Asia.
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. 8 Table of Contents We are continually seeking sources for our raw materials in or near the various countries where we have manufacturing operations.
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.
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.
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 U.S. 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.
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 integrated the U.S., 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.
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.
In response to increasing use of certification processes as a technical barrier to trade, standards writing bodies in the U.S. 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.
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.
Our active U.S. patents expire between 2023 and 2037. Intellectual property rights that apply to our various products include patents, trade secrets, trademarks and, to a lesser extent, copyrights.
Garments in this group are not as price sensitive as those in other reflective categories. 7 Table of Contents 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.
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.
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.
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. 7 Table of Contents 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.
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.
Internationally, Lakeland has sales representatives in 21 countries outside of the U.S. and sells 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.
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. 9 Table of Contents Suppliers and Materials It is our policy, whenever possible, to qualify multiple vendors for our fabrics and bindings.
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. See “- Environmental Matters” for additional discussion of environmental regulations. Suppliers and Materials It is our policy, whenever possible, to qualify multiple vendors for our fabrics and bindings.
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.
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.
Sales decline during the warmer summer vacation months and gradually increase from Labor Day through February with slight declines during holidays, such as Christmas.
Sales decline during the warmer summer vacation months and gradually increase from Labor Day through the fall with slight declines again during holidays, such as Christmas and the Chinese New Year.
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 will open a new facility in Monterrey, Mexico in FY24. 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, but also for Lakeland to achieve its growth objectives.
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 also continued developing and introducing 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 continue ramping up manufacturing and adding products to both of these 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 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.
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.
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.
These products allow us to supply and satisfy a wider range of our end users’ safety needs. 6 Table of Contents Our product lines include the following: · Electrostatic dissipative apparel used in electronics clean rooms; · Flame resistant (FR) meta aramid, para aramid and FR Cotton coveralls/pants/jackets used in petrochemical, refining operations, and electrical utilities; · Cotton and Polycotton coveralls, lab coats, pants and shirts; and · FR fabrics containing blends of cotton, Modacrylic, meta aramid, para aramid, and viscose.
Our product lines include the following: · Electrostatic dissipative apparel used in electronics clean rooms; · Flame resistant (FR) meta aramid, para aramid and FR Cotton coveralls/pants/jackets used in petrochemical, refining operations, and electrical utilities; · Cotton and Polycotton coveralls, lab coats, pants and shirts; and · FR fabrics containing blends of cotton, Modacrylic, meta aramid, para aramid, and viscose.
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. 10 Table of Contents 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.
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.
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.
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.
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.
The result is improved manufacturing throughput. Products The following is a description of our core product offerings: 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.
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.
Lakeland, by virtue of its international manufacturing and sales operations, is in a unique position to capitalize on this complex dynamic. 6 Table of Contents Government Regulation We are governed by regulations that affect the manufacture, distribution, marketing and sale of our products, including regulations relating to various environmental, health and safety matters.
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 also manufacture each of the above styles in our UL certified, NFPA compliant, Proximity line for Aircraft Rescue Fire Fighting (“ARFF”) with aluminized shells.
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 continue to add new capabilities to these facilities to meet the requirements of new products and new standards. 5 Table of Contents 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.
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 continue to offer a high level of customer service to distinguish our products and to create customer loyalty. The extension of common 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.
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.
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.
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. 11 Table of Contents Allen E.
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. Roger D. Shannon has served as our Chief Financial Officer since February 1, 2023.
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. 12 Table of Contents
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. Helena An has served as our Chief Operating Officer since April 6, 2023. Ms. An previously served as our Vice President of Procurement and Asia Manufacturing since 2018. Ms.
Dillard 62 Chief Operating Officer and Chief Financial Officer Steven L. Harvey 61 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.
Name Age Position Charles D. Roberson 60 Chief Executive Officer, President and Secretary Roger D. Shannon 58 Chief Financial Officer Steven L. Harvey 62 Executive Vice President for Global Sales and Marketing Hui (Helena) An 49 Chief Operating Officer Charles D. Roberson has served as our Chief Executive Officer, President and Secretary since February 2020.
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.
The Company has seven revenue generating reportable geographic segments under ASC Topic 280 “Segment Reporting”: USA Operations, Other Foreign, Europe (UK), Mexico, Asia, Canada, and Latin America. 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.
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.
PermaSure can be used to model response scenarios so that contingency plans for response can be put in place. 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.
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 contained on our website is not part of this Annual Report on Form 10-K or our other filings with the SEC.
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. · 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.
