Discontinued Operations

3 Months Ended

Apr. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

17. Discontinued Operations

Potential Transfer of the Company’s Brazilian Operations

Discontinued operations

On April 29, 2015, the Board of Directors of Lakeland Industries, Inc. determined to exit the Brazilian market. The Company’s Brazilian operations have been unprofitable over the last several years. After extensively considering a number of options and the advice of Brazilian legal counsel, the Board of Directors approved a transfer of the Company’s wholly-owned Brazilian subsidiary, Lakeland Brazil to a current officer of Lakeland Brazil, subject to successful negotiation and entry into a definitive agreement. It is intended that the transfer involve the assumption of a substantial amount of liabilities by the transferee and additional funding from the Company. In order to effectuate a transfer and aid the transferee to meet its liabilities, it is anticipated the Company would contribute funding of approximately US $1,900,000 to the transferee, subject to possible partial recoupment through a land sale. The transfer has been approved by the Company’s senior lender, Alostar Bank of Commerce.

The Company expects that the transfer of Lakeland Brazil will occur during the second quarter of fiscal 2016. However, there can be no assurances that the transfer will be successfully consummated. The Company currently estimates that it will incur total pre-tax exit and disposal costs of approximately US $2.2 million, consisting of the aforementioned approximately US $1,900,000 of funding to the transferee in connection with the transfer of Lakeland Brazil and approximately US $300,000 for legal and accounting fees and expenses. The foregoing are estimates only. Actual amounts will not be known until the Company has fully implemented the proposed transfer transaction. Even after the transfer, the Company may continue to be exposed to certain liabilities arising in connection with the prior operations of Lakeland Brazil, including, without limitation, from lawsuits pending in the labor courts in Brazil and VAT taxes, as more fully described in the Company’s annual report on Form 10-K for the fiscal year ended January 31, 2015. The Company understands that under the laws of Brazil, a concept of fraudulent bankruptcy exists, which may hold a parent company liable for the liabilities of its Brazilian subsidiary in the event some level of fraud or misconduct is shown during the period that the parent company owned the subsidiary. While the Company believes that there has been no such fraud or misconduct, there can be no assurance that the courts of Brazil will not make such a finding nonetheless. The risk of exposure to the Company substantially diminishes if the transferee continues to operate the Brazilian subsidiary for a period of at least two years, as the risk of a finding of a fraudulent bankruptcy lessens and pre-sale liabilities are paid off.

The following tables summarize the results of the Brazil business included in the consolidated statement of income for the three months ended April 30, 2015 and 2014, and balance sheets as of April 30, 2015 and January 31, 2015 as discontinued operations.

Balance Sheet
	(000's)		(000's)
	April 30, 2015		January 31, 2015
Assets of discontinued operations:
Cash	$	12	$	53
Accounts receivable		622		888
Inventory		2,979		3,216
Other current assets		1,495		634
Property/Equipment held for sale		1,339		1,544
Total assets of discontinued operations		6,447		6,335
Liabilities of discontinued operations:
Accounts payable		467		651
Accrued compensation and benefits		1,361		1,739
Other accrued expenses		1,901		1,163
Short term borrowings		630		688
Other liabilities		2,333		2,333
Total liabilities of discontinued operations		6,692		6,574

Statement of Operations
	(000's)		(000's)
	April 30, 2015		April 30, 2014
Net sales from discontinued operations	$	444	$	1,749
Cost of goods sold from discontinued operations		412		1,154
Gross profit from discontinued operations		32		595
Operating expense from discontinued operations		484		871
Operating loss from discontinued operations		(452)		(276)
Other, net from discontinued operations		(479)		(78)
Loss from discontinued operations before income tax		(931)		(354)
Net loss from discontinued operations	$	(931)	$	(354)

Summary Cash Flow Statement
	(000's)		(000's)
	April 30, 2015		April 30, 2014
Net cash used in operating activities		(587)		(570)
Net cash used in investing activities		—		(2)
Net cash provided by financing activities		552		572
Net effect on cash of FX variations		(6)		—
Net increase in cash and cash equivalents		(41)		—
Cash and cash equivalents at beginning of year		53		—
Cash and cash equivalents at end of year	$	12	$	—