Good afternoon, and welcome to the Lakeland Industries Second Quarter Fiscal Year 2016 Financial Report Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. Before we begin, parties are reminded that statements made during this call contain forward-looking information within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical facts, which reflect management’s expectations regarding future events and operating performance and speak only as of today, September 16, 2015. Forward-looking statements are based on current assumptions and analysis made by the company in light of its experience and its perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate under circumstances. These statements are subject to a number of assumptions, risks, and uncertainties and factored in the company’s filings with the Securities and Exchange Commission, general economic and business conditions, the business opportunities that may be presented to you and pursued by the company, changes in law or regulations, and other factors, many of which are beyond the control of the company. Listeners are cautioned that these statements are not guarantees of future performance, and the actual results or developments may differ materially from those projected in any forward-looking statements. All subsequent forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. At this time, I would like to introduce your host for this call, Lakeland Industries’ Chief Executive Officer Christopher J. Ryan. Mr. Ryan, you may begin.

Thank you. Good afternoon to you all and thank you for joining on our fiscal 2016 second quarter financial results conference call. We are going to provide brief opening statements on the status of operations and on our fiscal results for the quarter. The call will then be opened up so that we may respond to your questions. Now, I’d like to discuss our financial highlights, operating strategies and the progress that has been made along with our view of our objectives as we move forward. A key development in the quarter was the completion of our exit from Brazil. For financial reporting presentation purposes, unless otherwise noted, the operating results in Brazil are excluded from our discussions, as those results for all periods will be reported under discontinued operations accounting. With our exit from Brazil complete, we had few negative surprises to our financial performance in the second quarter fiscal 2016, which really was a great quarter and demonstrates both the leverage and the scalability in our business. Driven by our unique operating platform and overall operational improvements, net income from continuing operations grew by 500%. This marked the second consecutive quarter in which we reported a 500% increase in net income from continuing operations as compared with respective prior year periods. Free cash flow from continuing operations in the second quarter increased by 267% from the prior year, which followed a 105% increase for the first quarter and in dollars free cash flow was $8.154 million for only the six months ended July 31, 2015. As mentioned in our press release, we attribute this growth to the hard work of our growing worldwide team along with organic growth from our recurring base of customers and our unique operating platform, which has provided us with the ability to deliver…

Thank you, Chris. After those three words, everyone probably realizes I’m not a New Yorker. I’m from Alabama, so please work with me here and let me know if you need me thing translated. We’ll get that over to you. The following addresses now a review of the second quarter of fiscal year 2016. First, with a discontinued operations accounting that the press releases have presented, it will be far most simple and easy as you understand our financial results. The fiscal 2016 second quarter financial results that I discuss on this conference call will be from continuing operations unless otherwise noted, the discontinued operations related to the operating results in Brazil. As Chris mentioned, we have completed the details pertaining to our exit from Brazil, but prior to that, we exercised discontinued operations accounting for Brazil. Discontinued operations accounting entails the reclassification of all of the financial results of the Brazil operations within the consolidated financial results of the parent company, and a restatement of prior periods to reflect the same treatment. The global operations of Lakeland Industries, excluding Brazil is shown in financial reports as continuing operations. As of July 31, 2015, Lakeland sold the ownership interest of its business in Brazil an effective with the fiscal 2016 third quarter, beginning August 1, 2015, the company expects no further significant losses from that discontinued operations or charges or expenses relating to Brazil beyond the existing accrual of $900,000, which is recorded in the fiscal 2016 second quarter financial results. I can now review revenue growth. Sales were $29.5 million this year and $22.8 million last year, an increase of 29.2% with a portion of the growth resulting from orders received by Lakeland due to its unique operating platform during a period of industry capacity constraints. In the U.S.…

Thank you. At this time, we will begin the question-and-answer session. [Operator Instructions] And our first question will come from Alex Christensen of Craig-Hallum Capital Group.

Hey, everyone. Congratulations on a good quarter. We’re really excited to see what you guys are doing operationally, as well as with getting Brazil off your books. I got – I had a couple of quick questions for you. The first is, if you could just go into a little more detail on that - on your recurring business, what you’re seeing in your industrial needs? I know you mentioned the reflective wear, if you could just give us a little more detail on where you’re seeing positive trends and where you see those going for the rest of the year.

