Good day, ladies and gentlemen. We appreciate your patience. Welcome to the Lakeland Industries Fourth Quarter Fiscal 2020 Financial Results Conference Call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host for today, Mr. Charles Robertson. Sir, the floor is yours.

Okay. I'd like to begin with our safe harbor statement. Before we begin, parties are reminded that statements made during this call can contain forward-looking information within the meaning of the Securities Act of 1933 and the Securities 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 the 15, 2020. 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, including business affairs pertaining to the COVID-19 pandemic, 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. With that, I'll move on to our comments. Good afternoon. I'd like to thank you for joining our fiscal 2020 fourth quarter and full year financial results call. I'm joined here today by Lakeland's Chief Financial Officer, Allen Dillard. As many of our followers know, I was appointed President and Chief Executive Officer of Lakeland Industries on February 1 of this year. This is the first quarterly earnings call…

Thank you, Charlie. The following address is my review of the fiscal 2020 fourth quarter and full year ended January 31, 2020. Net sales were $28.2 million for the three months ended January 31, 2020 as compared to $25 million for the three months ended January 31, 2019. For the third consecutive quarter, our revenues exceeded $27 million. Coronavirus-related demand as best we can tell, added approximately $1 million to our fiscal 2020 fourth quarter sales, which were recorded in the final two weeks of that period. The majority of these orders were fulfilled with products already in inventory. Without the incremented COVID-19 demand, fourth quarter revenue would still have reached a record level for the period with an increase of 9% from the prior year, a growth rate that is well in excess of what we believe to be the industry growth rate. Net sales increased to $107.8 million for the fiscal year ended January 31, 2020, up 9% as compared to $99 million for prior year. Sales in the second and fourth quarters reached the highest levels in the company's history for their respective periods. On a consolidated basis for the year, domestic sales were $55.9 million or 52% of total revenues and international sales were $51.9 million or 48% of total revenues. This compares with domestic revenues of $49.9 million or 50% of the total and international sales of $49.1 million or 50% of the total in fiscal 2019. In fiscal 2020 versus 2019 sales in the U.S. increased by approximately $6 million or 12%, while international sales increased $2.8 million or 5.7%. Among our major international operations, sales in the U.K. were down less than 1% at nearly $9.4 million due to concerns related to Brexit. Sales in Mexico were down $700,000 or 20% due primarily…

Thank you. [Operator Instructions] We'll go first to Alex Fuhrman at Craig-Hallum Capital Group.

Great. Thank you very much for taking my question and congratulations on a really strong year and to everyone in their new roles here heading into 2020. I wanted to ask about the core business outside of coronavirus. Certainly, it seems like the -- outside of any sort of emergency demand, very strong quarter for the business. Can you talk a little bit about where that's coming from? Specifically, are there any industry groups that have really been contributing towards that growth that you've been seeing in the last couple of quarters? Just curious your outlook for the business here outside of any emergency demand?

Alex, it's hard for us to distinguish that and a lot of our sales have been made through our normal distribution channels. One area that is COVID-19 related that is likely to continue even perhaps longer than COVID-19 is we have seen an uptick in institutional cleaning services that are using our products. So we've had some nice orders come in from that direction. Otherwise, our chemical sales, our fire sales those obviously are not COVID-19 related, and we are trying -- part of our growth strategy is focusing on those higher-margin product lines into the second half of the year.

Okay. That's really helpful. Thanks. And then just thinking about the different geographies where you're active. I know you have a lot of your resources for sales and marketing geared towards emerging markets. Can you talk about the growth that you've been seeing in emerging markets and what your outlook would be there for the next couple of years and what you're doing to go after those opportunities?

We are currently reworking our sales strategy in foreign markets. We've run -- we've made some changes in the North American market space that we believe will improve performance in other developed markets around the world -- I mean Europe. We're already using these systems in China and Asia. South America will be next for us rolling them out. But we see India, the Middle East and Latin America as the areas of highest growth as we move forward. And we are looking to support those with additional sales personnel and are looking to our ERP system to give us better visibility or modeling of their demand so that we can service those markets better.

Okay. That's really helpful. I appreciate those answers and look forward to catching up again soon.

All right Alex. Thank you.

