Hasbro, Inc. (HAS) Q2 2012 Earnings Report, Transcript and Summary

Debbie Hancock Brian D. Goldner - Chief Executive Officer, President, Director and Member of Executive Committee Deborah M. Thomas - Chief Financial Officer, Principal Accounting Officer and Senior Vice President David D. R. Hargreaves - Chief Operating Officer

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division Felicia R. Hendrix - Barclays Capital, Research Division Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division Robert W. Carroll - UBS Investment Bank, Research Division Jaime M. Katz - Morningstar Inc., Research Division Sean P. McGowan - Needham & Company, LLC, Research Division Timothy A. Conder - Wells Fargo Securities, LLC, Research Division Eric O. Handler - MKM Partners LLC, Research Division Michael Kelter - Goldman Sachs Group Inc., Research Division Gregory R. Badishkanian - Citigroup Inc, Research Division Gerrick L. Johnson - BMO Capital Markets U.S. Michael A. Swartz - SunTrust Robinson Humphrey, Inc., Research Division James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Good morning, and welcome to the Hasbro Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. At this time, I'd like to turn the call over to Ms. Debbie Hancock, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Our second quarter earnings release was issued earlier this morning and is available on our website. Additionally, also available on our website are presentation slides containing information covered in today's earnings release and call. The press release and presentation include information regarding non-GAAP financial measures included in today's call. Please note that during today's call, whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share. This morning, Brian Goldner, Hasbro's President and Chief Executive Officer; and Deb Thomas, Hasbro's CFO, will review our second quarter financial results and discuss important factors impacting our performance. Following their statements, David Hargreaves, Hasbro's Chief Operating Officer, will join Brian and Deb to field your questions. Before we begin, please note that during this call and the question-and-answer session that follows, members of Hasbro management may make forward-looking statements concerning management's expectations, goals, objectives and similar matters. These forward-looking statements may include comments concerning our product and entertainment plans; anticipated product performance; business opportunities, plans and strategies; costs, financial goals and expectations for our future financial performance, including expectations for revenues and earnings per share in 2012. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. Some of those factors are set forth in our annual report on Form 10-K, our most recent 10-Q, in today's press release and in our other public disclosures. You should review such factors together with any forward-looking statements made on today's call. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call. Now I would like to introduce Brian Goldner. Brian?

