Good morning and welcome to the Lakeland Industries Fiscal First Quarter Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded. Before we begin, parties are reminded that statements made during the 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 June 8, 2018. Forward-looking statements are based on current assumptions and announcements 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 certain circumstances. These statements are subject to a number of assumptions, risks and uncertainties and factored in the company’s filing with the Securities & Exchange Commission, general economic and business conditions, the business opportunities that maybe 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. At this time, I would like to introduce your host for this call, Lakeland Industries, Chief Executive Officer, Christopher J. Ryan. Mr. Ryan, you may begin.

Thank you, and good afternoon to you all and thank you for joining our fiscal 2018 fourth quarter and full year [fiscal 2019 first 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. We were off to a very solid start to fiscal 2019, which further solidifies our leadership position in the global workforce protection market. While fiscal 2018 was quite strong in terms of a rebound, the start of our fiscal 2019 has continued in similar fashion as we are seeing growth in the global industrial economic landscape with particular resurgence in the oil and gas sector. We achieved the second consecutive year of revenue growth for the first quarter and nearly eclipsed the level of sales in the first quarter, above fiscal 2016 when we had significantly heightened demand resulting from the devastating bird flu outbreak. In the first quarter of fiscal 2019, we once again experienced sales growth in all of our major international operating regions as well as in our emerging market operations. Sales in the U.S. were lower due to inventory work down from large fourth quarter shipments and a concerted effort to focus on higher marginal product lines. Considerable effort and investment have been made in order to increase our manufacturing capabilities to meet growing customer demands. This was part of the revenue growth strategy we had last year and which is continuing into this year. I talked about our overall revenue growth strategy on the year-end earnings results conference call. I’d like to review the elements of this strategy and update you on our progress in the first quarter.…

Thank you, Chris. The following addresses my review of the fiscal 2019 first quarter ended April 30, 2018. Net sales from continuing operations were $24.3 million up from $23 million in Q1, 2018. As compared to the earlier period, overall sales volume was higher which resulted from economic growth globally and the continued rebound in the oil and gas sector. On a consolidated basis for the first quarter of fiscal 2019, domestic sales were $12.4 million or 51% of total revenues, international sales were $12 million or 49% of total revenues. This compares with domestic sales of $12.7 million or 55% of the total and international sales was $10.3 million or 45% of the total in the same period of fiscal 2018. Sales in the U.S. modestly decreased from the prior year period primarily due to strategic revenue mix adjustments with selective fulfillment of lower margin disposable product orders and renewals. In the U.S, disposables represent approximately 51% of total domestic sales. The other product line for marketing in the U.S. include Chemicals, woven, fire retardant or FR apparel reflective and glove. Disposable garments are among the least sophisticated and most commoditized of the garments we sell. Therefore it commonly yields the lowest margins by far in the U.S., although we have a different margin profile for similar garments internationally. Additional production capacity is being brought on line in new manufacturing facilities in India and Vietnam, which positions the company to increase sales globally and reduce our cost of production while expanding our sourcing of raw materials. As in the fourth quarter of last year, the oil and gas sector has been going through a rebound, a larger concentration of our products sold into the oil and gas sector are drawn for online of chemical protective apparel and leasing gross…

Thank you. We will now begin the question and answer session. [Operator Instructions] And our first question comes from Dave King with ROTH Capital. Please go ahead.

Thanks. Morning everyone.

Good morning.

I guess first on the – couple of questions on revenue. In terms of the pricing increases you took, it sounds like those were kind of later in the quarter. Were those a material driver to the 6% revenue growth? And I guess more importantly, do you expect a more meaningful contribution next quarter? And then separately in terms of the high margin utility and pharma products, it sounds like pharma launched the ship in Q2. Did you say when utility is launching? And then just more broadly, how should we be thinking about the contribution from those on an annual basis? Thanks.

Okay. Utility should be launching in the third to fourth quarter. Both these products have very, very good margins. And what was the other part of the question? Yes. It was price increases.

I think that the price increase was lighter in the quarter, and we'll see the effects of that stronger in Q2, Q3, and Q4.

And on a certain divisional line, we just raised prices June 1, so we're not going to see that until the third quarter.

Okay. And then these lines; are they material enough to drive a couple percentage of increase on the overall topline or is this…?

Yes and no, I mean, on the one we've just raised prices on, it’s about 6% of sales. So not there really, it is the year-end increases as they flow in through the rest of the year.

Okay. That helps. And then switching gears to expenses in terms of the increase there, it sounds like a lot of that was currency, but how should we think about the potential for further increases over the course of the year with Vietnam, India ramping? Chris, do you expect to make some more international sales hires and then investments in Amazon or IT, how should we be thinking about those in the expense line?

