Lakeland Industries, Inc. Reports Fiscal 2024 Fourth Quarter Financial and Full Year Financial Results
- Fiscal 2024 net sales of $124.7 million with a gross margin of 41.1%
- Acquisition of Jolly Boots and the LHD Group fire and rescue business
- Expected FY 25 revenue range of $140 million to $150 million
- Strong growth in U.S. and Latin American operations
- Fire services business expanded by over 80% compared to last fiscal year
- None.
Insights
The reported net sales increase of 10.5% for Lakeland Industries in fiscal 2024 is a positive sign of the company's growth, particularly when considering the broader market context. A detailed examination of the financials reveals strategic maneuvers, such as the acquisitions of Jolly Boots and LHD Group's fire and rescue business, which are likely to bolster the company's fire services segment. This diversification could provide a hedge against market volatility in their traditional sectors.
The impact of foreign exchange movements, particularly the Argentinian peso devaluation, has adversely affected operating expenses and Adjusted EBITDA, indicating a vulnerability in the company's financials to currency fluctuations. Investors should take note of the company's exposure to such risks, as it could affect future profitability. The forecasted revenue range for FY25 suggests a confident outlook, potentially attracting investor interest and impacting stock valuation positively if the company continues on its growth trajectory.
Lakeland Industries' focus on its fire services business aligns with the growing demand for protective clothing in emergency services. The substantial growth in this segment, including a reported 80% increase over the previous fiscal year, reflects the company's strategic positioning and the successful integration of acquisitions. These developments are likely to capture market share and could drive long-term revenue growth.
However, it's important to consider the reported decrease in the Asia business, which suggests regional challenges that may require targeted strategies to mitigate. The company's ability to navigate these hurdles while capitalizing on its strengths in the U.S. and Latin American markets will be critical for sustained growth and could influence investor sentiment.
The one-time charge for excess and obsolete inventory that Lakeland Industries took is a significant event, as it indicates a recalibration of the company's inventory management strategy. While this charge reduced the fourth-quarter gross margin, the adjusted gross margin figure provides a more normalized view of profitability. Effective inventory management is key in the protective clothing industry to avoid overstocking and maintain liquidity.
Moreover, the acquisitions mentioned are likely to have supply chain implications, potentially improving lead times and distribution capabilities. The synergy from these acquisitions could streamline operations and enhance the company's competitive edge, which is critical in an industry where timely delivery can be a deciding factor for contracts.
- Fiscal 2024 net sales of
$124.7 million and gross margin of41.1% - Fire Services further supported by announced acquisitions of Jolly Boots and the LHD Group fire and rescue business after year-end.
- FY 25 Revenue expected to be in the range of
$140 million to$150 million
HUNTSVILLE, AL / ACCESSWIRE / April 10, 2024 / Lakeland Industries, Inc. (NASDAQ:LAKE) (the "Company" or "Lakeland"), a leading global manufacturer of protective clothing for industry, healthcare and first responders on the federal, state and local levels, today announced financial results for its fiscal 2024 fourth quarter and full year ended January 31, 2024.
