Q1 2021 Lakeland Industries Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the Lakeland Industries first quarter 2021 financial results Conference call.
All lines have been placed on to listen only mode and the floor will be opened for your questions and comments following the presentation.
Before I 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 excuse <unk> Securities Exchange Act up 1934 [noise].
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 nine to 2020.
Forward looking statements are based on current assumptions and analysis made when a company in light of its experience and its perception of historical trends current conditions expected future developments and other factors that believes are appropriate under circumstances.
These statements are subject to a number of assumptions risks and uncertainties that are factored in the company's filings with the Securities and Exchange Commission General economic and business conditions that business opportunities that may be presented to you and perceived by the company changes then law or regulations and other factors many of which.
Sure beyond the control if the company.
Listeners are cautioned that these statements are not guarantees of future performance in the actual results or developments may differ materially from those projected any forward looking statements.
Oh subsequent forward looking statements attributable to the company our persons acting on its behalf are expressly qualified in their entirety by these cautionary statement.
At this time I would like to introduce your host for this call Lakeland Industries, Chief Executive Officer, <unk> Charles Robinson.
And Lakelands Chief Financial Officer, Allen Delevered, Mr. Everything you may begin.
Thank you good afternoon to you all and thank you for joining our fiscal 2021 first quarter.
Natural results conference call.
I'm joined today by wake ones, Chief Financial Officer, Alan dealer.
During our year end conference call, we talked about Lakeland expanding in transforming to advance its leadership position in the global personal protective equipment or P.P.E. market.
We believe were.
Results for the first quarter fiscal 2021, validate our commitment to leveraging our diverse manufacturing facilities and resilient supply chain with our new centralized data driven planning systems to propel wake went into a leadership position within the global P.P. market.
With our first quarter fiscal 2021 performance there should be no question that we have the necessary personnel facilities equipment supplier relationships in vision to be at the forefront of this elite group.
Challenged by pandemic of unprecedented proportion or people rose to the occasion aided by our investments in manufacturing facilities and information technology.
As a result with our performance in the first quarter, we provide a glimpse of what our financial performance could be as we utilize our materially improved financial position to continue processing systems improvements throughout Lakeland and work two weeks band and develop.
Our manufacturing capabilities for the future.
More importantly, we provided relief amid the coded 19 outbreak both here and abroad.
We are grateful to our global workforce and management team for their dedication to their co workers, our customers and those in need.
They're adherence to our safety protocols at work in at home and their willingness to work extended hours led to record quarterly sales, which increased by an impressive 85% to nearly $46 million.
Leveraging our new lease centralized operating systems and emerging data centric planning processes, we were able to respond to the demand for our products relating to the cobot 19 pandemic, while continuing to support and expand our traditional industrial customer base.
Globally in the first quarter, we have added in excess of 150, new industrial end users with demand resulting from shortages.
That are attributable to increased covert 19 demand, but not necessarily associated with cobot 19 applications.
Well over 180, new customers were added in health care and pharmaceutical sectors for what we believe our orders relating directly to Corona virus defense.
[noise] gross margin in profit.
Also were at record levels.
Several factors contributed to our increase in gross margin. These include higher prices for new customers. Many of these new customers were unable to secure products from other manufacturers amid the stress of dealing with kobin demand.
But because we own our manufacturing and it's built a durable and flexible production platform, we were able to flex and deliver when others could not.
You've heard US say this before and we can't say it enough.
As a branded P.P. provider, we are unique in owning our manufacturing facilities around the world.
We do not reply rely on outsourced contractors, and therefore own their supplier relationships and can shift our manufacturing in there in a matter of weeks, sometimes within days, we do not require much as is frequently the case with contractors.
This important differentiator enabled us to scale, our production output to achieve if not exceed our organic growth targets, while contributing to the global pandemic response for emergency protective apparel.
Corona virus related demand added approximately $11.2 million to our fiscal 2021 first quarter sales.
Approximately $6 million of these orders were fulfilled with products already in inventory.
Gross margins benefited from improved manufacturing efficiencies, resulting from a management decision to limit our product offering to only a few core styles during the pandemic period.
