Table of Contents
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) |
(Zip Code) | |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Large accelerated filer | ☒ | |||||
| Nonaccelerated filer | Smaller reporting company | |||||
Class |
Outstanding at May 30, 2025 | |
Common Stock, $0.01 par value per share |
Table of Contents
LAKELAND INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-Q
The following information of the Registrant and its subsidiaries is submitted herewith:
PART I - FINANCIAL INFORMATION:
| Page | ||||||
| Item 1. | ||||||
| Condensed Consolidated Statements of Operations Three Months Ended April 30, 2025 and 2024 |
3 | |||||
| 4 | ||||||
| Condensed Consolidated Balance Sheets April 30, 2025 and January 31, 2025 |
5 | |||||
| Condensed Consolidated Statements of Stockholders’ Equity Three Months Ended April 30, 2025 and 2024 |
6 | |||||
| Condensed Consolidated Statements of Cash Flows Three Months Ended April 30, 2025 and 2024 |
7 | |||||
| 8 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 | ||||
| Item 3. | 35 | |||||
| Item 4. | 35 | |||||
| PART II - OTHER INFORMATION: | ||||||
| Item 2. | 37 | |||||
| Item 5 | 37 | |||||
| Item 6. | 38 | |||||
| 39 | ||||||
Table of Contents
Three Months Ended April 30, |
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2025 |
2024 |
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Net sales |
$ |
$ | ||||||
Cost of goods sold |
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Gross profit |
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Operating expenses |
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Operating (loss) income |
( |
) | ||||||
Other income, net |
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Interest expense |
( |
) | ( |
) | ||||
(Loss) income before taxes |
( |
) | ||||||
Income tax (benefit) expense |
( |
) | ||||||
Net (loss) income |
($ |
) |
$ | |||||
Net (loss) income per common share: |
||||||||
Basic |
($ |
) |
$ | |||||
Diluted |
($ |
) |
$ | |||||
Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Three Months Ended April 30, |
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2025 |
2024 |
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| Net (loss) income |
( $ |
) |
$ | |||||
| Other comprehensive income (loss): |
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| Foreign currency translation adjustments |
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| |
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| Comprehensive (loss) income |
( $ |
) |
$ | |||||
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| April 30, | January 31, | |||||||
| 2025 | 2025 | |||||||
ASSETS |
||||||||
Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net of allowance for doubtful accounts of $ 5 , respectively |
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Inventories |
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Prepaid VAT and other taxes |
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Income tax receivable and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating leases right-of-use |
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Deferred tax assets |
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Other assets |
||||||||
Goodwill |
||||||||
Intangible assets, net |
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Total assets |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | $ | ||||||
Accrued compensation and benefits |
||||||||
Other accrued expenses |
||||||||
Income tax payable |
||||||||
Current portion of loans payable |
||||||||
Current portion of operating lease liabilities |
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Total current liabilities |
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Deferred income taxes |
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Loans payable – long term |
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Long-term portion of operating lease liabilities |
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Total liabilities |
||||||||
Commitments and contingencies (Note 11) |
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Stockholders’ equity |
||||||||
Preferred stock, $ |
||||||||
Common stock, $ Issued |
||||||||
Treasury stock, at cost; |
( |
) | ( |
) | ||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) |
( |
) | ||||
Total stockholders’ equity |
||||||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total |
|||||||||||||||||||||||||||||
Common Stock |
Treasury Stock |
|||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||
| Balance, January 31, 2024 |
$ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
| Net income |
— | — | ||||||||||||||||||||||||||||||
| Other comprehensive loss |
— | — | ||||||||||||||||||||||||||||||
| Dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Stock-based compensation: |
||||||||||||||||||||||||||||||||
| Restricted stock issued |
— | |||||||||||||||||||||||||||||||
| Restricted stock plan |
— | — | ||||||||||||||||||||||||||||||
| Return of shares in lieu of payroll withholding |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
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| Balance, April 30, 2024 |
$ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
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| Balance, January 31, 2025 |
$ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
| Net (loss) |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Other comprehensive loss |
— | — | ||||||||||||||||||||||||||||||
| Dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Stock-based compensation: |
||||||||||||||||||||||||||||||||
| Restricted stock issued |
— | |||||||||||||||||||||||||||||||
| Restricted stock plan |
— | — | ||||||||||||||||||||||||||||||
| Return of shares in lieu of payroll withholding |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
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| Balance, April 30, 2025 |
$ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
| |
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Three Months Ended April 30, |
||||||||
2025 |
2024 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net (loss) income |
( $ |
) | $ | |||||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities |
||||||||
| Deferred income taxes |
||||||||
| Depreciation and amortization |
||||||||
| Amortization of step-up in inventory basis |
||||||||
| Stock based and restricted stock compensation |
||||||||
| Equity in loss of equity investment |
||||||||
| Change in fair value of earnout consideration |
( |
) | ||||||
| (Increase) decrease in operating assets, net of effect of business acquisition |
||||||||
| Accounts receivable |
( |
) | ||||||
| Inventories |
( |
) | ||||||
| Prepaid VAT and other taxes |
( |
) | ||||||
| Other current assets |
( |
) | ( |
) | ||||
| Increase (decrease) in operating liabilities, net of effect of business acquisition |
||||||||
| Accounts payable |
( |
) | ||||||
| Accrued expenses and other liabilities |
( |
) | ||||||
| Operating lease liabilities |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash (used in) provided by operating activities |
( |
) | ||||||
| |
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|
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| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Acquisitions, net of cash acquired |
( |
) | ||||||
| Investments in convertible debt instruments |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash (used in) investing activities: |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Term loan borrowings |
— | |||||||
| Term loan repayments |
( |
) | ( |
) | ||||
| Credit line - borrowings |
||||||||
| Dividends paid |
( |
) |
( |
) | ||||
| Shares returned to pay employee taxes under restricted stock program |
( |
) | ( |
) | ||||
| |
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|
|||||
| Net cash provided by financing activities |
||||||||
| |
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|||||
| Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
| |
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|||||
| Net increase in cash and cash equivalents |
||||||||
| Cash and cash equivalents at beginning of period |
||||||||
| |
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|||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| |
|
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|
|||||
| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| |
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|
|||||
| Cash paid for taxes |
$ | $ | ||||||
| |
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|||||
1. |
Business |
2. |
Basis of Presentation |
3. |
Investments and Acquisitions |
| Net working capital acquired, including cash of $0.5 million |
$ | |||
| Property, plant and equipment |
||||
| Right of use assets |
||||
| Customer relationships |
||||
| Trade names |
||||
| Goodwill |
||||
| Backlog |
||||
| Lease liabilities |
( |
) | ||
| Other liabilities assumed |
( |
) | ||
| |
|
|||
| Total net assets acquired |
$ | |||
| |
|
| Net working capital acquired, including cash of $1.5 million |
$ | |||
| Property, plant and equipment |
||||
| Right of use assets |
||||
| Customer relationships |
||||
| Trade names and trademarks |
||||
| Technological know-how |
||||
| Other |
( |
) | ||
| Goodwill |
||||
| Lease liabilities |
( |
) | ||
| Other liabilities assumed |
( |
) | ||
| |
|
|||
| Total net assets acquired |
$ | |||
| |
|
| Net working capital acquired, including cash of $3.0 million and inventory of $6.0 million |
$ | |||
| Property, plant and equipment |
||||
| Right of use assets |
||||
| Customer relationships |
||||
| Trade names and trademarks |
||||
| Technological know-how |
||||
| Goodwill |
||||
| Lease liabilities |
( |
) | ||
| Other liabilities assumed, including debt of $3.7 million |
( |
) | ||
| |
|
|||
| Total net assets acquired |
$ |
|||
| |
|
(in millions, except per share amount) |
Quarter Ended April 30, 2024 |
|||
| Net sales |
$ |
|||
| Net income |
$ |
|||
| |
|
|||
| Basic earnings per share |
$ |
|||
| |
|
|||
| Diluted earnings per share |
$ |
|||
| |
|
|||
4. |
Inventories |
April 30, 2025 |
January 31, 2025 |
|||||||
| Raw materials |
$ | $ | ||||||
| Work-in-process |
||||||||
| Finished goods |
||||||||
| |
|
|
|
|||||
| Excess and obsolete adjustments |
( |
) |
( |
) | ||||
| |
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|
|||||
| $ |
$ |
|||||||
| |
|
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|
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5. |
Goodwill and Intangible Assets, Net |
| Balance at January 31 |
$ | |||
| Currency translation |
||||
| Balance at April 30 |
