Operator:.

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 in nearly two decades that is not being led by Chris Ryan.

It is an honor to succeed Chris as our CEO. He held the title through the end of our fiscal year 2020 and it is fitting that it was an historic year, marked by the highest levels of revenue in the company's history for the fourth quarter and full year alike.

Under Chris' leadership, we've made incredible progress in replacing DuPont and Tyvek-related sales with our own products and taking considerable market share away from them and others, while expanding and transforming the company to become a major player in the global personal protective equipment, or PPE market.

As a founding investor in Lakeland and a member of its leadership team for more than 30 years, we are fortunate to continue to drive forward with Chris as our Executive Chairman as of February 1.

I'm fortunate to have worked alongside him for the past 16 years, most recently as Chief Operating Officer before being appointed CEO, and I share his vision for growth for Lakeland.

So with a focus on strengthening our management team and introducing new perspectives into Lakeland, we were pleased to add Allen Dillard as our Chief Financial Officer in the middle of fiscal 2020.

This team has made considerable operational and financial progress this year, and we continue to work very hard to address our organic growth initiatives as well as our response to the COVID-19 pandemic. Lakeland's leadership team is bolstered by a deep bench of talent globally, particularly within our senior and middle management ranks.

Our managers coordinate and direct the efforts of approximately 2,400 employees worldwide. The differentiating term here is employees, since our key customers rely, or our key competitors rely predominantly on outsourcing manufacturing.

Owning our manufacturing facilities, managing our own supplier relationships, and having our own employees is a significant competitive strength. In the aggregate, it equates to manufacturing resilience. Our employees have risen to the challenges presented by COVID-19.

We have been able to add production capacity, move production between facilities, work with our supply chain partners to assure timely delivery of raw materials, and distribute garments from our various manufacturing and warehousing facilities around the world as demand and market conditions necessitate.

In so doing, we remain focused on supporting our day-to-day customers and responsibly addressing COVID-19-related demand. We are confident in our ability to build on the success achieved in fiscal 2020 to navigate the challenges and opportunities presented by COVID-19.

However, before we can service that demand, our first duty is to ensure the safety of our team globally. We are pleased to report thus far that our workforce is healthy and continues to abide by all relevant safety guidelines.

I'd like to congratulate our employees who have risen to the occasion to keep our workplaces and their communities and families safe, while contributing to our efforts to increase production.

Lakeland's manufacturing facilities in China and Vietnam and India produced disposable protective garments and chemical suits, including our popular line of sealed seam garments. These types of garments afford the wearer maximum protection from infectious agents and are commonly requested during viral outbreaks such as coronavirus.

The company is experiencing heightened demand for these products, and last month we announced that Lakeland was accelerating its previously planned expansion of our sealed seam manufacturing capacity by 30%.

In the last two years, Lakeland has invested approximately $6 million to expand its global manufacturing footprint into Vietnam and India, update and add IT systems, improve efficiencies, and increase margins. These investments have proven not only timely, but effective as evidenced by our current results.

Our fourth quarter saw a continuation of strong demand we experienced in the third quarter in the Americas and an improvement in our sales in China to the extent that we were on a pace for another quarter with revenue in excess of $27 million and record annual revenue of about $107 million.

And this is before the addition of late fourth quarter demand of approximately $1 million for the coronavirus outbreak in China.

In our fourth quarter results, we reported not only an increase in revenues to a record level, but improvements in our gross and operating margins as well as all major financial performance metrics including further improvements to our balance sheet. Allen will address many of these in his remarks.

We have ample liquidity to advance our ongoing business initiatives while aiding in the exigent circumstances relating to the coronavirus outbreak by moving our previously planned capacity expansion forward by approximately nine months from the first quarter of fiscal year 2022 to mid-April and May of this year.

The increase in our seam sealing capacity allows us to meet our immediate coronavirus-related demand, combined with our regular industrial demand and have increased capacity required to continue revenue growth when the coronavirus demand subsides.