Thank you, Debbie. Good morning, everyone, and thank you for joining us today. 2012 continues to develop in line with our expectations, as we shift more of our shipments to later in the year while improving profitability in the near term. While shipments are expected later in the year, through May, we have gained share in the United States. Given strong growth in our emerging markets, we're also confident that we're gaining share in these geographies as well. Innovation in Hasbro core brands and new initiatives, strong entertainment in both films and television and global expansion is driving our business this year and beyond. We remain steadfast in the execution of our branded play strategy for the long term and believe in the value it is creating for our shareholders. As we've stated, our 2012 plans calls for shifting 2% to 4% of our full year revenues into the second half of the year. We're on track with this plan, and we continue to expect to grow revenues and earnings per share, absent the impact of foreign exchange, for the full year 2012. We also expect that the fourth quarter will be greater than the third quarter in both revenues and earnings per share, similar to the historical trends in our International segment and Entertainment and Licensing segment. In the first and second quarters, in partnership with our retailers, we have restaged our retail presence, lowered overall inventory levels and focused on aligning our shipments with the strongest periods of consumer demand. As a result, it is not surprising to see our U.S. and Canada net revenues down through the first 6 months. However, we're very encouraged about the quality of our execution and the profitability improvements we are delivering. We remain committed and on track to returning to historical levels of operating profit in the U.S. and Canada segment. We have great innovative products launching over the next 2 quarters for all consumer groups and geographies. Entertainment is also driving incremental brand exposure and demand from both television and feature films. And our teams and retailers are supporting these fast-breaking initiatives. These include several new games, as well as our alliance with Zynga, through which we'll be launching Words With Friends, FarmVille and CityVille games this year. Across categories, we have new lines based on Hasbro core brands and a new 1D branded product line based on the incredibly popular band One Direction from the U.K., which is taking the world by storm. Internationally, our business grew 5% absent foreign exchange, although reported net revenues were down 4% as we faced a more challenging exchange rate environment. Our International revenues continue to benefit from our expansion into emerging markets, innovation in Hasbro brands, as well as global entertainment in both films and television programming. Year-to-date, all major geographic markets are up, excluding currency translation. In the second quarter, Latin America posted strong growth, up 15% and up nearly double that, absent foreign exchange. Excluding foreign exchange, Asia Pacific was up slightly, and Europe was down approximately 1%, given the challenging comparisons with Transformers and Beyblade last year. Through new markets and share expansion backed by innovative products and engaging marketing programs, we're in a position to grow off last year's strong performance despite facing a persistently challenging global economic environment. Our performance overall reflected the shipment timing and retail inventory reductions in the U.S. and Canada, as well as difficult comparisons versus Transformers and Beyblade last year. As a result, revenues in the Boys category declined 16%. Sales of Marvel properties, driven by tremendous performance at the box office, were very strong. Marvel's The Avengers is ahead of expectations, and The Amazing Spider-Man is just getting started. The strength in Marvel was offset by declines in Transformers and Beyblade within the Boys category. In the Games category, we are 1 year into the Gaming Center of Excellence as we reimagine, reinvent and reignite our entire Games business. To date, we've made very strong progress. Based on the faster pace of innovation and initial reactions to our new games, we have greater confidence today in our ability to stabilize this category in 2012 and grow it next year through newly created teams focused on specific demographics and psychographics and teams focused on technologies that span digital and analog play, ultimately marrying the 2 play patterns together. We are truly redefining what it means to play games for our consumers globally. Through our Boys Action Gaming lines, including Transformers Bot Shots, Star Wars Fighter Pods and MARVEL BONKAZONKS, we have created an entirely new gaming category, developed specifically for boys and their desire to battle and collect. Year-to-date, this new way to game has generated significant new revenues. In addition to our spring successes, this fall, we have new games including Twister Dance, MONOPOLY Millionaires, Lazer Tag, Where's My Water? and our new Zynga games. All of these initiatives will showcase our progress for gaming consumers. Our major U.S. retailers have aggressively lowered current game inventory, down 46% in the second quarter, putting themselves in a position to capitalize on these new innovations in the second half of this year. Moving to our Girls brands. We have several exciting new initiatives launching in the coming months, including Furby, which will be released in English-speaking markets in September and is already making retailers list of top 10 toys for Christmas; and our 1D line of products hitting shelves in August. Both of these initiatives are new in the category. In our core Girls brands, My Little Pony continued to leverage global television and grew shipments again this quarter and posted strong point of sale in major markets, including the U.S., U.K., Spain, Italy, Brazil and Russia. For the fall, Baby Butterscotch and BOUNCY, MY HAPPY TO SEE ME PUP are feature items in FurReal Friends. Baby Alive brings Baby Wanna Walk to the market, and for Littlest Pet Shop, our new television animation will be airing in U.S. this fall. A new line of LITTLEST PET SHOP Fairies will also be hitting shelves shortly. Finally, our Preschool category benefited from growth in Playskool Heroes, including Marvel and Transformers, our Sesame Street line and the initial introduction of our all-new, reimagined Koosh brand. Looking ahead in the year, we're excited about many new Preschool initiatives, including Koosh, our new PLAYSKOOL ROCTIVITY segment and Sesame Street. But our comparisons become more challenging later in the year as we anniversary last year's initial Sesame Street shipments. From an entertainment standpoint, our strategy is delivering growth within our Entertainment and Licensing segment and creating demand for our Hasbro brand’s innovative toys and games in global markets. Hasbro Studios shows are on every major market and country worldwide and driving positive point-of-sale trends. We are also distributing our award-winning shows via digital and home entertainment distribution channels. Our newest show, Kaijudo, recently premiered on The Hub, and this fall, Littlest Pet Shop television programming will air in the U.S. and begin airing internationally in 2013. In 2012, we continue to expect $300 million of television-backed revenues, about half of which we expect to be incremental. In the U.S., The Hub continues to make strong progress. The second quarter was The Hub's best quarter to date in the key demographic of kids 2 to 11 and June its biggest month. The network posted 54% growth in the second quarter versus a year ago and is outpacing growth at all major kids' networks. In respect to feature films, looking ahead to 2013, there are a number of films we're supporting. First, G.I. JOE: RETALIATION is expected in March 2013 in 3D with our partners at Paramount. In May, Iron Man 3 from Marvel is scheduled for release, as well as Star Trek from Paramount. Twentieth Century Fox is planning to release The Wolverine in July, and Marvel has scheduled Thor: The Dark World in November. Additionally, from Hasbro and Universal, Ouija is scheduled for release next year. Also in 2013, Hasbro is excited to again partner with Lucasfilm on their next 3D entertainment event. Hasbro will have a full line of merchandise supporting this venture. Lucasfilm will be announcing specific details on this topic, along with the actual 2013 timing of this news, at the upcoming Star Wars celebration taking place in Orlando on August 23 to 26. In summary, through the execution of our branded play strategy, we're in the early stages of unlocking the total potential of our brands. In the near term, the year is developing in line with our plan to improve profitability in the U.S. and Canada segment, stabilize the Games category and introduce new, innovative Hasbro core brand and entertainment-backed properties for the holidays. Over the longer term, we remain on our path toward delivering the full potential of Hasbro's and our partners' brands globally. Now I'd like to turn the call over to Deb. Deb?

