Corning Incorporated (GLW) Q2 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Corning Incorporated Second Quarter 2012 Earnings Results. It's my pleasure to turn the call over to Ann Nicholson, Director of Investor Relations. Please go ahead.

Thank you, John, and good morning. Welcome to Corning's second quarter conference call. Jim Flaws, Vice Chairman and Chief Financial Officer, will start the call with some prepared remarks. Before Jim starts, I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995. They involve a number of risks, uncertainties and other factors that could cause actual results to differ materially. These risks are detailed in the company's SEC reports. Now I'd like to turn the call over to Jim Flaws.

Thanks, Ann, and good morning, everybody. Now before I turn to our comments on the quarter and the outlook, I actually have an organizational announcement. As some of you know, Ken Sofio, our Vice President of Investor Relations, has been working a reduced schedule since March. Ken has been getting treatment for a serious medical issue. Ken now needs to put full time focus into his health. As a result, he will not be on the call this morning, and he will not be doing follow-up calls with investors. Ann Nicholson, Director of Investor Relations, will be the primary IR contact in the interim. Ann will be supplemented by myself; Tony Tripeny, our Corporate Controller; and Mark Rogus, our Treasurer. I have 2 requests of our investors. Number one, we will try to be as responsive as normal, but please recognize that our response time may take slightly longer, and time allocations may be a little shorter as we return calls today and tomorrow. Number two, you can direct e-mails to Ken's e-mail address with IR questions. Ken's assistant, Kelly Williams, will forward them to Ann Nicholson. You can also e-mail Ann or Kelly directly at the e-mail addresses shown on the screen. We ask that you keep Ken in your thoughts. If you wish to send a personal e-mail to him, Kelly will see that it gets to him. I appreciate your help at this time. So now onto the quarter. Hopefully, you’ve had a chance to read the press release we issued this morning on our second quarter results. If you haven't, you can find a copy on our IR website. In January, we told you of the reset in the corporation's profitability and our plan of forming bottom and marching up. Briefly, I think we're making progress.…

Thank you, Jim. John, we'd now like to open the lines for questions.

[Operator Instructions] And first on the line, Rod Hall with JPMorgan. Rod B. Hall - JP Morgan Chase & Co, Research Division: Just a couple of quick questions. One, Jim, I wonder if you could talk a little bit about demand linearity to the quarter, how that progressed. Just trying to get a feel for how rapidly demand might be deteriorating, particularly in Europe and China. And then, I would also like to get some feel for the capacity situation out there. I think you said that you have more or less fully utilized capacity. Is that -- how does that compare to the 25% capacity you guys took offline a couple of quarters ago? Is most of that now reutilized? Or are you talking about more full utilization of the stuff that's already running? If you could just give us some update on that. And then lastly on the China JV, just a clarification. Are you guys going to guarantee the loans into that JV? Or can you give us some idea how the loan mechanics work into that operation?

Sure. So in reverse order, on the new Chinese venture, what's happening is Samsung and Corning are each putting in $100 million approximately. That will be funded for each of us by dividends out of SCP. And then the remainder of the funding, $600 million, and I emphasize that’s spent over time, will come from loans from SCP to the new venture and, therefore, will not have any guarantee from Corning. So fundamentally, our cash going in is $100 million, and that's $100 million extra that we're getting out of dividends from SCP, which by the way is exactly what we did with the OLED venture. In terms of capacity, our wholly-owned capacity is running at high utilizations. That's driven by a combination of Gorilla and the uptick in LCD glass heading into Q3. However, if you recall, the original 25% included our worldwide capacity, and we still have significant capacity offline at SCP. In terms of demand linearity, I think your question was around Q2. And what we saw was weakening in light-duty filters in Europe, pretty much consistently starting in April. And in China, the weakness in cars was really with the shutdowns that occurred towards the end of Q2. In Telecom, we saw weakness throughout the quarter in Europe, principally in our legacy products. Rod B. Hall - JP Morgan Chase & Co, Research Division: Okay. And Jim, just given you're seeing -- are you guys -- I mean you didn't say anything about your 230 million TV unit expectations for the full year. Is that something that's under consideration? Or do you think it still makes sense at this stage to keep that number?

I don't think our forecast was ever 230 million. It was in low 220s. I think there is some risk that it could be in the upper 2 teens. On the other hand, the flipside is from an area point of view, that's not hurting us because we actually have seen stronger average size television growth this year.

