Lakeland Industries Inc (LAKE) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Lakeland Industries first quarter fiscal year 2011 earnings call. Before we begin parties are reminded that statements made during this call contain forward-looking information within the meaning of the Securities Act of 1993 and the Securities Exchange Act of 1934. Forward-looking statements are all statements, other than the statements of historical facts which reflect management's expectations regarding future events and operating performance and speak only as of today, June 14, 2010. 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 the 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, 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 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.

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

Good morning to you all and thank you for joining our fiscal 2011 first quarter conference call. We're pleased to report an improvement in consolidated revenues and gross margins for the first quarter of fiscal 2011. As previously reported and discussed, we had anticipated a softer first quarter due to several large contracts recorded in the fourth quarter, and that certain seasonality issues might affect our first quarter. The improved operations performance in the first quarter was driven by continued growth from our international operations, which generally deliver higher margins than our domestic sales. Furthermore, our international operations have an ancillary benefit of smoothing out seasonality as much of our international growth is originating from the southern hemisphere, which offsets the northern territories by mitigating the normal slowdown of sales of industrial protective garments that are primarily used outdoors or during warmer periods.

Beyond the somewhat softening of seasonality since the end of the first quarter, a few events have occurred which we believe bode well for Lakeland Industries. For the immediate and longer term the first event is the Gulf of Mexico oil spill. There appears to be minimal if any progress being made to contain the spill. As we have stated in times of natural disaster, there typically is large and urgent need for the environmental protective and safety apparel which we manfacture and distribute globally. Although we have increased production of these types of products at our facilities around the world to meet the substantial increase in demand for oil spill containment and remediation purposes, we are presently capacity constrained and the back orders are mounting.

In fact, there is a stock out of Tyvek products globally, and we await shipments of raw materials for new production runs. These Tyvek products are a top selling garment for us in the United States. You may also recall that we may only sell the Tyvek garments in North America, so for the rest of the world we have our own fabric from which we make similar high quality disposable garments. Due to the demand surrounding the Gulf oil spill as of this week we can't make our own disposable garments fast enough.

This is also true of the nitrile gloves we make in our India plant. Thus demand for these gloves as a result of the spill may bring India to profitability sooner than anticipated. Our warehouses are close to being completely depleted. Generally speaking these products produce a higher gross margin for Lakeland than the products made of Tyvek, so we stand to realize incremental profits. The order of magnitude for the Gulf oil spill clean up is unknown at this juncture, but based on our experience and what we're hearing we expect that this may last a few quarters.

Our manufacturing capacity today is less than it was a year ago or so due to our reduction in force in China as we had reacted to lower sales volumes associated with the global recession. The economic reality is that the US, for which China manufacturers supports, and the diminished oil supply chain requirements in the US, even after the recent pickup in volume. In the first quarter, we had begun to experience a pickup in demand globally as the recession had abated, with economic industrial growth returning in many corners of the world.

While sales in North America of our disposable products were weaker in the first quarter year-over-year, this is largely a result of softness in the US economy and does not speak to the increasing demand profile for our international operations. As a result, we have begun to see our manufacturing capacity become up challenged. As I mentioned, the requirements pertaining to the Gulf of Mexico oil spill are incremental to this anticipated growth. Since we do not want to bring on full time personnel for what appears to be limited one-time issue, we are presently reviewing outsourcing solutions for our sewing and manufacturing requirements, as well as opportunistic acquisitions, which may enable us to further enhance our international reach. Later in the year, we expect our manufacturing capacity to be realigned as a result of a second event.

In May, we disclosed a new agreement with DuPont, relating to our licensing and production of garments using their material. Lakeland Industries was recently named one of what is expected to be a limited number of wholesale distributors for the sale of DuPont garments in the United States. Through this end, we will remain a supplier to our existing customers, and we will have additional marketing opportunities domestically. DuPont will supply us with finished goods, which means that except for custom orders, we will no longer be purchasing from DuPont the raw materials that are made into the garments, nor will we be required to hold such large quantities of raw materials, work in process and finished goods in our inventory.