Our manufacturing approach even for times of emergency has always been to place a priority on satisfying the needs of our traditional customers. Our organic growth has been robust for a few quarters now.

COVID-19 demand, significant as it is remains incremental and requires management of our growth so that we do not trade one customer's protection for another customer's protection. It is our mission to continue to grow organically in excess of the overall market, which is estimated at approximately 7% worldwide.

We've exceeded this growth rate in both our fiscal 2020 third and fourth quarters even without estimated COVID-19-related sales. Since late January 2020, we have fielded orders in connection with what we believe is demand arising from the coronavirus outbreak.

Since the large majority of our orders come in through our globally diversified customer base of distributors who then resell the garments, it's difficult for us to ascertain whether products are being purchased for stocking purposes in anticipation of future orders or for immediate use by end users.

For this reason, we are not disclosing specifics on the orders being received prior to our quarterly results report as some of these orders are likely being held in inventory by distributors and end users for future use. This is often the case during crisis situations.

But the COVID-19 pandemic is having an unprecedented impact on most businesses in the overall global economy. In China, Lakeland personnel returned to work four days prior to the end of their scheduled Chinese New Year holiday in order to meet the demand for protective garments in Wuhan.

Since returning to work in China, our facility has been running at full capacity for 12 hours a day on all coronavirus-related lines. Our first shipments for coronavirus-related orders took place in the last two weeks of our fiscal fourth quarter.

And on February 14, 2020, we increased our hours of operation in our Vietnam and India plants, which were previously curtailed in order to draw down inventories from approximately 40 to 45 hours per week to 12 hours per day seven days per week.

In aggregate, we estimate these schedule changes amount to a nearly 50% increase in capacity above our curtailment schedule at about 20% above our normal operating schedule for products with COVID-19 application. The additional seam sealing equipment once installed will further increase this capacity in Vietnam.

Lakeland was well positioned for an emergency response at the onset of the coronavirus.

We have leveraged our inventory position previous investments in ERP planning and logistics tools and flexible manufacturing platform with our considerable experience in other emergency events to formulate a COVID-19 response plan that will sustain our strategic growth plans so that we emerge from this event in a position to continue our healthy organic growth rate.

To this end, Lakeland's priority through these kinds of events is to remain focused on satisfying the needs of our traditional customers and to service emergency demand to the extent that we have excess capacity or to the extent that we can quickly increase capacity.

This focus on our traditional markets allows us to develop additive new customer relationships and increased market penetration that serves as a hedge against economic downturns or excess inventories within distribution channels. Our plan is working.

Our current order backlogs have filled our manufacturing capacity through July and August for some products.

This has not only ended our manufacturing curtailment but now has us running at maximum capacity with inventories reduced to more normal operational levels as we seek to balance COVID-19 emergency need with the additional demand that is not coronavirus-driven within some of our vertical markets.

We have orders contracted for delivery beyond August the 1 of 2020, and additionally we have significant new accounts that are in development for the second half of the year.

Forward bookings and potential new accounts combined with our many market drivers, market diversification and resilient manufacturing capability position us well for the second half of the fiscal year FY 2021. But these are extraordinary times and we must be prepared for any eventuality.

This includes the possibility of temporary closure of our customers or suppliers manufacturing facilities and the uncertainty of the oil sector, a market from which we derive approximately 20% of our sales. Perhaps the preliminary oil production reduction agreement between OPEC and its allies announced last week will boost this industry.

Our focus will remain on organic growth initiatives, inventory management and the generation as well as preservation of cash, so that we may invest accordingly to build upon the terrific year that we had in fiscal 2020. That concludes my remarks. I will now pass the call to Allen to provide a more thorough review of the company's financial results..

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 to the loss of a large customer. Sales in Asia were up just under 1% at nearly $18.2 million, where China is our largest market and continues to experience limited economic growth. Sales in Canada were up $1.1 million or 12.6% driven by demand for fire products or turnout gear.

