Schiff Nutrition International Management Discusses Q1 2013 Results - Earnings Call Transcript

Sep.18.12 | About: Reckitt Benckiser (RBGPF)

Schiff Nutrition International (SHF) Q1 2013 Earnings Call September 18, 2012 11:00 AM ET

Executives

Rebecca Herrick - Assistant Vice President of San Francisco Office

Tarang P. Amin - Chief Executive Officer, President, Director and Member of Executive Committee

Joseph W. Baty - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Lee J. Giordano - Imperial Capital, LLC, Research Division

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Frank A. Camma - Sidoti & Company, LLC

Damian Witkowski - Gabelli & Company, Inc.

Operator

Welcome to the Schiff Nutrition Fiscal 2013 First Quarter Earnings Conference Call. My name is Christine, and I'll be

your operator for today's conference. [Operator Instructions] Please note, today's conference is being recorded. I will now turn the call over to Becky Herrick of LHA. You may begin.

Rebecca Herrick

Thank you, Christine, and thank you, all, for joining us this morning for the Schiff Nutrition Fiscal 2013 First Quarter Results Conference Call.

By now, you should have received a copy of the press release. But if you have not, please contact LHA at (415) 433-3777, and we will forward a copy to you.

As a reminder, this call contains forward-looking statements that are based on management's beliefs and assumptions, expectations, estimates and projections. These statements, including those relating to the company's fiscal year 2013 outlook, are subject to known and unknown risks and uncertainties, and therefore, actual results may differ materially. Important factors that may cause actual results to differ from those expressed or implied by such forward-looking statements are detailed in today's press release and the company's SEC filings.

In addition, the company's presentation today includes information presented on a non-GAAP basis. The company defines adjusted EBITDA as income from operations before depreciation, amortization, stock-based compensation and completed acquisition, including transaction and other related costs. The company believes these non-GAAP financial measures provide meaningful supplemental information regarding its operations. We refer you to the press release the company issued this morning, which is available on the company's website, for a reconciliation of the differences between the non-GAAP presentations and the most directly comparable GAAP measures.

With us from management today are Tarang Amin, President and Chief Executive Officer; and Joe Baty, Executive Vice President and Chief Financial Officer. It is now my pleasure to turn the call over to Tarang. Please go ahead, sir.

Tarang P. Amin

Thank you, Becky, and good morning, everyone. We are pleased to report another strong quarter. Net sales increased 46% and adjusted EBITDA increased 81% versus 1 year ago, reflecting strong progress executing our growth strategy. Given our strong start and expectations for the balance of the year, we're raising our fiscal 2013 guidance. Joe Baty, will review the revised outlook in a moment. Meanwhile, I'll discuss some of the highlights for the first quarter.

Our first strategy is building premium brands. We have leading brands in conditions that matter to consumers. MegaRed is the #1 omega-3 SKU in heart health. Move Free is a leading brand in joint care. Airborne is a leading brand in immune support, and Digestive Advantage is a leading brand in probiotics. We continue to invest in our premium brands with new advertising and consumer promotion. Selling and marketing as a percent of net sales was 22% in the first quarter. We expect this investment to increase in the next 2 quarters as we approach the key season for Airborne. As our brands are quite responsive to advertising, you'll continue to see that as our primary investment for organic growth. Even more important than the level of investment is the effectiveness of our brand-building efforts. We spent the last year developing advanced analytics that provide us return on investment data for each of our brands and help us to optimize our spending towards the most effective activities. Over time, we expect to better leverage our selling and marketing investment as a result of these analytics.

Our second strategy is leading innovation. As I've said before, the best way I know to build premium brands is to lead innovation. Over the past 18 months, we have led the innovation in our categories. Some of you may recall that at this time last year, the joint care category's experiencing a double-digit decline. Our launch of Move Free Ultra, the smallest joint care pill available on the market, supported by strong advertising investment, helped traverse these trends and improve the overall Move Free business.

Our other category-building innovations include MegaRed Extra Strength and Digestive Advantage Gummies. These items continue to build distribution in the first quarter. We're in the midst of launching yet another meaningful innovation in joint care. Move Free One. This proprietary formula of our MSC-certified krill oil, astaxanthin and HA has strong clinical support for promoting joint health. It also shows how we can take our technology advantage in krill and apply it to other brands.