$ | |||
| |
|
| Balance at January 31 |
$ | |||
| Amortization |
( |
) | ||
| Currency translation |
||||
| |
|
|||
| Balance at April 30 |
$ | |||
| |
|
6. |
Long-Term Debt |
7. |
Concentration of Risk |
8. |
Stockholders’ Equity |
Three Months Ended April 30, |
||||||||
2025 |
2024 |
|||||||
| 2017 Plan: |
||||||||
| Total restricted stock and stock option programs |
$ | $ | ||||||
| Total income tax expense recognized for stock-based compensation arrangements |
$ | $ | ||||||
| |
|
|
|
|||||
Performance- Based |
Service- Based |
Total |
Weighted Average Grant Date Fair Value |
|||||||||||||
| Outstanding at January 31, 2025 |
$ |
|||||||||||||||
| Awarded |
$ | |||||||||||||||
| Vested |
( |
) |
( |
) |
( |
) |
$ | |||||||||
| Forfeited |
||||||||||||||||
| Outstanding at April 30, 2025 |
$ | |||||||||||||||
Performance- Based |
Service- Based |
Total |
Weighted Average Grant Date Fair Value |
|||||||||||||
| Outstanding at January 31, 2024 |
$ | |||||||||||||||
| Awarded |
$ | |||||||||||||||
| Vested |
( |
) | ( |
) | $ | |||||||||||
| Forfeited |
( |
) | ( |
) | ( |
) | ||||||||||
| Outstanding at April 30, 2024 |
$ | |||||||||||||||
9. |
Income Taxes |
10. |
Net (Loss) Income Per Share |
| Three Months Ended April 30, |
||||||||
| 2025 | 2024 | |||||||
| Numerator: |
||||||||
| Net (loss) income |
( $ |
) |
$ | |||||
| |
|
|
|
|||||
| Denominator: |
||||||||
| Denominator for basic net (loss) income per share (weighted-average shares which exclude shares in the treasury, 1,358,208 at April 30, 2025 and 2024) |
||||||||
| Effect of dilutive securities from restricted stock plan |
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| |
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| Denominator for diluted net (loss) income per share (adjusted weighted average shares) |
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| |
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| Basic net (loss) income per share |
( $ |
) |
$ | |||||
| |
|
|
|
|||||
| Diluted net (loss) income per share |
( $ |
) |
$ | |||||
| |
|
|
|
|||||
11. |
Contingencies |
12. |
Segment Reporting |
Three Months Ended April 30, |
||||||||
2025 |
2024 |
|||||||
| Domestic |
$ | $ | ||||||
| International |
||||||||
| |
|
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|
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| Total |
$ | $ | ||||||
| |
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|
|||||
Three Months Ended April 30, |
||||||||
2025 |
2024 |
|||||||
(in millions of dollars) |
||||||||
| Net Sales |
||||||||
| US Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
||||||||
| Less intersegment sales |
( |
) |
( |
) | ||||
| |
|
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|
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| Consolidated sales |
$ |
$ |
||||||
| |
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|
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| External Sales |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
||||||||
| |
|
|
|
|||||
| Consolidated external sales |
$ |
$ |
||||||
| |
|
|
|
|||||
| Intersegment Sales |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe (UK) |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
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| |
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| Consolidated intersegment sales |
$ |
$ |
||||||
| |
|
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|
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Three Months Ended April 30, |
||||||||
2025 |
2024 |
|||||||
(in millions of dollars) |
||||||||
| Cost of Goods Sold: |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
||||||||
| Less intersegment cost of goods sold |
( |
) |
( |
) | ||||
| |
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|
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| Consolidated cost of goods sold |
$ |
$ |
||||||
| |
|
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|
|||||
| Gross Profit: |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
||||||||
| Less intersegment loss |
( |
) |
( |
) | ||||
| |
|
|
|
|||||
| Consolidated gross profit |
$ |
$ |
||||||
| |
|
|
|
|||||
| Operating Expenses: |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
||||||||
| Less intersegment operating expenses |
( |
) |
( |
) | ||||
| |
|
|
|
|||||
| Consolidated operating expenses |
$ |
$ |
||||||
| |
|
|
|
|||||
| Operating (Loss) Income: |
||||||||
| USA Operations (including Corporate) |
$ |
( |
) |
$ |
( |
) | ||
| Europe |
( |
) |
( |
) | ||||
| Mexico |
( |
) |
( |
) | ||||
| Asia |
||||||||
| Canada |
( |
) |
||||||
| Latin America |
( |
) |
||||||
| Other foreign |
||||||||
| Less intersegment loss (income) |
( |
) |
||||||
| |
|
|
|
|||||
| Operating (loss) income |
($ |
) |
$ |
|||||
| |
|
|
|
|||||
As of April 30, |
As of January 31, |
|||||||
2025 |
2025 |
|||||||
(in millions of dollars) |
||||||||
| Total Assets: |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
||||||||
| Less intersegment |
( |
) |
( |
) | ||||
| |
|
|
|
|||||
| Consolidated assets |
$ |
$ |
||||||
| |
|
|
|
|||||
| Total Assets Less Intersegment: |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Mexico |
||||||||
| Asia |
||||||||
| Canada |
||||||||
| Latin America |
||||||||
| Other foreign |
||||||||
| |
|
|
|
|||||
| Consolidated assets |
$ |
$ |
||||||