And finally, sales in Latin America increased $1.7 million or 25.3% as we expanded our customer base in Chile and Uruguay.

As previously disclosed in the third quarter of fiscal 2020, we initiated a curtailment of production and staff in Vietnam after having built up sufficient inventories that we believe would be needed given the disruption we had anticipated with the ERP system implementation.

The curtailment aid into our gross margins during the middle of the fiscal year. The ERP system has now been in use for three quarters and is yielding most of the intended improvements to enable enhanced efficiencies and productivity, as nearly half of our total revenues are processed using these capabilities.

That said, we did have a material weakness in our control over financial reporting pertaining to inventory valuation that has been reported in accordance with SEC reporting guidelines and have identified and implemented a specific review and remediation program. We will provide updates on that remediation as we progress.

Aside from this issue, the ERP system, higher revenue levels and margin improvement strategies, including a price increase for select products during the year have led to higher gross margins. Tariff increases on products made in China and sold in the U.S.

had minimal impact on our financial results, since we have been able to ship most of the manufacturing of these products to our Vietnam and Mexico plants, or instituted price increases to cover the differential Gross profit of $10.6 million for our fiscal 2020 fourth quarter increased from $6.9 million for the same period of the prior year.

Gross profit as a percentage of net sales was 37.7% for fiscal 2020 fourth quarter, an increase of 10 percentage points compared to the same period in 2019, and was driven by volume, price increases and fully reserved stock that we were able to sell into the COVID-19 demand.

For fiscal 2020 gross profit was $37.9 million, an increase of $4 million or 11.8% from $33.9 million in 2019. As a percentage of net sales in fiscal 2020, gross margin was 35.2%, up from 34.2% in 2019.

Operating expenses increased in the quarter and full year as our business substantially grew, but decreased as a percentage of revenue, a reflection of our vigorous attention to cost management efforts.

Operating expenses increased 5.5% to $8.9 million for the three months ended January 31, 2020 from $8.4 million for the three months ended January 31, 2019. Operating expenses as a percentage of net sales was 31.6% for the three months ended January 31, 2020 as compared to 33.7% for the three months ended January 31, 2019.

The increase in operating expenses, primarily relates to higher shipping, currency adjustments and commission and compensation pertaining to the higher sales volumes partially offset by reduced G&A expenses, primarily equity compensation and legal fees.

Operating expenses of $32 million in fiscal 2020 increased $1.9 million, or 5.6% from $30.6 million in 2019 while remaining at approximately 30% and 31% of sales respectively. Lakeland reported operating profit of $1.7 million in Q4 2020, up from a loss of $1.5 million in the prior period.

Operating margins were 6.1% for Q4 2020 and were a negative 6% for the prior year. Operating income in fiscal 2020 of $5.9 million increased $2.3 million or 65.4% from $3.6 million in 2019. All major operating regions, except Mexico were profitable or breakeven in fiscal 2020. On the higher pre-tax income, overall taxes increased.

Income tax expense consists of federal state and foreign income taxes. Income tax expense was $500,000 for Q4 2020 and $2.5 million for the full year of fiscal 2020 as compared to $400,000 in Q4 2019 and $2 million for all of fiscal 2019.

Fiscal 2020 income tax expense included a non-cash charge of $1 million associated with the GILTI component of the Tax Act of 2017. This is more completely discussed in our SEC filings. As a reminder, we have substantial tax shields pertaining to our U.S. and corporate income tax.

However, we are subject to taxational profits in certain of our foreign subsidiaries, as well as the new GILTI tax, which has been impacting us this fiscal year. Lakeland's net operating loss was approximately $15.9 million at January 31st, 2020 down from $20.6 million at the beginning of the fiscal year.

Fourth quarter 2020 net income was $1.2 million or $0.15 per basic and diluted share compared to a net loss of $1.9 million or $0.24 per basic share in the prior year.