Fiscal 2024 Fourth Quarter Financial Results Highlights and Recent Developments
- Net sales increased
7.7% to$31.2 million compared to$29 million last year - Gross margin was
35.9% compared to37.5% last year - The Company took a one-time charge of
$2.7 million for excess and obsolete inventory, which reduced the fourth-quarter gross margin by8.7% . Excluding this one-time charge for inventory right-sizing, Q4-FY24 gross margin* would have been44.6% - Net income was a loss of (
$1.0) million , or ($0.13) per basic and ($0.13) per diluted share, compared to net income of$0.2 million , or$0.02 per basic and diluted share, last year - Adjusted EBITDA excluding FX losses* was
$3.4 million compared to$1.9 million last year with a margin* of11.0% compared to6.7% last year. Including FX losses, Adjusted EBITDA* was$1.8 million with a margin* of5.7% - Foreign currency exchange movements negatively impacted operating expenses and Adjusted EBITDA by
$1.7 million compared to$0.1 million last year, due primarily to the Argentinian peso - Completed acquisition of Jolly Scarpe boots and announced agreement to acquire LHD Group's fire and rescue business subsequent to quarter end, enhancing Lakeland's fire service offerings
Fiscal 2024 Full Year Financial Results Highlights
- Net sales increased
10.5% to$124.7 million compared to$112.8 million last year - Gross margin was
41.1% compared to40.6% last year. Excluding the$2.7 million one-time charge for inventory right-sizing, our full-year gross margin* would have been higher by2.1% , or43.2% - Net income was
$5.4 million or$0.74 per basic and$0.72 per diluted share, compared to net income of$1.9 million , or$0.25 per basic and$0.24 per diluted share last year - Adjusted EBITDA* excluding FX losses* was
$15.7 million compared to$10.7 million last year with a margin* of12.6% compared to9.5% last year. Including FX losses, Adjusted EBITDA* was$12.0 million with a margin* of9.6% - Foreign exchange movements negatively impacted operating expenses and Adjusted EBITDA by
$3.7 million in FY24 compared to$1.1 million last year, due primarily to the Argentinian peso devaluation
*Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding FX losses, Adjusted EBITDA excluding FX margin and gross margin excluding inventory adjustments are non-GAAP financial measures. Reconciliations are provided in the tables of this press release.
Management Comments
"Lakeland delivered solid growth in fiscal 2024 as we continued to position the Company for meaningful expansion in FY2025 and beyond. Our full-year fiscal 2024 revenue grew by
Mr. Jenkins continued, "Subsequent to year-end, we were pleased to announce the acquisition of Jolly Scarpe in early February and the signing of an agreement to acquire the fire and rescue business of LHD Group in early April. Jolly Scarpe manufactures and sells a premium boots product line with a global reputation for safety, design and innovation. Along with our Pacific Helmets acquisition, the Jolly acquisition completes Lakeland's "head-to-toe" fire product offering, strengthens our geographic diversity, and presents exciting cross-selling opportunities with global certifications across Lakeland's existing sales and distribution channels. LHD fire and rescue offerings bring Lakeland a premium product portfolio, complementary geographic footprint, and LHD Care service offerings. LHD provides access to attractive geographies while aligning remarkably well with Lakeland's portfolio of leading fire services brands. Additionally, the LHD Care service offerings provide us with attractive recurring revenue streams that Lakeland will work to leverage and expand. These acquisitions reflect our commitment to executing and accelerating the pace of our small, strategic, and quick (SSQ) M&A strategy, and we look forward to investing strategically to broaden and diversify Lakeland's range of products and end markets."
Roger Shannon, Lakeland's Chief Financial Officer, added, "Lakeland delivered strong year-over-year sales and profitability growth. In addition to our
Fiscal 2024 Fourth Quarter Financial Results
Net sales were
On a consolidated basis for the fourth quarter of fiscal year 2024, domestic sales were
Gross profit was
Lakeland reported an operating loss of (
The Company reported a net loss of (
Adjusted EBITDA for the fourth quarter of fiscal year 2024 was
The Company did not repurchase common stock under its stock repurchase program during the fiscal 2024 fourth quarter. At January 31, approximately
On November 1, 2023, the Board of Directors declared a quarterly cash dividend of
FY 2025 Guidance and Outlook
This initial guidance is based on our current backlog of orders and current expectations. These metrics constitute forward-looking statements and are based on current expectations. For a discussion of factors that could cause actual results to differ materially from these metrics, see "'Safe Harbor' Statement Under the Private Securities Litigation Reform Act of 1995" below.
