ACQUISITIONS

12 Months Ended

Jan. 31, 2025

ACQUISITIONS

ACQUISITIONS

6. ACQUISITIONS

Acquisition of Veridian

On December 16, 2024, the Company acquired 100% of  U.S. based Veridian Limited (Veridian) for cash consideration of approximately $26.1 million subject to post-closing adjustments and customary holdback provisions. Founded in 1992, Veridian is a leading provider of firefighter protective apparel, including fire and rescue garments, gloves and boots.

Veridian’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. Veridian’s operating results and assets, including acquired intangibles and goodwill, are reported as part of United States in our geographic segment reporting.

The following table summarizes the preliminary fair values of the Veridian assets acquired and liabilities assumed at the date of the acquisition:

Net working capital acquired, including cash of $0.5 million	$	8,843
Property, plant and equipment		1,287
Right of use assets		768
Customer relationships		9,950
Trade names		1,400
Goodwill		4,956
Backlog		200
Lease liabilities		(768	)
Other liabilities assumed		(568	)
Total net assets acquired	$	26,068

Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges, the relief from royalty method for trade names and trademarks and technological know-how, and the cost method for the assembled workforce which was included in goodwill. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Veridian’s pre-acquisition forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. Amortization of Veridian’s identifiable intangible assets will be deductible for tax purposes. 

Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Veridian with our operations. Goodwill related to the Veridian acquisition is deductible for tax purposes.

Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals of inventory, contractual relationships, tangible assets and intangible assets. Changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date.

Acquisition of LHD

On July 1, 2024, the Company acquired 100% of the shares of the fire and rescue business of LHD Group Deutschland GmbH and its subsidiaries in Hong Kong and Australia (collectively, "LHD") in an all-cash transaction subject to post-closing adjustments and customary holdback provisions.  Total consideration was $14.8 million, net of $1.5 million cash acquired, of which $15.5 million was paid to retire LHD’s debt and $0.8 million was paid to the seller at closing. LHD is a leading provider of firefighter turnout gear, accessories, and personal protective equipment cleaning, repair, and maintenance. LHD has 111 employees worldwide and is headquartered in Wesseling, Germany, with operations in Hong Kong and Australia.

LHD’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. LHD’s operating results and assets, including acquired intangibles and goodwill, are reported as part of Europe in our geographic segment reporting.

The following table summarizes the fair values of the LHD assets acquired and liabilities assumed at the date of the acquisition and reflective of measurement period adjustments:

Net working capital acquired, including cash of 1.5 million	$	5,903
Property, plant and equipment		801
Right of use assets		2,905
Customer relationships		5,237
Trade names and trademarks		1,296
Technological know-how		270
Other		(76	)
Goodwill		7,606
Lease liabilities		(2,905	)
Other liabilities assumed		(4,780	)
Total net assets acquired	$	16,257

Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges, the relief from royalty method for trade names and trademarks and technological know-how. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on LHD’s pre-acquisition forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, trade names and trademarks and technological know-how acquired in the LHD transaction are being amortized over periods of 20 years, 10 years and 15 years, respectively, and are not deductible for tax purposes.

Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of LHD with our operations. Goodwill related to the LHD acquisition is not deductible for tax purposes. 

Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals, inventory, contractual relationships, tangible assets and intangible assets. These changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date.

Acquisition of Jolly

On February 5, 2024, the Company acquired 100% of the shares of Italy and Romania-based Jolly Scarpe S.p.A. and Jolly Scarpe Romania S.R.L. (collectively, “Jolly”) in an all-cash transaction.  Total consideration was $9.0 million, of which $7.5 million was paid to the seller at closing,  and $1.5 million remained unpaid subject to post-closing adjustments and customary holdback provisions. Jolly is a leading designer and manufacturer of professional footwear for the firefighting, military, police, and rescue markets. The company is headquartered in Montebelluna, Italy, with manufacturing operations in Bucharest, Romania, and has 150 employees. Jolly’s primary customers are based in Europe.

Jolly’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. Jolly’s operating results and assets, including acquired intangibles and goodwill, are reported as part of Europe in our geographic segment reporting.

