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, April 16, 2019. 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 the circumstances. These statements are subject to a number of assumptions, risks and uncertainties and factors 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 regulation 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'd like to introduce your host for this call, Lakeland Industries' Chief Executive Officer, Christopher J. Ryan. Mr. Ryan, you may begin.

Okay. Due to our accelerated filing status as a public company and our new internal information and reporting systems, we came down to the wire in terms of filing our financial results. With the potential for the filing for an extension, which we did not have to do thanks to the hard work by our finance team and other parties, we did not provide advanced notice of the conference call simply because it came down to today. So with that said, I'd like to say good afternoon to you all and thank you for joining our 2019 fourth quarter and year-end financial results conference call. We're 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. Fiscal 2019 was a year of total restructuring and significant development on a global scale with our progress on a consolidated basis marred most notably by the challenging costs and operational issues in connection with the implementation of an enterprise resource planning or ERP system. I'll speak more about our ERP challenges throughout my remarks. From a top line perspective, total revenues increased for a second year in a row driven by strength in all our international operations, while the ERP system in the U.S. led to lower domestic sales due to order processing and delivery delays. In the third and fourth quarters, we had elevated expenses and reduced revenue in the U.S. as we were unable to process orders to the extent that reflects the true global demand that we are otherwise experiencing. We ended the year with the highest level of revenue since 2011 excluding sales relating to emergency situations. This heightened level of revenue was…

Thank you, Chris. The following address is an overview of the fiscal 2019 fourth quarter and full year ended January 31, 2019. Net sales from continuing operations were $25 million for Q4 '19 as compared to $25.2 million for Q4 '18 and $24 million for Q3 '19. For the full year, sales increased to $99 million in fiscal '19 from $96 million in fiscal '18, an increase of about 3%. On a consolidated basis, for the fourth quarter of fiscal '19, domestic sales were $12.3 million or 49% of total revenues, and international sales were $12.7 million or 51% of total revenue, which is comparable to the prior year. Gross profit for Q4 '19 was $6.9 million as compared with $9.9 million in Q4 '18 and $8.5 million in Q3 '19. Gross profit as a percentage of sales decreased to 27.7% in Q4 '19, down from 39.4% in Q4 '18 and 35.3% in Q3 '19. Gross profit for all of fiscal '19 was $33.9 million, a decrease of $2.3 million or 6.4% from $36.2 million in 2018 but up from $31.6 million in 2017. Gross margin as a percent of net sales in fiscal '19 was 34.2%, down from 37.7% in 2018 and 36.7% in 2017. The gross margin decline in the fiscal '19 period as compared with the prior year primarily reflects increased expenses across distribution and supply chain management activities compounded by lower volume within the U.S. operation associated with the ERP implementation. These negative influences were partially offset by growth in higher margin regions, successful marketing of niche products domestically and internationally as well as price increases in select markets around the world during fiscal '19. Operating expense decreased 3.4% to $8.4 million in Q4 '19 from $8.7 million in Q4 '18. Quarterly OpEx was up from…

[Operator Instructions] We will take our first question from Dave King with Roth Capital.

This is Andrew stepping on for Dave. Just on the ERP system, I just wanted to see if you had the dollar amount in the cost of goods sold in the quarter and then also the dollar amount in operating expenses and what was the impact there from the ERP system.

We don't have it specifically quantified. We say in the neighborhood of $4 million once the -- with the overall impact through expense and revenue. We expect that number to decrease significantly in Q1. So there still will be some elevated expenses there, but we think we have taken the brunt of the hit for the consulting fees and some of the other supply chain disruptions that we experienced in trying to expedite shipping and things of that nature.

Great. That's helpful. And then is there any potential impact that you could have in Q2? Or should I be -- kind of work through it throughout Q1?

There will -- it should be much less significant primarily. We're working through efficiency issues and continuous process training with our people on new processes. It's been a seismic shift for us and somewhat unanticipated culturally, the hurdles that we were going to have to jump through. We're learning as a company on how to communicate all over again with a full blend ERP. Every single position talks to each other within the processes and that's been something that's been a real challenge for us, so we're working through that, and we don't anticipate Q2 to have anywhere near the impact that we're seeing now in Q1 to a lesser extent, obviously, than Q4.

Helpful. And then just, I guess, on -- getting back in terms of -- on the revenue side. If you could just maybe share how much you might think it might have weighted on revenue in terms of the ERP impact. And then in terms of the backlog, I believe you said on the call that it was at $4 million currently right now. And then just how do you feel about that backlog? And then how is your ability to meet demand?

Well, the backlog of $4 million was in the U.S. It was $10.5 million on a consolidated basis. So we look at this and trying to quantify the revenues lost to the ERP versus revenues deferred. So most of our customers have hung with us. A few -- if they're responding to issues that are time-sensitive and had to find product elsewhere, we try to quantify those cancellations, which we think was less than $1 million. We think the vast majority of our sales are actually deferred and they're present and are open orders now. And as far as capacity, I'll let Chris address capacity.

Yes, on capacity, we're building that. I think we probably have enough capacity overall. We have pockets in certain areas where we're short on capacity. I don't know we're a little short on capacity in Mexico. That will be made up in Vietnam over the coming 2 quarters, and it will be made up in other areas in Latin America.

Great. That's great color for us. And then I guess just on a more broad view of things. Can you maybe talk about -- I think oil prices have rebounded a little bit since the last call. Are you seeing any incremental demand from the oil patch? And then in terms of China, how is demand out there? I think we've seen some macro concerns out there. So just how is demand in China?

