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Long-Term Debt | 9 Months Ended
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Oct. 31, 2013
Debt Disclosure [Abstract] |
Long-term Debt [Text Block] | 6. Long-Term Debt On June 28, 2013, 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 satisfied. 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 (“BDC”). 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.
| ⋅ | 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, which was received and resolved in August 2013.
| 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
| o | A perfected first security lien on all of the Borrowers United States and Canadian assets, other than its Mexican plant and the Canadian warehouse
| o | Pledge of 65% of Lakeland US stock in all foreign subsidiaries other than 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 June 28, 2013 (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 Closing Date
| ⋅ | Interest Rate
| o | Rate equal to LIBOR rate plus 525 basis points
| o | Initial rate and rate at October 31, 2013 of 6.25%
| o | Floor rate of 6.25%
| ⋅ | Fees: Borrowers shall pay to the Lender the following fees:
| o | Origination fee of $225,000, paid on the Closing Date and being amortized over the term of loan and is included in other assets in the accompanying balance sheet
| o | 0.50% per annum on unused portion of commitment
| o | A 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 covenanted 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 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
| ⋅ | The Company is in compliance with all loan covenants of the Senior Debt at October 31, 2013.
| ⋅ | Other Covenants
| o | Standard financial reporting requirements as defined
| o | Limitation on amounts that can be advanced to or on behalf of Brazilian operations, 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 Date, 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, at the election of the Junior Lender
| o | All loan costs associated with the Subordinated Debt are included with the deferred debt costs from the Senior Loan and are being amortized over the life of the Senior Loan
| 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 price-protection 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, which requirement has been complied with
| o | Investor Rights: Junior lender will have the right to designate one board member or a board observer, subject to certain conditions. As of December 12, 2013, the Junior lender has not exercised this right
| 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
| o | The Company is in compliance with all covenants of the Subordinated Debt at October 31, 2013.
Management has valued the Warrant at $2.2 million. This has been treated as Original Issue Discount (OID) and is being amortized as additional interest over the five-year term of the related subordinated debt. The effective rate of return to the Junior Lender is computed by deducting the warrant valuation OID from the $3.5 million principal leaving a valuation for the debt at closing of $1.3 million. Including the 12% coupon and the amortization of the OID gives an effective per annum rate on just the debt of approximately 47%, assuming the warrant is broken out separately. However, management views this to be one blended loan or transaction along with the Senior Debt of up to $15 million at 6.25%, since the subordinated debt was a required condition of closing made by the Senior Lender. Amounts outstanding as of October 31, 2013 under the Senior Lender Facility were $11.8 million and under the Junior Lender Facility, $3.5 million net of un-amortized original issue discount of $2.0 million for a net value of $1.5 million included in the subordinated debt on the balance sheet. Borrowings in Brazil On April 19, 2013 the Company borrowed approximately US $240,000 (R560,000) for working capital at an annual interest rate of 18.16%. On September 5, 2013, the Company borrowed approximately US $150,000 (R354,000) for working capital at an interest rate of 1.80% per month The total bank loans in Brazil outstanding at October 31, 2013 were the equivalent of US $1.1 million and are included in short term borrowings on the balance sheet. Borrowings in UK On February 20, 2013 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 US $1,500,000 at current exchange rates), more fully described in the Company’s Form 8-K which was filed on February 20, 2013. The balance outstanding under this facility at October 31, 2013 was the equivalent of US $1.2 million and is included in short-term borrowings on the balance sheet. The interest rate repayment rate is 3.46% and the term is for a minimum period of one year renewable on January 31, 2014. The Company is negotiating for renewal and expects the renewal to occur. China Loan On August 12, 2013, the Company’s China subsidiary borrowed approximately US $0.8 million at an interest rate of 5.395% for a term of one year as more fully described in the Company’s Form 8-K which was filed on August 16, 2013. The balance under this loan outstanding at October 31, 2013 was $804,922. Such amounts mature August 2014 and is included in short-term borrowings on the balance sheet. Canada Loan In September 2013 the Company refinanced its loan with the Development Bank of Canada (BDC) for a principal amount of approximately Canadian and US $ 1.1 million. Such loan is for a term of 240 months at an interest rate of 6.45% with fixed monthly payments of approximately US $7,780 (C$8,169) including principal and interest. It is collateralized by a mortgage on the Company's warehouse in Brantford, Ontario. The amount outstanding at October 31, 2013 is $1,061,776 which is included as $1,011,776 Canadian loan on the accompanying balance sheet, net of current maturities of $50,000

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 22 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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