A substantial portion of shipping costs and related logistics and support personnel expenses also will be eliminated. This agreement is being phased in as we work through our remaining inventory, and certain modifications are anticipated. However, we expect that upon full implementation as this year progresses, we will reduce our annual expenses by a significant amount, which Gary will address in his remarks, and we will be able to reallocate our manufacturing capacity to address higher margin sales opportunities, originating from our international operations in the Gulf oil spill. Consistent with our strategy for the past few quarters, and in light of our new agreement with DuPont, we have systematically been reducing our inventory levels.

Against the backdrop of increasing sales, for the first quarter of fiscal 2011 at the highest level in a year-and-a-half, we have seen an improvement in our working capital, inventory turns, cash generation, cash position, and debt level. The manufacturing capacity constraints and stockout conditions for domestic disposables has led to an order backlog of $7 million as of May 31, 2010. I might tell you that a normal backlog position is about $1 million to $1.5 million.

Let me jump in. As of today it is even higher. It is not going down.

We did run into a use of cash at the end of the first quarter, pertaining to our operations in Brazil. Gary will discuss this in detail but the net result is manageable, and our business in Brazil continues to grow, with ample opportunities for market share gains. In country as well as providing support for our expansionary efforts throughout South America and elsewhere. Cash management continued to be a priority for Lakeland, and we believe we have done a very good job of executing on that front while positioning the Company for further international growth.

At April 30, 2010, we had reduced our inventory by nearly $5 million from the beginning of the fiscal year, reduced the borrowings under our credit facility by nearly half to $5 million and increased our cash balance by nearly 12% since January 31, 2010, to $5.7 million. We are well-positioned for continued performance improvements with a markedly enhanced financial condition, and the many growth opportunities we have identified within our global operating footprint. I will now pass the call over to CFO Gary Pokrassa, to provide a more detailed review of the Company's financial results.

Thank you, Chris. While Chris has provided an overview of some of our first quarter results and operational developments, I will provide a more detailed review of our consolidated financial results for the period. Total sales increased by $1.4 million in Q1 this year from Q1 last year resulting from a $1.7 million decrease in domestic sales offset by growth of $3.1 million or 45% improvement in foreign sales.

First Q domestic sales were $15.5 million versus $17.2 million in the earlier period and against $15.1 million in the fourth quarter of fiscal 2010. 1Q 2011 international sales were $9.9 million versus only $6.8 million in the year earlier period and $9.7 million in the fourth quarter of fiscal 2010. Q1 sales breakdown is now 60.9% domestic, 39.1% foreign, as compared with the year ago results domestic 71.8% and international at 28.2%. Disposable sales declined 8% in the US for Q1, disposables margins also declined by 3.5 points in Q1 compared with the same period of last year, mainly due to higher priced raw materials and an extreme competitive pricing environment. Sales of disposables which are likely the product of choice for oil spill remediation were not impacted by Gulf of Mexico related demand until after the end of the first quarter.

I will address international segments now. As you know we have spent the last few years building our international presence as we view the most significant opportunities to be represented by higher growth international markets. Lakeland and its subs now sell product in the following international markets, Australia, Brazil, Chile, Argentina, Ecuador, Colombia, Peru, China, Philippines, Thailand, Malaysia, Indonesia, Singapore, all of Europe, Middle East and India. In the first quarter we commenced sales out of two new countries, Russia and Kazakhstan.

For illustrative purposes, some revenue highlights for our more established international operations. I will read you percentages of Q1 growth in dollars quarter over quarter, year-over-year. Brazil 10%, Chile 19%, UK was 51%, external sales from China 63%, India was 173% on an admittedly small base and Canada was 37%. India due to an improvement in global demand, a new management team and a consolidation of earnings into a single universal line to be offered through all of our global businesses, we are pleased to report an increase of revenue to $0.5 million in Q1 from $200,000 in the same period a year ago. We are now marketing product from India through our sales channels in China, Canada, Chile, Europe, and the US as well as in country in India. Margins improved due to higher volume and efficiencies, business in India is still operating at a loss but the loss has declined and we believe it will be profitable sooner than anticipated.

Australia has no real operations as we have a large distributor serving that market, products are sourced from manufacturing facilities mostly in China with other products from US, India and Mexico. We are using West Farmers, a large distributor for Australia who are selling products in that country bearing the Lakeland brand. Supports our global branding initiative. Over the last few quarters we have been selling product in China, in the China market through direct sales efforts as well as through products sourced from our Chinese manufacturing operations as well as specialized products from our other manufacturing facilities around the world.

