Greetings, and welcome to the Lifeway Foods, Inc. Second Quarter 2013 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Hunter Wells of ICR. Thank you. Ms. Wells, you may now begin.

Good afternoon, and welcome to Lifeway Foods' Second Quarter 2013 Earnings Conference Call. On the call with me today are Julie Smolyansky, President and Chief Executive Officer; and Ed Smolyansky, Chief Financial Officer. By now, everyone should have access to the second quarter earnings release for the period ending June 30, 2013, which went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Lifeway's website at www.lifeway.net. This call is being webcast, and a replay will be available on the company's website. Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore, undue reliance should not be placed on them. Similarly, descriptions of Lifeway's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. Actual results could differ materially from those projected in any forward-looking statements. Lifeway assumes no obligation to update any forward-looking projections that may be made in today's release or call posted on their website. And with that, I would like to turn the call over to Lifeway's CEO, Julie Smolyansky.

Thank you for joining us today. I will provide you with a brief overview of our growth and success in the second quarter. And then, at the conclusion of my remarks, both Ed and I will be available to take your questions. We are pleased with our second quarter results, as the amazing health benefits of probiotics increasingly resonate with today's consumer. This has enabled us to further increase distribution with new and existing retail partners and drive a 12% net sales increase to $23.1 million in the second quarter. In the quarter, we experienced a 20% increase in the cost of milk, reducing our consolidated gross margin to 33% versus 37% in the second quarter last year. We also incurred approximately $300,000 in professional fees related to the acquisition of the Golden Guernsey dairy plant, our new manufacturing facility. Despite these headwinds, we generated a net income of $1.4 million or $0.09 per diluted share. And more importantly, we ended the quarter with $4.9 million in cash and cash equivalents, an increase of $2.3 million or 116%. We believe that with this cash generation and improved balance sheet, that Lifeway is better positioned than ever before to capitalize on our tremendous growth opportunities. While we are well aware of the health benefits of Lifeway Foods and our kefir products, there are still many people who have not tried our products. This is why we consistently invest in our marketing and advertising efforts to increase consumer awareness. These investments are paying off. Lifeway commands a dominant market share in kefir, encompassing at least 95% of the market in the United States. While we are the dominant brand in kefir, we have much opportunity for overall growth in the yogurt category. Only 17% of the U.S. population has indicated that they…

[Operator Instructions] Our first question comes from the line of Howard Halpern from Taglich Brothers.

I do have one question, and this is more based on the historical trends that have occurred. Typically, gross and net sales play off the first quarter and tend to either stay steady or rise into the fourth quarter. Is there anything that occurred that may have caused it to slip a little bit, revenue from one quarter to the next?

Well, in the first quarter, we stocked up Wal-Mart nationwide, so that's why the first quarter looked a little bit off-kilter, like in -- stronger. And so when you compare it, that had a big part of it. But I do think it'll even out since we've had so many great new product introductions in the last year, and those are all being set right now into major retailers. And ProBugs, we've been focusing on heavily and have had a lot of great placement. It's really exciting since ProBugs was launch basically at the time that the recession started, and it is the most expensive dairy product on the shelf space. And it has done so well in certain markets, like Whole Foods, where the shopper really wasn't as impacted as it was for kind of other markets within the United States. And now that we're coming out, we can tell that we're even coming out because so many mass retailers are really looking at the success that ProBugs has had in some of the more upscale markets and are now placing them on their store shelves. So it's really exciting to see.

And how is that, the ProBugs, translating into -- if I recall, you have your frozen yogurt, but don't you have a product that sort of matches that in the frozen area?

Yes, we have the frozen push-ups -- Frozen ProBugs push-ups. So due to the success of ProBugs as a strong brand, we have done a series of line extensions, including ProBugs Blast, which is now going into significant retailers, the Blast and then the dehydrated Bites, which will be coming into distribution points soon.

And how -- I don't know whether you've targeted this area, but with the healthy trend in schools, has that been a target area for you guys to focus on?

Yes. Yes. As a matter of fact, the guidelines just came out today for what the healthy snack recommendations will be kind of going forward in the school system, and we are definitely working with the USDA and school systems to look for opportunities to include our products because our products do meet their healthy snack guideline.

Okay. And off of Q2 results and as you get the new dairy up and running, do you have some estimate of how expenses might increase or capital expenses that are necessary to get that up and running by the end of the year?

I'll let Eddie comment on that. But I will say that there is a significant amount of assets that we won't be using that we can liquidate, which would probably offset some of our expenditures. But I'll let Ed go into detail on that.

Yes. So a lot of the expenses, non-capital expenses, have already been baked in because all of those are basically production -- I'm sorry, professional fees. A lot of the -- so those are already included in the first 6 months of the year. In terms of what we'll be able to see or realize going forward are going to be savings because we'll be able to produce our own materials, our own bottles. And we'll also be able to utilize all those assets to our advantage, for instance, to process milk and things like that, that we were doing before at the same facility. I think we touch based on this in the last conference call very slightly. Of course, there will be some slight ramp-up expenditures. But all the equipment is already in place. And in fact, we're going to take about 10% of the cost assets or cost of the assets that were purchased that had equipment in there, and we'll be able to sell that because it's just not useful for us. So we'll actually be able to use a lot of that stuff and then get money back from it.

Okay. So I'll see that sort of as a net-net offset in the cash flow statement. If you require some expenses, you can now have that asset sales basically in -- it will sort of net itself out that way?

Yes, we don't see us like spending a lot more on capital expenditures in the next 6 to 12 months. It will actually probably be a net benefit.

Okay. It would just be the employees, then, and as many as you hire, then that factors into the whole setup up there?

Of course.

Okay. And one final one. I know Julie said milk costs rose in this quarter. Can you give some perspective on what you or what the markets actually see for milk in the next quarter or 2?

Yes, we never really know where milk is going to go. Of course, we can always look to trends and things like that. I think there were some numbers that came out today and said that corn and different livestock futures were at 52-week lows. So hopefully, that will only -- yes, only push our inputs lower. But we, yes, we don't guide on the milk costs on that.

Okay. Well, thank you for your participation today. We appreciate the hard work and dedication of our employees, the support of our loyal customers and shareholders, and we look forward to sharing our third quarter 2013 results with you in the coming months. And I hope everyone enjoys the rest of the summer. Thank you.

Thank you.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.