Okay. I mean, we made comments to the extent that about 90% of our business is recurring, and that’s what I mean, three or four of our largest customers have been in our top five customers for the last 25 years. That’s what I meant about the recurring business, and the recurring business is growing. It’s not only the emergency business. The emergency business is nice, but the recurring business is growing at about a double-digit CAGR rate. And a lot of that is some of the new products – the FR products, which in the prior years, we were not very big in, and same with reflective, they’re all growing at double-digit rates and they’re all recurring business. So when you’re looking at FR products or reflective what we call high visibility products, they’re not usually in the lineup of emergency products, as chemical suits and disposables are. But they are actually providing a lot of our day-to-day growth, the recurring growth that nobody really sees, because it’s underlain in the larger numbers that you see sometimes with the emergencies. And what I’m trying to get to most people is that, we have become the go-to manufacturer when it comes to emergencies, which was not the fact in the past. In the past, some of our larger competitors, everybody just assumed, well, they have a huge inventory let’s go to them. But when – for various reasons, they cannot deliver, they come to us, and they find that we have the inventories and we have special inventories for emergencies now, and we have the capability to double, triple, or quadruple production on a dime’s notice. You have to understand, most of our major competitors use contractors. And if you use the contractor, you’re three to six months out in terms of expanding your capacity. So you really can’t respond to these types of emergencies, whether they are small oil spills, which occur all over the world, or whether it’s tank cars turning over on the railroad or on the highway, or the EPA dumping chemicals into the Colorado River. The list goes on and on and on. So that’s what most – in those areas that’s our disposables and chemical suits that are being used. But we are growing and we are growing internationally like I mentioned our cold weather line that we’re introducing in China, while there’s an opportunity to introduce that into Russia, into Kazakhstan, into Canada. So a lot of our new products, you will have [askability] [ph] across the entire world. And other than the major multinationals, we’re the only small company that covers the whole world.

Okay, great. And then I was just wondering on, you talked in the past about strategic national stockpiles in some of the allocations that Congress is giving to CDC and Health and Human Services and the NIH. Do you guys have an update on what you’re seeing with regard to that kind of after the emergency build-up?

Okay. What we’re hearing from various people, the hospitals and Health and Human Services is, this is a calendar – a late calendar 2016 or an early calendar 2017 event. Most of the money is coming out of Health and Human Services and go into the hospitals to build out pandemic isolation unit, which is construction. And so the first moneys are going to be used for construction, the latter moneys will be used to purchase supplies. So we can see the construction going on pretty much in calendar 2015 and 2016 with the purchase supply starting in late 2016, and going into 2017. And these purchases for personal protective equipment are earmarked at $65 million to 95 million. So we should see a good percentage of that, and it also will support growth or sales. About 18 months out or probably about a year.

Well, that’s great. Good to hear. Thank you guys very much, and congrats on the quarter again.

Thank you.

And our next question will come from Doug Ruth of Lenox Financial Services.

Congratulations to all, everybody at Lakeland, it’s an absolute beautiful report. Could you talk some about your – the organic growth plan that you have for the emergency situations?

Well, the organic is really, apart from the emergency what we’ve done is, we’ve set up a special system to be able to respond to emergency situation and it’s an inventory system that works with the end-user clients and/or the distributors. And it’s something that we might actually even patent, as a utility patent. But what we’re doing is, we’re setting up a, to be ready to respond to emergency situations with special inventory payment plans for customers, and that’s that one situation. The other part of the platform is the fact that we make the garments ourselves. We don’t contract it out like the rest of the guys do. And therefore, we make the better garment we believe. Organic growth is what I really wanted to get into, because this has been a – we never saw a lot of emergency situation business, we just didn’t. So most of the growth you saw from us was organic growth. And what I’m saying is that is still continuing. Over the years, I’ve told people that we lost about $80 million worth of DuPont type product sales between 2006 and 2010, but we replaced them all. I mean, we were losing $10 million dollars a year of DuPont Tyvek sales, because DuPont was in competition with us. And we replaced those $10 million of sales or almost $80 million of sales between 2006 and today. So if you look at the compound annual growth rate of what I would call our organic sales, okay, it was 17% a year. And now that we’re out, we’re no longer selling DuPont products, that we no longer have that millstone around all our neck called Brazil where we lost $34 million inside of three years, now people will begin to see both the internal or the organic growth at double-digits and they’ll see the emergency stuff and they’ll see more of it, because we are now the go-to manufacturer.