Thank you, and good morning. Hasbro enters the important second half of the year in strong financial condition and on track with our plan for 2012. Our profitability improved in the second quarter, despite lower revenues. Looking ahead, we have new innovative initiatives launching in the coming quarters, and our plan is to continue to generate healthy cash flow to fund our business and return cash to shareholders. For the second quarter 2012, revenues declined 7% in constant dollars. Including a negative $34.4 million impact from foreign exchange and consistent with our plan to shift 2% to 4% of our full year revenues to the second half of 2012, second quarter worldwide net revenues declined 11% to $811.5 million versus $908.5 million last year. Operating profit for the quarter was $86.3 million or 10.6% of revenues compared to our reported operating profit of $80.4 million or 8.9% of revenues in the second quarter 2011. As a reminder, in the second quarter of last year, we recorded a $13.1 million pretax expense or $0.06 per share for costs associated with establishing Hasbro's Gaming Center of Excellence. These costs were approximately evenly split between product development and SG&A. Excluding these costs, operating profit a year ago was $93.5 million or 10.3% of revenue. For the second quarter 2012, net earnings were $43.4 million or $0.33 per diluted share. Net earnings a year ago were $46 million or $0.33 per share, excluding the cost for the Gaming Center of Excellence and excluding a favorable tax adjustment of $20.5 million or $0.15 per diluted share. Including both items, second quarter 2011 reported net earnings were $58.1 million or $0.42 per share. Cash grew in the quarter to $779.9 million on $200.8 million of operating cash flow year-to-date. We're in a strong cash position to fund our business and return cash to shareholders. Looking at our second quarter 2012 results by segment, the U.S. and Canada segment net revenues were $406.6 million, down 19% versus $505 million last year and consistent with the plan to shift revenues later in the year. Retail inventories in the U.S. declined in the quarter, decreasing approximately 29%. Consistent with the shift in revenue timing, net revenues declined in the Boys, Girls and Games categories but increased in the Preschool category. The U.S. and Canada segment reported operating profit of $60.9 million and an operating profit margin of 15%. This compares to last year's second quarter operating profit of $57.7 million or 11.4% of revenues. The increase was driven by sales of higher quality inventory this year, as well as growth in Magic: The Gathering. Our second quarter 2012 operating profit margin is in line with historical operating profit margin levels. Second quarter 2012 International segment net revenues declined 4% to $360.5 million compared to $374.5 million last year. Net revenues in the International segment grew 5%, absent a negative foreign exchange impact of $33.4 million. Similar to the U.S. and Canada segment, the Preschool category grew, while the other major categories declined in the quarter. Having made investments during the past few years to increase our global footprint, the results in this segment include growth in Latin America, including Brazil, Colombia, Chile and Peru, as well as certain other emerging markets, such as Russia. This was offset by a decline overall in Europe and Asia Pacific, which had a challenging Transformers and Beyblade comparison. Operating profit in the International segment decreased 12% to $29.9 million or 8.3% of revenues versus $33.8 million or 9% in 2011. The decline in the segment's operating profit margin was a result of lower revenues in Europe, partially offset by the positive impact of revenue growth and resulting margin expansion in Latin America. The Entertainment and Licensing segment net revenues increased 59% to $43.2 million compared to $27.2 million in 2011. Revenue growth in the Entertainment and Licensing segment reflects a positive impact of the sale of television content in all formats, including global television distribution, digital distribution and home entertainment. For the second quarter 2012, the Entertainment and Licensing segment reported an operating profit of $8.2 million versus $600,000 in 2011. Higher revenues and better expense leverage drove the increase in operating profit in the quarter. For the company overall, cost of sales for the quarter was $312 million or 38.5% of revenues versus $378 million or 41.6% of revenues last year, reflecting sales of higher quality inventory year-over-year and higher margin revenue from the Entertainment and Licensing segment, as well as from Wizards of the Coast. Input cost did not have a material impact in the quarter. From an expense standpoint, total operating expenses were $413.2 million or 50.9% versus $450 million or 49.5% last