Lakeland Industries Inc (LAKE) 2009 Q2 法說會逐字稿

Before we begin, parties are reminded statements made during this call contain forward-looking statements 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 9th, 2008. 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 impacted in the Company's filings with the Securities and Exchange Commission, general economy and business conditions, the business opportunities that may be presented to you in pursuit 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 that actual results or developments may differ materially from those projected on 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.

Just as a reminder, today's call is being recorded. At this time I would like to introduce your host for today's call, Lakeland Industries President and Chief Executive Officer, Christopher Ryan. Mr. Ryan, please go ahead .

Thank you, and thanks everyone for joining us today on our second quarter conference call. I'm pleased to report that revenues rose nearly 27% over last year's second quarter. And our earnings climbed by 112%. Much of this was due to our acquisition in Brazil, which we told our shareholders last February would be accreted to earnings and in fact it is.

Excluding acquisitions, our internally generated growth initiatives have led to the highest level of increased sales in the Company's recent history, with an improvement of 13% in our latest second quarter, as compared to the prior year second quarter ended July 31st, 2007.

This organic growth is attributable, in large part, to the impressive increase in sales in our overseas markets versus last year . In our Chilean division, sales were up 93%. In our UK division, sales were up 13%. In our China-Pacific Rim division, revenue rose 123%. And in the US, largely due to new product introductions, our fire and wovens divisions saw sales grow 30%, while revenue within our our glove division rose 7%, and our chemical suit division posted growth of 19%. Our India glove division finally started shipping product this year, so we're looking forward to profits there once sales hit approximately $1.5 million, which we expect by the first quarter of next fiscal year.

Sales in our disposable garment division were somewhat lackluster this quarter due to extremely aggressive Tyvek garment pricing in the marketplace. We believe this trend will continue in our disposables division for the next several quarters.

We continue to reallocate manufacturing responsibilities world wide to increase margins. Our long-term goal is to be able to make the vast majority of our products at all our manufacturing locations to ensure fast delivery and reduce transportation tariff charges, affording us a competitive edge on customer pricing. We continue to view South America, the Asian tigers, the old Soviet Union and India as our engines of rapid expansion, while maintaining modest growth rates in the more mature North American and European markets for non-disposables, and flat to declining sales for disposables in North America.

Next year we plan to open an office in Abu Dhabi to cover the fast-growing regional markets tied to security and oil production, specifically the United Arab Emirates, Kuwait, Saudi Arabia, Qatar, Yemen, Egypt and Iraq. We view this area and Russia as the last pieces of the puzzle. Abu Dhabi provides tax-free treatment and close proximity to our Indian facility, shipping out of Mumbai, Bombay. Abu Dhabi will complete our geographical market penetration.

Concurrently, we will continue to increase our new product penetration into these faster-growing economies. Ours is a simple two-pronged strategy. New geographical markets with new products. Block and tackle and get 50 yards on the ground every quarter in both the football and financial sense. We continue to maintain a good comfort zone with street estimates for this fiscal ending January 31st, 2009, and will make every effort to drive similar growth in calendar 2009, even as we believe next year will bring a further slowing of the economy in the US and most of Canada, with the exception of the western Canadian oil provinces and perhaps the eastern maritimes.

Long-term we believe the US will emerge from the recession in 2010, just as we expect to hit peak earnings as a result of our new product entries and strategic resource allocations overseas by aggressively expanding our geographic footprint in rapidly growing economies. With our Brazilian acquisition now complete, we feel more confident than ever that Lakeland is poised for further performance improvement and enhanced shareholder value this year and next.

With that I will turn the financial discussion over to Gary Pokrassa, our CFO.

Thank you, Chris. The first thing I'd like to do is thank all the people in Brazil and at Lakeland who have worked so hard with us to make our recent acquisition a success. I also want to thank the people at Wachovia for working with us so well.

For the quarter ended July 31, the first quarter in which we have included, the results have included Qualytextil, the results have exceeded our expectations. The Brazilian management is budgeting 20% organic growth and revenue for the next two years, and so far they have met their projections and budgets. This 20% growth is excluding sales in Brazil of Lakeland products which is being aggressively set up, as we speak, and should expand earnings further next year.

The July results from Brazil also, however, included about $0.025 per share as a result of spillover from April due to a customs worker strike in Brazil. So on a normalized basis Qualytextil contributed about $0.08 a share net of additional expenses for the quarter.

While Chris already spoke about our top-line growth, let me just add that our Q2 operating profit increased 140% over Q2 last year, with operating margins at 8% up from 4.2% in Q2 of last year. Our effective tax rate is evolving. China is now at the statutory rate of 25%. And Brazil, after local incentives, is at about 16.5% overall effective rate. My estimate for overall effective tax rate on a consolidated basis going forward is now about 28%. That is a tough number to pin down, though, but that is my estimate.

Now that we have leveraged our balance sheet ever so slightly, our debt to equity ratio is now about 1 to 3.3. Our ROE has gone from 4.6 to 9.3 year-over-year in the quarters. Also, our ROI went from 4.4 to 7.8, although this still could be improved on. And the Company's ROA is 7.2, up from 4.0 last year.

The Company's book value per share is up from $12.05 to $13.14 year-over-year. And our share price--I see this morning, this is not true--but our share price had been trading at less than book value.

Thank you. And back to Chris .

Okay. Thank you and thanks everyone for joining us today, and if there are any questions, we'll address them right now.

Thank you, the question-and-answer session will be conducted electronically. (OPERATOR INSTRUCTIONS)

Okay, it doesn't seem like there are any questions so we appreciate your participation on Lakeland's second quarter fiscal year 2009 conference call. Oh, excuse me, we do have a question.

Yes, and our first question comes from Mike [Dessler] with [Anamax] Holdings.

Hello, gentlemen, good morning. How are you? I don't have a question. I want to just congratulate you on a great quarter and proving all the previous quarterly conference call acrobatics that some of the analysts have been giving you wrong. And that's really it. I just wanted to applaud you on doing an excellent job carrying through on what you promised to do.

Thank you very much.

Thank you.

Okay, you're welcome, and take care.

And at this time there appears to be no further questions in the queue.

Okay, we appreciate your participation in Lakeland's second quarter fiscal year conference call. With a view toward further improvement in our financial results beyond the second quarter's record revenues and increased earnings per share we are excited to continue our investor outreach initiatives by visiting key money centers in the months to come. Please feel free to call us to discuss the Company's operations, or to schedule a meeting with management. Thanks, again, and good-bye.

This does conclude our teleconference for today. We'd like to thank everyone for your participation, and have a wonderful day.