| |
|
|
|
|||||
| Total Goodwill and Intangible Assets |
||||||||
| USA Operations (including Corporate) |
$ |
$ |
||||||
| Europe |
||||||||
| Other foreign |
||||||||
| |
|
|
|
|||||
| Consolidated goodwill and intangible assets |
$ |
$ |
||||||
| |
|
|
|
|||||
| Three Months Ended April 30, (in millions of dollars) |
||||||||
2025 |
2024 |
|||||||
| External Sales by product lines: |
||||||||
| Disposables |
$ |
$ |
||||||
| Chemical |
||||||||
| Fire |
||||||||
| Gloves |
||||||||
| High Visibility |
||||||||
| High Performance Wear |
||||||||
| Wovens |
||||||||
| |
|
|
|
|||||
| Consolidated external sales |
$ |
$ |
||||||
| |
|
|
|
|||||
13. |
Subsequent Events |
Table of Contents
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward-Looking Statements
The following discussion and analysis should be read in conjunction with the historical financial statements and other financial information included elsewhere in this quarterly report on Form 10-Q. This Form 10-Q may contain certain forward-looking statements. When used in this Form 10-Q or in any other presentation, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “project”, “plan,” “seek,” “will,” “may,” “might,” “would,” “could” and similar expressions, are intended to identify forward-looking statements. They also include statements containing a projection of sales, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.
The forward-looking statements in this Form 10-Q are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to us. These statements are not statements of fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Some of the important factors that could cause our actual results, performance or financial condition to differ materially from expectations are:
| • | we are subject to risk as a result of our international manufacturing operations and are subject to the risk of doing business in foreign countries, particularly in China and Vietnam, including risks relating to the impacts of tariff policies, which could affect our ability to manufacture or sell our products, obtain products from foreign suppliers or control the costs of our products; |
| • | a terrorist attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively impact our domestic and/or international operations; |
| • | our results of operations could be negatively affected by potential fluctuations in foreign currency exchange rates; |
| • | we have manufacturing and other operations in China, Vietnam, and other countries which may be adversely affected by tariff wars and other trade maneuvers; |
| • | our results of operations may vary widely from quarter to quarter; |
| • | disruption in our supply chain, manufacturing or distribution operations could adversely affect our business; |
| • | climate change and other sustainability matters may adversely affect our business and operations; |
| • | some of our sales are to foreign buyers, which exposes us to additional risks; |
| • | because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could negatively impact our inventory levels and net sales; |
| • | we face competition from other companies, a number of which have substantially greater resources than we do; |
| • | our operations are substantially dependent upon key personnel; |
| • | technological change could negatively affect sales of our products and our performance; |
| • | cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations; |
| • | 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 success depends in part on our proprietary technology, and if we fail to successfully obtain or enforce our intellectual property rights, our competitive position may be harmed; |
| • | We are implementing a new enterprise resource planning system; |
| • | We have identified a material weakness in our internal control over financial reporting; |
| • | we deal in countries where corruption is an obstacle; |
| • | we are exposed to U.S. and foreign tax risks; |
| • | we may be subject to product liability claims, and insurance coverage could be inadequate or unavailable to cover these claims; |
| • | environmental laws and regulations may subject us to significant liabilities; |
| • | provisions in our restated certificate of incorporation and by-laws and Delaware law could make a merger, tender offer or proxy contest difficult; |
| • | we may not achieve the expected benefits from strategic acquisitions, investments, joint ventures, capital investments and other corporate transactions that we have pursued or may pursue; |
| • | 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; |
| • | adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations; and |
| • | the other factors referenced in this Form 10-Q, including, without limitation, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the factors described under “Risk Factors” disclosed in our fiscal 2025 Form 10-K. |
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We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements that are based on current expectations. Furthermore, forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements after the date of this Form 10-Q, whether as a result of new information, future events or otherwise, except as may be required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q might not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors.