Our next question is from Mark Sue with RBC Capital Markets.

Ken, hope you feel better. Jim, just a question on the industry supply side. Do you think that the industry might consider and Corning might consider idling capacity after a near-term volume bounce in the near-term considering the North American seasonality and possible rebound in China? Do you hold your capacity steady? And subsequently, what's the impact on price declines? Should we think about more moderate pricing declines to continue from now till year end? Or can we see a step function down if we -- if the supply chain further reduces their inventories?

So in terms of industry capacity utilization, obviously, our competitors will have to speak for themselves. But for Corning, we have the ability to throttle back relatively easily, but we always have a certain number of tanks that are coming up for their normal repair. And so to the degree that we saw in the fourth quarter the need to do that, we can do that relatively easily because there's always some tanks that we need to repair. In terms of pricing, I'm delighted by the Q3 pricing that we basically have reached agreement with almost all of our customers already. I'm not giving guidance for Q4 at this stage, but we're quite hopeful that we'll be able to again have Q4 pricing be moderate. Clearly, that's our goal.

Got it. And then separately, just the Telecom business, it seems to somewhat resilient. Does that -- does it feel that business might -- the trends there continue or do we come out somewhat peaked? And do they actually become impacted by the macro themselves on the Telecom side? Maybe your thoughts of Telecom sustainability maybe beyond the near term.

Well, the positive news for Telecom is that we think we're on the right side of the optical substitution transition with most of our products. And so compared to a lot of other Telecom equipment providers, we have that going for us. The flipside, we're not immune to the macro environment. We started to feel that, as I mentioned, in Europe, and we've started this -- we've seen some projects we expected to happen at a slower pace. But fundamentally, we feel very good about where we stand with our products. Demand for fiber remains very strong, particularly in China. We have good fiber-to-the-home visibility. The Australian project regrettably is starting slower than what we expected, and we probably should have remembered that because Verizon did also originally. But we feel pretty good about Telecom. I think our biggest worry would be Europe and Telecom.

And next, we'll go to with Wamsi Mohan with Bank of America Merrill Lynch.

Ken, I hope you do better soon. Jim, can you address sort of the need to set up another LCD glass melting operation in China? I mean, you sort of characterized this market at the last Analyst Day as a mature market, sort of flattish over the next several years. I'm sure you have extensive analysis to support this, but can you share maybe what is the cost differential to a panel maker if you ship from Sakai, which is running at low capacity utilizations, or, frankly, SCP versus making it locally in China? And also, you have other operations in Beijing. Could you talk about the ramp up of that facility, too?

Yes, that's a very complicated question, so I'll take a shot at it. So as you recall in China, when the panel industry -- when the Chinese government requested applications from the panel industry to build several years ago, there were 9 applications, and I think 5 were approved. They have been phased, I think, appropriately by the various panel fab manufacturers on a very delayed manner. So we basically have BOE up and running. China Star is up and running, and none of the other new ones are really running. So Samsung had received approval for their Gen 8.5 panel fab. They have started construction, but it's on a much delayed basis from what they originally planned. This new facility is a small facility, and it's located very close to theirs. It will be built in phases and only as they need it. And so it's not like we're turning it all on at once. The same thing is true for our Beijing facility. We are actually going to write up the capacity in the second half of this year, but it will be on a very phased basis. We can ship in from Korea to Samsung. It would not come from our Japanese facility. And they could do that. I won't comment on the economics, but clearly, Samsung very much wanted to have a glass facility built there next to their fab. But we are going to be very, very careful on our managing our overall capacity. And I will comment that at SCP, we expect capacity to remain significantly idle with the loss of LG share.

What equipment are you specifically expecting to move from SCP to China?

We’re not giving out that detail at this stage.

Okay. And on the specialty side, sales came in a little below expectations. You alluded to a mix shift and others. Can you give us anything a little more specific over there? Was it just sort of the relative sizes that impacted volumes so you had more mix toward smartphones as opposed to tablets in the quarter?

I'm sorry, I'm not at liberty to give you more detail. I can just say that in the last month, we received a surprise that a customer wanted a different product shipped, and we had to scramble to try and make that, and we couldn't get it done in the month of June.

Okay. The last one for me, have you seen any incremental activity in designs for Gorilla, particularly as it relates to automotive and anything related to Windows 8-based applications?