- Revenue - We expect FY25 Revenue in the range of
$140 million to$150 million . This Revenue expectation includes the recently announced Jolly Scarpe and Pacific Helmets acquisitions but does not include the LHD fire and rescue business, which we expect to close in late May 2024. - Adjusted EBITDA - We expect FY25 Adjusted EBITDA, excluding any material negative impact from foreign exchange, to be in the range of
$16.8 million to$18.5 million (1). This Adjusted EBITDA expectation includes the recently announced Jolly Scarpe and Pacific Helmets acquisitions but does not include the LHD fire and rescue business, which we expect to close in late May 2024.
(1) Excluding revenue, the Company does not provide guidance on a GAAP basis as certain items that impact Adjusted EBITDA, such as equity compensation, foreign exchange gains or losses, acquisition expenses and employee separation expenses, which may be significant, are outside the Company's control and/or cannot be reasonably predicted. Please see the "Reconciliation of GAAP Results to Non-GAAP Results" and the related footnotes at the end of this press release for detailed information on calculating non-GAAP measures. For a reconciliation of other non-GAAP financial measures, see the non-GAAP financial reconciliation tables in this release.
Mr. Jenkins added, "We are pleased with the progress of our acquisition strategy and how it positions us for growth in revenue and profitability. Fiscal 2024 brought significant and necessary changes to Lakeland. We enter Fiscal 2025 with momentum and high expectations. During the past year, we made important strategic investments in the fire services category of our business as well as in leadership that we expect to help advance Lakeland and our longer-term strategy. We anticipate the traction we are garnering with those investments will continue."
"Fiscal 2025 will be a year of emphasis on improving operational excellence and initiatives we believe will improve customer experiences, expand organic growth potential, and strengthen our acquisition integration process, allowing us to capitalize on acquired synergies faster. We continually assess opportunities that can either enhance our capabilities and expertise, expand our global presence, or be 'bolt-ons' that can leverage our current infrastructure," concluded Mr. Jenkins.
Financial Results Conference Call
The Company will host a conference call and live webcast on Thursday, April 11, 2024, at 12:00 p.m. Eastern to discuss its fiscal 2024 fourth quarter and full-year financial results. Investors, analysts, and members of the media interested in listening to the live presentation are encouraged to join a webcast of the call, available at:
Event URL: https://www.webcaster4.com/Webcast/Page/2237/50274
Please note that the webcast is listen-only, and webcast participants will not be able to participate in the question-and-answer portion of the conference call. Interested parties may also participate in the call by dialing (888) 506-0062 or (973) 528-0011 and entering the passcode 954856. Interested parties are asked to dial in approximately 10 to 15 minutes prior to the start time of the call.
An audio replay of the conference call will be available until Thursday, April 18, 2024. To access the replay, please dial (877) 481-4010 or (919) 882-2331. The replay passcode is 50274. An archived version of the webcast will also be available on the Lakeland Investor Relations website.
About Lakeland Industries, Inc.
We manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 2,000 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, transportation, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. Internationally, we sell to a mixture of end users directly and to industrial distributors, depending on the particular country and market. In addition to the United States, sales are made into more than 50 foreign countries, the majority of which were into China, the European Economic Community ("EEC"), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Uruguay, Middle East and Southeast Asia.
For more information concerning Lakeland, please visit the Company online at www.lakeland.com.
Contacts
Lakeland Industries, Inc.
256-600-1390
Roger Shannon
rdshannon@lakeland.com
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995
This press release contains estimates, predictions, opinions, goals and other "forward-looking statements" as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to the Company's predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects, and management's expectations for earnings, revenues, expenses, inventory levels, capital levels, liquidity levels, or other future financial or business performance, strategies or expectations, including without limitation the expected benefits of the Pacific, Jolly and LHD acquisitions and our M&A strategy. All statements, other than statements of historical facts, which address Lakeland's expectations of sources or uses for capital, or which express the Company's expectation for the future with respect to financial performance or operating strategies can be identified as forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions as described from time to time in press releases and Forms 8-K, registration statements, quarterly and annual reports and other reports and filings filed with the Securities and Exchange Commission or made by management. As a result, there can be no assurance that Lakeland's future results will not be materially different from those described herein as "believed," "projected," "planned," "intended," "anticipated," "can," "estimated" or "expected," or other words which reflect the current view of the Company with respect to future events. We caution readers that these forward-looking statements speak only as of the date hereof. With respect to our guidance for revenue and Adjusted EBITDA, such metrics are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management; actual results will vary, and those variations may be material. The Company hereby expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which such statement is based, except as may be required by law.
Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), the Company uses the following non-GAAP financial measures in this press release: Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding FX, Adjusted EBITDA excluding FX margin, gross margins excluding inventory adjustments, and operating income excluding inventory adjustments, foreign exchange, severance and acquisition expenses. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. The Company believes that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies.
For more information on the non-GAAP financial measures, please see the Reconciliation of GAAP to non-GAAP Financial Measures tables in this press release. These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
(Financial Tables Follow)
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(
| Year Ended January 31 | ||||||||
| 2024 | 2023 | |||||||
Net sales | $ | 124,688 | $ | 112,846 | ||||
Cost of goods sold | 73,496 | 66,997 | ||||||
Gross profit | 51,192 | 45,849 | ||||||
Operating expenses | 45,200 | 40,308 | ||||||
Operating profit | 5,993 | 5,541 | ||||||
Other income (expense), net | 3,415 | (33 | ) | |||||
Interest expense | (52 | ) | (37 | ) | ||||
Income before taxes | 9,356 | 5,471 | ||||||
Income tax expense | 3,930 | 3,598 | ||||||
Net income | $ | 5,425 | $ | 1,873 | ||||
Net income per common share: | ||||||||
Basic | $ | 0.74 | $ | 0.25 | ||||
Diluted | $ | 0.72 | $ | 0.24 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 7,352,356 | 7,562,187 | ||||||
Diluted | 7,539,705 | 7,737,963 | ||||||
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's except for share information)
ASSETS | ||||||||
Current assets | 2024 | 2023 | ||||||
Cash and cash equivalents | $ | 25,222 | $ | 24,639 | ||||
Accounts receivable, net of allowance for doubtful accounts of at January 31, 2024 and 2023, respectively | 19,169 | 17,296 | ||||||
Inventories | 51,250 | 58,176 | ||||||
Prepaid VAT and other taxes | 2,753 | 1,963 | ||||||
Income tax receivable and other current assets | 3,111 | 3,517 | ||||||
Total current assets | 101,505 | 105,591 | ||||||
Property and equipment, net | 10,685 | 9,140 | ||||||
Operating leases right-of-use assets | 10,969 | 5,472 | ||||||
Deferred tax assets | 3,097 | 2,764 | ||||||
Other assets | 110 | 100 | ||||||
Goodwill | 13,669 | 8,473 | ||||||
Intangible assets, net | 6,830 | 6,042 | ||||||
Equity investments | 4,719 | 5,354 | ||||||
Convertible debt investments | 2,161 | ---- | ||||||
Total assets | $ | 153,745 | $ | 142,936 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 7,378 | $ | 6,558 | ||||
Accrued compensation and benefits | 3,922 | 2,522 | ||||||
Other accrued expenses | 2,487 | 4,068 | ||||||
Income tax payable | 1,454 | 609 | ||||||
Short-term borrowings | 298 | 405 | ||||||
Accrued earnout agreement | 643 | 3,182 | ||||||
Current portion of operating lease liability | 2,164 | 1,253 | ||||||
Total current liabilities | 18,346 | 18,597 | ||||||
Deferred income taxes | 2,097 | 769 | ||||||
Loans payable - long term | 731 | ---- | ||||||
Long-term portion of operating lease liability | 9,121 | 3,580 | ||||||
Total liabilities | 30,294 | 22,946 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Preferred stock, | ----- | ----- | ||||||
Common stock, | 87 | 87 | ||||||
Issued 8,722,965 and 8,655,699; outstanding 7,364,757 and 7,325,005 at January 31, 2024 and 2023, respectively | ||||||||
Treasury stock, at cost; 1,358,208 and 1,330,694 shares at January 31, 2024 and 2023, respectively | (19,979 | ) | (19,646 | ) | ||||
