LONG-TERM DEBT AND SUBSEQUENT EVENT

12 Months Ended

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 would have allowed 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. There can be no assurance that the Company will be able to close on such financing.

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).

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.

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 will be approximately $1.1 million, expected to be received in June 2013. All production from this facility is being transferred to other Lakeland manufacturing facilities. There are no product lines which will be 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.