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. · Introduce New Products: We continued our history of product development and innovation by introducing new proprietary products across all our product lines.
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.
Shannon also served as Chief Financial Officer and Treasurer for Steel Technologies and various senior finance roles at the Brown-Forman Corporation, British American Tobacco, and accounting positions at Vulcan Materials Company, Lexmark International and KPMG. Steven L. Harvey has been our Executive Vice President for Global Sales and Marketing since January 2021. From 2007 to 2018, Mr.
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.
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. 4 Table of Contents 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.
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.
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. 3 Table of Contents 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.
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.
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.
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.
Approximately 1,300 or 80% 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.
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.
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-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.
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.
For purposes of this Form 10-K, (a) FY refers to a fiscal year ended January 31; for example, FY23 refers to the fiscal year ended January 31, 2023 and (b) Q refers to a quarter, for example Q4 FY 23 refers to the fourth quarter of the fiscal year ended January 31, 2023. 1 Table of Contents Business Strategy Key elements of our strategy include: · Improve Sales & Marketing in Existing Markets: We believe that we have continued opportunities to increase market penetration and improve margins in existing markets by our sales and marketing focus on vertical markets.
We also seek to advertise our Lakeland branded tradenames and trademarks. · 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 have continued to develop our CleanMax line of clean and sterile manufactured garments for use in critical and aseptic work environments by adding a new product targeting the rapidly growing, regulated cannabis market (CBD oils, etc.).
Lakeland is also committed to manufacturing R&D and invests in new equipment to improve efficiencies, improve quality, and maximize manufacturing flexibility. · 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.
Lakeland is also committed to manufacturing R&D and invests in new equipment to improve efficiencies, improve quality, and maximize manufacturing flexibility. 2 Table of Contents · Decrease Manufacturing Expenses by Opening New Manufacturing Facilities: We have successfully opened new manufacturing facilities in Vietnam and India to hedge against ever increasing manufacturing costs in China.
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 59 Chief Executive Officer, President and Secretary Allen E.
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. 8 Table of Contents 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 17, 2023.
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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.
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On December 2, 2022, we acquired UK-based Eagle Technical Products Limited (“Eagle”). Eagle is a leading designer and provider of protective apparel to the fire and industrial sectors. Eagle provides differentiated product offerings through its innovative and technical solutions.
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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. 3 Table of Contents 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.
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The acquisition enhances our product portfolio, particularly within fire service protective clothing, and expands our sales presence in the Middle East and Europe.
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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.
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Through our acquisition of Eagle Technical Products, we are now offering CE (European standard) firefighting turnout gear in markets outside of North America where NFPA-certified ensembles are being challenged by lighter-weight CE turnout gear.
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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.
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Also, Eagle has brought us an innovative luminescent trim for our turnout gear that is not dependent on retro-reflective technology to make firefighters more visible in low light. . Additionally, we recently received CE certification (European) for a new powered air-purifying respirator (“PAPR”) suit.
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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.
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This product is currently approved for use with a specific powered air-purifying respirator; however, the technology developed to attain certification of this product is applicable to other “PAPRs” and will allow us to develop additional PAPR suits approved for use with other brands and models.
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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.
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The addition of Eagle’s products into our global sales channels, coupled with bringing the manufacture of Eagle products “in house” provides us immediate sales opportunities in all markets outside of North America. With Eagle’s CE products, Lakeland will be one of very few manufacturers of Fire Service gear to offer complete lines of both NFPA and CE certified products.
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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.
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Integration of Eagle onto the Lakeland platform has already begun. Eagle is currently offering Lakeland products, chemical suits, and NFPA certified turnout gear, into their existing markets and Lakeland has already begun selling Eagle hoods and CE certified products into our existing markets in Asia, South America, and Europe.
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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.
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Eagle products are currently produced at several contract manufacturers, but manufacturing will eventually be brought “in house” as contractual obligations with existing customers are fulfilled and new business is bid specifying Lakeland manufacturing. This strategy is consistent with all of the three previously discussed key elements of our “Business Strategy” · Continued Emphasis on Customer Service .
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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.
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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. · Continued Development of Manufacturing Capability: It is critical that we increase our manufacturing capacity to meet our sales growth targets.
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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.
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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.
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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.
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We manufacture woven garments at our facilities in China, Mexico and Argentina.
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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: · Continued Development of Manufacturing Capability: It is critical that we increase our manufacturing capacity to meet our sales growth targets.
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These regulations differ among and within every country in which we operate. We are not involved in any pending or, to our knowledge, threatened governmental proceedings, which would require curtailment of our operations because of such laws and regulations.
