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LONG-TERM DEBT AND SUBSEQUENT EVENT | 12 Months Ended
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Jan. 31, 2013
Long Term Debt and Subsequent Event Disclosure [Abstract] |
Long Term Debt and Subsequent Event Disclosure [Text Block] | 6. LONG-TERM DEBT AND SUBSEQUENT EVENT Revolving Credit Facility At January 31, 2013, the total balance outstanding under our revolving credit facility amounted to $9.6 million. In January 2010, the Company entered into a one-year $23.5 million revolving credit facility (as amended from time to time, the “Loan Agreement”) with TD Bank, N.A. (“TD Bank”). In January 2011, TD Bank agreed to a two-year extension to expire January 2013 in June 2011, TD Bank agreed to extend the term to June 2014 and add a $6.5 million term loan facility to be used to fund capital expansion in Brazil, Mexico and Argentina, as well as the ability to refinance existing debt in Canada. In April 2012, TD Bank agreed to add a $3.0 million term loan facility to be used to refinance a portion of the revolver. Borrowings under this $6.5 million term loan facility are in the form of a five-year term loan, with maturity in June 2013. As a result of the arbitration award issued against the Company in May 2012 and the subsequent entry into a Settlement Agreement in respect thereof, as well as due to the recent operating results of the Company mentioned below, one or more events of default have occurred during the year under the TD Bank revolving credit facility and term loan facility, including an event of default for failure to comply with the minimum EBITDA covenant, which allows TD Bank, at its option, to accelerate the loan. On October 17, 2012, the Company entered into an Amendment No. 5 and Waiver (the “Amendment”) to the Loan Agreement. Under the Amendment, TD Bank has agreed to waive the Company’s noncompliance with the consolidated leverage ratio requirements and consolidated EBITDA requirements of the Loan Agreement, in each case, for the fiscal quarters ended April 30, 2012 and July 31, 2012. TD Bank has also agreed, with respect to standards for the October 31, 2012 quarter compliance standards, not to test or has revised these and one other financial covenant. Pursuant to the Amendment, TD Bank has reduced the Company’s revolving line of credit from the aggregate principal amount of $30,000,000 to $17,500,000 and increased the maximum interest rate payable on the revolving credit balance from LIBOR plus 2.50% to LIBOR plus 3.50%. There is currently approximately $9.6 million of outstanding borrowings under the Loan Agreement. The maturity date of amounts outstanding under the revolving credit facility was changed from June 30, 2014 to June 30, 2013. The Loan Agreement requires payment of certain access fees for all unused portions of the total borrowing capacity provided to the Company. The maximum amounts borrowed under the revolving credit facility during FY13 and FY12 were $12.9 million and $18.4 million, respectively, and the weighted average interest rates during the periods were 2.87% and 1.96%, respectively. The maximum amount borrowed under the term loans was $6.3 million in FY13 with a weighted average interest ratio of 2.89%. The credit facility contains financial covenants including, but not limited to, fixed charge ratio, funded debt to EBITDA ratio, inventory and accounts receivable collateral coverage ratio, with respect to which the Company was not in compliance at January 31, 2013, as amended in October 2012. The current interest rate on this term loan at January 31, 2013, was 2.9%, and principal and interest of $131,470 was due monthly. The operating losses from Brazil and impairment charge resulted in the Company’s being in default with its TD Bank facility. In June 2012, the Company has engaged Raymond James & Associates, Inc. to assist management and the Board of Directors in its evaluation of a broad range of financial and strategic alternatives for the Company. Subsequent Event On May 15, 2013, the Company accepted a commitment letter from a bank for a Senior Credit Facility subject to execution of documentation, final due diligence, obtaining by the Company of a minimum of $3.5 million of junior debt under terms satisfactory to lender, and an inter creditor agreement. On June 28, 2013, Lakeland Industries, Inc. (the “Company”) and its wholly-owned subsidiary, Lakeland Protective Wear Inc. (collectively with the Company, the “Borrowers”), entered into a Loan and Security Agreement (the “Senior Loan Agreement”) with AloStar Business Credit, a division of AloStar Bank of Commerce, a state banking institution formed under Alabama law (the “Senior Lender”). The Senior Loan Agreement provides the Borrowers with a three year $15 million revolving line of credit, at a variable interest rate based on LIBOR, with a first priority lien on substantially all of the United States and Canada assets of the Company, except for the Canadian warehouse. On June 28, 2013, the Borrowers also entered