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INCOME TAXES | 12 Months Ended
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Jan. 31, 2018
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] |
8. | INCOME TAXES
The provision for income taxes is based on the following pretax income (loss):
Domestic and Foreign Pretax Income (Loss) |  | FY18 |  | FY17 |  | FY16 |
Domestic |  | $ | 7,480 |  | $ | 1,833 |  | $ | 6,140 |
Foreign |  |  | 863 |  |  | 4,439 |  |  | (572) |
Total |  | $ | 8,343 |  | $ | 6,272 |  | $ | 5,568 |
Income Tax Expense (Benefit) |  | FY18 |  | FY17 |  | FY16 |
Current: |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 600 |  | $ | (49) |  | $ | 225 |
State and other taxes |  |  | 20 |  |  | 29 |  |  | (41) |
Foreign |  |  | 1,325 |  |  | 1,577 |  |  | 1,554 |
Deferred: |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 5,955 |  | $ | 823 |  | $ | 157 |
Valuation allowance-deferred tax asset |  |  | 3 |  |  | — |  |  | (181) |
Foreign |  |  | — |  |  | — |  |  | — |
Total |  | $ | 7,903 |  | $ | 2,380 |  | $ | 1,714 |
The following is a reconciliation of the effective income tax rate to the Federal statutory rate:
|  | 2018 |  | 2017 |  | 2016 |
Statutory rate |  |  | 33.81 | % |  | 34.00 | % |  | 34.00 | %
State Income Taxes, Net of Federal Tax Benefit |  |  | 2.27 |  |  | 0.59 |  |  | 1.77 |
Adjustment to Deferred |  |  | — |  |  | — |  |  | 8.86 |
Foreign Dividend and Subpart F Income |  |  | (17.19) |  |  | 2.15 |  |  | 10.93 |
Transition Tax (net of FTC from Transition Tax) |  |  | 26.53 |  |  | — |  |  | — |
Argentina Flow Through Loss |  |  | 0.38 |  |  | (0.38) |  |  | (1.76) |
Brazil Worthless Stock Deduction |  |  | — |  |  | — |  |  | (14.21) |
Permanent Differences |  |  | (1.32) |  |  | 0.46 |  |  | (8.78) |
Valuation Allowance-Deferred Tax Asset |  |  | 0.34 |  |  | — |  |  | (3.26) |
Rate Change |  |  | 47.17 |  |  | — |  |  | — |
Other |  |  | 2.74 |  |  | 1.12 |  |  | 3.22 |
Effective Rate |  |  | 94.73 | % |  | 37.94 | % |  | 30.77 | %
The tax effects of temporary differences which give rise to deferred tax assets at January 31, 2018 and 2017 are summarized as follows:
|  | 2018 |  | 2017 |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |  |  |
Inventories |  | $ | 866 |  | $ | 1,122 |  | $ | 1,267 |
US tax loss carryforwards, including work opportunity credit* |  |  | 4,411 |  |  | 8,613 |  |  | 9,336 |
Accounts receivable and accrued rebates |  |  | 242 |  |  | 266 |  |  | 238 |
Accrued compensation and other |  |  | 190 |  |  | 109 |  |  | 266 |
India reserves - US deduction |  |  | 19 |  |  | 75 |  |  | 75 |
Equity based compensation |  |  | 126 |  |  | 286 |  |  | 202 |
Foreign tax credit carry-forward |  |  | 2,199 |  |  | 3,698 |  |  | 3,388 |
State and local carry-forwards |  |  | 1,017 |  |  | 791 |  |  | 900 |
Argentina timing difference |  |  | 37 |  |  | 51 |  |  | 116 |
Depreciation and other |  |  | 90 |  |  | 80 |  |  | 103 |
Amortization |  |  | (174) |  |  | (240) |  |  | (218) |
Brazil write-down |  |  | 181 |  |  | — |  |  | — |
Allowance for Note Receivable - Brazil |  |  | 552 |  |  | 834 |  |  | 835 |
Deferred tax asset |  |  | 9,756 |  |  | 15,685 |  |  | 16,508 |
Less valuation allowance |  |  | 2,199 |  |  | 2,170 |  |  | 2,170 |
Net deferred tax asset - USA |  | $ | 7,557 |  | $ | 13,515 |  | $ | 14,338 |
*The federal net operating loss (“NOL”) that is left after FY18 will expire after 1/31/2034 (20 years from the generated date of 1/31/2014). The credits will begin to expire after 1/31/2020 (10 years from the 1st carryover year generated date of 1/31/2010) and will fully expire after 1/31/2028. The state NOLs will begin to expire after 1/31/2025 and will continue to expire at various periods up until 1/31/2038 when they will be fully expired. The states have a larger spread because some only carryforward for 15 years and some allow 20 years. Tax Reform On December 22, 2017, new federal tax reform legislation was enacted in the United States, resulting in significant changes from previous tax law. The 2017 Tax Cuts and Jobs Act (the Tax Act) reduces the federal corporate income tax rate to 21% from 35% effective January 1, 2018. As a result of the Tax Act, we applied a blended U.S. statutory federal income tax rate of 