European sales increased to $1.3 million in the first quarter from $800,000 in the prior year. Demand continues to be present in this region. In Brazil, which we entered through an acquisition in May of 2008, we have manufacturing sales operations representing a good sized contribution to our overall financial results. I should note from this Latin American hub in Brazil and also in Chile we have begun to expand into neighboring markets such as Colombia and Argentina which are all relatively new operations but experiencing a high level of proposal activity. For Brazil, sales in Q1 were $2.9 million compared to $2.6 million in the prior year.

Gross margins were $49.4 million versus $46.6 million in the year ago period due to larger bid contracts and favorable exchange rates. At the end of the first quarter we recorded a charge of $1.6 million relating to a back tax issue pertaining to our business in Brazil. Prior to our acquisition of the business the previous management had routinely imported raw materials through a port in a neighboring state in that country. This activity was facilitated by an import broker, but we had ensured that the proper taxes were paid. These materials were then trucked from the port to the manufacturing plant in the neighboring Brazilian state, where the operations are domiciled.

At that time, the management of the business obtained a legal opinion for this process and the associated taxation, which they had relied on in good faith and based on internal analysis, we stopped using this port in April of 2009, suspended the practice. In October of 2009, the Brazilian subsidiary received an audit notice from its home state, which said that the taxes paid to the neighboring state should have been paid to the home state. The accumulated amount at the time was BRL4.8 million with a notification also including assessed fines and interest of an additional BRL5.9 million for a total of BRL10.7 million. It is about $5.8 million.

We turned this matter over to Lakeland's advisors and we had originally been told it was likely we would prevail. We recently learned, however, there was an adverse ruling in the Brazilian Supreme Court. The Brazilian state in which our operation is based has announced an amnesty for this tax, paid between 2004 and 2006, whereby if the taxes claimed are paid by the stipulated date, the interest and penalties will be forgiven. According to the fiscal regulation of Brazil much of this amnesty payment will be recouped as credits against future taxes due. Since these taxes have already been paid, but to the other state, Bahia, which is the state we operate in, will allow this amnesty payment to be recouped as credits against future taxes, but only to the extent they would equal the taxes already paid to the other state.

These claims, our attorney informs us that BRL1 million, about $0.5 million will be successfully defended based on the lapse of statute of limitations to about BRL300,000 reals and $200,000 based on state auditor misunderstanding. Small amount of BRL200,000, about $100,000 will be paid by amnesty and defended by a different attorney. This amount was already included in a total amnesty program of BRL3.5 million, about $1.9 million, and this total amnesty program amount was paid on May 31. The Company also intends to offset taxes paid in this back tax reconciliation with funds set aside in escrow as part of the acquisition in May of 2008, which was set aside for contingencies just like this. To date, a little over $0.5 million from the escrow has been released and likely we will file a claim against an additional about $1 million.

There is an additional exposure for VAT taxes for the period of 2007 through 2009 in the amount of approximately $3.3 million, of which $1.9 million is eligible for future credit. The $1.4 million is subject to indemnification from the sellers and the Company intends to pursue this claim. It is important to note that any future collections of further escrow moneys, indemnification collections from selling share holders and any potential negligence suits against responsible third parties will be booked as future profits offsetting this quarter's write off of $1.6 million. Further, in our operations in Brazil, we have terminated for cause certain members of the management team, and promoted others from within to take their place. We will take a charge of $200,000 to the second quarter relating to costs associated with the terminations. These costs will be run through the Brazilian operations, which have been and are expected to continue to generate attractive profits for Lakeland.

Consolidated SG&A expenses in Q1 were $6.1 million compared to $5.3 million in the same period and $6.1 million in Q4. Higher SG&A in the most recent period reflects costs associated with our international growth strategy, including start up expenses for new regional entries, expansionary efforts in certain of our more established foreign operations. Expenses in the quarter also include exposure to foreign currency movements, such as unhedged losses from the euro in China. Cost saving initiatives implemented several months ago are expected to have an impact beginning in the second fiscal quarter to reflect the new DuPont agreement. Later in the year we will implement additional cost savings initiatives, primarily in the US from reduced requirements for logistical and related support, as we will no longer be making standard products from DuPont material, and therefore will not need to procure raw materials, ship them to China, return ship the finished goods here, which will then have been transported and stocked in our warehouses. Combined cost savings initiatives result in about $2 million in annual savings, not to mention having a favorable impact on our inventory turns and also reducing our working capital requirements.