This increased our manufacturing throughput beyond the increase in manufacturing capacity due to extended plant operating schedules.
Gross margins also benefited from sales of inventory that had been fully or partially reserved in previous periods.
On a consolidated basis for the first quarter gross margin as a percentage of revenue reached a record 48.6% compared to 30.6% in the prior year period and 37.7% in the fourth quarter of last year, when we had $1 billion.
It's cobot 19 related sales.
The primary elements of our fundamental gross margin improvement strategy include development, a flexible manufacturing capacity.
Increased market penetration into high value markets significant improvement in manufacturing efficiencies.
And extension as higher margin product lines into four end markets.
In our first quarter of fiscal 2021 sales volumes in factory for utilization contributed to our record gross margin.
[noise], having previously built up staffing and inventory over the preceding 18 to 24 months in anticipation of potential disruptions, while deploying a new ERP system, we drew down the staffing in the middle of last year.
With the higher inventory levels, we were able to deliver on kobin related demand in post record revenues as I mentioned a moment ago.
In fact, a majority of the Kobin related orders were fulfilled with products already in inventory, enabling us to attain a sales volume that is significantly above our normal manufacturing capacity and not sustainable quarter over quarter.
Finally.
Amid this incredible demand environment.
[noise] excuse me.
We reduced the number of SK use or product variations in our offering.
This enabled our manufacturing staff to improve yields and manufacturing efficiencies as we focused on fewer partick products for larger runs.
We were able to make quick decisions in the quarter due to the business intelligence in production planning tools afforded us by our new ERP system.
In turn we experienced greater efficiencies in factory floor utilization to drive incremental gross margins on a percentage basis and in dollars.
Given all the aforementioned gross profit in dollars set a quarterly record at $22.1 million in the first quarter fiscal year 2021, a 190% increase from $7.6 million for the same period of the prior year end up 108.
Percent from $10.6 million.
In the fourth quarter fiscal year 2020.
As previously disclosed in anticipation of continued heightened demand relating to covert 19, we commenced manufacturing capacity expansion efforts.
More recently.
We encountered significant price increases in available raw materials and briefly adjusted our manufacturing schedules in Vietnam in China from a maximum schedule of 12 hours per day to a normal schedule of 10 hours per day for disposable products until we could confirm the level of demand at the.
As higher prices.
We have since returned to a maximum capacity operating schedule.
As raw material prices increased we pass those increases on the customers, which led to some deferral or reducing.
Of speculative orders.
Still while we last reported order backlogs.
Filling our manufacturing capacity through July and August for some products. We're now quoting deliveries out to August and September and continue to develop significant new accounts for the second half of the year.
Benefiting from higher sales elevated gross margins resilient manufacturing capabilities and effective management of operating expenses are operating leverage was magnified.
Our pretax operating margin was in excess of 27% another record as compared with less than 6% in each of the last two fiscal years.
Net income in the first quarter jump to a record $8.6 million up from a loss in the prior year.
With this high level of profitability and minimal capital investment, we paid off our remaining debt and added 9 million to our cash balance to end the quarter with 23, and a half million dollars in cash or about $2, a 95 cents per share in cash.
Well Cobot 19 has presented unprecedented conditions that have materially improved our financial position.
We remain on a higher trajectory for organic growth.
And are building an environment of global operational excellence that will benefit our financial performance and organic market share attainment for the foreseeable future.
Cobot 19 likely will impact our business through the entirety of fiscal 2021.
We anticipate continued strong demand through Q2 and believe that higher than normal sales will continue into Q3.
We believe that once the pandemic sick subsides, there will likely be secondary government driven demand as governments around the world seek to replenish and perhaps increase their P.P. stockpiles prior to a possible second wave a virus outbreak in the fall.
The timing for this as always in crisis situations and the aftermath is uncertain.
Some RF cues from government agencies have already been released while others may take up to a year to surface.
Additionally, we believe the private sector will also engage in stockpiling of P.P.E.S. supply channels catch up to demand.
And finally, we are seeing the emergence of institutional cleaning as a new market segment as countries States municipality schools Sports and entertainment complex is the travel industry private businesses and building owners reopened.