33.811%. The Tax Act requires us to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax (see below), re-measuring our US deferred tax assets as well as reassessing the net realizability of our deferred tax assets. The Company completed this re-measurement and reassessment in the fiscal year. The rate change, along with certain immaterial changes in tax basis resulting from the 2017 Tax Act, resulted in a reduction of our net deferred tax asset to $7.6 million with related income tax expense of $5.1 million, thus dramatically increasing our effective tax rate in the fiscal year ended January 31, 2018. Transition Tax Upon enactment, there is a one-time deemed repatriation tax on undistributed foreign earnings and profits (the “transition tax”). This tax is assessed on the U.S. Shareholder’s share of the foreign corporation’s accumulated foreign earnings and profits that have not previously been taxed. Earnings in the form of cash and cash equivalents will be taxed at a rate of 15.5% and all other earnings and profits will be taxed at a rate of 8.0%. We recognized tax expense of $5,120,928 related to the transition tax in 2017. However, foreign tax credits were used in the amount of $5,120,928 to fully offset this transition tax and the Company will not incur any cash outlay related to this tax. We previously considered substantially all of the earnings in our non-U.S. subsidiaries to be indefinitely reinvested outside the U.S. and, accordingly, recorded no deferred income taxes on such earnings. At this time, and until we fully analyze the applicable provisions of the Tax Act, our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. Apart from the Transition Tax, any incremental deferred income taxes on the unremitted foreign earnings and profits are not expected to be material. Income Tax Audits The Company is subject to US federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions. Returns for the years since FY2015 are still open based on statutes of limitation only. Chinese tax authorities have performed limited reviews on all Chinese subsidiaries as of tax years 2008 through 2015 with no significant issues noted and we believe our tax positions are reasonably stated as of January 31, 2018. Weifang Meiyang Products Co., Ltd. (“Meiyang”), one of our Chinese operations, was changed to a trading company from a manufacturing company in Q1 FY16 and all direct workers and equipment were transferred from Meiyang to Weifang Lakeland Safety Products Co., Ltd., (“WF”), another entity of our Chinese operation thereby reducing our tax exposure. Lakeland Protective Wear, Inc., our Canadian subsidiary, is subject to Canadian federal income tax, as well as income tax in the Province of Ontario. Income tax returns for the 2014 fiscal year and subsequent years are still within the normal reassessment period and open to examination by tax authorities. In connection with the exit from Brazil (Note 13), the Company claimed a worthless stock deduction which generated a tax benefit of approximately USD $9.5 million, net of a USD $2.2 million valuation allowance in FY16. While the Company and its tax advisors believe that this deduction is valid, there can be no assurance that the IRS will not challenge it and, if challenged, there is no assurance that the Company will prevail. The Company’s Board of Directors has instituted a plan subject to declaration and approval each year to elect to pay annual dividends to the Company from a portion of Weifang’s future profits, a portion of Meiyang’s future profits and a portion of the UK’s future profits starting in FY15 and likely from a portion of Beijing’s future profits starting in FY19. In the fiscal year ended January 31, 2018, a dividend in the amount of $5.0 million was declared, approved and distributed from Weifang China. It is the Company’s practice and intention to reinvest the earnings of our non-US subsidiaries in their operations with the exception of the dividend plan Change in Valuation Allowance We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. The valuation allowance was approximately $2.2 million for the years ended January 31, 2018, 2017 and 2016.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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