The Company's net loss in Q1 was $1.3 million compared to income of $100,000 for Q1 a year ago, $0.25 a share loss compared with $0.02 profit a year ago and the decrease in net income is obviously resulting from this $1.6 million charge from VAT tax expense in Brazil. Excluding that, the Company would have reported net income of $200,000 in Q1, which would have been 143% increase compared to the same period in 2009. Improved profitability before the VAT tax expense reflects an increase in sales and higher margin contributions from an expanding base of international revenues, and favorable tax benefits, partially offset by higher operating expenses, which in large part reflect the Company's international growth strategy.

Turning to cash flow and the balance sheet, we generated $5 million of cash from operations in Q1, mainly as a result of operating profits and a reduction of $4.9 million in inventory levels down to $33.7 million at the end of the quarter from $38.6 at the beginning of the fiscal year. This cash generation was partially offset by net loss for the quarter and other adjustments stemming from the Brazil VAT tax issue. During the first quarter we reduced our bank debt by $4.6 million, outstanding balance of our bank debt at the end of the first quarter was $5 million, and we're targeting further modest reductions in Q2. We ended the first quarter with cash of $5.7 million, increase of $600,000 from the beginning of the year, bank facility allows total borrowings of $23.5 million, at an interest rate which is presently below 2%.

Given our borrowings at the end of the first quarter, there was a remaining amount of $18.5 million available, of the total, we're allowed to use up to $8 million of the cash we're permitted acquisitions subject to certain conditions. The Company's book value was about $13.30, therefore our share price is trading at a discount of about 25% to book value, current ratio is 4.4 to 1 and working capital is $49.5 million and that compares to our enterprise value of $55 million.

That concludes my remarks, and I will turn the call back to Chris.

Thanks, Gary. Before we turn the call over to the audience for questions, I would like to summarize some of our forward highlights and investment merits for our shareholders and other followers. Looking ahead, a key element of our growth strategy is the attainment of market share internationally, and maintaining our level of business domestically. To this end, we have been active in bidding on larger projects and moving up the value chain toward the production and sales of higher margin garments, while broadening the product lines offered by each of our international sales operations. As a result of these efforts, we have been successful in expanding our customer list and distribution channels. We envision overall revenue growth and margin improvements with the softening of the seasonality given our more globalized presence.

We intend to demonstrate growth on the top line and the bottom line for all of fiscal 2011, exclusive of the Brazil VAT tax issue and absent shifts associated with larger contracts we'll see an overall increase in our margins given the revenue mix shifting toward international sales. Our balance sheet should remain strong in 2011. The increase in sales and profits for the year along with our healthy balance sheet, and access to credit positions us to seek opportunistic acquisitions, to further accelerate our growth rate, and enhance our global presence. I will now turn over the call to the operator for the Q&A session.

(Operator Instructions). Your first question will come from Sheldon Grodsky with Grodsky & Associates.

Good afternoon, everybody. In the press release, you said there were two people terminated for cause in Brazil, and so I assume something bad happened. Was that related to the value-added tax --

Only indirectly. That would have -- we just found out about the VAT tax issue and how serious it was only in the past week, which frankly is why we ended up having to defer the timing of this call. We were working on preparing to terminate these people for cause before this. There is a whole host of documented breaches of contract which we were prepared to do long before we found out about this. There are really two separate, intertwined issues in Brazil.

The terminations were not a result of fraud or embezzlement or anything that would affect earnings. That's key to understand. The costs are really legal costs in terminating them and, you know, protecting ourselves legally against a termination for cause.

I assume that it would be a fair statement that the company was blindsided on the value-added tax.

That is more than a fair statement.

