Good afternoon and welcome to the Lakeland Industries’ Fiscal 2017 First Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Before we begin, parties are reminded that 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. 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. 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, estimated or expected or other words which reflect the current views of the company with respect to future events. We caution readers that these forward-looking statements speak only as of the date hereof. 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 the events, conditions or circumstances on which such statement is based. Please note this event is being recorded. I would now like to turn the conference over to Lakeland Industries’ Chief Executive Officer, Christopher J. Ryan. Mr. Ryan, you may begin.

Good afternoon to you all and thank you for joining our fiscal 2017 first quarter financial results conference call. We are going to provide brief opening statements in the status of operations and on our financial results for the quarter. The call will then be opened up so that we may respond to your questions. Before we go any further, as you may know, from our press release issued earlier today and from our most recent quarterly calls, we present our financial results based on our continuing operations. That will be the case with today’s conference call, unless otherwise specified. The continuing operation in financial results reflect our ongoing business since following our exit from Brazil, which was effectuated in the third quarter of fiscal 2016 with additional issues addressed thereafter. Now, I would like to discuss our financial highlights, operating strategies and overall business with a view of our objectives as we move forward. As stated in our press release issued earlier today, the first quarter of fiscal 2017 showed progress on a number of operational and forward-looking objectives that position the company for its next phase of growth. Putting this into context, in recent years, we were very effective in building back our U.S. business with Lakeland branded products following the multiyear pullback and ultimate elimination of sales of DuPont or Tyvek-related products. At the same time, while we have undertaken an international growth and diversification strategy, we had a major setback in Brazil, which is now past us as we had exited that business which we had acquired and invested quite a bit in. We believe it is an impressive testament to our brand and products as well as our global management team and workforce that we have been able to not just rebound from those negative…

Thank you, Chris. The following addresses my review of the first quarter of fiscal year 2017 ended April 30, 2016. The fiscal 2016 financial results that I discuss on this call will be from continuing operations, unless otherwise noted. The discontinued operations relate to the operating results in Brazil. As Chris mentioned, we have completed the details pertaining to our exit from Brazil and we exercised discontinued operations accounting for Brazil. Our first quarter of fiscal 2017 financial results included net sales from continuing operations of $20.4 million for the three months ended April 30, 2016, compared to $24.8 million for the prior year period or a decrease of 18%. The gross margin was 33.3% this quarter compared to 37.4% in Q1 FY ‘16 and 29.4% in the fourth quarter of FY ‘16. In addition to lower sales volume in the most recent periods, which weighed down margins, last year’s same period gross margin was favorably impacted by higher margin sales of products relating to the Ebola crisis and other cost saving efforts making comparisons difficult. Also included in Q1 FY ‘17 were severance payments associated with the reduction in force in the U.S., which Chris described to move production to more cost effective facilities in Mexico and China. Further, with the currency fluctuations, the comparisons of fourth quarter to first quarter results is more appropriate given the distortions from the year ago period. Operating expenses worldwide increased from $6.1 million last year to $6.6 million for the current year’s first quarter and $6.3 million in the fourth quarter of FY ‘16. As a percentage of sales, operating expenses were 32.4% in Q1 FY ‘17, 30.8% in Q4 FY ‘16 and 24.4% in Q1 FY ‘16. The main factors for the increase in operating expenses are a $0.3 million increase…

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Alex Fuhrman at Craig-Hallum.

Great. Thank you very much for taking my questions. Certainly, it seems like things have stabilized a little bit following the last quarter. I was wondering if you could talk a little bit more about the MIS rollout. When do you envision that being completed? And just as you think about your customers’ inventory levels, when do you imagine that distributors’ inventory levels will get back to where they were kind of in mid 2015? Is that one or two quarters out? Just trying to understand I guess what you are talking about with when you envisioned some of those trends normalizing over the next few quarters?

Okay. With respect to the MIS, we have done a lot of front-end work that would have been somewhat disruptive with our response to the Ebola and bird flu events. We have – we continue to streamline our processes and clean up our databases, so that we are prepared to implement the MIS. We have been looking at one system for some time and working with it and are still finalizing a decision that this is absolutely the direction the company wants to go. There are a couple of options where technology has improved over the last year or so as we have moved through the front-end that we are taking into consideration. That being said, the spending that we have discussed in the past should not change with any significance. In terms of the implementation, though, we are probably still looking at the 18-month range on the U.S. – probably U.S. Canada solutions.

And on the inventory levels of our customers, we have been in constant contact, particularly with some of the larger distributors like Grainger. And the larger guys started adjusting their inventories downward last August. We had a very powerful third quarter ending October 31 with bird flu, so it wasn’t seen in our numbers, but we were hearing it from the distributors. And they have been reducing inventories ever since August. But only about last month, we have heard that they are beginning to think about starting to build them and we have heard that from some of the bigger guys. So, I sort of expect our sales to pickup in the area of 5% to 7% over the next couple of quarters as they start reordering, because they sort of hit bottom certainly on the oil and gas stuff that they buy. I mean, they have virtually nothing there. And oil broke through $50 and stayed there, over $50 for the day, I won a bet based on that back in February. So, I think the oil and gas industry will pick up relatively well over the next year although I don’t think hiring will come back for at least a year, but we are seeing our major distributors. And when we talk about guys who buy a lot from us, they are all beginning to buy now. So, I think other than the slow point that we always feel in August when everybody goes on vacation that it should sequentially pick up certainly in the second and even more in the third. That’s what we are looking at.