On our recently acquired Airborne brand, we started shipping 2 exciting new innovations, Airborne Plus Energy and Airborne Hot Soothing Mix. Airborne Plus Energy combines the immune support of Airborne with B vitamins to support energy. Airborne Hot Soothing Mix delivers immune support in a powder that dissolves in hot water. These launches build upon last year's successful introduction of the Airborne Chewables, and we believe will help Airborne lead innovation in immune support. We also have promising new Digestive Advantage products in development, which we'll talk about once they began shipping to our customers. As we've demonstrated, we're committed to leading innovation in our categories.

Our third strategy is expanding our channel and geographic footprint. Our primary focus is to grow the categories of our key customers. To that end, we are pleased that in August, Sam's Club accepted MegaRed Extra Strength. This item has proven highly incremental to the omega-3 category, so it's great to see its continued expansion. At Costco, testing of our Digestive Advantage Gummies and MegaRed Joint is currently under way nationally and preliminary results are promising. Digestive Advantage Gummies deliver our BC30 technology in unique form for probiotics. We're also making progress expanding our distribution footprint. One highlight is that Target is expanding the number of Schiff items they carry and providing more prominent shelf placement. Our condition-leading premium brands fit well with their category strategy.

In the first quarter, we also made progress growing our direct-to-consumer online business. All of our products are now on Schiff marketplace and our e-commerce sales, while small, continue to grow. Perhaps even more important is the loyalty we're getting through our online relationship efforts. We've signed up hundreds of thousands of consumers to our loyalty programs and our efforts continue to gain traction.

Our fourth strategy is pursuing acquisitions. As you know, on March 30, we closed our Airborne acquisition. Airborne is one of only 2 scale brands in immune support, has high brand awareness, a loyal consumer following and fits our premium brand model well. We paid $150 million for this brand, or roughly 7.5x synergy-adjusted EBITDA. Our guidance reflects year 1 synergies of $7 million. I'm happy to report, we have now confirmed fiscal 2014 synergies of $3 million to $4 million. Our operations team has done a great job securing these savings, helping make this acquisition accretive this fiscal year. Looking ahead, we intend to evaluate potential acquisitions based on their ability to help us build premium brands, lead innovation and expand our channel and geographic footprint.

Our fifth strategy is driving world-class operations. World-class operations are dependent on great people. We continue to build a world-class team. In the past, I've mentioned some of the senior executive additions to Schiff. We've also enhanced the Vice President-Director level talent across the company, providing us greater capacity and capability. We've been able to attract top talent from leading consumer goods, pharmaceutical and supplement companies. This investment in our people has helped deliver disproportionate results relative to the categories in which we compete.

The other area where we've spent quite a bit of time and have not talked about as much is our Salt Lake City operations. Schiff has a rich history of providing consumers with the highest-quality products, and our customers have exceptional service from our modern manufacturing distribution facility in Salt Lake City. Building on those historic strengths during fiscal 2012, we began a lean transformation within our operations team, which is expected to improve our ongoing cost structure, as well as position us for future organic and inorganic growth. Lean is a proven business methodology that delivers results by driving out waste across the enterprise.

The Schiff lean effort is focused on 2 key areas: Strategic sourcing and manufacturing and distribution optimization. There have been several wins to date. Specifically, we've employed new sourcing techniques to reduce the cost of our packaging materials, as well as to reduce the cost of our contract manufacturing. This is one of the reasons beyond our branded sales growth that we're taking up our margin guidance for the year. Our manufacturing and distribution optimization shrink the footprint of our Salt Lake City facility by approximately 20%, yielding lower ongoing lease cost in fiscal year 2014, as well as an expected reduction in work-in-process and finished goods inventory. We are energized by the potential of this initiative to further enhance our quality and operational excellence.

In summary, we continue to execute well on our growth strategy. These efforts are not only driving results in the short term, but we believe are positioning us for the future.

Now I'll turn the call over to Joe Baty for a more detailed review of our fiscal first quarter 2013 financials and revised outlook.

Joseph W. Baty

Thank you, Tarang. Good morning, everyone, and thank you for joining us. I'd like to start by sharing some FDMx year-over-year IRI data for the 12 weeks ending August 12, 2012. The overall supplements category grew at approximately 3%. Joint care was down 5%. Probiotics grew 11%. Omega-3 oils were up 8%, and overall immune support was flat. Including contribution from the Airborne acquisition, our net sales increased 46.2% to $85.1 million for the 3 months ended August 31, 2012, compared to $58.2 million for the same period in the prior year. As we discussed last quarter, we are no longer providing a breakdown of sales by individual brand, but we will continue to provide a breakdown of total sales between branded and private label.