Yes. We only found out about it Thursday, last Thursday, so we're still investigating other avenues to avoid paying these taxes totally. We don't know that we will be successful, but one thing we do know is that an escrow was set up specifically for this reason, so we feel somewhat confident that we'll be able to call on the escrow to repay the tax. When we do that, then what was a $1 million loss becomes a $1 million gain, and the gain that we may in the future report, once we break the escrow will be as meaningless as this loss, but I'll turn this over to Gary.

To some extent we're kind of a captive of the accounting rules here. The accounting rules allow up to a one year look back period when have you an acquisition. When you have an incident like this that a liability arises, an unexpected liability arises prior to the acquisition, you have up to one year and if this had happened within the first year of the acquisition, we're now past two years, remember, we would have reported this instead of taking a $1.6 million charge, we would have reported it as simply an adjustment to the purchase price, and in effect added it to goodwill essentially.

In the meantime, this is a very complicated issue because the way this purchase price was structured, is we had a down payment and we had a supplemental purchase price based on an earnout. The earnout was based on a multiple of calendar year 2010 EBITDA. Needless to say we doubt very much that at this point that there will be a supplemental payout, but at the same time, when we terminated two of the three sellers for cause, there are some issues that cross relating from the management agreement which we terminated, to the stock purchase agreement and the supplemental purchase price.

We are presently I guess in a period -- we're trying to negotiate an applicable settlement with these two people on a comprehensive basis, not just their termination, but their rights under the supplemental purchase price. At this point there is nothing settled. We could end up in arbitration or we could have a settlement. We do expect to get a big chunk of this back as Chris said, and as soon as we can break escrow there is $1 million still in escrow.

We got one of the three sellers did release the escrow funds and that was offset against the charge that we took, about $1 million remaining in escrow and as soon as we can break escrow when we get that the accounting rules did not require -- did not allow us to offset that because we don't actually have it in our possession. We have not broken escrow at this point. Had we been able to break escrow I would have counted that as an offset to the charge. We do expect to break escrow and whenever this $1 million comes in, we will report that as a gain which will largely offset this $1.6 million loss.

Thank you.

Your next question will come from Doug Ruth with Lenox Financial Services.

Hi. Sort of a complicated report, but overall I am pleased with the sales growth and the future, what we can see happen during the second quarter. Can you talk a little bit about what the morale might be in the Brazil operation now?

Very good question. Actually I made it a point after meeting in a lawyer's office I went back from Sao Palo to Salvador where our operations are, and we held kind of a staff meeting, and almost like the kind of like a presidential press conference almost where we had all of our staff and peppered questions away, and we made it clear that he had a number of his relatives involved also, so we had one round of terminations, and that was it, and the morale had been very poor prior to that. We believe everybody who was there now is very happy where they are, and I think everybody's morale is quite good, and we just got another projection from Brazil and without quoting numbers, I think our Brazil operation looks very strong going forward. We are very comfortable with our numbers going forward.

And what about this, you had talked about in the past that there were large sales with the turnout gear. Is that some of the revenue growth this happened during the first quarter?

Sure. That's a large part of that -- that's their number one product. That's the largest product in Brazil, but most of that is sold via large bid contracts as opposed to smaller orders.

And so some of that large bid contract was fulfilled during the first quarter?

Yes, it was, and we have -- we have others that we're looking at that are in our projections going forward. It depends on the bids.

Yes, so there is, possibly could be some additional orders from Brazil, some larger orders coming in during the second quarter?

Second and some in the second that we're looking at third quarter was where we're really projecting some of the large bids to really hit us in the third quarter.

Third quarter.

I can say also that in response to your question if you remember in Q4 we had a purchase order from the Rio De Janeiro fire department. We had a second purchase order that we did fulfill in Q1 in part which represents some revenue in April, and we do expect the third and final one to be in Q3 somewhere.

Okay.

Again, that's projections. Even though you win the bid, you can't actually book it as backlog until you actually get the PO, so that's in our projections, but we have not gotten the PO.

Okay. One of the things that you have been criticized for was the glove business and what was happening in India and it sounded like there was some significant progress. Could you tell us about what's happening?

We're all out of gloves due to the Gulf oil spill. I mean, every glove we made in India that we had in the United States is sold. They're gone. We're bringing in new container loads of gloves from India, so the Gulf oil spill in essence has probably speeded up our ability to get the India facility to break even, because just essentially the very gloves that we make in India are the very gloves that are the best gloves to use in an oil clean up.