We'll move next to Gerry Sweeney at Roth Capital.

Good afternoon, gentlemen. Thanks for taking my call I very much appreciate it. So obviously wanted to maybe touch upon the COVID side of the business. I know it sounds like you're a little bit reluctant to go into details, but I wanted to see if you could give even qualitatively maybe some view as to what -- maybe some inbound calls orders talking to distributors are related to COVID today versus maybe at the end of January or the beginning of the quarter if you'd be inclined to do so?

Yes. Yes Gerry, calls certainly haven't dried up. There's still people looking for product, but I think that the most interesting dynamic that's going with that is looking at the second half of the year. There are a number of industries, pharmaceuticals, medical that have run into supply issues not necessarily with our products, but masks, medicines, and that kind of thing that are looking to assure that they don't repeat the situation in the future. To that end, we talked about booking business out into the second half of the year and we have a number of people and this is unusual for us that are booking months in advance willing to wait for the product, because I can only assume that their demand is not based on what they see as a business or an immediate use of it, but it's for stockpiling and preparation, and I'm not talking government stockpiling here. I'm talking about individual companies.

Got it. Filling their own sort of stockpiles.

Yes.

Got it. And then sort of the next step was I think we discussed in the past, COVID potentially giving you an opportunity to move in with new customers. And I think you even touched upon it slightly with the previous answers with companies that may not have been able to be supplied by their normal or their previous suppliers, et cetera. So it opens the door essentially. Have you seen any of that coming through?

Yes we have. We've been successful in doing that. If you go back Gerry and look at the timeline for COVID-19 developing, and you look at where the world really -- well where the World Health Organization declared a pandemic, if you look at where that is from the timeline and you consider where our products are manufactured in China and you look at a sailing time, you've got 45 days from the time you realize you have the emergency before you can get the first products for instance into the U.S. or Europe. Those products are just now arriving, unless you airfreight it. So the demand is just starting to be satiated.

Got it. Okay. And then switching gears slightly. I think on the last call you talked about the ERP system giving you better visibility into logistics even emerged with some of the containers' penalties for unloading -- excess time in unloading etcetera. And gross margin -- and I think you threw out maybe 200 basis points of potential improvement. And obviously gross margins up this quarter. Was that part of that ERP system? I think you called out some specifics, but how do we look at that on a go-forward basis?

Gerry, if you don't mind I'll pass that to Allen. He is the expert on all things margin-related.

Yes.

Yes. Gerry that was a contributing factor to our margin improvement as we had planned. But there were a number of factors that we experienced in -- particularly in the quarter: product mix, pricing, our ability to -- we use the system to help us manufacture -- do our manufacturing allocations, which assisted in improving margins. And then we were able to utilize existing stock on hand. So there are a combination of factors that really drove our margin improvement. We think the ERP and some of the pricing and product mix are things that will continue to stick and help us continue to drive that increase or sustain that increase as we move forward. But it was a combination of all those factors. It's hard to specifically quantify exactly how much the ERP drove that improvement, but it certainly gave us a much more aggressive approach to the way we managed our manufacturing allocations.

Got it.

If I can add to that it's only installed in half of our business at this point.

Yes.

So we have a lot of low hanging fruit elsewhere within the company to go get with this.

Got it. But maybe to summarize on the margin front it was, sort of, ERP mix and price, which are -- I don't want to say permanent but more stickier and then probably some of the inventory or stocking on hand with obviously a little bit more transitory on the margins from a high-level view. Is that a fair way to sort of summarize?

That's a very -- yes. That's exactly right. Very fair.

Okay. And then, obviously, I think ERP your -- the second half of the rollout is that -- that's more international first half was more North American or even…

Yes, we're essentially fully installed in the U.S., which to Charlie's point is approximately half of the business throughput. We're going to initiate the first stages of our international rollout in the second half of this year. We've got a solid road map for doing that. And our goal is to progressively reduce the number of other systems that we have to use to manage our business to -- from -- you can imagine with seven or eight international markets to drive all of those to a single system will substantially improve our management capability and our manufacturing allocation efficiencies.

I appreciate taking the time to answer my questions and congratulations on a great quarter and year.

Thank you Gerry.