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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. 4 Table of Contents · Continued Emphasis on Customer Service . We continue to offer a high level of customer service to distinguish our products and to create customer loyalty.
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Human Capital Management As of January 31, 2023, the Company employed approximately 1,600 people worldwide of which approximately 1,550 were full-time and approximately 50 were part-time, of which approximately 90 were employed in the United States and 1,500 were employed outside of the United States.
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The result is improved manufacturing throughput and reduced inventory levels. 5 Table of Contents 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.
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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 invested heavily to help ensure the health of our employees.
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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.
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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.
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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.
Added
Per- and polyfluoroalkyl substances (PFAS) are man-made chemicals that have been used in industry and consumer products worldwide since the 1940s. PFAS have been widely used to make products more resistant to heat, oils, grease, chemicals, and water.
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Therefore, PFAS are found in everyday consumer goods such as food packaging, nonstick cookware, stain resistant fabrics and carpets, some cosmetics, water-repellent clothing, and some firefighting foams. PFAS are now the subject of increasing regulatory attention. Both the EPA and the European Union have proposed draft regulations regarding PFAS, which include restrictions, data gathering and/or phase-out requirements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+66 added−11 removed49 unchanged
Biggest changeThere 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.
Biggest changeThere can be no assurance that we will be able to identify, pursue or acquire any targeted business. 15 Table of Contents If we are unable to integrate or successfully manage businesses that we have recently acquired or may acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and increased revenue, which may result in material adverse short and long-term effects on our consolidated operating results, financial condition and liquidity.
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.
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 if 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.
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.
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 U.S. dollars.
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.
However, our purchases in China are primarily made in the RMB, the value of which has floated for the last 6 years, therefore we have been exposed to additional foreign exchange rate risk on our Chinese raw material and component purchases.
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.
Further, all 50 states, the District of Columbia and U.S. territories have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected persons and/or state regulators in the event of a data breach or compromise, including when their personal information has or may have been accessed by an unauthorized person.
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.
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 of confidence.
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.
Five of our competitors, DuPont, Honeywell, Ansell, MSA 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.
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. 14 Table of Contents Our results of operations may vary widely from quarter to quarter.
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.
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.
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 U.S. against the RMB and the Euro. We do not hedge other currencies at this time.
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.
If the value of the U.S. dollar increases relative to the Canadian dollar, the Pound, the Euro, or the RMB then our net sales could decrease as our products would be more expensive to these international customers because of changes in rate of exchange.
In addition, products manufactured by others may render our products obsolete or noncompetitive. 15 Table of Contents Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations.
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.
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.
As a result of the Loan Agreement the Company entered into on June 25, 2020, as amended on June 18, 2021 and March 3, 2023, we currently have a $25.0 million revolving credit facility, expiring June 25, 2025.
Any material uninsured loss could have a material adverse effect on our financial condition, results of operations and cash flows. 19 Table of Contents Environmental laws and regulations may subject us to significant liabilities.
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.
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.
In addition, certain states’ privacy, security, and data breach laws, including, for example, the California Consumer Privacy Act (“CCPA”) (as amended by the California Privacy Rights Act), include private rights of action that may expose us to private litigation regarding our privacy and security practices and significant damages awards or settlements in civil litigation.
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 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.
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 variations could negatively impact our stock price. 12 Table of Contents Disruption in our supply chain, manufacturing or distribution operations could adversely affect our business . Our ability to manufacture, distribute and sell products is critical to our operations.
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.
In the event that non-U.S. dollar denominated international purchases and sales grow, exposure to volatility in exchange rates could have a material adverse impact on our financial results. 16 Table of Contents Covenants in our credit facilities may restrict our financial and operating flexibility.
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.
In FY23, more than half of our net sales were made by operations 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.
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.
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. In February 2023, the Company declared a quarterly cash dividend.
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.
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. 13 Table of Contents Technological change could negatively affect sales of our products and our performance.
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.
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. Climate change and other sustainability matters may adversely affect our business and operations.
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.
Security breaches of our systems or security breaches of third parties’ systems on which we rely to process, store, or transmit electronic information, could result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data, as well as material disruptions to our operations that could impact services.
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.
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.
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.
The impact of the invasion of Ukraine, including economic sanctions or additional war or military conflict, as well as potential responses to them by Russia, could adversely affect the Company’s business, supply chain, suppliers or customers and potentially heighten our risk of cyber-attacks.
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.
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.
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.
Our U.S. 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 U.S.
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.
The rapid development of fabric technology continually affects our apparel applications and may directly impact the performance of our products.