When you see the photos of these workers working on the beach wearing the white bunny suit, which chances are ours or DuPont's and they're wearing gloves, I don't know if they're ours, but they could be. They're the very type of glove that we make. It is a nitrile-type glove.

It is aqua marine colored and they're nitriles because they're synthetic and therefore they're impervious to oil whereas natural latex might not necessarily be impervious to oil.

Is that $7 million backlog, does that include gloves or no?

No. That's just disposables.

Just disposables.

Wow. Is there any way to quantify what the backlog of gloves might be?

We sort of suspect it will be as much as we can make.

Wow. That's terrific.

With the Gulf oil spill it is just difficult to tell how long this is going to go on, but we sort of suspect that the clean up will go on for quite a long time. When we look at the Exxon Valdez that went on for 18 to 24 months after the spill and here we're looking at the swamps in Louisiana and much money is going to be devoted to cleaning the grass weeds that are soaked with oil. It is going to go on for quite a while and quite frankly nobody, I mean nobody in the United States has inventory. KC, Kimberly Clark, DuPont, ourselves, we're all out.

The whole industry is in a stock out position at this point.

Wow. Can you talk about then what's happened in Australia? It sounds like there has been large progress there as well.

Well, we have the second largest distributor in the country. We decided to go with them rather than set up sales offices, which are quite expensive to do in a developed country like Australia. As they get our products they're getting much of their salesforce is becoming much more familiar with our products and so they grow incrementally.

Then what we have the opportunity to do is once they're comfortable with Lakeland, and right now they're primarily selling the disposables, is then to introduce our glove, to introduce our cottons, so introduce all of our other products to this one distributor, as they get a real comfort with Lakeland and with Lakeland products. It is a good market, and we have an opportunity here for a number of years to continue to increase our penetration with the products that Australia is selling, and to add products to that Australian distributor.

So it has been a very positive relationship so far?

Very positive. Hopefully it will go on for years and continue to grow for 10 or 20% for years to come.

And you feel like you chose the right partner there?

Yes. They're very good. They pay on time. They're easy to work with, great relationship.

Gary had mentioned that you had disclosed that you had a backlog of $7 million. Can you tell us how big the backlog is now or --

It is bigger than that.

Yes.

Not going down.

It grows by a couple hundred thousand a day.

Wow. Okay. Well, sounds like ultimately the Brazil situation will work out.

I am sort of committed to getting that money back, so I am really committed to, we have a $1.6 million charge and I am committed to getting -- I can't guarantee it but boy I am committed to getting all of that back. It may take some legal fees as an offset.

Basically in your mind you -- you're offsetting that $1.6 million charge and you had a positive -- you had a 143% earnings growth in this period.

Right.

That's your -- that's your position, I mean that's how you're viewing it mentally.

The way I view it mentally is this is GAAP, you have a big write off and if we're successful in recovering the moneys out of escrow and that's exactly what escrows are for, then we have to report an equally stupid profit. It is not an operating profit, and these are tax issues.

It is not really an operating loss but GAAP is forcing you to --

Yes, that's why we're reporting it below the line and below operating profit.

Yes.

Keep in mind we do have a claim against the sellers for indemnification over and above the escrow, and we will look to enforce that claim.

Yes.

We also may look to the third parties for indemnification also.

Okay.

Such as the logistics house that got the Company's management involved in this, but as I said, it is doubtful that we'll be paying any supplementary purchase price also, so we were looking at that at being a substantial amount next year, and now we're not looking at that being really anything, but we'll see whether we can make a comprehensive settlement because we want to move forward here with Brazil.

That's the best thing. Minimal litigation costs.

Yes exactly.

Thank you. That's the end of my questions.

Thank you, Doug.

(Operator Instructions).

We appreciate your participation in Lakeland's first quarter fiscal 2011 financial results conference call. As we are committed to delivering value for our shareholders, we believe Lakeland will continue to effectively manage its balance sheet, control expenses and execute its strategy for long-term growth. Please feel free to call us to discuss the Company's operations or to schedule a meeting with management as we bring our investment story to prospective investors in the months to come. Thanks again and goodbye.

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.