Net income for fiscal 2020 was $3.3 million or $0.41 for basic and diluted share which included the noncash GILTI tax expense compared to net income in fiscal 2019 of $1.5 million or $0.18 per basic and diluted share.

The improved results in fiscal 2020 reflects higher sales and gross margin expense management, and operating efficiencies due in part to the ERP system and factory utilization. The company had 8,005,927 basic shares outstanding at January 31st, 2020.

37,953 shares were repurchased in the fourth quarter as part of the company's $2.5 million stock buyback program that was approved July of 2016. Approximately $500,000 was spent to repurchase shares in fiscal 2020. To-date $1.7 million has been spent to repurchase shares with just over $800,000 remaining available under the buyback program.

At January 31st, 2020 Lakeland had cash and cash equivalents of $14.6 million, up from $9.5 million at the end of fiscal third quarter and an increase of $1.8 million or 14% from $12.8 million at the beginning of the fiscal year.

Inventories were increased by $1.9 million year-over-year, but were down over $3 million from Q3 as we continue to focus on improving cash conversion. We actually benefited from this increase in inventories as we began to respond to COVID-19 demand in late Q4.

At the present time, our sealed seam finished goods inventories remain below normal stocking levels in all of our warehouses around the world and we are now quoting July deliveries for new orders in many cases.

We're servicing coronavirus orders only to the extent we have capacity beyond what is required to service our traditional customers and organic growth targets. We believe this process upholds our long-term growth strategies, supports our commitment to our customers, and contributes to the COVID-19 response.

Accounts receivable at year-end increased by nearly $1.2 million due to higher sales as DSOs remain relatively steady at 60 days or less. Accounts payable increased by $1 million and shareholders' equity increased by $1.9 million.

Total assets reported increased $4.7 million in the year from 90 -- from $94.7 million to $99.4 million in part due to the impact of the new lease accounting requirements. Total debt outstanding at January 31st, 2020 was $1.2 million down $100,000 from $1.3 million at the end of fiscal 2019.

The company has no borrowings outstanding on its $20 million revolving credit facility. The company is currently negotiating a new revolving credit facility to provide for greater financial flexibility and reduced administration expense.

Working capital of $66.9 million including cash at January 31st, 2020 increased $1.8 million during the fiscal year. Capital expenditures were approximately $300,000 during the fourth quarter of fiscal 2020, down from $600,000 in the prior year period. For the year, capital expenditures was $1 million down from $3.1 million in fiscal 2019.

Major investments were made in prior years as Charlie mentioned during his remarks. The majority of the spending in fiscal 2020 was allocated towards extending the global rollout of the ERP system and additional manufacturing capacity in Vietnam and India, which -- most of which has been substantially completed.

Fiscal 2021 CapEx is budgeted at approximately $2 million, primarily for global ERP rollout and strategic capacity increases. Adjusted free cash flow in fiscal 2020 was over $4 million, an increase of $3.8 million from $500,000 in the prior year driven by increased profitability and the reduction in capital expenditures.

We have seen efficiencies come into play to enhance our results and we will continue to manage all areas of expenses as we invest in our growth. The operating leverage in our business on higher sales volume has enabled us to drive better returns in 2020.

We believe there remain opportunities for top line growth and further performance improvements using the ERP system along with other means for increasing margins and cash flow through fiscal 2021. This is of course amid the current business conditions, which seem unpredictable given the economic impact globally from COVID-19.

Challenges remain particularly with COVID-19, which has been modifying the outlooks and the business decisions for many industries around the world.

In turn, we have seen in the fourth quarter and upon entering into the first quarter that certain of our newer high-margin products are not the priority with demand globally centered around disposable and chemical product lines.

In any case, Lakeland is in the best operating and financial condition it has ever been and we are excited for what lies ahead in fiscal 2021. That concludes my remarks. I will turn the call back to the operator to open the call for questions..

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..

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..