Lakeland Industries Inc (LAKE) 2008 Q2 法說會逐字稿

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 6, 2007.

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 circumstances.

These statements are subject to a number of assumptions, risks and uncertainties factored in the Company's filings with the Securities & 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.

At this time, I would like to introduce your host for this call, Lakeland Industries President and Chief Executive Officer, Chris Ryan. Mr. Ryan, you may begin.

Thank you; dear fellow stockholders, this quarter we faced a few obstacles which we believe are one-time in nature.

Earnings per share were $0.14 per share, up from $0.10 per share last quarter. As I promised last quarter, we expect to dig ourselves out of this hole by the first quarter of next year. Again, barring unforeseen market forces, such as a real recession as opposed to the obvious current business economics softening, we believe we can increase our earnings sequentially for the next 3 quarters from the first and second quarters reported here today.

This quarter saw the consumption of our last piece of highly-priced Tyvek inventory. This impacted our second quarter by $0.03 per share, but will not impact us in our upcoming third quarter and at October 31. This is one reason why we're looking for improved third quarter from an earnings perspective.

Start-up costs in India, Chile, and Japan impacted us by $0.02 per share. These start-up costs should get to break even, and then to profitability over the next 3 quarters. One-time medical insurance accruals and inventory reserves impacted us by $0.035 per share, or $0.095 total this quarter.

Sales are down in the USA due to a softening industrial economy in auto, auto suppliers, housing, power, utilities, and light manufacturing, such as boats and competitive discounting by our competitor.

Our strategy is to increase our international sales to the point where they more than make up for the loss of the US domestic sales. This will not happen in the next quarter or two; it will take time.

The second tier of that strategy is to introduce new and better performing, higher margin products such as our ChemMax line of chemical protective garments, new chemical protective gloves from India, new novel offerings in our high-visibility line of garments, all to be introduced in the third and fourth quarters of this coming year.

We feel we are in the middle of a turnaround spanning the next 3 quarters. The stock is trading below liquidation value, a valuation usually reserved for companies losing money or headed toward bankruptcy. We have an extremely strong balance sheet, almost no debt, cash of $1.6 million, and access to over $20 million through our banking lines of credit. We do expect to earn a reasonable profit this year. Our earnings are trending upwards, so we therefore believe that the stock should also.

I will introduce our CFO, Gary Pokrassa.

Thank you, Chris. I'd like to address our effective tax rate of only 18% for Q2, as resulting from lesser domestic profits and greater foreign manufacturing profits for the quarter.

We also generated, I'd like to point out that close to $0.5 million cash from operations in Q2. Our inventory did increase about $3 million from Q1. This is in part due to the soft sales in Q2, and in part due to preparation for a new customer who has put a sizeable order for a new anti-static coverall product line, which also fits into our product line diversification effort that Chris was referring to.

Our Mexican restructuring is proceeding on target, and we should be at full efficiency by late October. We believe this should allow us to decrease manufacturing costs by at least $500,000 per year once it hits full efficiency around the end of the third quarter.

And with that, we'll turn it over to the audience for questions.

Are there any questions?

Thank you. [OPERATOR INSTRUCTIONS].

Tom (Sudden), Smith Barney.

Yes, good afternoon fellows. It sounds like you're a little bit more optimistic for second half, but probably fiscal '08 is a year in which we could expect to see maybe some consistent higher numbers coming out of quarterly reports.

That's pretty much the gist of what we're saying. We're going to see weak sales for the remainder of the year domestically. Our job will be to try to increase international sales and new products to outdistance the loss in domestic sales. And we're hoping to achieve that by first quarter of next year.

There's a lot of things on the plate that you actually -- and I've been with the stock for several, with the Company for several years -- have absolutely no control over. It seems like they've sort of ganged up on you at the last 3 or 4 quarters. Can we reasonably expect that maybe those exogenous non-recurring factors are going to be a little bit less present going forward?

Well I hope so; I can't predict with any great certainty what the competition is going to do, and of course, I can't control what is beginning to look like a recessionary climate. I can't control the recessionary climate; that's part of the problem. The competition is the other part of the problem. I quite frankly don't know what the competition is going to do, but I get the sense that they're figuring out that what they're doing isn't working for them.

And this is a question that I'm sure you just hate to have asked, but is there any light at the end of the tunnel as far as Homeland Security spending is concerned, or is that pretty much going to require another terrorist event before that comes to the fore?

I think your latter observation will require some big terrorist instance before it comes to the fore again.

Well thanks, fellows; best of luck the second half and again next year.

Okay, thank you.

Thank you. [OPERATOR INSTRUCTIONS].

There are no further questions registered at this time. I would like to turn the meeting over to Mr. Ryan.

Okay, well if there are no further question, I would like to thank the people that showed up to listen to our quarterly report, and I'll close it at that.

Thank you; the conference has now ended. Please disconnect your lines at this time. We thank you for your participation and have a nice day. Once again, the conference has now ended. Please disconnect your lines at this time. We thank you for your participation and have a nice day.