How does Lakeland keep track of all the emergencies? You wake up and you turn on the news and there’s the crisis of the day that is what the company does. You respond to these crises. How does the company – how are you aware or how are your people aware of what you should do to respond to these emergencies each day?

Well, usually the way it happens is there is an emergency and it’s – it involves somebody. If it’s an oil-spill it involves the oil company. If it’s a tank car spill, it involves the railroad. If it’s a pandemic, it usually involves the hospitals. Those people who are directly affected usually or immediately call their safety distributor looking for equipment. And it’s not just the protective apparel that we manufacture. We really stick to apparel, but they’ll call – they’re looking for respirators to, so they’ll be on with the distributor looking for respirators and they might call 3M directly, because 3M is the biggest manufacturer of the respirator, so it’s – really they usually call us. We’ll see it on the nightly news, and then the next morning they’ll call us. But we usually hear it before the nightly news. So – I mean that’s how we respond. We usually respond to the end-user customer directly or we respond to the distributor who’s being called by the end-user. And we keep inventory all over the world.

Okay. And then, could you talk about the development of what you’re doing with the management and the sales team?

Now that – as I said, now that we don’t have to worry about Brazil both financially and from a management point of view, we’re looking at each market and we’re looking at where we can hire new sales people or beef up our sales and marketing operations. And that’s just beginning but we’ll move ahead quite quickly with that. So we’re looking at every market. We’re looking at Australia. We’re looking at Korea. We’re looking at all the markets and we’re looking how we can beef up both our sales and marketing efforts, because we basically have the manufacturing put away. I mean, it’s nailed down.

Okay. You mentioned that you, you have some additional plans for capital investments for capacity and distribution as – can you offer any additional commentary there?

Well, it’s just investment in our ERP systems and our other information systems so that we can better control inventory. Basically keep less inventory and you had to service customers better, and that’s where we’re investing. Again, it’s something we haven’t had a lot of time to think about up here at the top of management and now we do.

And do you have a goal as far as when you’re hoping to get the ERP system online?

Well, we’re pretty far along with our ERP system in China, and then in United States we’ll probably have it done by the end of the year, and in Argentina we’re doing it right now.

Okay. What about Mexico? Is there any progress with – you noted previously that there are some big customers. Has there been any inroads do you feel at this point?

Not quite yet. The thing that flowed Mexico down was the drop in oil prices that we didn’t really – I asked a bit, most of the world didn’t anticipate that six to nine months about. But what we’re seeing is that, they’re beginning to make decisions, because Pemex is – the country of Mexico is not completely dependent on oil, although it is a big part of their economy. Pemex is the big part of that. And so those decisions have been sort of stalled. But I think as oil settles down in the 40s, people can sit down and say, this is the supply that we’re going to be used in these to the export. This is the amount of exploration we’re going to be doing and decisions will finally get made. They’re going to close down some production and keep other production going. One of the things that has happened with regard to the oil and gas slowdown is that the industry is found us to be an ideal opportunity to shutdown refineries into their long overdue maintenance that they haven’t done for years, which really helps that they buy a lot of garments when they do that.

Okay. My final question is, what is – where is the company now with responding to some of these emergency crisis is? Would there be additional revenue and profits to come through in the third quarter?

We don’t think we can sit there and say, oh, this is going to happen, because we don’t see it. But what we’ve been seeing over the last couple of years is that, you do have these incidences on a by monthly basis, but we never saw them. Now we do, because we can deliver and we can deliver quickly, and most importantly, we can deliver a quality product quickly by lot of products that were delivered during these pandemics were defective.

I understand. Now, for example, would there be any additional bird flu sales in the third quarter, or is that largely behind the company?