Seek to prevent any type of infection, whether it be from cobot 19, or some other outbreak.
For the financial analyst another investors among our listeners.
It is an imperfect exercise to attempt to eliminate the positive and negative effects of cobot 19 to arrive at a normalize first quarter financial performance for like what.
Pandemic response equates to healthcare on an industrial scale and as such sales are for the most part may through our ordinary distribution channels and are not distinguishable from regular business unless the distributor discloses the end user or application.
Yes, they are not normally prone to do and or even less so.
During times of the allocated supply.
The takeaways for like one.
Are there we have developed a resilient and flexible global manufacturing platform.
They diversified and expanding customer base growing brand power for high quality competitively priced Pee dee.
And exceptional balance sheet, and an operating model with tremendous leverage.
That concludes my remarks, I'll pass the call to Alan to provide a more thorough review of the Companys financial results.
Thank you Charlie.
Following addresses my review of the financial results for fiscal 2021 first quarter ended April Thirtyth 2020.
Net sales were a record $45.6 million for the three months ended April Thirtyth 2020, as compared to 28.2 million or the three months ended January 31st 2020, and $24.7 million for the first quarter of last year.
The fourth consecutive quarter, our revenues have exceeded $27 million.
Corona virus related demand as best we can tail added approximately $11.2 million to our fiscal 2021 first quarter and approximately 1 million and our fourth quarter fiscal 20 sales.
Or more balanced view of our financial performance with Koby demand contributions in both first quarter 21, and first quarter fourth quarter 20 period, but not in our first quarter 20 period, I'm, including certain fourth quarter 20 numbers for comparison purposes, where it might be more helpful.
On a consolidated basis for the first quarter of fiscal 2021, U.S. sales were 23.1 million or 51% of total revenues and international sales were 22.5 billion or 49% of total revenues. This compares with you as sales of 12.9.
10 million or 52% of the total and international sales of 11.8 million or 48% or the total in fiscal 2020.
While our revenues are significantly larger our business remains very well balanced from a geographic diversification standpoint.
Drilling down in fiscal first quarter 21 versus first quarter 20 sales in the U.S. increased by approximately $10.2 million or 80%.
International sales increased $10.7 million or 90%.
Among our major international operations sales in the UK were $3 million versus 2.4 million last year sales in Mexico more than doubled to $1.4 million from 600000.
Sales in Asia were up 136% at over $9 billion from 3.8 million.
Canada sales of four point Threemillion, we're up from 2.5 million and Latin America increased to 2.4 million from 1.7 million.
Now, let's look at our product mix diversification.
Disposables, which continue to be our largest product group increased by nearly 153% or 18.9 million to 31.2 million from 12.4 million last year.
Chemical sales were up 75% or nearly $4 million to $8.9 million from 5.1 million last year, both product Grace benefited from organic growth as well as significant coated 19 demand.
Flame resistant or fr products grew modestly.
To $1.5 million from $1.4 million.
Gloves were just slightly higher at nearly 800000.
Hi performance, where products, our newest line, which is marketed to utility companies and similar organizations.
Were up nearly 25%, but this is still a small component of our overall business.
In large part our channel checks suggest that pp purchasing was focused if not refocused and the immediate term to pandemic efforts at the expense of certain traditional industrial usage.
Furthermore, during a significant duration of our first quarter certain end market customers such as those in the construction industry in the automotive sector, which typically contribute about 10% or more to our annual revenues were shut down voluntarily or by government mandate.
The energy energy sector also has had some disruption as we addressed in our fourth quarter commentary. So we're keeping a close watch on this segment, although we're not reporting any meaningful changes in sales.
That occurred in the first quarter.
As a result of the aforementioned issues, we experienced year over year declines in sales for our wovens and high visibility or reflective product groups as.
As of June certain of these trends, including workplace closures and purchasing of disposable and chemical garments over other product groups in the wake of the pandemic have persisted.
Moving onto gross profit.
Gross profit of 22.1 million.
For fiscal 2021 first quarter increased by 14.5 million or by 190% from 7.6 million for the same period of the prior year gross profit as a percentage of set net sales was 48.6% for the fiscal 2021 first quarter an increase of.