The following table summarizes the fair values of the Jolly assets acquired and liabilities assumed at the date of the acquisition and reflective of measurement period adjustments:

Net working capital acquired, including cash of $3.0 million and inventory of $6.0 million	$	9,246
Property, plant and equipment		1,277
Right of use assets		1,783
Customer relationships		425
Trade names and trademarks		610
Technological know-how		272
Goodwill		1,363
Lease liabilities		(1,783	)
Other liabilities assumed, including debt of $3.7 million		(4,212	)
Total net assets acquired	$	8,981

Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges, the relief from royalty method for trade names and trademarks and technological know-how. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Jolly’s pre-acquisition forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, trade names and trademarks and technological know-how acquired in the Jolly transaction are being amortized over periods of 14 years, 10 years and 10 years, respectively, and are not deductible for tax purposes.

Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Jolly with our operations. Goodwill related to the Jolly acquisition is not deductible for tax purposes.

Acquisition of Pacific

On November 30, 2023 the Company acquired 100%  of the shares of  New Zealand-based Pacific Helmets NZ Limited (“Pacific”) in an all-cash transaction valued at approximately $6.3 million including the assumption of debt, subject to post-closing adjustments and customary holdback provisions. The acquisition enhances Lakeland’s product portfolio, particularly within fire service protective helmets.  Headquartered in Whanganui, New Zealand, Pacific is a leading designer and provider of structural firefighting, wildland firefighting, and technical rescue helmets.  The transaction was funded through the revolving credit facility and cash balances.

Pacific’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.

As part of the acquisition agreement, Pacific paid from the holdback an amount equal to the amount by which Pacific’s revenue fell below NZ$11.1 million for Pacific’s fiscal year ended March 31, 2024 subject to certain conditions.  The amount of the reduction to the holdback was $0.3 million.

The following table summarizes the fair values of the Pacific assets acquired and liabilities assumed at the date of the acquisition and reflective of measurement period adjustments:

Net working capital acquired including cash of $0.1 million	$	1,694
Property, plant and equipment		2,265
Right of use assets		350
Customer relationships		1,236
Trade names and trademarks		440
Technological know-how		495
Goodwill		3,190
Total assets acquired		9,670
Lease liabilities		(350	)
Less liabilities assumed		(3,054	)
Total net assets acquired	$	6,266

Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges, the relief from royalty method for trade names and trademarks and technological know-how. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Pacific’s pre-acquisition forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, trade names and trademarks and technological know-how acquired in the Pacific transaction are being amortized over periods of 14 years, 15 years and 10 years, respectively, and are not deductible for tax purposes.

Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Pacific with our operations. Goodwill related to the Pacific acquisition is not deductible for tax purposes.

Total acquisition-related costs were $2.0 million and $0.5 million for the years ended January 31, 2025 and 2024, respectively. Transactional costs and acquisition-related amortization is included in operating expenses in the Consolidated Statements of Operations.

The following unaudited pro forma information presents our combined results of operations as if the Veridian, LHD, Jolly and Pacific acquisitions had occurred at the beginning of FY24. The unaudited pro forma combined financial information was prepared using the acquisition method of accounting under existing U.S. GAAP.  The Company has been treated as the acquirer.  The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition; (2) factually supportable, and (3) expected to have a continuing impact on the combined company's results. There were no material transactions between the Company and the acquired entities during the periods presented that are required to be eliminated. The unaudited pro forma combined financial information does not reflect cost savings, operating synergies or revenue enhancements that the combined companies may achieve or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies or revenue enhancements.

Pro forma combined financial information (Unaudited)

,

(in millions, except per share amounts)	Year Ended January 31
	2025			2024
Net sales	$	178.5		$	173.2
Net income	$	(18.3	)	$	5.4
Basic earnings per share	$	(2.46	)	$	0.73
Diluted earnings per share	$	(2.46	)	$	0.71

The unaudited pro forma combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations that we would have reported had the acquisition been completed as of the beginning of FY24 and should not be taken as representative of our consolidated results of operations following the acquisition. In addition, the unaudited pro forma combined financial information is not intended to project the future results of the combined company.