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.
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.
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.
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.
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.
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.
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.
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.
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.
If the value of the U.S. 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.
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.
Roberson, our Chief Executive Officer, President and Secretary; Roger D. Shannon, our Chief Financial Officer; Steven L. Harvey, our Executive Vice President for Global Sales and Marketing; and, Helena An, our Chief Operating Officer.
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. 13 Table of Contents 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.
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.
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.
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, market share and damage our customer relationships.
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.
Provisions in our restated certificate of incorporation and by-laws and Delaware law could make a merger, tender offer or proxy contest difficult.
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.
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.
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.
While no cybersecurity attack to date has had a material impact on our financial condition, results of operations or liquidity, the threat remains. 14 Table of Contents 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.
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.
Our sales process requires us to make multiple demand forecast assumptions, each of which may introduce errors 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 at all.
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.
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.
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. 17 Table of Contents 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.
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.
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.
A terrorism attack or other geopolitical crisis 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.
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.
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.
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.
These laws apply according to the residence of the impacted individual. Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information.
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.
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.
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.
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.
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.
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 U.S. dollar or RMB in relation to foreign currencies could increase the cost of the services provided to us upon contract expirations or supply renegotiations.
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.
As a global organization having access to and processing personal data in the course of our business, we are subject to U.S. and international data privacy, security and data breach notification laws as well as contractual requirements which may govern the collection, use, disclosure and protection of personal data.
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. 18 Table of Contents 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.
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.
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. 16 Table of Contents 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.
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.
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.
Our business is also at risk from and may be materially impacted and/or disrupted by information security incidents such as ransomware, malware, viruses, phishing, social engineering, and other security incidents. Such incidents can range from individual attempts to gain unauthorized access to information technology systems through phishing emails to more sophisticated security threats.
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The occurrence of any of these events could have an adverse effect on our business results and financial condition.
Added
Further escalation of specific trade tensions, including those between the U.S. and China, or more broadly in global trade conflicts, could adversely impact the Company's business and operations.
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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.
Added
The Company's business is also impacted by social, political, and labor conditions in locations in which the Company or its suppliers or customers operate; adverse changes in the availability and cost of capital; monetary policy; interest rates; inflation; recession; commodity prices; currency volatility or exchange control; ability to expatriate earnings; and other laws and regulations in the jurisdictions in which the Company or its suppliers or customers operate.
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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.
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For example, changes in local economic condition or outlooks, such as lower economic growth rates in China, Europe, or other key markets, impact the demand or profitability of the Company's products. 10 Table of Contents 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.
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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.
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We have significant international operations and are subject to the risks of doing business in foreign countries, particularly in China and Vietnam, which could affect our ability to manufacture or sell our products, obtain products from foreign suppliers or control the costs of our products. We have business operations in approximately 60 foreign countries.
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(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”).
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In particular, because a majority of our products are manufactured in China and Vietnam, the possibility of adverse changes in trade or political relations with China or Vietnam, political instability in China or Vietnam, increases in labor costs, the occurrence of prolonged adverse weather conditions or a natural disaster such as an earthquake or typhoon in China or Vietnam, or the outbreak of a pandemic disease in China or Vietnam could severely interfere with the manufacturing and/or shipment of our products and would have a material adverse effect on our operations.
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In connection with our operations in China, we purchase a significant amount of products from outside of the United States.
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Our business operations may be adversely affected by the current and future political environment in the People’s Republic of China (“PRC”). The government of the PRC has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership.
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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.
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Our ability to operate under the PRC may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters.
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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.
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Under its current leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
Removed
Any indebtedness that we incur may be indexed to a replacement benchmark, such as the Secured Overnight Financing Rate (“SOFR”).
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A change in policies by the PRC government could adversely affect our interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. 11 Table of Contents The PRC government exercises significant control over the Chinese economy, including but not limited to controlling capital investments, allocating resources, setting monetary policy, controlling and monitoring foreign exchange rates, implementing and overseeing tax regulations, providing preferential treatment to certain industry segments or companies and issuing necessary licenses to conduct business.
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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.
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In addition, we could face additional risks resulting from changes in the PRC’s data privacy and cybersecurity requirements. Accordingly, any adverse change in the Chinese economy, the PRC legal system or the PRC governmental, economic or other policies could have a material adverse effect on our entities in the PRC and our prospects generally.
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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. 20 Table of Contents ITEM 1B: UNRESOLVED STAFF COMMENTS None.