Business Overview
We manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 2,000 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, transportation, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. In addition, we supply federal, state and local governmental agencies and departments, including fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. Internationally, we sell to a mixture of end-users directly and to industrial distributors, depending on the particular country and market. In addition to the United States, sales are made into more than 50 foreign countries, the majority of which were into China, the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Uruguay, Middle East, Southeast Asia, New Zealand, Australia and Hong Kong.
The Company’s strong market position across its focus product categories and markets is supported by continued and increasing investment in its global footprint, particularly owning and operating its own manufacturing facilities, acquiring complementary companies or products that expand and enhance product offerings and/or geographic customer territories and investing in sales and marketing resources in countries around the world. We believe that ownership of manufacturing is the cornerstone of building a resilient supply chain and providing high-quality products to our customers. Having ten manufacturing locations in eight countries on five continents, and sourcing core raw materials from multiple suppliers in various countries affords Lakeland with superior manufacturing capabilities and supply chain resilience compared to our competitors who use contractors. Additionally, our focus on providing customers with best-in-class service includes the strategic location of our sales team members.
Lakeland is committed to protecting the world’s workers, first responders, and communities while creating shareholder value. Key elements of our corporate strategy include:
| • | Creating a high-performance culture driven by our corporate values, |
| • | Investing resources in high-growth geographies and product categories, |
| • | Building a premier global firefighter safety brand through product and marketing enhancements, |
| • | Driving profitable growth in high-end chemical and limited-use/disposable protective clothing through product development, strategic pricing initiatives, channel diversification, and operations optimization, and |
| • | Acquiring companies that improve Lakeland’s competitive advantage in focus markets. |
On December 16, 2024, the Company acquired U.S.-based Veridian Limited (Veridian) for cash consideration of approximately $26.1 million subject to post-closing adjustments and customary holdback provisions. Founded in 1992, Veridian is a leading provider of firefighter protective apparel, including fire and rescue garments, gloves and boots, with an annual revenue of approximately $21 million. Veridian has approximately 150 employees and is headquartered in Des Moines, Iowa.
On July 1, 2024, the Company acquired the fire and rescue business of LHD Group Deutschland GmbH and its subsidiaries in Hong Kong and Australia (collectively, “LHD”) in an all-cash transaction subject to post-closing adjustments and customary holdback provisions. Total consideration was $14.8 million, net of $1.5 million cash acquired, of which $15.5 million was paid to retire LHD’s debt and $0.8 million was paid to the seller at closing. LHD is a leading provider of firefighter turnout gear, accessories, and personal protective equipment, as well as decontamination, repair and maintenance services. LHD has 111 employees worldwide and is headquartered in Wesseling, Germany, with operations in Hong Kong and Australia.
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On February 5, 2024, the Company acquired Italy and Romania-based Jolly Scarpe S.p.A. and Jolly Scarpe Romania S.R.L. (collectively, “Jolly”) in an all-cash transaction. Total consideration was $9.0 million, of which $7.5 million was paid to the seller at closing, and $1.5 million remained unpaid subject to post-closing adjustments and customary holdback provisions. Jolly is a leading designer and manufacturer of professional footwear for the firefighting, military, police, and rescue markets. The company is headquartered in Montebelluna, Italy, with manufacturing operations in Bucharest, Romania, and has 150 employees. Jolly’s primary customers are based in Europe.
Our net sales attributable to customers outside the United States were $26.0 million and $22.0 million for the three months ended April 30, 2025 and 2024, respectively.
We are continually monitoring the potential financial impact of the Russian invasion of Ukraine on our operations. For the three months ended April 30, 2025, sales in Russia were approximately 1.4% of our consolidated sales and sales into Ukraine were not significant. We do not have any capital assets in Russia.
Results of Operations
Three Months ended April 30, 2025, Compared to the Three Months Ended April 30, 2024
Net Sales. Net sales were $46.7 million for the three months ended April 30, 2025, an increase of $10.4 million or 28.7% compared to $36.3 million for the three months ended April 30, 2024. Sales of our Fire Services product line increased $10.5 million due to $9.8 million in sales from Veridian acquired in December 2024 and LHD acquired in July 2024, and $0.7 million growth in the product line. Our Industrials product line sales in Q1 FY26 were in line with Q1 FY25 with a slight contraction of $0.1 million.