So in terms of auto, we are working with several car manufacturers and are quite hopeful that we'll get something designed in. As we've said before, the pace of the auto industry is quite a bit slower compared to consumer electronics. We are working with a number of people on touch devices, and I think people are hopeful about the impact of Windows 8. But I really can't give you any quantity forecast.

Our next question is from Amir Rozwadowski with Barclays.

Jim, when we're going over your commentary on sort of ASPs and sort of progression in terms of the marketplace, it does seem as though the shares issue that you folks were dealing with earlier this year and late last year now seems to be behind you folks. Is that an appropriate characterization?

Yes, I mean, it's very obvious that we lost significant share in LG last year. That's no secret. that was the customer. But I think, by and large, we think shares have been relatively stable. I mean, in any given quarter, they can move up and down a little, particularly because some customers may run at higher utilizations than others. But right now, we think the share situation is relatively stable, and it is our goal to maintain our share.

Okay. So going forward, in terms of your expectation, you don't see any potential additional sort of potholes or anything along those lines that could cause material fluctuation in terms of your share?

I'm not expecting any. I don't have a perfect crystal ball, Amir, but I would say that I'm not aware of that. And I think what I'm delighted by our Display team in heading into quarter 3 has reached agreement with our customers. We're quite hopeful that with the utilizations ticking up in Japan, that will be good for us. So I'm not expecting any share potholes. And as I said, our goal is to maintain our worldwide share. And in any given quarter, it can move up and down a couple of points. But generally, that's what we expect to have happen.

Okay. That’s very helpful, Jim. And then in thinking about sort of overall demand environment, you did mention that you expect utilization to pick up in the back half of this year as we head into the fall selling season. What are your expectations around the fall selling season and the holiday selling season this year? I mean, are you expecting embedded in your guidance sort of typical seasonality? Or are you taking it a notch lower with respect to the current macro environment?

I think it varies region by region. U.S., we're expecting to see relatively consistent unit growth. We're expecting to see the area -- the larger televisions do better, as they have all year long. I think the place, as I indicated in my comments, that we have the most concerns about would be China as to what the growth rate there will be in the back half of the year. And then it's not -- in China, as you know, it's not a traditional fall retail season like it is in the United States and Europe. And I think that's the one that we're most concerned about. In Europe, we’re not looking for robust unit sales, although as I mentioned, we were delighted that the last 3 months have been year-over-year units have been up. And the area even more strongly in Europe, so that's good news.

Okay, that's helpful, Jim. And then lastly, we've seen you folks put some of your cash to work either through acquisitions. Obviously, we are seeing some of the setups on the JV side, as well as a pickup in terms of your buyback this quarter. In the past, you guys have mentioned that you're going to be more proactive around utilizing your cash balance. Any other developments that we could expect to hear on that front as you're thinking at all a change with respect to using your cash on sort of shareholder return initiatives or anything along those lines?

I have nothing to announce today. I mean, we still have some money left on our share repurchase. Obviously, we'd love to close the BD deal. We are looking at some smaller acquisitions from time to time in Telecom, but there's nothing imminent. So you shouldn't be looking for any announcement right away. But we are very alert to trying to improve shareholder returns. And so I'm sure we'll be discussing that as the year progresses.

And we'll go to Steven Fox with Cross Research.

I have 2 questions, Jim. First of all, in terms of the outlook for the wholly-owned glass business. Is -- things are being driven more by 1 or 2 customers, especially one that's underutilized into the third quarter? And then secondly, the Gorilla glass outlook, any color you can provide in terms of unit versus area? In other words, are you seeing it being driven more by tablets in the second half or at least in this coming quarter? Any color on those 2 issues would be helpful.

I don't have any unit data that I can give you on Gorilla, I'm sorry. In terms of outlook for our utilization, our wholly-owned business, it's -- we obviously are expecting, as I indicated, a significant increase in Japan, but we are seeing utilization ramp already at our Taiwanese customers and in China. So it's really relatively across-the-board in our wholly-owned business. Obviously, there are some customers we have stronger positions with. And when they ramp up, it helps us more.

Great. And then maybe just to ask the Gorilla Glass question a different way. Relative to your expectations for the quarter going forward, how are you factoring in the economic environment into the demand for handheld devices where Gorilla’s designed in?