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We face additional risks in the PRC due to the PRC’s historically limited recognition and enforcement of contractual and intellectual property rights. We may experience difficulty enforcing our intellectual property rights in the PRC. Unauthorized use of our technologies and intellectual property rights by partners or competitors may dilute or undermine the strength of our brands.
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If we cannot adequately monitor the use of our technologies and products or enforce our intellectual property rights in the PRC or contractual restrictions relating to the use of our intellectual property by Chinese companies, our revenue could be adversely affected. Our entities are subject to laws and regulations applicable to foreign investment in the PRC.
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There are uncertainties regarding the interpretation and enforcement of laws, rules and policies in the PRC. Because many laws and regulations are relatively new, the interpretations of many laws, regulations and rules are not always uniform. Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas.
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Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic. As a result of the foregoing, it may be difficult for us to obtain swift or equitable enforcement of laws ostensibly designed to protect companies like ours, which could have a material adverse effect on our business and results of operations.
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There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. We have transition risks related to the transition to a lower-carbon economy and physical risks related to the physical impacts of climate change.
Added
Transition risks include increased costs of carbon emission, increased cost to produce products in compliance with future regulations, increased raw materials cost, shifts in customer/consumer values and other legal, regulatory and technological risks. Physical risks include the risk of direct damage to assets or supply chain disruption caused by severe weather events such as floods, storms, wildfires and droughts.
Added
In addition, concern over climate change may result in new legal and regulatory requirements to reduce or mitigate the effects of climate change on the environment. Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to sustainability matters, which could adversely affect our business.
Added
The markets in which we compete are highly competitive, and some of our competitors have greater financial and other resources than we do.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. 21 Table of Contents PART II
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 20 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShares 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”).
Biggest changeOn April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5 million of its outstanding common stock, which became effective upon the completion of the prior share repurchase program.
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”).
On July 6, 2021, the Board of Directors authorized an increase in the Company’s then current stock repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock.
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.
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 6, 2023 there were 30 registered holders of our shares of common stock.
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.
(2) Represents the amount remaining under our share repurchase program as of January 31, 2023. 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.
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.
Issuer Purchase of Equity Securities Period Total Number of Shares Purchased (1) 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 — $ — — $ 363,998 December 1 – December 31 --- $ --- --- $ 5,363,998 January 1 – January 31 2,581 $ 14.48 --- $ 5,363,998 Total 2,581 $ 14.48 --- $ 5,363,998 (2) (1) Withholding of 2,581 restricted shares to cover taxes on vested restricted shares during the fourth quarter of FY23.
Removed
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.
Added
Dividend Policy Prior to February 2023, we had not paid any cash dividends on our common stock. On February 1, 2023, the Board of Directors declared a quarterly dividend of $0.03 per share that was paid on February 22, 2023, to stockholders of record as of February 15, 2023.
Removed
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.
Added
On December 1, 2022, the Board of Directors authorized an increase in the Company’s stock repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock. The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time.
Removed
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.
Added
We do not have any other share repurchase programs.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet 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. 28 Table of Contents 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.
Biggest changeNet cash used in operating activities of $5.5 million for the year ended January 31, 2023 was primarily due to an increase in net inventories of $9.7 million and an increase in accounts receivable of $2.3 million due to stronger Q4 FY23 sales, partially offset by non-cash expenses of $3.6 million for deferred taxes, depreciation and amortization, and stock compensation.
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 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 a decrease in accounts receivable due to lower sales activity of $6.7 million offset by an 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 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 made capital expenditures in the year for the ERP project, leasehold improvements for our new corporate headquarters, and equipment purchases in Mexico and China.
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.
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, 2023.
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.
ITEM 7. 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.
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.
Shipping and handling costs associated with outbound freight are included in operating expenses, and for the years ended in FY23 and FY22 aggregated approximately $3.2 million and $2.9 million, respectively. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue.
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.
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, 2023 and 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.
As of January 31, 2023, the Company had no borrowings under the Loan Agreement, and there was $25 million of additional available credit under the Loan Agreement.
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.
Interest expenses was less than $0.1 million for the year ended January 31, 2023 compared to $0.1 million for the year ended January 31, 2022. The Company did not drawdown any of its available line of credit during FY23. Income Tax Expense. Income tax expense consists of federal, state and foreign income taxes.
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.
In FY23 and FY22, we recorded a valuation allowance of approximately $0.4 million and $0.8 million, respectively. The Company recognizes tax positions that meet a “more likely than not” minimum recognition threshold.
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”).
On July 6, 2021, the Board of Directors authorized an increase in the Company’s stock repurchase program under which the Company may repurchase up to an additional $5 million of its outstanding common stock.
