Greetings and welcome to the Lakeland Second Quarter Fiscal Year 2019 Earnings Release. At this time, all participants are in a listen-only mode. [Operator Instructions]. As a reminder, this conference is being recorded. Forward-looking statements involve risks, uncertainties and assumptions as described from time to time in press releases and Form 8-K registration statement. Quarterly and annual reports and other reports and filings filed with the Securities and Exchange Commission are made by management. All statements other than statements of historical facts which address Lakeland's expectations of sources or uses of 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 view 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 events conditions or circumstances on which such statement is based. I would now like to turn the conference over to your host, Christopher Ryan, CEO. Please go ahead.

Good afternoon to you all, and thank you for joining our fiscal 2019 second quarter financial results conference call. We are going to provide opening statements on the status of operations and on our financial results. The call will then be opened up, so that we may respond to your questions. Now on to my formal remarks. Our topline performance for the second quarter of fiscal 2019 shows strong improvement amid a continuation of global industrial growth trends that’s favorably impacted Lakeland for the past three quarters. But the more important story is the progress achieved in our efforts to drive sustainable improvements in longer term, topline results as well as bottom line performance. The global industrial economic landscapes remains fertile, the oil and gas sector has rebounded from lows of a year or more ago, and automotive sector has been cooperating. In addition to these longstanding target markets for our products, we’ve been successfully introducing new products and penetrating multiple geographic markets to help drive our sales and brand on a global stage. We achieved the second consecutive year of revenue growth for the second quarter since the level of sales in the second quarter of fiscal 2016 had been significantly heightened due to demand resulting from a devastating bird flu viral outbreak. Second quarter fiscal 2019 sales were 7.1% higher than the year earlier period, which is higher rate of growth than the year-over-year improvement of 6.0% for the first quarter. Our second quarter '19 results would have been more outstanding if we had not missed three days of revenue from our U.S operations due to the implementation in this country, the first phase of our global ERP system rollout. The ERP implementation on the SAGE X3 platform is a critical component of a more evolutionary development for…

Thank you, Chris. The following addresses my review of the fiscal '19 second quarter ended July 31, 2018. Net sales from continuing operations grew to $25.6 million from $23.9 million in the year earlier period and up from $24.3 million in the first quarter of this year. As compared to the earlier period, overall sales volume was higher, which resulted from global economic growth of somewhat rebound in oil and gas sector and continued traction domestically and internationally. For the third consecutive quarter, demand for our products sold into the oil and gas sector has been strong and consistent with our expectation as oil prices traded in a similar range as to where they’re today. Other growing product categories are FR or flame retardant and heat resistant garment, both are generally higher margin and include our new line of protective apparel developed for sale into the utility sectors. Total sales in the U.S increased 8.2% primarily resulting from demand for disposables in woven product lines as well as FR related garments. Among the company's larger international operations, sales in China into the Asia-Pacific Rim increased 6.1% mostly as a result of increased intercompany demand that’s eliminated in consolidation. Canada sales decreased $.2 million or 6.9% as compared to the prior year period in which the wild fire response created unusually high demand. U.K sales increased $.5 million or 22.9% as new distributors in Europe continued to place initial stocking orders. Russia and Kazakhstan sales combined increase $.5 million as the company continue to gain customers in this region and Latin America sales increased $.5 million. Domestic sales were 52.2% of total revenues and international sales were 47.8% of total revenues in the second quarter. This compares with domestic sales of 52.8%, international sales of 47.2% of the total in the…

Thank you. [Operator Instructions] Our first question comes from the line of Dave King from ROTH Capital. Please proceed with your question.

Sure. Thanks for taking my questions. What sort of impacts did the ERP implementation have on the gross profit and OpEx during the quarter, even on a dollar margin basis? And then to what extent do you expect those costs to subside in coming quarters? It sounds like you do expect them to come down a bit, so just trying to get a sense of the magnitude there. And then, on the shipment delays, have those continued in the Q3 and how long did those continue? Is it still impacting the business? Thanks.

Well on the shipment delays, it was about two weeks, somewhat it was a slowdown process, not a stoppage altogether. For three days, we were down due to an inventory and certain opening balances into the new system, so we don’t anticipate the ERP implementation that negatively impacts Q3 sales due to delayed shipping. As far as the impact on margin, on gross margins, there were some additional labor and management process and warehouse reorganization that took place in the quarter that we don’t expect to be significant in Q3 and Q4. There were some expenses also associated with the ERP in terms of just general cleanup and getting the information into the system data entry that type thing that was an impact on both gross margins and operating margins. To a lesser degree, we will see some continuing operating expenses associated with ERP into Q3 and Q4, but again it will make a lesser impact as this process -- all of our processes smooth out and we’ve -- don’t have the required -- haven't made for additional temporary labor to do some of the lower-level data entry type work and relabeling things of that nature in the warehouse that we are on top of at this point.

Okay. So just to kind of get a sense to size this up, in Q2, is this kind of what -- several hundred thousand dollars of incremental cost of goods sold and OpEx, or is it…?

Yes.

… tens of thousands of dollars?

No, no. It's a couple hundred thousand dollars that we have to incur to get all this done. Some of it – it’s expenses that the vast majority of expenses associated with ERP we could capitalize, but there were some things that are really more associated with reorganization and clean up of data and that type of thing that with it could not be capitalized.