We're -- as you know, we have difficulty forecasting Gorilla. And on the positive side, as we continue to feel smartphones are growing, we continue to feel touch is prevalent on smartphones, we are not feeling any competitive loss there. The downside is we can't -- it's hard for us to tell whether the economy is in fact going to impact phone sales. We think tablet sales are relatively strong. We're -- there obviously are, from time to time, model changes that influence quarters, but we're not sensing economic weakness in the Gorilla business. But it is a very difficult business for us to track because the supply chain is much more complicated than it is in Display.

Fair enough. And of course, I'll make [indiscernible] to Ken and his family.

Our next question is from Amitabh Passi with UBS.

Jim, I think this morning, one of your Japanese competitors reported and guided for flat volume in the September quarter versus your low double-digit increase. Should we take that to mean that you're potentially getting share in the third quarter relative to your competitors? And what does that imply in terms of downside risk to pricing as we move through the rest of the year? And then just as a follow-up, you talked about some capacity still left in your share buyback plan. Can you just remind us how much is left in your buyback plan?

On the latter question, I think about $300 million is left in the existing buyback program. On our competitor's announcement this morning, I think you should talk to them. I think the thing for you to think about analytically is their customer portfolio and what's happening with their customers versus what's happening with our customers. I do not anticipate that we are going to experience anything other than moderate price declines, as we talked about.

And next, we'll go to Ehud Gelblum with Morgan Stanley.

Jim, a couple of questions. First on Dow Corning, a little bit aside from the current conversation. Did I hear you correctly in saying that volumes and margins were up, competitors like Wacker saw them down, and kind of expect from the macro that Dow Corning should be doing probably a little bit worse? So just trying to understand the correlation. I know there was the one-time. But in terms of revenue, it sounds as though revenue was doing better there. So I wanted to understand if I misunderstand something, or is something else is going on there that maybe one-time-ish in nature, or what's kind of the difference there? Then on SCP, I think you mentioned something about signing a multi-quarter deal with, I believe, it was a new customer. I'm not sure if it was a new customer or an existing customer. But if you could give us some more clarity on that, that would be great. And then, can you give us an update on the Gorilla side, how the yield improvements are impacting your long-term growth? I understand that in the near term, there was an impact to mix in Q2 that you couldn't supply, and therefore, that might be why it's so strong in Q3. But if we expand over multiple quarters -- if you can help us correlate your previous comments on yield improvements over the last couple of quarters to what we should be expecting for Gorilla going forward.

So I'll try to get those questions. So on Gorilla, over time, our customers are improving their yields as they take our glass and finish it. We do not believe that yield improvement had any impact on the Q2. We think we had more significant impact from yields last year, and we think it's a more gradual improvement. The comment on Q2 was really around a mix related with customers changing their orders from one thing to another very late in the quarter, and we just couldn't react quickly enough. At SCP, it's an existing customer that we signed a multi-quarter deal with. At Dow Corning, Dow Corning is a complicated company, but our silicone business had volume increases and also had the benefit of, thankfully, some lower raw material costs structure. On the polysilicon side, what we saw was slightly higher prices in the quarter. Polysilicon, which is perhaps the one that has more comparisons to Wacker, is a -- it's a very difficult industry to predict right now because of the -- what's going on in the solar industry. But we think that Hemlock did quite well in the most recent quarter. But it's a really hard industry to predict right now.

Great. As a follow-up, is it the -- was the mix shift in Q2 that's causing the strong growth into Q3? Or is it the seasonal trend?

I'm sorry, what? Relative to Gorilla?

Correct. Your guidance for Q3 is strong for Gorilla. I'm wondering if that's seasonal or that's because you couldn't meet some demand in Q2 because the late quarter mix shift, and therefore, that just got pushed into Q3 and we're seeing sort of a one-time bump?

No, we don't believe it's a one-time bump. We think it's related to strong end market demand for our products or our customers’ products using the glass.

Okay. So we should be assuming that, that -- the yield improvement story that was an issue before, is less of an issue, like you said before, and therefore, we should be assuming nice strong growth for Gorilla going forward?

I hope so.

Our next question is from Jim Suva with Citi.

My first question has to do kind of just a bigger picture. Jim, as you look at the capacity expansions, can help people better understand the concern about excess supply coming into the industry of glass as there's quite a bit of idled capacity today? And we know we hear you talk about coming in with very measured ramps. But can you talk to us about the strategy of going into China? Is it more so that the customers are kind of strong arming you into it? Or how come this industry just isn't going into permanent oversupply?