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.
In this Form 10-K, (a) “FY” means fiscal year; thus for example, FY23 refers to the fiscal year ended January 31, 2023 and (b) “Q” refers to a quarter; thus, for example, Q4 FY23 refers to the fourth quarter of the fiscal year ended January 31, 2023.
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”).
Of the Company’s total cash and cash equivalents of $24.6 million as of January 31, 2023, cash held in Latin America of $1.8 million, cash held in Hong Kong of $0.7 million, cash held in the UK of $2.4 million, cash held in Vietnam of $0.8 million, cash held in India of $0.7 million and cash held in Canada of $1.0 million would not be subject to additional US tax in the event such cash was repatriated due to the change in the U.S. tax law as a result of the 2017 Tax Cuts and Jobs Act (the “Tax Act”).
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.
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. Business combinations .
Three Months Ended January 31, (Unaudited) Year Ended January 31, 2022 2021 2022 2021 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 26 Table of Contents Three Months Ended January 31, (Unaudited) Year Ended January 31, 2022 2021 2022 2021 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, 2022 2021 2022 2021 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 .
Three Months Ended January 31, (Unaudited) Year Ended January 31, 2023 2022 2023 2022 External Sales by Product Line: Disposables $ 13.9 $ 14.1 $ 55.2 $ 67.2 Chemical 4.8 5.5 22.2 24.5 Fire 5.5 2.3 14.7 8.2 Gloves 0.5 0.5 2.3 2.2 High Visibility 1.2 1.8 5.8 5.6 High Performance Wear 1.2 0.9 5.0 3.6 Wovens 1.9 1.7 7.6 7.1 Consolidated external sales $ 29.0 $ 26.8 $ 112.8 $ 118.4 25 Table of Contents Three Months Ended January 31, (Unaudited) Year Ended January 31, 2023 2022 2023 2022 External Sales by region: USA $ 11.9 $ 11.2 $ 49.0 $ 47.6 Other foreign 1.8 2.1 7.2 7.1 Europe (UK) 3.0 1.5 8.3 10.3 Mexico 0.8 0.8 3.7 4.1 Asia 5.6 7.4 24.7 29.8 Canada 2.1 1.4 9.1 8.2 Latin America 3.8 2.4 10.8 11.3 Consolidated external sales $ 29.0 $ 26.8 $ 112.8 $ 118.4 Three Months Ended January 31, (Unaudited) Year Ended January 31, 2023 2022 2023 2022 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of goods sold 62.5 % 60.8 % 59.4 % 57.0 % Gross profit 37.5 % 39.2 % 40.6 % 43.0 % Operating expenses 37.2 % 35.0 % 35.7 % 29.5 % Operating profit 0.3 % 4.2 % 4.9 % 13.6 % Other income, net 0.3 % 0.5 % 0.0 % 0.1 % Interest expense 0.0 % 0.0 % 0.1 % 0.0 % Income before tax 0.6 % 4.7 % 4.8 % 13.7 % Income tax expense (0.0 %) 2.8 % 3.2 % 4.1 % Net income 0.6 % 1.9 % 1.6 % 9.6 % Net Sales .
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.
Income tax expense was $3.6 million and included $0.2 million associated with the GILTI component of the Tax Act of 2017 for the year ended January 31, 2023, as compared to an income tax expense of $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.
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.
Operating Profit . Operating profit decreased to $5.5 million for the year ended January 31, 2023, from $16.0 million for the year ended January 31, 2022, due to the impacts detailed above. Operating margin decreased to 4.9% for the year ended January 31, 2023, compared to 13.6% for the year ended January 31, 2022. Interest Expense.
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.
The Company has been able to pass along a portion of these costs to its customers. 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.
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.
We anticipate FY24 capital expenditures to be approximately $3.0 million as we continue to deploy our ERP solution globally, complete the new manufacturing facility in Monterrey, Mexico, and replace existing equipment in the normal course of operations. We expect to fund the capital expenditures from our cash flow from operations.
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 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. 28 Table of Contents 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 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).
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).
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.
LIBOR is subject to a floor of 100 basis points. On March 3, 2023 the Company changed the benchmark interest rate in our credit facility from the LIBOR to the Secured Overnight Financing Rate (“SOFR”). All outstanding principal and unpaid accrued interest under the revolving credit facility is due and payable on the maturity date.
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 increased 15.6% from $34.9 million for the year ended January 31, 2022 to $40.3 million for the year ended January 31, 2023. Operating expenses as a percentage of net sales were 35.7% for the year ended January 31, 2023, as compared to 29.5% for the year ended January 31, 2022.