Gross Profit. Gross profit for the three months ended April 30, 2025 was $15.6 million, a decrease of $0.6 million, or 3.7%, compared to $16.2 million for the three months ended April 30, 2024. Gross profit as a percentage of net sales decreased to 33.5% for the three-month period ended April 30, 2025, from 44.6% for the three months ended April 30, 2024. Gross profit performance declined in the three months ended April 30, 2025 due to revenue mix coupled with lower margins in our acquired businesses, higher manufacturing and freight costs. Our margins in the acquired businesses were impacted by the amortization of the write-up in inventory as part of purchase accounting.
Operating Expense. Operating expenses increased by $6.3 million, or 45.0%, from $14.0 million for the three months ended April 30, 2024 to $20.3 million for the three months ended April 30, 2025. This increase is attributable to the acquisitions of Veridian and LHD which increased operating expenses by $2.8 million. In addition, the Company incurred transaction-related expenses related to our acquisitions of $0.9 million coupled with severance costs of $0.6 million, costs of $0.2 million due to ongoing PFAS litigation and $0.6 million of costs associated with the Monterrey facility. The remaining increase was related to additional selling expenses including travel and trade shows, increased outbound freight, professional fees and administrative expenses of $1.1 million. During the quarter ended April 30, 2024, the Company evaluated the earnout consideration accrual related to the Eagle and Pacific acquisitions and reduced the accrual by $0.7 million, which was recorded as a reduction in operating expense. Operating expenses as a percentage of net sales were 43.4% for the three months ended April 30, 2025, up from 38.5% for the three months ended April 30, 2024, primarily due to the factors noted above.
Operating Loss. Operating loss was ($4.6) million for the three months ended April 30, 2025 compared to an operating profit of $2.2 million for the three months ended April 30, 2024, due to the impacts detailed above. Operating margins were (9.9%) for the three months ended April 30, 2025, as compared to 6.1% for the three months ended April 30, 2024.
Income Tax Expense (Benefit). Income tax expense consists of federal, state and foreign income taxes. Income tax benefit was $1.2 million for the three months ended April 30, 2025, compared to income tax expense of $0.4 million for the three months ended April 30, 2024. The income tax benefit is a result of the pre-tax operating loss in the three months ended April 30, 2025. The Company’s effective tax rate for the first quarter of FY26 was 23.4% which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions. The Company’s effective tax rate for the first quarter of FY24 was 19.0%, which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and the GILTI provision, and the earn-out adjustments related to the Pacific and Eagle acquisitions.
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Net Income (Loss). Net loss was ($3.9) million for the three months ended April 30, 2025 down from net income of $1.7 million for the three months ended April 30, 2024.
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Liquidity and Capital Resources
At April 30, 2025, cash and cash equivalents were approximately $18.6 million, and working capital was approximately $104.4 million. Cash and cash equivalents increased $1.1 million, and working capital increased $2.8 million from January 31, 2025 due to the balance sheet fluctuations described below.
Of the Company’s total cash and cash equivalents of $18.6 million as of April 30, 2025, cash held in Latin America of $2.2 million, cash held in the UK of $2.5 million, cash held in Russia and Kazakhstan of $1.9 million, cash held in the EEC of $4.8, cash held in India of $0.6 million, cash held in Vietnam of $0.2 million, and cash held in Hong Kong of $0.1 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 December 22, 2017 enactment of the 2017 Tax Cuts and Jobs Act (the “Tax Act”). When the Company repatriates cash from China, of the $1.8 million balance at April 30, 2025, an additional 10% withholding tax may be incurred in that country. The Company expects to repatriate cash from China during FY 26 and in anticipation of doing so, has accrued withholding tax expense of $0.3 million as of April 30, 2025.
Cash used in operations was $4.9 million due to net loss of ($3.9) million, and an increase in working capital of $3.0 million offset by non-cash charges of $2.1 million. Net cash used in investing activities was $1.2 million for capital expenditures for our new ERP system and replacement of manufacturing equipment. Net cash provided by financing activities was $8.5 million due to $6.6 million borrowed under our credit facility to fund working capital increases and the addition of a $2.2 million working capital loan for Jolly to support their operations offset by dividends of $0.3 million, repayment of short-term borrowings of $0.2 million and $0.1 million in shares returned to pay income taxes on shares vested under our equity compensation program.
We believe our current cash, cash equivalents, borrowing capacity under our Loan Agreement, and the cash to be generated from expected product sales will be sufficient to meet our projected operating and investing requirements (including planned capital expenditures) for at least the next twelve months. However, our liquidity assumptions may prove to be incorrect, and we may need to utilize our available financial resources sooner than we currently expect.