year. Program production amortization in the quarter totaled $10 million versus $7.1 million last year. Given our current expectations of ultimate revenues and current mix of programming, we now expect program production amortization to be in the $50 million to $60 million range for 2012. As we continue to gain production efficiencies, we anticipate spending less on programming from a cash standpoint and now expect cash spend to be in the $60 million to $70 million range for the current year. Second quarter 2012 royalties were 8.7% of revenues compared to 9% of revenue in 2011 and reflect strong sales of entertainment properties, including Marvel, Beyblade, Transformers and Star Wars. For the full year 2012, we anticipate royalties to be at the higher end of the 7% to 8% of revenue range we previously shared with you. This reflects the anticipated strength of the Marvel brands this year. Our advertising-to-revenue ratio in the second quarter was 9.8% versus 9% in 2011. The increase is consistent with our stated plan to increase our investment in advertising in 2012. For the full year, we anticipate advertising to be in the 10% to 11% range. SG&A of $191.4 million declined $22 million year-over-year and, as a percentage of revenues, was 23.6% in the second quarter 2012 versus 23.5% in 2011. In 2011, excluding games costs, SG&A was $206.7 million or 22.8%. We are currently targeting SG&A to be approximately 20% of revenues for the full year 2012. Moving below operating profit. Other expense was $4.2 million in the second quarter of 2012 versus $4.6 million in 2011. Our 50% share of The Hub is included on this line in the P&L. For the second quarter 2012, our share of the earnings in The Hub was a loss of $2.4 million compared to income of $197,000 last year. We continue to expect The Hub's impact for the full year 2012 to be in line with 2011 levels. Our underlying tax rate for the second quarter 2012 was 26.8% compared to an underlying tax rate of 27.7% in the second quarter 2011. We expect our full year tax rate to be in line with the second quarter's 26.8% rate versus 26.2% in 2011. Now let's turn to the balance sheet. At quarter end, cash totaled $779.9 million compared to $584.8 million a year ago and $883.8 million at the end of the first quarter. Operating cash flow for the first 6 months was $200.8 million and includes $25 million in television programming. For the trailing 12 months, operating cash flow was $468 million and includes $67.9 million in television programming costs over the period. We continue to return cash to shareholders through our quarterly dividend program, and in the second quarter, we paid $46.7 million in cash dividends to shareholders. Our next dividend payment is scheduled for August 15. Given our 20% increase in the quarterly dividend rate earlier this year, we anticipate full year 2012 dividend payments to be approximately $180 million compared to $154 million for the full year 2011. After repurchasing approximately $5 million worth of shares in the second quarter, $217.3 million remained available at quarter end under our current share repurchase authorization. Our intention is to continue repurchasing shares opportunistically in the open market using the current authorization as appropriate. However, as we’ve stated previously, we do not currently anticipate repurchasing shares at the same level as we did in 2011 and 2010. The quality of our receivables portfolio remains good, and receivables at quarter end were $651.4 million versus $838 million last year and $456.6 million at the end of the first quarter. DSOs were 72 days, down 11 days versus last year. DSOs improved year-over-year based on the timing of shipments and collections. Inventory levels at quarter end were $416.9 million compared to $426.9 million a year ago and $397 million at the end of the first quarter. Our inventory position declined in the quarter versus last year due to lower U.S. inventory, partially offset by international expansion, including a new warehouse in Russia, which was opened in April 2012. Depreciation and capital expenditures for the quarter were $24.4 million and $27.1 million, respectively. Given the innovation in Hasbro's and our partners' brands, geographic expansion, our focus on profitability improvement and the strength of our financials, we are in a strong position to deliver on our guidance to grow revenue and earnings per share, absent the impact of foreign exchange, for the full year 2012. Our expectation is that the fourth quarter will be greater than the third quarter in both revenues and earnings per share as we better align the U.S. and Canada business with consumer demand to be later in the year, similar to the historic trends we see in the International and Entertainment and Licensing segments of our business. Brian, David and I are now happy to take your questions.