Great. That’s really helpful. Both of you thank you. And then also I was curious about the new biodegradable product – or maybe not biodegradable is the right word, but the more eco-friendly product that can be dissolved in boiling water. How much traction have you been getting there as you have been kind of showing that product and presenting that to potential customers? And is it fair to assume that – as that product comes online in a more meaningful way, is it fair to assume that, that could be potentially going after new business from – taking away from some of your competitors or should we think of that more as an up-sell to your existing product line within your existing customer base?

Well, first of all, we haven’t perfected it. We have a problem with finding the right machinery in China to make it the way we patented it. And there is a few things we still need to work out. It has been much longer than I thought and we probably won’t even introduce it for a year. On the other hand, we are moving into a new vertical with existing products, so that’s where we are really looking for the – probably the new revenues to come in. This is on the clean room side as opposed to the green side.

Great. That’s really helpful, Chris and Teri. Thank you both very much.

The next question is from Doug Ruth at Lenox Financial Services.

Hi. I also appreciate the sequential improvement from the fourth quarter it’s really nice to see. What kind of – are you quantifying at all what kind of international growth you might be projecting for the next year or two?

We are, as a rule, not projecting exact numbers on international growth. We are seeing improvements, as Chris pointed out, in the currencies and understanding that on our actual volume in terms of units has held steady and even grown in some areas. We have seen in Canada historically the best results we have ever seen. We are on – so we are projecting some growth there. We have made some structural changes in the UK in terms of our sales management and our overall international organizational management for kind of the business manager in there underneath our VP, International Sales hired somebody in Australia. So, certainly we are expecting growth in that area. I think one of the stronger metrics above and beyond the sales growth that we do anticipate in most of our regions is, as the economy improves, we expect to see the gross margins improve as we streamline some of our processes. And with the additional focus that we are putting on the sales force that we are putting on efficiencies, I think we anticipate nicer margins in some areas.

We anticipate growth in all our foreign markets going forward except one, Argentina.

Okay. Do you think like the first quarter maybe represents like a trough in Europe and that perhaps the sales will trend somewhat higher from that level generated during that time period?

Well, Europe had a really tough comparison, because Europe did most of the Ebola sales, a lot of Ebola sales in this first quarter last year. So, it’s a really rough comparison to that. I mean, I think that we had almost $4 million in sales in the first quarter last year.

So the numbers that we are seeing are more normalized, is that sort of what you are suggesting?

They are more normalized and they are a little bit sub-par, because Europe has also slowed down. I mean, now that oil is climbing, it’s going to help the currencies in Mexico, Russia, Kazakhstan, Canada, a lot of countries. And as oil goes up, the oil and gas sector will maybe improve a little bit, but it really, really pushes the currencies and it pushes the overall economy of that particular country. When you see in Mexico, and oil is a large part of their GDP, as it is in Kazakhstan, as it is in Russia, as it is in Canada, it’s not only going to bump the currencies, it’s going to bump their GDP.

I think Chris’ metric of 5% to 7% just probably holds.

On the international front.

On the international side as well.

Okay. I was impressed too that the margins seemed to hold up on the U.S. disposables sales, even though the volume went down. That was pretty impressive.

Thank you. Now the game is to get them even higher.

Well, thank you for answering my questions and it sounds like you had survived some tough times but we are looking forward for higher sales going forward, so that’s the one, yes.

Yes, I mean it’s even incremental improvement from the fourth to the first and we hope to have roughly the same type of incremental improvement from the first to the second and so on.

Yes, that sounds terrific. Thank you.

Thank you.

[Operator Instructions] And our next question is from Peter Muckerman at Raymond James.

Hey, guys. Thanks for taking the questions. My question pertains to the unfortunate – well, the unfortunate media thing with the 60 Minutes, with I guess it’s your competitor. Has that resulted in potentially any higher sales for you as you – as they are kind of having to deal with that issue? And then also, I think Zika has yet to play out in the United States, but is that something – the funding to help fight that, is that something where you are seeing any sort of growth?

Okay. Number one, you are referring to the 60 Minutes bashing of Kimberly-Clark and I don’t think we have really recovered even on the stock price from that, because we – there were some shorts out there engaged in a whisper campaign and the stock went from 9 to 8 on that day. And of course, we have absolutely nothing to do with that. There will be no lawsuits against us. It’s all Kimberly-Clark’s problem. Have we gained business from that, I can’t specifically say no one part [ph] left, but I think over time, yes we will, if we use it correctly, with the right customers. The second question regarded Zika and I told people, it’s not – unless something really changes here, we will pick up some nice new business, maybe $0.25 million, but that’s all I really expect out of Zika, of course unless something happens and it’s on the front page of the New York Post and then all our customers panic and they start buying like nutcases, I don’t expect that.

Alright. Well, yes, the 60 minutes thing was unfortunate, it was very frustrating, but it is what it is, I guess. But thank you for taking the question.

Sure.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

We appreciate your participation on Lakeland’s Fiscal 2017 first quarter financial results conference call. As we are committed to delivering value for our shareholders, we believe this is 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 encouraged by our growth prospects as we are well positioned to grow organically through our overall market expansion as well as capturing the market share. Thank you again and goodbye.

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