Additional paid-in capital | 79,420 | 78,475 | ||||||
Retained earnings | 69,282 | 64,765 | ||||||
Accumulated other comprehensive loss | (5,360 | ) | (3,691 | ) | ||||
Total stockholders' equity | 123,450 | 119,990 | ||||||
Total liabilities and stockholders' equity | $ | 153,745 | $ | 142,936 | ||||
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
Operating Results (
Supplemental Information
| Year Ended January 31 | ||||||||
| 2024 | 2023 | |||||||
Net sales | $ | 124,688 | $ | 112,846 | ||||
Cost of goods sold | 73,496 | 66,997 | ||||||
Gross profit | 51,192 | 45,849 | ||||||
Operating expenses | 45,200 | 40,308 | ||||||
Operating profit | 5,993 | 5,541 | ||||||
Other income (expense), net | 3,415 | (33 | ) | |||||
Interest expense | (52 | ) | (37 | ) | ||||
Income before taxes | 9,356 | 5,471 | ||||||
Income tax expense | 3,930 | 3,598 | ||||||
Net income | $ | 5,425 | $ | 1,873 | ||||
Income before taxes | 9,356 | 5,471 | ||||||
Interest expense | (52 | ) | (37 | ) | ||||
Depreciation and amortization | 2,291 | 1,505 | ||||||
EBITDA | 11,700 | 7,013 | ||||||
Equity compensation | 890 | 1,491 | ||||||
Other income (expense), net | 3,415 | (33 | ) | |||||
Eagle acquisition costs | 267 | 589 | ||||||
Eagle revaluation of earnout consideration | (2,538 | ) | --- | |||||
Severance expense | 1,349 | --- | ||||||
Monterrey | 743 | 240 | ||||||
Pacific Helmets acquisition costs | 262 | --- | ||||||
China manufacturing restructuring | --- | 278 | ||||||
Inventory adjustment | 2,719 | --- | ||||||
Adjusted EBITDA | $ | 11,977 | $ | 9,644 | ||||
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
Operating Results (
(Unaudited)
Reconciliation of GAAP Results to Non-GAAP Results
Three Months Ended January 31, | Twelve Months Ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
Gross Margin excluding inventory adjustment | ||||||||||||||||
Gross Profit | 11,205 | 10,862 | 51,192 | 45,849 | ||||||||||||
Inventory adjustment | 2,712 | 2,712 | ||||||||||||||
Divided by net sales | $ | 31,239 | $ | 28,997 | $ | 124,688 | $ | 112,847 | ||||||||
Gross Margin excluding inventory adjustment | 44.6 | % | 37.5 | % | 43.2 | % | 40.6 | % | ||||||||
Net income (loss) to EBITDA | ||||||||||||||||
Net income (loss) | $ | (977 | ) | $ | 184 | $ | 5,426 | $ | 1,873 | |||||||
Interest | (30 | ) | (11 | ) | (52 | ) | (37 | ) | ||||||||
Taxes (1) | 1,253 | (12 | ) | 3,930 | 3,598 | |||||||||||
Depreciation and amortization | 592 | 417 | 2,291 | 1,505 | ||||||||||||
EBITDA | $ | 899 | $ | 600 | $ | 11,700 | $ | 7,012 | ||||||||
EBITDA to Adjusted EBITDA (excluding non-cash expenses) | ||||||||||||||||
EBITDA | $ | 899 | $ | 600 | $ | 11,700 | $ | 7,012 | ||||||||
Equity compensation (2) | 143 | 350 | 890 | 1,491 | ||||||||||||
Other income (expense) (3) | (3,602 | ) | (107 | ) | (3,416 | ) | 33 | |||||||||
Eagle acquisition costs (4) | 250 | 589 | 267 | 589 | ||||||||||||
Eagle revaluation of earnout consideration (5) | 151 | - | (2,538 | ) | - | |||||||||||
Severance expense (6) | 581 | - | 1,349 | - | ||||||||||||
Monterrey (7) | 368 | 140 | 743 | 240 | ||||||||||||
Pacific Helmets acquisition costs (8) | 262 | - | 262 | - | ||||||||||||
China manufacturing restructuring (9) | - | 278 | - | 278 | ||||||||||||
Inventory adjustment (10) | 2,719 | - | 2,719 | - | ||||||||||||
Adjusted EBITDA | $ | 1,770 | $ | 1,851 | $ | 11,977 | $ | 9,644 | ||||||||
Adjusted EBITDA Margin | ||||||||||||||||
Adjusted EBITDA | $ | 1,770 | $ | 1,851 | $ | 11,977 | $ | 9,644 | ||||||||