On June 25, 2020, the Company entered into a Loan Agreement (the “Original Loan Agreement”) with Bank of America, N.A. (“Lender”), as amended by Amendment No. 1 to the Loan Agreement, dated June 18, 2021 (“Amendment No. 1”), Amendment No. 2 to the Loan Agreement, dated March 3, 2023 (“Amendment No. 2”), Amendment No. 3 to the Loan Agreement, dated November 30, 2023 (“Amendment No. 3”), Amendment No. 4 to the Loan Agreement, dated March 28,
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2024 (“Amendment No. 4”), and Amendment No. 5 to the Loan Agreement, dated December 12, 2024 (“Amendment No. 5” and, collectively with Amendment No. 1, Amendment No. 2, Amendment No. 3, and Amendment No. 4, the “Loan Agreement Amendments”; and the Original Loan Agreement, as amended by the Loan Agreement Amendments, the “Amended Loan Agreement”).
The Amended Loan Agreement provides the Company with a secured revolving credit facility of up to $60.0 million of borrowings from December 12, 2024 through January 31, 2026 and of up to $50.0 million of borrowings from February 1, 2026 through January 31, 2027 (in each case, such limits remain subject to a reduction to no less than $40.0 million from the net proceeds of equity issuances if the Company raises capital during such periods). The revolving credit facility includes a $10.0 million letter of credit sub-facility. On January 24, 2025, as required by the Amended Loan Agreement, the Company used certain net proceeds of its equity issuance to reduce the principal amount outstanding under the Amended Loan Agreement. As a result thereof, the maximum principal amount under the revolving credit facility was reduced to $40 million. The credit facility matures on December 12, 2029.
Borrowings under the revolving credit facility bear interest at a rate per annum equal to the sum of (i) the greater of the daily Secured Overnight Financing Rate (“SOFR”) or an index floor of 1% plus (ii) the Applicable Rate (as defined in the Amended Loan Agreement). The Applicable Rate is based on a funded debt-to-EBITDA ratio (discussed below) and includes four different levels constituting a SOFR margin range from 1.25% to 2.00%. All outstanding principal and unpaid accrued interest under the revolving credit facility are due and payable on the maturity date. On a one-time basis, and subject to there not existing an event of default, the Company may elect to convert up to $5.0 million of the then outstanding principal of the revolving credit facility to a term loan facility with an assumed amortization of 15 years and the same interest rate and maturity date as the revolving credit facility. The Amended Loan Agreement provides for a fee on any difference between the line of credit commitment and the amount of credit it actually uses, determined by the daily amount of credit outstanding during the specified period. Such fee is calculated at the Applicable Rate and is payable quarterly.
The Company made certain representations and warranties to the Lender in the Amended Loan Agreement that are customary for credit arrangements of this type. The Company also agreed to maintain, as of the end of each fiscal quarter a minimum “basic fixed charge coverage ratio” (as defined in the Amended Loan Agreement) of at least 1.20x and a “funded debt to EBITDA ratio” (as defined in the Amended Loan Agreement) not to exceed 3.5x (with step-downs to 3.25x and 3.0x on February 1, 2026 and February 1, 2027, respectively), in each case for the trailing 12-month period ending with the applicable quarterly reporting period. In addition, the Company has agreed to maintain a springing “asset coverage ratio” (as defined in the Amended Loan Agreement) of at least 1.10x, but only to the extent that the maximum funded debt to EBITDA ratio exceeds 3.25x at any reporting period. The Company was in compliance with all of its debt covenants as of April 30, 2025.
Stock Repurchase Program. On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $5.0 million of its outstanding common stock, which became effective upon the completion of a prior 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 $5.0 million of its outstanding common stock.
No shares were repurchased in the three months ended April 30, 2025 leaving $5.0 million remaining under the share repurchase program at April 30, 2025. The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time.
Quarterly Cash Dividend. On February 1, 2025, the Board of Directors declared a quarterly cash dividend. The quarterly dividend of $0.03 per share was paid on February 24, 2025, to stockholders of record as of February 17, 2025.