Branded sales grew 49.3% to $74.8 million, representing 88% of our net sales. This compares to $50.1 million or 86% of net sales for the same period in the prior year. Private label sales were $10.3 million compared to $8.1 million. The first quarter-over-first quarter increase was primarily related to timing of promotional activity for certain private label products. Gross profit, determined in accordance with GAAP, increased to $40.1 million from $26 million in the prior year period. Gross profit as a percentage of net sales increased to 47.1% from 44.7%. The improvement was primarily due to a higher mix of branded sales, together with operational efficiencies, partially offset by an adjustment to acquired Airborne inventory.

As previously discussed, following the Airborne acquisition, we began the process of allocating the purchase price to primarily intangible but also tangible assets, including inventory. The valuation process resulted in a $3 million purchase accounting adjustment of acquired Airborne inventories effective as of the acquisition date. The $3 million is subsequently charged to cost of goods sold as the inventory is sold. Accordingly, during the first quarter, we recognized $1.6 million of this amount. The $1.6 million charge lowered GAAP gross profit margin by 1.8 percentage points.

Total operating expenses were $27.7 million, as compared to $18.3 million reported in the same period a year ago. As previously guided, in fiscal 2012, we increased our emphasis on support for advertising and brand building, and we intend to continue that focus during fiscal year 2013. Aggregate advertising, consumer marketing and other net trade promotion-related expense increased by approximately $6 million for the first quarter compared to a year ago. Total selling and marketing expenses were 22.4% of net sales, as compared to 20.1% for the prior year period. We expect selling and marketing costs to increase in the next 2 quarters due to the seasonality of Airborne among other factors.

Other operating expenses totaled $8.6 million for the current quarter, including incremental amortization expense, an increase in stock-based and other management incentive award expenses and other incremental personnel and infrastructure-related costs. This compares to $6.6 million reported in the year-ago period.

For our first quarter ended August 31, 2012, as reported, net income was $6 million or $0.20 per diluted share compared to $4.7 million or $0.16 per diluted share for the first quarter ended August 31, 2011. Adjusted EBITDA, which is defined as income from operations before depreciation, amortization, stock-based compensation and completed acquisition, including transaction and other related costs, was $17.4 million for the first quarter of fiscal 2013. This compares to $9.6 million for the same period of fiscal 2012. The effective tax rate for the current period was 37.3% compared to 36.5% for the prior year period.

On to the balance sheet and comparing August 31, 2012 to May 31, 2012, as recast for certain reclassified balances related to the Airborne acquisition, working capital was $62 million as compared to $53.6 million. Cash and cash equivalents, including both current and long-term securities were $20.5 million compared to $14.4 million. Inventories were $37.4 million as compared to $43.9 million. Total credit facility debt was $139.7 million and $142 million, respectively.

Shifting gears to our fiscal year 2013 outlook. We are pleased with our fiscal 2013 first quarter financial results, which were better than previously expected. Accordingly, we are increasing prior guidance for top line growth and our profit margins. As compared to prior guidance, we now forecast overall net sales growth between 43% and 46% for fiscal 2013 as compared to fiscal 2012. The change is due to our expecting greater branded sales growth. Gross profit percentage is expected to be in the range of 49% to 51% for fiscal 2013. Increase from prior guidance is primarily attributable to expected higher branded sales growth and operational efficiencies, including sourcing and other savings from lean manufacturing and supply chain initiatives. We expect an additional $1 million charge to cost of goods sold relating to the acquired Airborne inventory in the second quarter. This will negatively impact gross profit and is factored into our guidance.

As previously guided, selling and marketing expense as a percentage of net sales are expected to be in the range of 25% to 27%. Other operating expenses, net, including assumptions regarding the impact of management incentive awards and ongoing legal costs among other factors, are estimated at $36 million to $38 million. Fiscal 2013 amortization expense is currently forecast at approximately $6 million to $6.5 million, but is subject to change based on final valuation of tangible and intangible assets related to the Airborne acquisition. We expect our operating margin for fiscal 2013 to approximate 14.5% to 16%. We continue to plan capital expenditures at approximately $5 million in fiscal 2013. Depreciation expense is forecast at $4.3 million to $4.8 million. Non-cash stock compensation expense is expected to be $4 million to $4.5 million. Overall cost of borrowing is expected to be approximately 7.5%. We expect our effective tax rate to be 37% to 39% for fiscal 2013.