[Operator Instructions] Our first question is from the line of Drew Crum of Stifel, Nicolaus. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: So Brian, a couple of questions. Starting with the Boys business, can you talk about the declines you're experiencing in Beyblade and Transformers? I think, coming out of the first quarter, you were pretty happy with the degradation you had seen in those businesses. And also, can you talk about how the Marvel business is tracking relative to 2007? And I'd also like to get your thoughts on Europe as you head into the second half of 2012.

Sure, sure. If you look at both Transformers, the brand, as well as Beyblade, the performance is better than one would expect in a post-movie or a post-phenomena year. So Beyblade is tracking well. In fact, in the U.S., the POS is up pretty significantly. Transformers total brand is down as one would expect, but has been mitigated by television and the expansion of the brand into other categories, and so it is down less than one would expect in a non-movie year following a movie. So again, fairly positive, although we're in a tough comp quarter versus a year ago for both brands. As we look at Marvel, the performance has been phenomenal. The Avengers has performed great and is ahead of our expectations. We continue to be very excited about this brand as we roll into the third and the fourth quarter with DVDs and other promotion around those brands. Spider-Man has really just gotten started and feel very good about the product lines, as well as the performance there. And that will continue, obviously, to route [ph] into the DVD periods. So I won't be able to give you -- not going to give specific guidance versus 2007 because, again, Avengers is a new property for us. It wasn't out there in 2007. Spider-Man has performed well, and Marvel has performed very well. So I think overall, our Boys business is well positioned for the year. In terms of Europe, David -- I'll ask David to comment in a moment. Overall, we're seeing bright spots and challenging spots. But overall, our investments in merging European territories -- eastern European territories, Russia and our Turkey business continue to perform exceedingly well. The U.K. has performed exceedingly well and a few other markets. And then we have a couple of markets where there's clearly some signs of economic challenge, particularly Spain. I don't know, David, if you want to comment further.

Yes. I mean, not really. I mean, clearly, it is a challenging economic environment, particularly countries like Spain and Greece. On the other hand, history shows us that if you've got a good product line and good entertainment, lots of innovation, you can have a good year in a down economy and vice versa. So we think with the continuing strength for Beyblades and as well as a lot of new product launches coming later in the year, including things like Furby, that we should have a pretty good year in Europe, even despite the economic challenges. And then, of course, our business in Latin America is storming ahead at the moment. We feel very good about our business there.

So Drew, if you look even in a market like Spain that is, from an economic standpoint, fairly challenged, I was remarking that My Little Pony brand is up significantly in POS in the quarter. It is because we’ve put television on the air. It's part of our overall TV strategy. The fact that our brand shows are now in over 170 countries, really every country you'd want to be in globally, including throughout Europe. And it's beginning to perform quite well. So as David said, innovative product lines, entertainment-backed product lines, which include our core brands and television, do have a way to not only mitigating but helping us to grow despite economic challenging environments.

Your next question is from the line of Felicia Hendrix of Barclays Capital.

Just wondering if you could give us some color on U.S. point of sales. Brian, you talked about some specific lines, but just wondering overall, if you could give us some details on that.

Yes, I'll give you a bit, and then David can -- should talk some specifics. Overall, through both the first half and into the quarter, the U.S. business was down 1% or 2% in total, but again, ahead of the market because we've gained share in the U.S. market. That was really driven by our Games business being down obviously. Our shipments in Games being down 7.5% in the quarter is better than our overall POS as we start to put new lines into the market, including our Boys Action Gaming segments. And we have seen some very bright spots within our overall POS. But recognize, once you take a decision to take and put less inventory into the market and restage the business around the consumer, clearly, that has an impact, just the amount of inventory you have in terms of overall POS. I don't if you want to comment further.

Yes, and then I think when you go internationally, it's more mix. Certainly, in the U.K. and Mexico, we're having really strong POS. In Spain, where we talked about the difficult economy, clearly, our POS is down. I think if you go to the Latin American markets, again, I was reviewing their businesses last week, and clearly, our business is up by more than the industry in each of those markets. So we must be gaining share in places like Brazil, Colombia, Peru and Chile, and then our business in Russia and Turkey is doing very well. Clearly, again, the growth that we're achieving is greater than the market growth, so we must be gaining share in those markets as well.

That's really helpful color. Brian, when you look to the second half of the year and you -- I mean, I know POS, you can't project it. But would do think that you would see an improvement there?