into a Loan and Security Agreement (the “Subordinated Loan Agreement”) with LKL Investments, LLC, an affiliate of Arenal Capital, a private equity fund (the “Junior Lender”). The Subordinated Loan Agreement provides for a $3.5 million term loan to be made to the Borrowers and a second priority lien on substantially all of the assets of the Company in the United States and Canada, except for the Canadian warehouse and except for a first lien on the Company’s Mexican facility. Pursuant to the Subordinated Loan Agreement, among other things, Borrowers issued to the Junior Lender a five year term loan promissory note (the “Note”). At the election of the Junior Lender, interest under the Note may be paid in cash, by payment in kind (PIK) in additional notes or payable in shares of common stock, par value $.01 per share (“Common Stock”), of the Company (the “Interest Shares”). If shares of Common Stock are used to make interest payments on the Note, the number of Interest Shares will be based upon 100% of an average of the then current market value of the Common Stock, subject to the limitations set forth in the Subordinated Loan Agreement. The Junior Lender also, in connection with this transaction, received a common stock purchase warrant (the “Warrant”) to purchase up to 566,015 shares of Common Stock (subject to adjustment), representing beneficial ownership of approximately 9.58% of the outstanding Common Stock of the Company, as of the closing of the transactions contemplated by the Subordinated Loan Agreement. The Company’s receipt of gross proceeds of $3.5 million in subordinated debt financing was a condition precedent set by Senior Lender, of which this transaction satisfies. The proceeds from such financings have been used to fully repay the Company’s former financing facility with TD Bank, N.A. in the amount of approximately US$13.7 million. Also repaid upon closing of the financings was the warehouse loan in Canada with a balance of Cdn$1,362,000 Canadian dollars (approximately US $1,320,000), payable to Business Development Bank of Canada. The Company believes that the conditions that were reported in its Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended January 31, 2013 resulting in doubts about the Company’s ability to continue as a going concern have now been resolved as a result of the closing of the financing and the repayment of such debt as described herein. The following is a summary of the material terms of the financings: $15 million Senior Credit Facility
| ⋅ | Borrowers are both Lakeland Industries, Inc. and its Canadian operating subsidiary Lakeland Protective Wear Inc. (the “Borrowers”).
| ⋅ | Borrowing pursuant to a revolving credit facility subject to a borrowing base calculated as the sum of:
| o | 85% of eligible accounts receivable as defined
| o | The lesser of 60% of eligible inventory as defined or 85% of net orderly liquidation value of inventory
| o | In transit inventory in bound to the US up to a cap of $1,000,000, subject to a satisfactory appraisal of Alabama real estate
| o | Receivables and inventory held by the Canadian operating subsidiary to be included, up to a cap of $2 million of availability
| o | Amount available at closing was approximately $12.3 million
| ⋅ | Collateral will be
| o | A perfected first security lien on all of the Borrowers United States and Canadian assets, other than its Mexican plant
| o | Pledge of 65% of Lakeland US stock in all foreign subsidiaries other than Canada subsidiary with 100% pledge of stock of its Canadian subsidiaries
| ⋅ | Collection
| o | All customers of Borrowers must remit to a lockbox controlled by Senior Lender or into a blocked account with all collection proceeds applied against the outstanding loan balance
| ⋅ | Maturity
| o | An initial term of three years from the Closing Date
| o | Prepayment penalties of 3%, if prepaid prior to the first anniversary of Closing Date; 2% if prior to the second anniversary and 1% if prior to the third anniversary of the ClosingDate
| ⋅ | Interest Rate
| o | Rate equal to LIBOR rate plus 525 basis points
| o | Floor of 6.25%
| o | Initial rate of 6.25%
| ⋅ | Fees: Borrowers shall pay to the Lender the following fees:
| o | Origination fee of $225,000
| o | 0.50% per annum on unused portion of commitment
| o | A monthly, non-refundable collateral monitoring fee in the amount of $3,000 per month
| o | All legal and other out of pocket costs
| ⋅ | Financial Covenants
| o | Borrowers covenant that, from the closing date until the commitment termination date and full payment of the obligations to Senior Lender, Lakeland Industries, Inc. (the parent company), together with its subsidiaries on a consolidated basis, excluding its Brazilian subsidiary, shall comply with the following additional covenants:
| ⋅ | Fixed Charge Coverage Ratio. At the end of each fiscal quarter of Borrowers, commencing with the fiscal quarter ending July 31, 2013, Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than 1.1 to 1.00 for the four quarter period then ending.