Again, thank you for your participation this morning. And now I will turn the time back to our President, Tarang Amin.

Tarang P. Amin

Thanks, Joe. We're encouraged by our continued brand-building momentum. We are doing what we said we would, executing a compelling growth strategy. This execution delivered another quarter of strong net sales, gross margin and adjusted EBITDA. We're setting the bar even higher for our team and I look forward to sharing our progress in future calls. Also, we'll be presenting tomorrow at the Imperial Capital 6th Annual Global Opportunities Conference in New York and I hope to see you there.

Now operator, we can open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Lee Giordano from Imperial Capital.

Lee J. Giordano - Imperial Capital, LLC, Research Division

I just wanted to follow up on your acquisition strategy. I know you're still looking out there. I just wanted to know what you think of the environment today and kind of what opportunities you're seeing? And then also, when you think about moving into new categories, are there any categories that stand out as potential for expansion?

Tarang P. Amin

Lee, we can't give you many details on our acquisition strategy for competitive reasons. But what I can tell you is we remain highly disciplined when we take a look at opportunities. I mean, a great example of that was Airborne. We feel really great about picking up one of only 2 scale brands in immune support, for what turned out to be 7.5x synergy-adjusted EBITDA. So I'd say our strategy is, does it help us build a premium brand? Does it help us lead innovation or expand the channel and geographic footprint? That's the lens by which we take a look at opportunities, and then we'll have a pretty disciplined financial lens in terms of what the evaluations look like, and -- but we see -- we still see plenty of things out there.

Lee J. Giordano - Imperial Capital, LLC, Research Division

Great. And it sounds like Digestive Advantage Gummies seem to be doing well. Is the gummy an area of growth for you as far as moving out into other categories? Or is that just something that works for probiotics?

Tarang P. Amin

Well, I think overall, gummies have done very well in the marketplace. I mean, Avid's recent sale to Church & Dwight at the price that they sold at probably shows the interest there. But what I'd say is for our own business, what we really like about Digestive Advantage Gummies is it's a unique form in probiotics. Our BC30, because of the hardiness of that strain of probiotic is well-suited also for gummies and help survive through the GI tract. So it is a particular match. I think broadly speaking, we're always interested in forms that consumers are interested in and we have a pretty good track record there when you take a look at our brands and what parts of our business are growing.

Operator

The next question comes from Tim Ramey from D.A. Davidson.

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Joe, I know you'd like to not comment specifically on specific brands, but it'd be helpful to understand what percentage of branded sales growth came from existing brands versus acquisition in the quarter. Can you help us at all on that?

Joseph W. Baty

Not -- probably not to the extent that you'd like, Tim. I mean, we have taken the position that we're not going to break out branded sales for our respective categories and that would include not breaking down between organic and inorganic. And primarily, we're doing that from a competitive standpoint. We just want to protect ourselves. Obviously, some of our key competitors don't provide that level of detail, so we'd prefer not to do it ourselves. What I can tell you though is we've updated our guidance. We've revised our guidance upwards. And from a top line standpoint, that's all related branded sales growth. So we're certainly pleased with both acquisitions, and I would tell you even further in regards to Airborne, that as compared to our excitement back on the day we bought it, we're even more excited today.

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Great. And on the inventory step-up, should we assume that the other, roughly $1.4 million, flows through into 2Q?

Joseph W. Baty

$1 million flows through in the second quarter. The initial $400,000, we actually took in the fourth quarter of fiscal '12. So once we've taken the $1 million in the second quarter, we're done.

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Got you. Okay. So I mean, just for modeling purposes, obviously, seasonality and from the perspective of the step-up, 3Q looks like that's the highest, probably, gross and operating margin quarter. Is that a fair way to think about it?

Joseph W. Baty

Well, again, we -- as you know, we don't provide guidance on a quarterly basis. But we can tell you and certainly because of the seasonality of Airborne, that both the second and the third quarters are higher sales quarters. I would also point out though that as we noted in our comments, that we do expect our level of spending to be higher in those quarters as well.