Well, that all depends. I mean, bird flu exits soon it disappears at a temperature of about 75 degrees. And we probably could anticipate, at least, $1 million of addition in the third quarter. But what happens is, when the temperature drops, bird flu can reappear. When the temperature generally goes above 75 degrees, it disappears, it kills the virus. So it sort of disappeared around May, June, and come Autumn, the temperatures goes down, it could reappear. But let me underscore the word could, we don’t know. And the thing that can happen is that, if it’s did live through the summer, because the oil inclines of Canada and those bird start migrating down to South America. We may not see it in the United States. We may see it in Mexico or Colombia next time around.

Okay. Well, thank you for answering my questions, and congratulations again on the fabulous report.

Okay. Thanks, Doug.

And the next question is from Peter Muckerman of Raymond James.

Hey, good afternoon you, all. And once again, I would echo the congratulations. It really is pretty fantastic. I have just a – actually more of a few comments and most of my questions have been answered. But I get the impression honestly that the opportunity that you all have here is kind of huge. And my quick question is, did the Ebola crisis put you guys on the map? I know you guys have been around a long time. I understand that. But to the Ebola crisis really puts you on the forefront of kind of being kind of a brand name. And then I was also curious, are you working with any sort of consulting groups to keep your name out there and keep this momentum going, or do you not necessarily think that you even need to do that, I was just curious?

On Ebola there is no question that our garments were featured on the cover of Time Magazine. I mean, another full Time magazine, it was the highlight spread the inside of our factory. So we got a lot of free what you might call free PR during Ebola.

Sure.

I mean after in bird flu, it wasn’t mentioned the insiders will knew who we were. But the general public was pretty much kept in the dark, as to what went on in the bird flu in this country, but it was the largest avian flu influenza in the history of the United States, and you’re going to barely hit the headline. I mean, they….

All right. So I picked up on that, I saw that.

As – but on consulting groups, yes, we do employ consulting groups that are helping us in certain industries they live like the healthcare industry.

Okay. Good. Good. I think that’s smart. The other thing is I’m just curious, I always think about you all when I turn on the news because there is the crisis of the day as I think we can all agree. And I was curious to whether all these wildfires out west were something – I mean, I have just been listening to the news reports I have gathered are going [ph] that they can’t hire these – I mean, they’ve been taking people out of jail to fight the fires. I mean, is it that bad? And I was just curious if that’s something that you’ve gotten any sort of…

That drives overall demand, whether it’s direct or indirect. And when I mean by direct they may buy our smoke-jumping uniforms, which are uniforms we make specifically for the situation which are wildfires. Or if we’re not going to get the order directly they may order from one of our competitors who then have to run and produce it, which means that capacity in the industry is at a modicum and prices go up. So either way it helps us.

Right, and then lastly, just a comment I would make is, I get the impression that with all these, all this global warming that’s going on, I mean, it really does seem like there’s something amiss, there’s no question about it. I get the impression that Lakeland to a degree anyway might be kind of a beneficiary of that. I mean when you stop and look around these floods and these – all these, I mean, it’s just – it really is the crisis of the day. And I sometimes have to think that just because of the Internet and the media and everything, but I kind of think it’s not necessarily, it just seems like, I mean, there’s murders is happening, I guess, in Saudi Arabia. And it seems like it’s not a catastrophe yet, but they don’t have it under control either. So I don’t know, it’s just – it’s the crisis of the day seems to be the theme these days. So – but I think you guys are doing a great job and I’d say keep the momentum going. It’s awesome.

Yes, my only comment on that is it seems that a lot – we get a lot more hurricanes and they’re a lot more violent than they used to be. And when we have a big hurricane it really drives our sales.

Oh, it does, really?

Contract directly.

Okay.

Whether it’s Sandy or the one is Louisiana, really, really drove our sales.

I see. I didn’t realize that. Okay. Well, thanks again. And you guys are doing a great job.

Thank you.

Thanks, Peter.

[Operator Instructions]

Okay. We appreciate your participation in Lakeland’s fiscal 2016 second quarter financial results conference call. As we are committed delivering value for our shareholders, we believe this is the best achieved for Lakeland Industries through the continued implementation of strategies for effectively managing its balance sheet, controlling expenses, and capitalizing on long-term global growth initiatives. We are very excited about how our business has performed and our future prospects. We’ll be sharing this outlook tomorrow at the Craig-Hallum Alpha Select Conference in New York City and look forward to seeing institutional shareholders at this event. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.