[Operator Instructions] We'll go next to Andrew Pike at AN Valuations.

Hi. Good day everybody. My name is Andrew Pike. First of all I'd like to say this is a very impressive company, really -- looks really great. So this is my first time on one of your conference calls. So there might be some things that you've discussed in previous calls that I don't -- that I'm not privy to. So my apologies if a question comes across as something that might be well a bit known to -- more known to some of the other people on the call. I'm trying to get a better understanding of the -- of what the factories look like from the inside. And I'm trying to understand, do you have textile mills where you're producing cloth? Or is it just -- are you just cutting cloth that you've taken from others? Is it mostly manual assembly, long benches with people working? Or is it heavy machinery?

No, we're light industrial. We're not a textile mill. We are a cut and sew operations assembling garments in various countries around the world. The raw materials that we use are in many -- well part of our own design but they are manufactured to our specifications by a number of different textile companies in the U.S., Europe, China, India various places around the world. One of the things that we pride ourselves in especially where our core products are concerned is the development and qualification of multiple suppliers for product. And that's one of the reasons we won't -- okay.

No sorry go ahead.

That's one of the reasons we won't manufacture our own fabrics. We become too dependent on suppliers of either -- well a polymer. And there's far fewer of those than there are spunbonded polypropylene or film.

Right. Okay. So, when there was $6 million of CapEx spent over the past two years focused on Vietnam, India and IT systems which I believe to be the ERP systems. If I understand that it's light manufacturing mostly cut and sew, is it correct that Vietnam, and India that was just an expansion of the plants that you expanded it. Or how does that happens?

No. Those were new plants new plant installs. Startups.

That's new locations?

India was an existing location, but it was a glove plant. We refitted it and turned it into a cut and sew operation and Vietnam was a ground-up operation. Greenfield.

Fantastic. Awesome. And sorry, just flipping pages here. I believe you said $2 million coming up in 2021 if I understood correctly. Is that going to be ERP? Or are you building out more plants?

There will be -- a part of that will be the international expansion of ERP. Part of it will be expansion of capacity in existing facilities and part of it will be normal maintenance capital just to replace old worn machines and other plant and equipment.

Okay. Thank you. And just one more before I take up all my time and take up everybody's time. My apologies everybody for that. My last question is, I'm trying to understand your competitive strategy versus -- I think there are some pretty big players in this market. And are you going for the speed and customization angle against the big players? Or are you going for the produce more cheaply which I can't see how but what's the strategy against the big competitors? How do you beat them at their game?

Our key against the big players in the market, the DuPont, the Kimberly Clarks, the Ansells -- well, DuPont and Kimberly-Clark is we own our manufacturing. They use contract manufacturers. They typically work on a three-month rolling forecast. The quickest they can turn up the knob in case of an emergency is 30 days and that -- that result is 30 days beyond that 30 days.

Right.

Okay. So, owning our own product, we're in China, we're in Vietnam. We run into a trade war. We shift product from China to Vietnam, no duty. Problem solved. We have -- owning our own plants -- owning -- the other part of using contractors is, you don't necessarily control the rolled goods supply. So, we control who our vendors are and we have those relationships not our suppliers.

Okay. Okay. So you can react faster. And you've got better control over the quality for example?

Correct. And we also sew an extremely wide range of products compared to our competitors. Disposable and chemical, we compete against DuPont, Kimberly Clark. We go up -- in turnout gear, we go up against MSA and Globe, Fire-Dex. We compete in electric arc flash clothing against -- there are very few people that sew as broad a range of PPE as we do. As a matter of fact, I can't think of anyone.

Okay. Well I'd like to thank you very much for entertaining my questions. And yes good -- much -- wishing much success in the coming year and hope everybody stays healthy.

Well, thank you sir.

And that's all the time we have for questions today. I'll turn the conference back to management for any additional or closing comments.

Thank you, very much. We appreciate your participation on Lakeland's fiscal 2020 fourth quarter and year end financial results conference call. As we look ahead to fiscal 2021, we continue to be poised for growth in sales, market share attainment and margin expansion, which we believe will deliver value for our shareholders. Thank you again for joining us on today's conference call. Goodbye.

Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time and have a great day.