Okay. 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 9, 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 factored into 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 and regulations; and/or 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 these projected in any forward-looking statements. All subsequent forward-looking statements attributable to the company or persons acting on behalf are expressly qualified in their entirety by these cautionary statements. At this time, I'd like to introduce myself, Chris Ryan, Chief Executive of Lakeland Industries. So good afternoon to you, all, and thank you for joining our Fiscal 2020 Second Quarter Financial Results Conference Call. I'm joined here today with Lakeland's Chief Operating Officer, Charles Roberson; and for the first time, our newly appointed Chief Financial Officer, Allen Dillard. Welcome to the team, Allen. For those of you who did not see our press release over the summer, Allen was named our CFO effective August 12. So…

Thank you, Chris. The following address is my review of the fiscal 2020 second quarter ended July 31, 2019. As Chris mentioned, I've been with the company for about a month, so my comments will be limited. Net sales were $27.5 million for the 3 months ended July 31, 2019, as compared to $25.6 million for the 3 months ended July 31, 2018, and $24.7 million for the 3 months ended April 30, 2019. On a consolidated basis for the second quarter of fiscal 2020, domestic sales were $14.4 million or 53% of total revenues, and international sales were $13 million or 47% of total revenues. The company experienced sales growth domestically, benefiting from easing of earlier delivery challenges associated with the ERP implementation as well as in all operating regions in the Americas excluding Mexico. Sales in Mexico were lower due to a large, recurring customer bid for fire resistant garments that was previously won and filled but has not been republished yet this year. Foreign exchange currency translations negatively impacted sales in the UK, Europe and China as reported on a consolidated basis in U.S. dollars. China sales are included in our Asia Pacific business and led to a modest decline year-over-year on a reported basis in U.S. dollars. We do not anticipate a recovery unless the U.S.-China trade dispute is settled. And even then, it will require time for China's manufacturing GDP to recover. In the meantime, we have shifted our focus to Southeast Asia in efforts to replace lost sales revenue. India and Russia were also slightly weaker in the second quarter. But because of the relatively small size of their sales, this can recover relatively quickly. Gross profit of $10.4 million for fiscal 2020 second quarter increased from $9.2 million for the same period in…

Thanks for the nice job, Allen. To conclude my formal comments, I'd like to address our stock buyback program. On our last earnings call in mid-June when our share price was about $12, we cited an outlook for improving cash levels as the reason for taking a closer look at our stock repurchase program. That was halfway through the second quarter, so we already knew to a meaningful extent what our cash would be at the half year mark given our anticipated capital allocation strategy. What's changed since that time is that we spent according to our plan, the second quarter was strong and our share price went even lower, perhaps reacting to the constant machinations by political leaders on cross-border trade issues. With this backup, we began to buy some shares towards the end of the second quarter. 9200 shares were purchased in the quarter as part of our $2.5 million stock buyback program approved on July 19, 2016. To-date, $1.2 million was spent to repurchase 114,848 shares with no shares purchased in the fourth quarter of fiscal 2020 and all of the other purchases made in fiscal 2019 fourth quarter. We are encouraged by the company's direction and progress including potential cash flow generation, which would be an even greater catalyst to encourage us to buy more shares. As we close out the first half of this fiscal year, we believe we are very well positioned with an impressive array of products for basic daily use and specialized applications, a diversified manufacturing presence around the world that provides us with flexibility to navigate an erratic macroeconomic environment, financial health and a growing global team to capitalize on the opportunities ahead. That concludes my remarks. I will turn the call back to the operator to begin the Q&A session. Operator?

[Operator Instructions] Our first question comes from Alex Fuhrman of Craig-Hallum.

Congratulations on a really nice quarter. I wanted to ask about the composition of the backlog. It sounds like you guys have made nice progress now implementing the ERP system and starting to get some results there. And it sounds like you had a nice amount of that backlog related to the ERP implementation that you were able to work through here in the quarter, but the backlog still looks pretty big, actually got a little bit bigger during the quarter. So just thinking about the orders still in that backlog. Are there still orders related to the ERP implementation? Or is this just more recent business that's come up in the quarter?

You want to pick that up, Charlie?

Yes, Chris. Our backlog, currently, the $0.5 million that we took out in this quarter represents the bulk of the ERP backlog. Most of what we have now is incurred from sales in the current quarter.