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Okay. And one other quick one, I don't know if that you gave it, you were going through it awfully fast, but could you give us a revised estimate of what you think interest expense will be for this year? Or no real change from previous thoughts?

Joseph W. Baty

No real change. I mean, the guidance that we gave before was we expected our overall cost of borrowing rate to be around 7.5% and I noted that again today. And then again, obviously, we expect some fairly significant cash flows this year, but for the time being, the assumption should be that we're not paying down any of the debt beyond what is required.

Operator

The next question comes from Frank Camma from Sidoti & Company.

Frank A. Camma - Sidoti & Company, LLC

Just a couple of things, a clarification on guidance. Does that include the inventory charge?

Joseph W. Baty

Yes. The 49% to 51% gross profit margin absorbs the in-aggregate $2.6 million inventory charge that we'll have in fiscal '13.

Frank A. Camma - Sidoti & Company, LLC

Okay. But for modeling purposes, we can pull that out that charge, correct? I mean, if we wanted to adjust your margins to what they would be on a normalized basis?

Joseph W. Baty

Well, I mean, how you adjust your model, Frank, is your decision. I would tell you that for us, if you look at our adjusted EBITDA schedule, that $1.550 million that you see as and add-back for M&A-related cost is the inventory charge. Next quarter, we'll add back the other $1 million.

Frank A. Camma - Sidoti & Company, LLC

Okay, I was wondering if you could just go into the distribution in a little more -- the new distribution in a little more detail. You did go through it but, Tarang, I was wondering if you could just talk a little bit more about that?

Tarang P. Amin

Our sales team has done a terrific job over the last year, really building up distribution by our key accounts. We've had a number of wins when you take a look at our Costco distribution from last year to this year. Wal-Mart, Walgreens, CVS, all of our core customers have stepped up distribution pretty significantly. In addition, we are also seeing, as part of our strategy to expand our channel and geographic footprint, is Target has made a pretty big statement by taking in a number of Schiff items and actually giving us pretty prominent shelf placement. So we feel really good about our capabilities on the distribution and assortment standpoint. And I think a lot of it is driven by the innovation we have, where we really are leading the innovation in our categories and we're stepping up to our customers with things that they're really wanting. So I think that's going to continue to be good for our business as we go forward and continue to build distribution.

Frank A. Camma - Sidoti & Company, LLC

Great. And is Airborne -- have they always been in Costco or is that new for them?

Tarang P. Amin

Airborne has been in Costco in prior times, but it's as an in-and-out. So it goes in during the season and it comes back out during the summer. At Sam's, we have more year-round distribution and so our plan, as far as we have a great business at Costco, is to fully integrate Airborne into other activities, and we believe there, we can do good things together.

Frank A. Camma - Sidoti & Company, LLC

Okay. And since you're having such success on the branded side, are you taking any price increases or are you still resistant to price increases?

Tarang P. Amin

Well, we base our price -- our brands, first of all, are already quite premium-priced. If you take a look at MegaRed, it's at over 60% premium relative to other alternatives of getting your omega-3. You look at Move Free, it's always been a pretty significant premium. So we feel good about our premium-pricing on the whole. Having said that, our basis of cost of price increases really have to do with, are we bringing something really meaningful and innovative to the market. Our Move Free Ultra, for example last year, and our MegaRed Extra Strength, both came at premium-pricing even relative to our overall brand business. Or is there a cost justification? And so we'll continue to evaluate our business on that basis. But I'd say at least for your purposes, we'll see prices go up based on innovation but not because of an overall strategy to take our prices up.

Frank A. Camma - Sidoti & Company, LLC

Okay, great. And the final question I have is if you could just talk a little bit more about the promotional activities that drove the private label businesses? Do you mean that's new contracts? Additive contracts? Or did you just come in to support a customer during that time of year, type of activity?

Joseph W. Baty

Just to clarify, our customers that we do private label products for, I mean, they will run promotions themselves, different forms throughout the year. And so, what I was trying to say is that first quarter-over-first quarter uptick is primarily related to the timing of their in-house promotions. It doesn't really change our overall guidance regarding private label expectations for the year.

Operator

[Operator Instructions] The next question comes from Damian Witkowski from Gabelli & Company.

Damian Witkowski - Gabelli & Company, Inc.