| ⋅ | Minimum Quarterly Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). Borrowers shall achieve, on a rolling basis as defined herein and excluding the operations of the Borrower’s Brazilian subsidiary, EBITDA of not less than the following as of the end of each quarter as follows:
| o | July 31, 2013 for the two quarters then ended, $2.1 million;
| o | October 31, 2013 for the three quarters then ended, $3.15 million,
| o | January 31, 2014 for the four quarters then ended, and thereafter, $4.1 million
| ⋅ | Capital Expenditures. Borrowers shall not during any Fiscal Year make Capital Expenditures in an amount exceeding $1 million in the aggregate.
| ⋅ | Conditions to Closing:
| o | Borrower must have obtained a $3.5 million subordinated debt (which was satisfied by the closing under the Subordinated Loan Agreement)
| o | Borrower must have had minimum of $2.0 million excess availability at closing
| ⋅ | Other Covenants
| o | Standard financial reporting requirements as defined
| o | Limitation on amounts that can be advanced to or on behalf of Brazil limited to $200,000 for fiscal year ended January 2014 and nothing thereafter
| o | Limitation on total net investment in foreign subsidiaries of a maximum of $1.0 million per annum
$3.5 million Subordinated Debt Financing
| ⋅ | Subordinated Loan Agreement
| o | Maturity date: June 28, 2018
| o | Interest at 12.0% per annum through and including December 27, 2016, increased to 16% per annum on December 28, 2016 and 20% per annum on December 28, 2017. Until the first anniversary of the Closing, all interest shall either be paid in kind (PIK) or paid in shares of common stock of Lakeland, valued at 100% of the then market value
| o | Warrant to purchase 566,015 shares of Common Stock (subject to adjustment), exercisable at $0.01 per share
| o | Warrant is subject to customary anti-dilution adjustment provisions, including for issuances of Common Stock or Common Stock equivalents at a price less than $5.00 per share, computed on a weighted average basis, subject to a hard cap limitation of 1,068,506 shares on total number of shares to be issued from a combination of warrants, interest shares and anti-dilution adjustments. The Company is allowed to issue up to 500,000 shares without triggering this provision, to allow for restricted shares and other new compensatory issuances.
| o | Warrant exercise period is five years from the closing date
| o | Registration Rights: the Company commits to filing with the Securities and Exchange Commission a registration statement covering the shares issuable in connection with the subordinated loan transaction within 90 days of the closing date and to have it effective no later than 180 days from the closing date
| o | Investor Rights: Junior lender will have the right to designate one board member or a board observer, subject to certain conditions
| o | Subject to Senior Lender Subordination Agreement, the subordinated loan, may be repaid in increments of $500,000 with Senior Lender approval, on or after June 28, 2014
| o | Early Termination Fees; Applicable Termination Percentage:
| ⋅ | (a) Upon early repayment of the Term Loan, Borrowers shall be obligated to pay, in addition to all of the other Obligations then outstanding, an amount equal to the product obtained by multiplying $3,500,000 by the applicable percentage set forth below:
| ⋅ | 5.00% if the effective date of termination occurs on or before June 28, 2014
| ⋅ | 3.00% if the effective date of termination occurs after June 28, 2014 but on or before June 28 2015; or
| ⋅ | 1.00% if the effective date of termination occurs after June 28, 2015 but on or before June 28, 2016
| ⋅ | Upon acceleration of the loan following a Change of Control, Borrowers shall be obligated to pay, an additional fee equal to $35,000
| o | Financial covenants setback 10% from those in the Senior Loan Agreement
| o | Second priority lien on substantially all of the assets of the Company in the United States and Canada, except a first lien on Mexican facility
Management intends to obtain a valuation of the Warrant and will include this in the Company’s next Quarterly Report on Form 10-Q. Borrowings in Brazil in FY13
| ⋅ | Short-term borrowing of $R1,109,040 (USD$500,256) at January 31, 2013, due in equal monthly installments $R100,822 (USD$50,708) through October 2013 at an interest rate of 1.35% monthly. The accrued interest as of January 31, 2013, is $R15,475 (USD$7,708).