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Capital Expenditures. Our capital expenditures for the three months ended April 30, 2025 of $1.2 million principally relate to capital investment in our new ERP system and some replacement equipment for our manufacturing sites. We anticipate FY26 capital expenditures to be approximately $3.0 million to replace existing equipment in the normal course of operations, expand our fire services products manufacturing capabilities and invest in our new ERP system. We expect to fund the capital expenditures from our cash flows from operations. The Company may also expend funds in connection with potential acquisitions.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements in our fiscal year 2025 Form 10-K. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult, or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2025 Form 10-K. There have been no significant changes in the application of our critical accounting policies during the three months ended April 30, 2025.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
A smaller reporting company is not required to provide the information required by this Item, and therefore, no disclosure is required under Item 3 for the Company.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of April 30, 2025. The term “disclosure controls and procedures” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and principal financial officer have concluded that as of April 30, 2025, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting described below.
Notwithstanding the ineffective disclosure controls and procedures as a result of the identified material weakness described below, management has concluded that the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with U.S. generally accepted accounting principles.
Material Weakness in Internal Control over Financial Reporting
As previously disclosed in our 2025 Form 10-K, management identified certain deficiencies in the Company’s internal control over financial reporting that aggregated to a material weakness related to the completeness and accuracy of its foreign reporting packages. Specifically, the Company has undergone significant changes in size, complexity and geographic footprint primarily due to multiple acquisitions, and has numerous systems that process financially relevant data. Of these systems, Sage X3 (United States, Canada and the United Kingdom) and Kingdee (China and Hong Kong), were in the Company’s scope for testing of information technology general controls (“ITGCs”) in support of management’s assessment of internal control over financial reporting. The Company’s consolidation process is manual and based upon reporting packages submitted by the various locations. For those locations where the financially relevant systems were not in-scope and not subject to the Company’s testing of ITGCs, the financial reporting controls, as designed, do not adequately
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address the completeness and accuracy of the foreign reporting packages. The reporting packages form the basis of multiple controls, including a key management review control designed to detect a material misstatement in the Company’s consolidated financial statements as well as other controls. Additionally, the Company did not update the control activities documentation for numerous locations and, in some cases, did not change control processes to reflect changes in operating structure. This contributed to the material weakness disclosed in our 2025 Form 10-K in the Company’s internal controls.
Management’s Remediation Plan and Status
In response to the material weakness, management has taken, or is in the process of taking, the following actions:
| • | Implementing an enterprise resource planning (“ERP”) system, which is expected to roll out in phases over the next several years. Phase I should be completed by the end of the 2026 fiscal year; |
| • | Established a technology committee of the Board of Directors to oversee the role of technology in executing the Company’s business strategy and risks associated with technology strategies, major technology investments, operational performance and technology trends; and |
| • | Migrating substantially all of our operations to a common accounting system and utilizing a common chart of accounts and improved accounting close and revise procedures. |
While we have taken steps to remediate the identified material weakness and will continue to complete the remediation process as quickly as possible, we cannot at this time estimate how long it will take to remediate this material weakness. The material weakness will not be considered remediated until the controls are designed, implemented, and operate for a sufficient period of time and management has concluded, through independent testing, that these controls are operating effectively. As management continues to evaluate and work to improve our disclosure controls and procedures and internal control over financial reporting, we may take additional measures to address these control deficiencies or modify certain remediation measures described above.
Changes in Internal Control Over Financial Reporting
Other than continuing to make progress on the ongoing remediation efforts described above, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended April 30, 2025 that materially affected, or are reasonably likely to affect materially, the Company’s internal control over financial reporting.
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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 (2) |
||||||||||||
February 1 – February 28 |
3,453 | $ | — | — | $ | 5,030,479 | ||||||||||
March 1 – March 31 |
— | $ | — | — | $ | 5,030,479 | ||||||||||
April 1 – April 30 |
2,716 | $ | — | — | $ | 5,030,479 | ||||||||||
Total |
6,169 | $ | — | — | $ | 5,030,479 | ||||||||||
| (1) | Includes withholding of 6,169 restricted shares to cover taxes on vested restricted shares during the first quarter of FY26. |
| (2) | Represents the amount remaining under our share repurchase program as of April 30, 2025. |
Item 5. |
Other Information |
Table of Contents
| Item 6. | Exhibits |
Exhibits:
* Filed herewith
† Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LAKELAND INDUSTRIES, INC. (Registrant) | ||||||
| Date: June 9, 2025 | /s/ James M. Jenkins | |||||
| James M. Jenkins, | ||||||
| Chief Executive Officer, President and Executive Chairman | ||||||
| Date: June 9, 2025 | /s/ Roger D. Shannon | |||||
| Roger D. Shannon, | ||||||
| Chief Financial Officer and Secretary (Principal Financial Officer and Authorized Signatory) | ||||||
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