Question on inventories. They decreased here, what's the main reason for it?

Joseph W. Baty

Well, we believe we're getting better, Damian, in managing our inventories and Tarang touched on our lean initiatives that we've been implementing -- started implementing in fiscal 2012. In addition to eliminating waste out of the system, one of the key objectives for us is to just to increase our inventory turns and we're seeing -- and we believe we're seeing some of the benefit on the inventory side as well from those initiatives.

Damian Witkowski - Gabelli & Company, Inc.

Okay, and then can we go back to the Airborne synergies that you mentioned. I didn't quite catch all of it. The total synergy that you expect this year, how much of it have we already captured in the first quarter? And I think you also talked about next year as well?

Joseph W. Baty

Okay, when we announced the Airborne acquisition, we filed an 8-K and stated that on a trailing 12-month basis, they had around $12 million in EBITDA. But we expected upwards of $7 million in synergies for year 1, which for all intent is our FY '13. Okay, so in essence then we laid out a pro forma financial that said, on a trailing 12-month basis, it'd be with year 1 synergies around $19 million. And we also stated that there was potential for an additional $3 million to $4 million in synergies in year 2, which is effectively our fiscal '14. So the comments and communication we've given today is we are now at a point with discussions with the manufacturing partner for that product, that we're very confident and confirm that, that additional $3 million to $4 million in synergies for FY '14 will be realized.

Damian Witkowski - Gabelli & Company, Inc.

Okay. And then just looking at your raised guidance especially on the top line, what do you think is driving the better-than-expected results? Is it just better response to your sales and marketing?

Tarang P. Amin

It's the execution on our growth strategy. And we've seen on our branded business really good responsiveness. As I mentioned, our capability of taking a look at the ROI of our investments, we've seen the combination of our sales, as well as marketing initiatives, really, and innovation, really, having our brands respond to that. So it's our confidence and our ability to continue to execute well and continue to grow those brands.

Damian Witkowski - Gabelli & Company, Inc.

And now that we're sort of over a year into it--I mean is, are there any channels in the advertising side that worked better than others, meaning, TV better than radio or print?

Tarang P. Amin

Yes, we usually don't get into that level of detail in terms of our specific marketing mix but what I can tell you is, on our brands and given our target, TV is a very effective medium. And so we continue to be very heavy on TV but also we've diversified our marketing to also include quite a bit of print and online as well.

Operator

The next question comes from Tim Ramey from D.A. Davidson.

Timothy S. Ramey - D.A. Davidson & Co., Research Division

I just wanted to circle back on some of the lean objectives you talked about for the Salt Lake City plant. It wasn't totally clear, maybe I just missed it, but it sounded like you thought you would idle or you would create kind of white space in 20% of that facility? Maybe you could go over that again? And also, is there an opportunity to bring the Airborne production in-house, if there is excess production capacity?

Tarang P. Amin

Sure, Tim. So our lean effort is all about reducing waste and eliminating kind of unneeded space. And so as such, given the progress we have on lean, we're going to be able to give up 20% of the lease space we have in our current building. And that can be subdivided for use for another potential tenant. We're in the process right now of reconfiguring the plant to its new footprint and this work will be pretty much complete through the -- by the end of this fiscal year. As to your second question on Airborne, as part of the process of lean, we take a look at not only our current but also future needs, and we're highly confident that in our -- the space that will be remaining, it gives us the ability to reconfigure our lines in our space to much more efficient flows, which allow us to take on more business. Specifically to Airborne, we always have the option to bring it in-house or stay with our contract manufacturer. In Airborne's case, Amerilab, which has manufactured Airborne from the very beginning, has great capabilities and is a really good partner for us. And so we're ambivalent, in some respects of where we get that savings from, if Amerilab, if we can get the savings through them, we're perfectly happy keeping the business with them and/or we can bring it in-house. And I think what we are confirming right now is we are highly confident we can get the savings either way. And we'll always leave our manufacturing options open.

Operator

[Operator Instructions] There are no additional questions at this time. I'll now turn the conference back to Tarang Amin for final remarks.

Tarang P. Amin

Okay. Well, thank you, everyone, for participating on the call today. We hope you have a great day.

Operator

Thank you for participating in the Schiff Nutrition Fiscal 2013 First Quarter Earnings Conference Call. This concludes the conference for today. You may all disconnect at this time.

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