Okay. That's really helpful. And then just thinking about gross margins and your product manufacturing, really strong looking gross margins here in the second quarter. Can you give us a sense of what the impact could be to your gross margins as you think about taking price increases to offset tariffs that could be coming? And then thinking about your manufacturing in China, obviously, you can diversify your supply chain for many years long before these tariffs. Can you give us a sense of how much of the product that you're currently manufacturing in China is then sold in China or elsewhere in Asia as opposed to being imported?

I'm going to jump in here and try to answer that, and I'll kick it off to Charlie. Just jump in whenever you're ready, Charlie. As we look at margins, we really look at on, number one, where can we get the most manufacturing efficiency; and number two, based on that backlog of order flow. So kind of where we are margin-wise is we think we're seeing a more normalized margin environment, particularly as we begin to migrate our production to the lower-cost facilities. If you look at the numbers, you can tell that the bulk of the manufacturing that occurs in China comes to the U.S. and other markets. So as we migrate that to the lower cost, we believe that we're going to see some stabilization or normalization in our margins going forward. And I'll let Charlie kind of speak to how we're managing the production levels in those different facilities.

Yes, to put a specific range on the margin right now is difficult because there are some headwinds to it. The entire trade situation is still very much in flux, and we're currently evaluating our Chinese product mix to see what we can and cannot move out of there. Not all of those products lend themselves to new operations. So we're reviewing our capacities globally trying to rationalize that in lieu of the new tariffs. But the bigger complication is knowing what the psychological impact of the trade war is going to be on our customer base. In the U.S., it represents 50% of our income. I think that there's an opportunity here for us or nearly, I'd say, to improve our margins. But in the current business environment and customer concerns over the trade war, we're looking for additive business outside of the U.S. to make sure that we have the capacity to keep everything running.

What's important to note is that our Chinese operation can sell to every country in the world, or 49 countries currently, and cannot sell really to just one country, United States, unless they pay that 15% tariff. So when we look at the United States, we have our Indian operation, our Mexican operation and our Vietnamese operation able to export into the United States duty free. So we have a lot of flexibility here, and that's what I want to emphasize. It's only the United States that is putting a tariff on Chinese goods. The rest of the world is not.

Our next question comes from Dave King of Roth Capital Partners.

This is Scott stepping on for Dave. First, on the ERP system, do you have a dollar amount in cost of goods sold from the ERP impact in the quarter?

That would be Allen.

I don't know that we actually have the exact number. We know what the backlog was. We could go back and look at it. We could try and calculate that, but I don't have an estimate of what that might be currently at hand.

Okay. That's helpful. Now that ERP seems to be behind you, how are you feeling about your ability to meet demand? And did you happen to lose any customers during the ERP implementation?

Charlie?

Dave, one of the things that we learned through our ERP implementation, you've got to remember that a bulk of the most complex part of it was our operations in Mexico, and we did have a number of customers that came to us and told us upfront that they were going to have to go elsewhere while we get through this. And we have seen, in the last quarter, a number of those customers return. I don't think we have all of them back yet. I think other people are still waiting to see more, but we don't anticipate significant customer loss at the end of this.

Okay. And lastly, how are some of your oil and gas customers holding up given some of the recent weakness there? Similarly, how's demand been in China given some of the matters of concern there?

China is feeling that. Their GDP and industrial output has taken a hit, and we have seen some declines there. A lot of the diversification efforts that we've been through in the past year have been to lessen our reliance on the oil and gas sector. It's still significant. But our introduction of cleanroom products, work in electrical utilities are all meant to diversify ourselves away from the gyration, the fluctuations of that particular market. And I think we've been successful to a large degree.

But oil and gas revenues have held steady with the exception of one customer in Mexico.

Thank you very much.

And this will conclude our question-and-answer session. I will now turn the conference back over to Mr. Ryan for any closing comments.

Okay. Well, we do appreciate your participation on Lakeland's Fiscal 2020 Second Quarter Financial Results Conference. We continue to be poised for continued growth in sales, market share attainment and profitability in fiscal 2020, which we believe will deliver value for our shareholders. If you are an institutional shareholder or a potential investor, we will be presenting at the Sidoti conference on September 25 in New York and look forward to seeing you there. Thank you again for joining us on today's conference call, and goodbye.