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.
Our capital expenditures for FY23 of $2.0 million principally relate to our capital purchases for our manufacturing facilities in Vietnam, the enhancement of IT infrastructure, and equipment purchases supporting the new manufacturing facility under development in Monterey, Mexico.
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.
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, Middle East and countries within Southeast Asia. We had net sales of $112.8 million in FY23 and $118.4 million in FY22.
A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized.
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.
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.
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.
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.
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. 23 Table of Contents Inventories.
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.
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. During FY23, the Company was impacted by tariff costs on certain products imported from China.
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. 29 Table of Contents 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”).
On December 1, 2022, the Board of Directors authorized an increase in the Company’s stock repurchase program, under which the Company may repurchase up to an additional $5 million of its outstanding common stock. Shares repurchased in FY23 totaled 390,989 shares at a cost of $5.4 million leaving $5.4 million remaining under the share repurchase program at January 31, 2023.
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.
Net income decreased to $1.9 million for the year ended January 31, 2023 from $11.4 million for the year ended January 31, 2022. Fourth Quarter Results Net sales and net income were $29.0 million and $0.6 million, respectively, for Q4 FY23, as compared to $26.8 million and $0.5 million, respectively, for Q4 FY22.
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 investing activities of $16.5 million for the year ended January 31, 2023 includes the $10.5 million Eagle acquisition and reflects the Company’s $3.1 million investment in Bodytrak®. Purchases of property and equipment were $2.0 million as the Company increased capital expenditures in the year for the ERP project and equipment purchases in Mexico and Vietnam.
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.
Gross profit performance in FY22 benefited from higher volumes including direct container shipments, related factory utilization and an improving product mix with pricing power.
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.
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. 24 Table of Contents Significant Balance Sheet Fluctuation January 31, 2023, as Compared to January 31, 2022 Cash decreased by $28.1 million, primarily as a result of $5.5 million of cash used in operations coupled with $5.4 million in share repurchases, $10.5 million for the acquisition of Eagle, $3.1 million in equity investment and $2.0 million in capital improvements.
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 of our disposable and chemical product line were impacted due to a reduction in COVID-19 demand, primarily in Asia and uneven demand from our industrial markets.
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.
Refer to Note 1, “Business and Summary of Significant Accounting Policies,” and Note 5, “Acquisitions,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information on the Company’s business acquisitions. Net Income Per Share.
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.
Excluding inventory acquired from Eagle, inventory increased $9.7 million driven by investment in inventory to reduce the impact on our supply chain of a global slowdown in freight deliveries. The Company has made strategic investments of $6.1 million in Inova Design Solutions Ltd.
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.
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. On June 25, 2020, we entered into a Loan Agreement (the “Loan Agreement”) with Bank of America (“Lender”).
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.
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.
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.
Net sales decreased to $112.8 million for the year ended January 31, 2023 compared to $118.4 million for the year ended January 31, 2022, a decrease of $5.6 million. Sales in the U.S. increased $1.4 million or 2.9%, primarily due to increases in sales of fire gear coupled with improvements in direct container sales.
Manufacturing expansion is not only necessary to control rising costs, it is also necessary for Lakeland to achieve its growth objectives.
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 $63.9 million and $70.8 million for the fiscal years ended January 31, 2023 and 2022, respectively.
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.
In FY23 we recorded approximately $1.3 million in write-downs of inventory and $0.6 million in inventory adjustments in FY22. 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.
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.
Canada sales increased by $0.9 million or 11.0% due to improvements in the industrial markets. Latin America sales decreased $0.5 million or 4.4% due to weaker local currency, primarily the Argentine peso. Sales into the Mexican market decreased by $0.4 million or 9.8%, driven by weaker industrial demand at the beginning of FY23.
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.
Other product lines, such as fire, high performance, and wovens, increased by $8.7 million due to strengthening demand in those markets and the impact of Eagle’s sales during the last two months of our fiscal year. Sales were affected by customers over-ordering in prior periods, resulting in excess channel inventories and shipping delays with ocean freight carriers. Gross Profit .
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.
The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time. On February 1, 2023, the Board of Directors declared a quarterly cash dividend as part of the initiation of a recurring quarterly dividend program.
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.
Certain of the Company’s materials suppliers and logistical service providers have experienced disruptions during the COVID-19 pandemic, resulting in supply shortages. Similar disruptions could occur in the future. 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.
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.