Finished points from 30.6% and the prior year period, and 11 percentage points from 37.7% and the fourth quarter of last year. When we had a million dollars akovaz 19 related demand.
Charlie review the key drivers for our gross margin improvement.
So I won't repeat those comments.
With our substantially higher sales volume in gross margin contributions to leverage in our operating model drove substantial increases in profit and cash flow.
And is expected to under the circumstances operating expenses increase in the quarter, but decreased as a percentage of revenue opex increased 24% and $9.8 million for the three months ended April 30 is 2020.
From 7.9 million in first quarter fiscal 20, and 8.9 million in fourth quarter fiscal 20 operating expenses as a percentage of net sales was 21.6% part of the three months ended April Thirtyth 2020, compared to 31.9% in.
First quarter, 20, and 31.6% in fourth quarter 20.
The increase in operating expenses, primarily relates to higher shipping and commissions and compensation related to the higher sales volumes.
Partially offset by a reduction in travel and other associated expenses year over year.
Lakeland reported operating profit of a record $12.4 million in first quarter 21.
From a loss of 315000 in the prior year period, and a profit of 1.7 million in fourth quarter 20 operating margins were 27.1% for.
For the first quarter 2021.
A 1.3% loss for the prior year period, and 6.1% and fourth quarter 2020.
All major operating regions were profitable and the first quarter fiscal 21, which shows a slight reversal for Mexico, which was the only unprofitable major country operation in the fourth quarter fiscal plenty.
On the higher pretax income overall taxes increased tax expense consists of federal state and foreign income taxes income tax expense was $3.7 million for the first quarter of fiscal 21 as compared to 100000 and the first quarter of physical 20 as remain.
And here, we have substantial tax shields pertaining to our U.S. and corporate income tax. However, we are subject to taxation on profits of certain of our foreign subsidiaries.
Lakelands net operating loss for federal purposes.
Is estimated to be 6.6 million at April Thirtyth 2020 down from approximately 15 million at the beginning of the fiscal year.
First quarter fiscal 21, net income was $8.6 million.
Or a dollar eight per basic and a dollar seven per diluted share compared to a net loss of $465000 or six cents per basic share in the prior year.
Improved results reflect higher sales and margin expense management, and the enhanced operating efficiencies leverage and factory utilization.
The company had 7.972 million 423 basic shares outstanding at April Thirtyth 2020.
We did not repurchase any shares in the first quarter as a part of the company's 2.5 million dollar.
Stock buyback program that was approved in July of 2016.
As a reminder to date, we have spent 1.7 million to repurchase shares and still have over 800000 remaining available and that buyback program.
As of April 3rd as of January 21st.
As excuse me as of April Thirtyth, 2020, lifetime had cash and cash equivalents of $23.5 million up from 14.9 million at the end of fiscal 2020.
Inventories were reduced by $6.7 million from the beginning of the fiscal year due largely to a sell through of sales same finished goods driven by Cobra demand.
This product line remains slightly below normal stocking levels and all of our warehouses around the world and we are now quoting deliveries into August and September for new orders in many cases as we've stated we are servicing corona virus orders only to the extent that we have capacity beyond what is.
Required to service, our traditional customers and organic growth targets. We believe this process uphold our long term growth strategies supports our commitment to our customers and contributes to the code at 19 response.
Accounts receivable at quarter end increased by nearly $7.6 million.
Due to higher sales as Dsos remain steady at approximately 50 days accounts payable and accrued expenses decreased by approximately $1 million.
And shareholders equity was increased by $8.5 million total assets increased $8.3 million in the quarter.
For 99.4 million.
To $107.7 million.
The company has essentially no debt outstanding at April Thirtyth 2020.
Which resulted from paying off the 1.2 million dollar term loan that we had at January 31st 2020. The company has no borrowings outstanding on his $20 million revolving credit facility.
The company is currently negotiating a new revolving credit facility agreement that will provide even greater financial flexibility and reduced administration.
Working capital of 77.9 million at April Thirtyth 2020.
Increased from 66.9 million at the beginning of the fiscal year.