Okay. That helps. Thank you. Then switching gears, in terms of Vietnam, how much production is out of Vietnam now? And then, Chris, where do you see that going by year-end, and then into fiscal '20? I get -- you can probably get up to 600 workers fairly quickly, but just given the efficiency probably not being as good as it is in China, just what’s your best kind of guess from where we sit today in terms of where you can be?

Okay. We should be up to 600 workers by next March or April of '19. It all depends on sales. We built a healthy inventory margin for the changeover such that -- so that we could meet delivery, we wouldn’t fall into the problem of not being able to deliver as so many companies I know have when they changed over, particularly to SAP, so we have plenty of inventory. We've got to clear that inventory. Once that is cleared out in the next 3 to 4 months, that's when Vietnam will go full online, and that's when it will probably start really making money as compared to China costs.

Okay. That helps. It's good color. And then, I guess lastly from me and I will step back, pharmaceutical suites, I didn't hear what they aim to stand with that [ph] excuse me if I missed it, but when do you expect to launch some of those products and begin shipping some of those products?

We are basically selling a lot of the non-sterile, and we're still delayed on the sterile for another couple of months.

Okay. Okay, great. Thanks for taking my questions. Good luck with the rest of the year.

[Operator Instructions] Our next question comes from the line of Alex Fuhrman from Craig-Hallum Capital Group. Please proceed with your question.

Great. Thank you very much for taking my question, and congratulations on another really strong revenue quarter despite the stronger dollar. I wanted to ask about some of the changes that you're making to your distribution, specifically it seems like the rollout of Amazon and e-commerce opens up a lot of new avenues for the company. Curious how the rollout in Canada went and what learnings you have -- in particular, what types of customers that’s been attracting, and how that might impact your rollout into other markets on Amazon?

Okay. Well, we're rolling out in Canada and Australia, United States to the consumer, the typical Amazon consumer buying which we all know and do ourselves, okay? Canada is relatively new. We haven't gotten too much in the way results on that. Next quarter, we will be able to tell you in a lot more detail about Canada and Australia, and how much the U.S has grown say from here to the next time we report in the quarter. We are also doing quite well on Alibaba in China too, so that’s something we didn't -- we don't discuss too much, but it's growing also. And once we get on Amazon lined up in Europe, India, Australia, Mexico, and Canada, then we will start lining up some of the other e-platform selling groups whether it’s Wal-Mart or somebody or Alibaba or the Indian version of that. But right now, it is really too early to tell on how fast will it ramp up, ask me next quarter, then I will be able to give you some hard numbers.

Thanks, Chris. That’s helpful. And just thinking about kind the opportunity with your customer base more broadly, can you give us a sense of how much you think -- what share of your customers are currently small business? It certainly seems as you move into more online marketing and ramp that up, that could be an area of growth for you. Is that an area that’s currently a sizable portion of your customer base? Just trying to understand if you have a good sense of how many of your end-users are big corporations versus smaller businesses and consumers versus government agencies and things like that?

Well, that’s fairly tough to say. We do deal with 1,200 distributors which are for the most part smaller than the top 80 guys, but we do business with the top three of the top 80 guys and substantial business. But I think what you're really trying to get out is the cannibalization if we start selling small businesses, will that cannibalize our distributor business. And yes to some extent it will. But then on the other hand, we have other competitors like Kimberly-Clark and DuPont. So it will bite into their business as well. So will we lose some business? Yes, we will, but I don't think we'll cannibalize much more than 10% or 15% of our existing small distributor business.

That's great. Thank you very much, Chris.

Our next question comes from the line of Pete Muckerman from Raymond James. Please proceed with your question.

Thank you and good afternoon. The majority of my questions have been answered. So I thought I just jump in there and ask in relation to some of these hotspots around the world, China swine flu, India has got to break out, you got Ebola in the Congo. Where are you all in that mix? I know you guys have stated in the past that it has really become a crisis before. It really impacts you, but just I wanted to ask. Thank you.

Okay. Yes, it does impact our sales, but not in a big way. These are small outbreaks. In Africa, to date it's only 43 people. In India it's only 60. This is out of continental populations of 1.5 billion.

Yes.

So it's not a big deal either in sales. It's when it really breaks away and starts affecting thousands of people, then everybody panics. And that's when the demand go through the ceiling, it's when prices go through the ceiling, and it has not happened yet. If it were to happen anywhere and really send the panic or really could take [indiscernible] to panic, it would happen in India, because the population in India is so compact. Things would spread very quickly as they did in [indiscernible]. Whereas in the Congo, you’re talking about African villages that are separated by miles. So not a lot of transportation. Surprise it spread in Africa as much as it did in the last big outbreak.

Yes, okay. Thank you. And just one really quick last question, what is -- I don’t know if you can comment on it, but what is you guys have not utilized any of the buyback yet. What is -- can you elaborate or touch on that? Do you feel comfortable doing that just …?

Yes, we feel very comfortable doing it and every time I try to pull the trigger the stock goes up $0.50.

Okay. Okay.

[Indiscernible].

Yes. Yes, okay. Well thank you.

There are no further questions at this time. And I would like to turn the call back to Christopher Ryan for closing remarks.

Okay. We appreciate your participation on Lakeland's 2019 second quarter financial results conference call. Our expanded global team remains energized for the opportunities ahead. We are very well-positioned for continued growth in sales, market share and profitability, which we believe will deliver value for our shareholders. Thank you again for joining us today's conference call. Bye, bye.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.