On the case of our new venture in China, our customers are partnered with Samsung. And this has been known -- we actually have talked about this for quite a while. I think investors kind of hoped it wouldn't happen, but we've always known it would happen at some point. Clearly, Samsung will make their own announcements about the timing of their panel fab there, but I think you should expect this not to be a sudden giant increase in capacity for the panel or the glass industry. We're building a factory that supplies Samsung. It's a small factory. It's going to be relatively close to them. We're going to be very measured about how fast we ramp the -- we spend the money first and ramp the tanks. We're doing the exact same thing in Beijing. We're being very measured about how we bring up the capacity. I don't think you should expect us to do any further capital spending for glass in Korea or in our wholly-owned business in Japan or Taiwan. I think any capacity increases that we’ll get over the longer sweep of time will be around our productivity principally from thin. I think that’s by and large -- my observation is probably true for the industry as a whole. I don't think you're going to be seeing a lot of new footprint there. So you shouldn't be thinking that this glass factory in China is very big. And I will remind you that we are -- there's a significant amount of capacity in Korea that is offline and likely to stay offline.

And then as my quick follow-up, when you mentioned that gross margins for the company in total was going to increase about 1 percentage point, I mean, that's pretty good news. Is the strength behind that mostly driven by the increase of your wholly-owned utilization? Or is it a combination of other factors? I mean, the strength from the wholly-owned glass side of Display?

It's clearly the wholly-owned business with good volume growth this upcoming quarter. And again, moderate price decline should help our gross margin.

And next, we'll go to George Notter with Jefferies. George C. Notter - Jefferies & Company, Inc., Research Division: I guess I was curious about the decision to formulate a joint venture with Samsung in China. I think you certainly have the option to try to take that business through your wholly-owned division. What was the rationale there? Any flavor would be helpful.

Well, I think we've talked about before, for Samsung, on our original agreement, which is now almost 20 years old with them, they have the right if they wanted to put a panel operation in China that SCP could ship into them in combination -- consultation with them, we decided the better answer would be to build a new venture there, a small one, and supply directly, rather than ship in from Korea. But I'm not at liberty to give you much more detail than that. But they always had the right to self-supply their panel fab in China from way back in 1995, when the original agreement was put in place.

Our next question is from Carter Shoop of Keybanc Capital Markets.

This Steve Cho filling in for Carter. Can you guys talk about how your Environmental Tech division is positioned for the transition towards natural gas for the heavy-duty trucks next year?

We're not expecting much a significant switch in that at this stage. But clearly, it could have an impact on the demand going forward because you don't need a diesel particulate filter. But we're not expecting a significant shift at this point in time.

And next, we'll go to Simona Jankowski with Goldman Sachs.

A couple of questions. First, I think you mentioned that half of your glass is now thin. Do you have an expectation of where that might be by year end or by next year? And then secondly, on the China JV, how much capacity do you think that will add to your combined wholly-owned and SCP capacity? And also, when you talk about the $100 million investment there, is that just a net reduction in your free cash flow? Or is there any other aspect to that, that you can have by reducing your capital intensity elsewhere?

So on investment in the new glass venture there, what you will see is higher dividend from SCP, for an extra $100 million, sometime in the back half of the year, and then we will turn around and put that into the equity portion of the new China factory. That is the only Corning financial impact, and so it's essentially neutral at free cash flow over the course of the back half of the year. I don't have the exact timing of which quarter it will fall, but we could get the dividend in one quarter and the investment in another. But essentially, it's neutral to our free cash flow for the new venture. In terms of thin, we are not giving out a forecast, but we continue to expect that every quarter the percentage of glass going thin will increase, and it will do so again next year and the year after. Ultimately, we'll get to a point where almost all the glass will be thin.

And in terms of how much your capacity will increase overall with the China JV?

It's a very small number. We’re not giving out the exact number, but it’s a very small number.

And next, we'll go to Jagadish Iyer with Piper Jaffray.

Two questions, Jim. First, how should we think about the mix between the Gorilla Glass 1 and the Gorilla Glass 2? Is there a qualification cycle? Or is it a seamless replacement? And then is it fair to assume that 2013 will be a majority of Gorilla Glass 2? And then I have a follow-up.

The answer to the latter is yes, it is. What we find is the transition is generally around a model change. People very rarely have an existing model that has one glass in it and then they will change to another. So we've been going through this, but the transition is going seamlessly, and customers are enthusiastic about Gorilla Glass 2.