| ⋅ | Long-term borrowing of $2,000,000 (USD$1,005,884) due in equal monthly installments $R166,667 (USD$83,827) through February 2014 at an interest rate of 1.09% monthly. The accrued interest as of January 31, 2013, is $R14,573 (USD$7,258).
Borrowings in Brazil subsequent to year end
| ⋅ | On April 19, 2013 the Company borrowed R$560 thousand (approximately USD$280 thousand) for working capital.
Borrowings in UK – subsequent event
| ⋅ | On February 20 the Company and its UK subsidiary completed an agreement to obtain accounts receivable financing with HSBC Bank in the UK in the amount £1,000,000 (approximately USD $1,500,000 at current exchange rates), more fully described in the Company’s Form 8-K which was filed on February 20, 2013.
Five-year Debt Payout Schedule This table reflects the TD Bank loans as amended. This reflects the liabilities as of January 31, 2013 and does not reflect any subsequent event
|  | Total |  | 1 Year or less |  | 2 Years |  | 3 Years |  | 4 Years |  | 5 Years |  | After 5 Years |
Canada facility loan |  | $ | 1,398,566 |  | $ | 100,481 |  | $ | 100,481 |  | $ | 100,481 |  | $ | 100,481 |  | $ | 100,481 |  | $ | 896,161 |
Term loans - TD Bank |  |  | 5,550,000 |  |  | 5,550,000 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Borrowings in Brazil |  |  | 1,578,779 |  |  | 1,578,779 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Revolving credit facility |  |  | 9,558,882 |  |  | 9,558,882 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 18,086,227 |  | $ | 16,789,142 |  | $ | 100,481 |  | $ | 100,481 |  | $ | 100,481 |  | $ | 100,481 |  | $ | 896,161 |
Canadian Borrowings In June 2006, a subsidiary of the Company entered into an agreement to construct a distribution facility in Brantford, Ontario at a fixed cost of approximately $2,400,000. In order to finance the acquisition, the Company has arranged a term loan in the amount of $2,000,000 (Canadian) bearing interest at the Business Development Bank of Canada’s floating base rate minus 1.25% (equal to 3.75% at January 31, 2013) and is repayable in 240 monthly principal installments of $8,350 (Canadian) plus interest. The subsidiary has drawn down the full amount of this loan and has included $33,899 (Canadian) as capitalized interest reflected in the asset cost. Such building was completed, and the Company took occupancy in December 2007. The term loan is collateralized by the land and buildings in Brantford, Ontario, as well as certain personal property of our Canadian subsidiaries. In addition, $700,000 (Canadian) of the term loan is guaranteed by the Company. This loan was repaid on June 28, 2013 as part of the overall financing completed by the Company. Sale of Real Estate in China In April 2013, the Company executed a contract for the sale of real estate located in Qingdao, China. The sale was structured as a sale of a subsidiary’s stock after transferring out all non-real estate assets to other Lakeland entities. The proceeds of the sale to the Company were approximately $1.1 million, which was received in June 2013. All production from this facility has been transferred to other Lakeland manufacturing facilities. There are no product lines which were dropped as a result of this plant closing. Accordingly, the operations of this plant are not being treated as a discontinued operation. Sale of India Property The Company has entered into a Memorandum of Understanding (“MOU”) in April 2013 for the sale of Plot 24, the largest of three plots held for sale by the Company. The sale price is approximately $500,000 US dollars. Due to time-consuming Indian governmental approvals needed, the Company does not expect to collect the cash until late in 2013.

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