Factors affecting Q4 FY23 results of operations included: · Improvement in sales primarily in the fire and industrial markets and due to the Eagle acquisition · Pricing pressure on non-strategic products · Margins were negatively impacted by product mix and currency and the write-down of the carrying value of certain inventory as freight rates declined toward year-end Liquidity and Capital Resources At January 31, 2023, cash and cash equivalents were approximately $24.6 million and working capital was approximately $87.0 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.
Cash and cash equivalents decreased $28.1 million and working capital decreased $21.6 million from January 31, 2022 reflecting the impact of the Company’s purchase of Eagle, additional investment in Bodytrak and stock repurchases.
Removed
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.
Added
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.
Removed
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.
Added
On December 2, 2022, we acquired UK-based Eagle Technical Products Limited (“Eagle”) in an all-cash transaction valued at approximately $10.5 million subject to post-closing adjustments and potential future earnout payments. The acquisition enhances Lakeland’s product portfolio, particularly within fire service protective clothing and expands its sales presence in the Middle East and Europe.
Removed
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.
Added
Headquartered in Manchester, UK, Eagle is a leading designer and provider of protective apparel to the fire and industrial sectors. Eagle provides differentiated product offerings through its innovative and technical solutions. The cost to manufacture and distribute our products is influenced by the cost of raw materials, finished goods, labor, and transportation.
Removed
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. 23 Table of Contents Response to COVID-19 Outbreak Our strategy for responding to the COVID-19 outbreak evolved from prior “black swan” events.
Added
During FY23, we have experienced continued inflationary pressure and higher costs as a result of the increasing cost of raw materials, finished goods, labor, transportation, and other administrative costs associated with the normal course of business.
Removed
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.
Added
The increase in cost of raw materials and finished goods are due in part to a shortage in the availability of certain products, the higher cost of shipping, and inflation. We can only pass elevated costs onto customers in an effort to offset inflationary pressures on a limited basis.
Removed
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.
Added
Future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect our financial results. 22 Table of Contents Impact of Russia’s Invasion of Ukraine on Our Business The current conflict between Russia and Ukraine is creating substantial uncertainty about the role Russia will play in the global economy in the future.
Removed
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.
Added
Although the length, impact and outcome of the ongoing military conflict between Russia and Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions.
Removed
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.
Added
The escalation or continuation of this conflict presents heightened risks and has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to information systems, heightened risks to employee safety, significant volatility of the Russian ruble, limitations on access to credit markets, increased operating costs (including fuel and other input costs), the frequency and volume of failures to settle securities transactions, inflation, potential for increased volatility in commodity, currency and other financial markets, safety risks, and restrictions on the transfer of funds to and from Russia.
Removed
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.
Added
We cannot predict how and the extent to which the conflict will affect our customers, operations or business partners or the demand for our products and our global business. Depending on the actions we take or are required to take, the ongoing conflict could also result in loss of cash, assets or impairment charges.
Removed
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.
Added
Additionally, we may also face negative publicity and reputational risk based on the actions we take or are required to take as a result of the conflict, which could damage our brand image or corporate reputation. We are continually monitoring the potential financial impact of the Russian invasion of Ukraine on our operations.
Removed
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.
Added
Our business in Russia accounted for approximately 2.4% and 2.5% of our consolidated net revenues and 1.9% and 3.0% of our net income for the years ended January 31, 2023 and 2022, respectively. Our assets in Russia were approximately 2.5% and 2.1% of our consolidated assets at January 31, 2023 and 2022, respectively.
Removed
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.
Added
The net book value of our assets in Russia at January 31, 2023 was approximately $3.5 million of which $1.3 million is cash. We currently have not recognized any impairment charges related to the assets of our Russian business.
Removed
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.
Added
However, the extent, severity, duration and outcome of the conflict between Russia and Ukraine and related sanctions could potentially impact the value of our assets in Russia as the conflict continues. Our Russian business is part of our Other Foreign segment. Our sales into Ukraine were not significant.
Removed
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.
Added
COVID-19 The COVID-19 pandemic has had, and continues to have, a significant impact around the world, prompting governments and businesses to take unprecedented measures, such as restrictions on travel and business operations, temporary closures of businesses, and quarantine and shelter-in-place orders.
Removed
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.
Added
The COVID-19 pandemic has at times significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The COVID-19 pandemic and the measures taken by many countries in response have affected and could in the future materially impact the Company’s business, results of operations and financial condition.
Removed
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.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 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. 30 Table of Contents
Biggest changeITEM 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. 29 Table of Contents

Other LAKE 10-K year-over-year comparisons