I think at this point we've made most of our investments in terms of additional sales staff globally. Typically Q1 has slightly higher operating expenses. This year, in particular, we had a lot of the expenses came in from the tax work that was done at year end around the transition tax that was implemented on December 2017. We did see currency flux primarily in Latin America and Russia and some in India, to a small extent China, came through as well as audit phase that came in on us. We changed our filer status last year to accelerated filers and there were some additional audit fees associated with stock [ph] compliance around that, as well as some medical claims. We're self-insured, so that as the experience comes through. But I do think we'll see this level out in the coming quarters.

Okay. That helps. And then I guess last one from me, and then I'll step back. The current Ebola situation in Congo looks like there is some like 38 cases now. I'd assume that's everyone still working on, preposition supplies, is that the right way of thinking about it at least for now?

Yes. It probably won't do a hell of a lot unless there is a huge outbreak. We can't predict that, although it looks like relatively low percentage outbreak. I'm actually watching what's going on in India with this new spreading disease they have there which carried by bats, that is actually the Indian government is taking that much more seriously than the Congolese government in Africa.

Interesting. Okay. All right. Thanks for taking my questions and nice quarter.

[Operator Instructions] And our next question comes from Alex Fuhrman with Craig-Hallum Capital Group. Please go ahead.

Great. Thank you very much for taking my questions. Couple from us here. One, we’d love to get a sense of the time line of milestones that you're looking to in Vietnam and India with regard to production. Chris, I think you mentioned looking to get to once you're up and running about 600 manufacturing employees in each of those locations. Can you give us a sense of how many you currently have in Vietnam and at what rate we should expect to see that scale up and then become fully operational?

Okay. We have 300 people in Vietnam as we sit here today, okay. We'll scale that up to 600 certainly by this time next year. The real key for me is not only hiring in the heads, but scaling them up to what we called standard productivity, in other words getting our ladies to sow at a standard equal to what China sows at , okay, but at lower wages. And that's the real – that's where we start really saving money. India is the same thing. We now – we've ramped up our Indian sowers and cutters to about 120 people. We'll probably add up to 30 more in the New Delhi facility. We have not chosen the site yet simply because in India it takes longer to negotiate things both with the private sector and particularly the government sector. So we should have something on that in three months. We're trying – we're watching very closely, the gain in sales versus our need for extra capacity, because if you build capacity that you don't need you’ve got a problem. You got an expense that isn't yielding any revenues. So it's building those in tandem. So we're watching that very, very closely. And what one tends to do is you can see a spike, like we did in the fourth quarter, last fourth quarter, you can cover that with contractors, but if that spike stays there, in other words it’s just continuing, then we can internalize it into Vietnam or India. But India is our long, long term play, simply because you've got about 1.5 billion people there, more than 50% of them are under 30, wages are still very, very competitive in India relative to the rest of the world. There's few countries left in the world after China with that larger population that isn't going to get sucked up immediately. I suspect that in four to five years, Vietnam will be going through the same situation China is now, supply and demand. There won't be any supply of the labor and the wages will just start skyrocketing.

That's really helpful. Thanks Chris. And then, just trying to unpack the really strong growth margin that we saw in the first quarter, it sounds like if I'm understanding your comments correctly it sounds like a pretty good-sized portion of that gross margin lift is probably related to your growth internationally and in markets outside the U.S. And I'm just trying to understand the magnitude and the sustainability of that. Do you anticipate the better pricing environment internationally to persist for the foreseeable future? And then, as you continue to grow your businesses internationally, should that continue to be a driver of gross margin going forward?

Yes. Primarily because in many of the emerging market countries or even the mature market countries, we started out getting a good good foot hole with low prices. And that was driven by the fact that we had the lowest cost in the world. Now that we're more established we have a name, we have a brand. We have the ability to continue to raise prices, and when we raise prices that raises basically the margins across the board, and that what we're beginning to do and that's why you're beginning to see this. So we do have a good way to go before we even get to our competitors prices with the guys with a very big brand name. So we have quite a room to raise prices in certain countries, which then raises all the margins.

That's great. Thanks a lot Chris.

And there are now further questions at this time. So this concludes our question and answer session. I'd like to turn the conference back over to Chris Ryan for any closing remarks.

Okay. We appreciate your participation on Lakeland's fiscal 2019 first quarter financial results conference call. Our global team is 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. Our focus remains on these objectives. For shareholder, we welcome you to attend our annual meeting scheduled for June 20, in Ronkonkoma, Long Island, and I will look forward to meeting you there. Thank you again for joining us on today's conference call. Good bye.

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