In China, we're actually doing quite well given the macro concerns. The only thing we've seen is our sales are increasing in China. They would have increased probably even more but this is a call simply because of nationalistic feelings in China over Mr. Trump. We're an American corporation. So some of our distributors are not buying American, but we're still increasing our sales in the Asia Pacific and in the China region. Probably maybe when this trade war is over, we'll go back to being the good old Americans who they bought from in the past. And I'm trying remember the other part of that question.

Just if you're seeing any additional demand from the oil patch because I think oil patch [indiscernible]

Yes. We are seeing additional demand in the oil patch. And common sense would sort of tell you at $70 a barrel, if it stays here for any period of time, a lot of these wells offshore and onshore are going to go back into operation, which means they'll increase the number of people they have to hire to service them, which means we should see better sales.

[Operator Instructions] We'll go next to Mark Rosenkranz with Craig-Hallum.

I'm wondering if you can give a little more color on some of the product categories. We saw good growth from the wovens, I think obviously good growth from the disposals. Just wondering if you can provide any more color on any type of potential new products went online or where you've kind of seen success. I know international is a big part of the year, if you've seen any products that are particularly better or worse in international versus here in the U.S.

Well, international is up smartly. They did not have to go through the ERP. The 2 new product launches suffered time-wise because of the ERP hold-ups particularly in shipping and planning. I think they really ought to -- we lost a year basically on those 2 new product introductions, but they are now in gear. We are buying the fabric. We are setting up. We're making it. So I'd say we lost the year but they should take off by the first -- by the end of the first quarter, and we'll be reporting that to you in the second quarter.

Okay. Good. That's helpful. And then on the supply chain, you mentioned the increased investment in Vietnam and rest of the APAC and the target by 2021 of increase in the employee headcount to equal China then India. Is there any type of catalyst as we -- workforce in 2021 or any timing of when that headcount will move around.

Okay. What we're doing is we're moving resources or at least cutting some resources to Vietnam and India simply because China has become quite expensive and will continue to get more and more expensive. However, we do plan on keeping our Chinese operations to service, certainly domestic Chinese market, because we're making in China, we're selling in China. We can turn our inventories in China theoretically 3 to 4 times. So we'll keep our capacities in China pretty much level. If we do anything, reducing in China would be small. Vietnam can still grow by another 100 people. We will grow India in concert with our sales growing. As we see our sales growing, and we're predicting about 7% organic sales, we will then tap up India as Vietnam fills. Vietnam is much lower cost than China as is India. So we hold to basically increase our gross margins and some of our operating expenses to go down when these 2 operations really kick in. But right now, Vietnam is kicking and I think they have about 540 people and they can go to 700 that's when we run out of space there. By the end of the year, they should be at standard allowed hours and some doing even better so then we will really recapture a lot of the labor costs that we've been paying in China. And as we grow, we will grow in India with -- basically to meet future sales. Our only sort of pocket of capacity shortage is in Mexico, which we're curing now. It's basically adding people, adding other sources of production. But right now, we're doing a lot of business in the wovens market in the United States and we need to fill, really fill that almost void. I mean we've got sales. We've got to basically make them.

[Operator Instructions] We do have a question coming up here from [ Eric Song ] with [ Brighton Capital ].

This is [ Eric ] from [ Brighton Capital ]. I have a -- so I think I missed a number in terms of the amount of revenues that were affected by the ERP system. How much revenues did we lose in the United States as a result of the ramp -- the ERP efficiencies?

We still -- what we could quantify was around $1 million, and that's just based on customers who communicated canceled orders, things of that nature. We believe the vast majority of these orders were deferred into Q1 and that they're sitting in our open orders though that's not a hard number at all. I'm certain there are some sales that bled off that they didn't notify us that, that's what was happening.

Some customers call us and say, "Sorry. Goodbye." Some customers call us and say, "When you get your delivery or you're shipping out of time, give us a call." And some customers stay with us and just are willing to take a deferred delivery. That's about the situation. So you've got 4 categories.

Right. And a lot of it depends on whether or not our customers hold an inventory position with us. If they don't hold much in the way of inventory, then they have a pretty low pain tolerance for any kind of extended delivery lead time.

So the customers who probably did leave us were the customers we least want.

There you go. And so how much higher is the backlog at the end of the quarter relative to a normal level?

I think it's probably about $3 million higher than it normally would be, and maybe half of that's in the U.S. and half of that is international. We're also seeing with some of our U.S. customers in that backlog, which we don't really have the ability to quantify, give us a year and our new ERP, we'll be able to. But we can't really quantify of that number on how much of that is new blanket orders. Our seniors dictating North American sales has advised us that he's hearing from a number of customers that they want to place more blanket orders and smooth out their deliveries a little bit, which, obviously, helps us on the manufacturing side, but it's hard to factor that in. It's this kind of a gut feel that it seems that more of our customers at this point are placing blanket orders.

Mr. Ryan, there appears to be no further questions at this time. I would like to turn the call back over to you for any closing comments.

Okay. We appreciate your participation on Lakeland's Fiscal 2019 Fourth Quarter and Year-end Financial Results Conference Call. We believe we have the right mix of products, manufacturing presence around the world, financial strength, global staffing and leadership to now capitalize on the opportunities ahead. We're very well positioned for continued growth in sales, market share and profitability in fiscal 2020, which we believe we will deliver value for our shareholders over the coming year. Thank you again for joining us on today's conference call and goodbye.

The event playback has concluded. Thank you.