Divided by net sales | $ | 31,239 | $ | 28,997 | $ | 124,688 | $ | 112,847 | ||||||||
Adjusted EBITDA Margin | 5.7 | % | 6.4 | % | 9.6 | % | 8.5 | % | ||||||||
Adjusted EBITDA excluding FX | ||||||||||||||||
Adjusted EBITDA | $ | 1,770 | $ | 1,851 | $ | 11,977 | $ | 9,644 | ||||||||
Currency Fluctuation | 1,660 | 93 | 3,739 | 1,084 | ||||||||||||
Adjusted EBITDA excluding FX | $ | 3,430 | $ | 1,944 | $ | 15,716 | $ | 10,728 | ||||||||
Adjusted EBITDA Margin excluding FX | ||||||||||||||||
Adjusted EBITDA excluding margin | $ | 3,430 | $ | 1,944 | $ | 15,716 | $ | 10,728 | ||||||||
Divided by net sales | $ | 31,239 | $ | 28,997 | $ | 124,688 | $ | 112,847 | ||||||||
Adjusted EBITDA Margin excluding FX | 11.0 | % | 6.7 | % | 12.6 | % | 9.5 | % | ||||||||
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
Operating Results (
(Unaudited)
Reconciliation of GAAP Results to Non-GAAP Results
Three Months Ended January 31, | Twelve Months Ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
Operating Profit excluding inventory adjustments, foreign exchange, severance and acquisition expenses: | ||||||||||||||||
Operating profit (Loss) | $ | (3,295 | ) | $ | 76 | $ | 5,993 | |||||||||
Eagle acquisition costs | 250 | 589 | 267 | 589 | ||||||||||||
Eagle revaluation of earnout consideration | 151 | - | (2,538 | ) | - | |||||||||||
Severance expense | 581 | - | 1,349 | - | ||||||||||||
Pacific Helmets acquisition costs | 262 | - | 262 | - | ||||||||||||
Inventory adjustment | 2,719 | - | 2,719 | - | ||||||||||||
Currency Fluctuation | 1,660 | 93 | 3,739 | 1,084 | ||||||||||||
Operating Profit excluding inventory adjustments, foreign exchange, severance and acquisition expenses: | $ | 2,328 | 758 | 11,791 | 7,214 | |||||||||||
Operating Margin excluding inventory adjustments, foreign exchange, severance and acquisition expenses: | ||||||||||||||||
Operating Profit excluding inventory adjustments, foreign exchange, severance and acquisition expenses | $ | 2,328 | 758 | 11,791 | 7,214 | |||||||||||
Divided by net sales | $ | 31,239 | $ | 28,997 | $ | 124,688 | $ | 112,847 | ||||||||
Operating Margin excluding inventory adjustments, foreign exchange, severance and acquisition expenses | 7.5 | % | 2.6 | % | 9.5 | % | 6.4 | % | ||||||||
The financial data above includes non-GAAP financial measures, including EBITDA and Adjusted EBITDA. Management excludes from EBITDA and Adjusted EBITDA all expenses for interest, taxes, depreciation and amortization, and Other Income, which is comprised of interest income and gains (losses) from equity method investments. For Adjusted EBITDA management also excludes equity compensation, acquisition-related expenses, excess and obsolete inventory adjustments, severance costs, and start-up costs for our Mexican operations. This press release also discusses (i) Adjusted EBITDA margin, which is calculated by dividing Adjusted EBITDA by GAAP net sales; (ii) Adjusted EBITDA excluding FX, which is calculated by subtracting foreign currency losses from Adjusted EBITDA; (iii) Adjusted EBITDA excluding FX margin, which is calculated by dividing Adjusted EBITDA excluding FX by GAAP net sales; (iv) operating income excluding one-time adjustments, which is calculated by subtracting excess and obsolete inventory adjustments, foreign exchange losses, acquisition expenses and severance expenses from operating income; and (v) gross margin excluding inventory adjustments, which is calculated by subtracting excess and obsolete inventory adjustments from gross margin.