Capital expenditures were approximately 200000 during the first quarter of fiscal 2021 flat from the prior year period.
Capex for the year is expected to be approximately $2 million as compared with 1 million in fiscal 20, and 3.1 million in fiscal 2019. The majority of our Capex in the current fiscal year will be for strategic capacity increases as needed continued enhancement.
Factoring efficiencies and extending the phase rollout of our ERP system.
Adjusted free cash flow in first quarter 21 was 11.9 billion an increase of over 12 million from the prior year period, driven by higher sales margins and operating efficiencies as cash expenditures in both periods were approximately flat.
That concludes my remark I will turn the call back to the operator to open the call to questions.
Thank you the floor is not open for your questions. If you do you have a question. Please press star one on your telephone keypad at this time.
Using a speaker phone, we ask that was signaling you pick up your handset to ride the best sound quality again that a star one for any questions or comments.
Well go first to Mike will lag with benchmark.
Congratulations guys, it's nice to see you well prepared to Angeles pandemic is.
Clearly the results are showing that.
Couple of questions first you mentioned briefly.
The current quarter is continuing to see strayed from.
Cobot could you kind of competitive strength, you're seeing now to the extent you saw during the just reported April quarter.
After that with the.
23 million cash plus all the other cash availability you have.
Yeah, I've seen you talk about increasing capacity, 150% could you talk about timing as such in how you see that if you know todays running at full capacity is going to put that offer how that looks and then last question just on pricing.
Obviously, you can pass through the price increases on the raw materials to your customers, but can you talk a little bit about.
Longer term pricing strategy. Thanks.
Thank you Michael we appreciate your initiating coverage of Lakeland and welcome you to your first Lakeland earnings call as a covering analyst.
Welcome aboard thanks.
So it to your questions. The strengths that we're seeing you know in Q2 compared to Q1.
I think the best way to characterize it is.
It is not quite as chaotic the demand is still quite high Q1, I would characterize by a lot of people jumping into the market.
Spiking the demand very quickly people thought that they could make masks are they found out when they tried to ship them into various places around the world that they didnt have the quality required. So some of that demand well that demand has begun to dissipate.
We're seeing the impact of that on raw material supply.
Raw materials are still available, though it increased pricing.
But availability has.
Become a little bit more healthy.
I think.
The departure.
The opportunists that.
Participated in Q1 with regard to demand for raw materials and filling it has now been replaced by.
Governments and institutions that are seeking to stockpile product before the fall in it in anticipation of a potential second wave.
We've seen a number of surprisingly large RF queues come out in the last couple of weeks.
And there's there's even some confusion in those RF cues right now but.
The quantities that we're seeing quite frankly, and the delivery times, the raw materials aren't available to meet those so we we see that demand being pushed out into subsequent subsequent quarters, just simply because the raw material supply is not there right now.
So that I think that takes care of your first question I as far as our using cash to acquire more capacity yeah [laughter].
Because of my answer to the first question. We obviously are are seeking to do that.
As rapidly as efficiently as we can.
As to how much we can add we are somewhat hindered in the application or adding capacity because travel.
Is limited because of the pandemic.
So that makes bringing new sites online getting so were trained is problematic for that and we're working.
To develop methods around that problem as we speak.
And that's.
What was the third or pricing.
Long term surprising.
Right.
Our strategy. Unfortunately, we're watching a certain part of the lower end of product lines become commoditized.
Our strategy to face that.
Up until Cobot 19 was to deemphasize our sales efforts on our disposables and focus moving to the utilities and fire service in woven products, which are higher mark margin products to begin with there's a lot more value added and they are more expensive products.
We have are fortunate.
To have a very good sales team in that area and a good product designer.
Actually so two good product designers and we have.
Product offerings assembled.
That are currently launched unfortunately, the pandemic has somewhat dampened.
Interest in those lines, you know electric utilities.
Huh.
Normally have.
Semiannual stipends to their workers for fr garments that really didnt happen. This spring.
As they were putting them in disposables they were more worried about staying up and running an operational.
And.
Letting people use last year's fr garments.
So our strategy is product related and moving to higher end product lines and exporting those into foreign markets.
Right, whether they're centralized in the U.S.