Yes. In this year, do you think -- can you give us some idea about the mix between Gorilla Glass 1 and 2, please, for this year?

We're not disclosing that. I'm sorry.

Okay. Then just a quick follow-up. You gave some thoughts on the stimulus in China for the second half of this year, but you also mentioned there is some risk from China. If you look at the track record in terms of what the stimulus has done in China, there's a big uptick in LCD a few years ago. So can you kind of give in that context how do you see in terms of how things are most likely to play out this time versus the last time?

So it's a tricky thing to judge because when that stimulus was done 3 years ago, originally, the penetration of LCDs was much slower than it was today. But it's our belief that this will have some impact because the spread of LCDs is still moving -- I'd characterize it kind of westward in the country. And so we think it will be positive, but maybe not as big of a pop as what we experienced when they rolled it out 3 years ago.

John, I think we have time for a couple more questions.

We'll go to the line of Mehdi Hosseini with Susquehanna International.

2 questions. One on balance sheet. Jim, how should we think about the free cash flow, either in terms of absolute value or margin in the second half of the year? And I have a follow-up.

We expect free cash flow -- it's really 2 components. So I'll first say that we think operating cash flow will continue to be excellent in the third and fourth quarter. The free cash flow, it will all depend on the timing of the closing of the BD transaction. So if it closes in the third quarter, it's obviously a very big outflow. If it plays to the fourth quarter, it would affect that one. But other than that, we expect strong operating cash flow, and I don't think our capital spending will be all that different in the quarters going forward.

Sure. But on the blended basis for the second half, should we expect the free cash flow margin up like mid single digit?

I'm sorry. We're not quantifying the forecast of free cash flow.

Okay. And then moving on to your comment about the TV -- total number of TV shipment for this year, low 220 million, to what -- to some -- to what extent are you concerned that there may have been demand pull-in due to Olympics or do we need to -- do you -- even focusing on this given how Olympics have played into the TV shipment in the prior years?

It's always typical for us to judge exactly sporting events and the impact on television demand. I would say compared to prior Olympics, you remember the Chinese Olympics, I would say there is much less talk about the Olympics being a big driver of televisions this year. We do suspect that there was some influence because of European soccer earlier this year. It may have had a little bit of influence. But we're not expecting as much of an impact from this Olympics as we did in 2008 with the Chinese Olympics.

And our final question will be from the line of Andrew Huang with Sterne Agee. Andrew Huang - Sterne Agee & Leach Inc., Research Division: Correct me if I'm wrong, but I thought I heard you say that SCP would be transferring some equipment from Korea to Suzhou for the new JV. So first, is that correct? And can we take that to mean that there would be very little net increase in glass capacity?

They are transferring a small amount of equipment. But as I've said several times now, that capacity from this new facility, which is still quite a ways in the future, is not a very large amount. Andrew Huang - Sterne Agee & Leach Inc., Research Division: Okay. And then as a follow-on question, I think you mentioned at the last minute, there was a change in demand for Gorilla Glass. Can you give us a little more color on what that change was?

We have a customer who had ordered a particular products in Gorilla and then reduced that and changed -- and mixed into other products. And we were not able to respond quite fast enough.

Thanks, Andrew, and thank you, Jim. Thank you all for joining us today. A playback of the call -- I'm sorry, Jim, go ahead.

We've got one more announcement before we wrap up. We do have one IR announcement. We'll be speaking at the Citi Technology Conference on Thursday, September 6, in New York City. I'd just like to offer one summary comment about our quarter. I think we're making progress on our plan to form bottom in Display. We had one quarter of moderate price declines behind us, and we're executing on another quarter of that. We'll only know for sure when we see bottom in the rearview mirror, but I actually feel good about our progress so far. Our other businesses are on track to grow sales and improve profitability. Obviously, we're not happy with increasing economic headwinds affecting some of them, worries that economic headwinds make the march-up results perhaps be slightly smaller. So we can't control the world's economies, but we can control our costs, and we tend to do so if we see more weakness. We look forward to updating you at the end of quarter 3. Ann?

Thanks, Jim. So a playback of today's call is available beginning at 10:30 a.m. Eastern Standard Time and will run until 5 p.m. Eastern Standard Time on Wednesday, August 8. To listen, dial (800) 475-6701. The access code is 253774. And of course, an audiocast is available on our website during that time. John, that concludes our call. Please disconnect all lines.