Management excludes these items principally because such charges or benefits are not directly related to the Company's ongoing core business operations, in the case of the inventory adjustments, because of the unusual, one-time nature of the adjustments, and in the case of foreign currency adjustment, because of the unusual nature of the material devaluation of the Argentinian peso. We use such non-GAAP measures in order to (1) make more meaningful period-to-period comparisons of the Company's operations, both internally and externally, (2) guide management in assessing the performance of the business, internally allocating resources and making decisions in furtherance of the Company's strategic plan, and (3) provide investors with a better understanding of how management plans and measures the business. The material limitations to management's approach include the fact that the charges, benefits and expenses excluded are nonetheless charges, benefits and expenses required to be recognized under GAAP and, in some cases, consume cash, which reduces the Company's liquidity. Management compensates for these limitations primarily by reviewing GAAP results to obtain a complete picture of the Company's performance and by including a reconciliation of non-GAAP results to GAAP results in its earnings releases. Non-GAAP financial measures are not alternatives for measures of financial performance prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures presented by other companies, limiting their usefulness as comparative measures.
Additional information regarding the adjustments is provided below.
(1) Adjustments for Taxes, which consist of the tax effects of the various adjustments that we exclude from our non-GAAP measures, and adjustments related to deferred tax and discrete tax items. Including these adjustments permits more accurate comparisons of the Company's core results with those of its competitors.
(2) Adjustments for Equity Compensation, which consist of non-cash expenses for the grant of equity awards.
(3) Adjustments for Other Income, which consists of interest income and gains/(losses) from Investments accounted for under the equity method of accounting.
(4) Adjustments for acquisition-related expenses included advisory fees, due diligence expenses and legal fees related to the Company's acquisition of Eagle Technical Products Limited.
(5) Adjustment for the reduction of the estimated earnout payment related to the Eagle acquisition. An increase to the accrued earnout payment of
(6) Adjustment for accrued separation costs for our former CEO who retired from the Company on January 31, 2024. Severance costs for the full year included our former COO who separated from the Company in the first quarter of fiscal year 2024, our EVP of Sales and other management in the second quarter of fiscal year 2024, and other management in the third quarter of fiscal year 2024.
(7) Adjustments for costs for our Mexican operations consists of external services and legal fees associated with the Monterrey, Mexico facility.
(8) Adjustments for acquisition-related expenses included advisory fees, due diligence expenses and legal fees related to the Company's acquisition of Pacific Helmets in the first six months of fiscal year 2024.
(9) Adjustments for acquisition restructuring costs consisted of cash severance payments to approximately 100 workers at our Weifang manufacturing facility in the fourth quarter of fiscal year 2023.
(10) Adjustments for right-sizing our inventory of obsolete products.
SOURCE: Lakeland Industries, Inc.
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