And just one follow up on the capacity what is your current.
One right now and the capacity you're running at.
Revenue basis.
[laughter].
Yeah, Michael that's not something I want to put out in public for competitive reasons.
In terms of.
Putting a dollar figure on that plus it's highly variable.
In Allen's remarks, I think he demonstrated how much of our woven capacity, we can shift over to nonwovens to grow that part of the business.
Yes, so it's highly variable.
Okay, great. Thank you congratulations great quarter and continued success.
Thank you.
Well go next to Alex Fuhrman at Craig Hallum.
Great. Thank you very much for taking my question and congratulations on I really a tremendously strong.
Corridor.
Ask about the new customers that that you think you've been gaining here lately as a result, the product shortages stemming from from Cove. It sounds like you're picking up a lot of customers. Both on the health care side of things as well as customers that that aren't necessarily directly involved in combating the pandemic that would love to just get a sense.
How you're coming to the determination that you've picked up these new end users and what sort of it I categories that you then users fall in and then you kind of think a ahead over the next year to do you think that there is a strong likelihood that a lot of these end users will continue to use lakeland product in 2021 and beyond that.
No you remember you picked up a lot of business like that.
Coming after Ebola in bird just curious if you've had conversations with some of these new customers and how likely you are to be supplying them in the future after the band.
Uh huh.
Hi.
Alex.
The new customers that were seeing and and Weve discussed it in the comments.
Fall into basically two categories industrial which.
Our largely.
Accounts that have come to us for their regular business.
Their traditional suppliers were not able to meet their demand and we know it because we've tried to sell to them for years.
These are accounts that we would have wanted for a very long time, and we took advantage of our ability to.
Continually source product in our inventory to get in.
And service them, we were selective about the accounts that we did service and tried to only service accounts that we thought would be sticky.
Now, whether we will keep all of their business, we're certainly going to try to do that.
But at the very least <unk> and then in the largest of the customers that we've talked with they have stated that they will no longer be exclusive to their previous supplier, which we're taking to me they're going to keep the door open we were there for them through this pandemic and they're not going to be caught sole supplier again.
Yes.
On the other side of it we had the healthcare and.
Pharmaceutical part of the business that goes into our new clean room.
Business model, which has a higher the higher end of disposables.
That actually isn't so much replacing.
Competitors' products as it is accelerating the acceptance of our products into a certain facilities.
Once your excepted.
Yeah.
They had such significant problems with supply through this pandemic they are going to keep multiple suppliers and they are going to turn product.
Through all of them. So yeah, we do think that a lot of what we have taken is going to stick certainly is all won't and I think as time goes added in the future.
For whatever reason to that you know some people may leave but.
I've got to give it to our sales team I think that they've been highly selective is who they picked in and I'm pleased with their choices.
Right. That's really helpful. Thank you and then if I could just ask about your inventory position I I know that you had had too much inventory for a lot of 2019, and we're working that down on you now have the lowest level of inventory that that the company. It added about three years.
Data sufficient amount to be able to service the demand you're seeing here should we expect to see your your inventory levels that build back up over the course of the year.
I think we have to to look at that.
As to where the inventory is previously you know the it the inventory that you were talking about for the last couple of years. It was very high was in finished goods, that's not where we want to carry our inventory at all and Fortunately that is where much of our depletion occurred.
[music].
In a time like this where raw materials or a concern.
We've actually brought in more raw materials, if we expand and open up another manufacturing facility you know somewhere else in the world that will also increase our raw materials, we don't see raw materials is problematic inventory.
It is the finished garments that we're seeking to control and.
Quite frankly, we're not going to add inventory finished goods inventory back in be up beyond our current levels.
Willingly people are gonna have to justify that inventory if they want us to carry it because we think that operating as close to our manufacturing facilities with regard to product sales.
That maximizes our leverage our financial leverage.
That's terrific well, thank you very much and thanks for a everything you're doing to get the economy back back up and running.
[laughter]. Thank you Alex.
Well take our next question from Jerry Sweeney at Roth capital.
Hey, good afternoon, Charlie and Alan Thanks for taking my call on and congratulations on a good quarter.
Thank you.
Just wanted to talk about the new customers I think 150 on the industrial side 180 on the pharma side.
Is there anyway, you can I mean.
To some degree these are just numbers, but is there anyway, you can sort of benchmark at about.
It's a 10% and increase and potential industrial.
Customers or 10% they could take 10% additional revenue just trying to.
You know create a little bit of a bracket I understand exactly how much.
Growth you saw not just on customer capital revenue side.
Oh, Hey.
And I don't I know, it's not easy question, so but yes.
I will say this.
No just like we service the Cove at 19, we service that largely from our inventory and we tried to use our manufacturing capacity to take new customers right. So I guess, the best way to say it as we we have tried not to knowingly exceed our manufacturing capacity at maximum to attain new.
Customers, because where we do exceed that not deliver we have put ourselves in the same category as their previous suppliers and were low to do that got it.
Makes sense, Okay. I guess, that's helpful. And then I'm just trying to figure out I think it a quarter. There's a few moving parts. So we have about 45.6 million of revenue.
6 million inch change only maybe 7 million was from the inventory side. So that takes us down to like 38, 39 million well you weren't necessarily running at full utilization that 12 hour utilization for the full quarter.
You know if.
If we were to sort of be running at full utilization for that full quarter would have revenue have been a little bit higher I'm, just trying to figure out what.
Q.
On a norm you you're missing some of the some of the components of the growth I I'll, let Alan spin prices. He covered in his comments yeah. That's some of that that's some of the math, Jerry but one of the other things that really help with the throughput in the quarter was you know to two Charlie's comments was one of the S.K. you reduction yeah, we were able.
We were able on a.
Volume basis to push more through the facility.
Oh, just by reducing the number of skews and to your point Yeah. We did have a period during the quarter, where we reduced the operating a hours back to normal in Vietnam in China, as we factored the raw material price increases.
And to the sales operations.
That was that was a big issue for us because the price increases that we saw in a material side, we're very significant.
And we Didnt to Charlie's point, we didn't want to put ourselves in an overhang.
With you know very expensive you know goods without you know demonstrated demand in orders on the back into that so your your your math is is is good. It's the same math. It we've used internally. So I think you could use as a rough model to kind of gauge plus or minus where are we.
Might be at full Max capacity generally got it and it into that.
Jerry I would add that at some point, where we're not there yet.
You know we've reduced the S.K. use to a pan a pandemic level yeah.
Because we need that capacity and so to our customers you know at some point as we start to return to a new normal because that's what it's going to be it's not going to be like it was before the pandemic, but we will gradually add back some of the S.K. use that we kicked out though it will by no means be all of.
So there yeah, that's and really we you know we hope to be able to augment that with.
Additional capacity. So you know we don't have any declawed, yeah, yeah, two or two to two to that part of your question and actually going back to a one of Michael's questions you know.
Over half of the Capex that we that we did employee in the queue first quarter was associated with capacity expansion and you're going to see that spending accelerate a you know to Charlie's point, we're gonna have to managed carefully around you know what travel limitations present themselves, but we are we are full speed ahead.
At two as Dennis as much as that we are will be allowed to continue that investment and capacity expansion and raw materials as a consideration in that right. Now we're we're not nailed to the ceiling in terms of raw materials demand, but it wouldn't take.
A tremendous event you know a second wave.
It wouldn't take much for it to pan against the ceiling again, and if we had just started a new facility and so far we've been able to get all we have needed.
But you know on a new facility.
Depend on where we put it in everything else, but I'd hate to start went up and have it star for raw materials.
Got it got it okay.
He said I think I had one other question I'm just checking.
But I may be you know what I'll follow up offline with the with the other question, but I appreciate it thanks, guys and congrats again.
Thank you Gerry Thank you Gerry.
[noise] and that has all the time, we have for questions today I'd like to turn the conference back to Mr. ever San Fran just so our closing comment.
Thank you and.
We appreciate your participation on Lakelands fiscal 2021 first quarter financial results Conference call.
We continue to be well positioned as a leading player in the more globally recognized in growing pp industry.
Thank you again for your time for joining us on todays conference call and 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 Dane.
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