Yes, I believe, obviously, as we put more new innovation, core brands and our partners into the market, you have more inventory, which is part of our strategy, putting more inventory in line with consumer demand. We have also been able to reorient our P&L, we talked about it earlier in the year, to have significantly more marketing spend in the second half of the year than we had versus prior years. In the second half of the year, really focusing in on increasing our marketing spend overall, but not going above the 10% to 11% range total company, total year. But again, all that will point to a greater rate of sale and great innovations in our product line. We're particularly excited about a lot of our new innovation, be it the Furby brand; or this 1D, One Direction brand, that's coming in the Girls category; as well as in Littlest Pet Shop, the fact that we have this whole new line of fairies, which is already off to a pretty good start, albeit early days; and My Little Pony. So that in each category, I think, we have some great new innovations and things that have already shown us to be selling quite well. In Preschool, I think one of the categories we're happiest to see selling quite well is not just in Sesame, but really the Playskool Heroes line, where we've really reoriented and expanded the play patterns for those brands to this youngest consumer and performing quite well, so...

And when you wre looking at the fourth quarter versus the third quarter, you explained in your prepared remarks that the strength is surprising if you just look at your overall historical trends, but you had said that it's mainly due to tracking more how your International and Entertainment businesses tend to track seasonally. Is that a trend that you think we will see continuing on a go-forward basis? Or is that just something for this year?

Yes, I think, if you look go forward -- actually, if you go back historically, go prior to 2010 and '11, 2009 actually, fourth quarter was bigger than third quarter. So again, it has to do with putting more innovation and more marketing in the quarter. It has to do with the trends within the international business, and we're lining up the U.S. to be more like a lot of our international markets, the fact that E&L, our Entertainment and Licensing segment, does tend to have higher revenues. So I would say this is really more a glimpse into the future of how we intend to execute our plans, and it's not inconsistent with the ways we've achieved our years in past years, although more recently, it had been third higher than fourth.

Our next question is from the line of Margaret Whitfield with Sterne Agee. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: I was wondering if you could comment on where you have gained market share, what categories, both in the U.S. and if there are any gains overseas to comment on. That's my first question.

Sure. David, do you want to talk about some market share?

Yes. In terms of the U.S., clearly, our POS is down a bit more on Games than it is on toys. Toys, we’re much closer to flat. And within that, we are up on Boys' toys during the quarter. We are up on Preschool during the quarter. As we go overseas, less really good POS data. But clearly, some of the markets where we said we're significantly up would be U.K. I think a lot of that is Boys again as well. And as we go into the other markets I talked about, the newer emerging markets, such as Peru, Chile, Colombia and Korea and Turkey and Russia, I think we are probably gaining share, and our POS up is in -- is up in most categories because it is up fairly significantly. And it's probably up across the board because we're getting established and growing significantly in these markets. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: So given the growth in emerging markets, at what point do you think you could achieve profitability? I think you were targeting it, wasn't it 2013 or…

It's mixed, Margaret. I mean, many of those markets I talked about today are already profitable, especially the smaller markets, which are adjacent to large markets and can maybe, to some extent, utilize their services. I think the markets where we've talked about not being breakeven, thus far, are the bigger markets that have high potential. And we're investing heavily in order to put infrastructure in place, which, obviously, includes offices, people, systems, warehouses. So we've opened a new warehouse in Russia this quarter. So in places like China, Russia, Brazil, India, the BRIC markets, which have bigger and have long-term potential, the investment is higher. And they’re the markets which are not yet at a breakeven, maybe Russia, maybe much closer to that at this stage.

Right. So we're on track, Margaret, for -- 2013 had been our guidance for Brazil and for Russia to become profitable. In fact, we're on track for that. We may decide to take a bit longer in China given our progress that we've made there. But again, the biggest geographies and the biggest costs go profitable in 2013, and that's been consistent with our plan. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: Final question. Any new product launches that will come late that will help to drive Q4 to be ahead of Q3 apart from the timing issues that you've discussed?

Well, we have a significant range of new initiatives, almost by category. We tried to outline some of that in the prepared remarks. Within even the Beyblade business that has been out there and performing quite well, we have the new BEYWHEELZ line, as well as a number of new initiatives in there and new entertainment backing that. Obviously, we have our Boys Action brands, with Transformers being supported by television and all the Marvel properties that have their DVDs that come out in those windows; Star Wars in the third and fourth quarter with new initiatives. In the Girls business, clearly, Furby and One Direction and new Littlest Pet Shop, in addition to new My Little Pony. In the Preschool category, clearly, coming out with some brand new Sesame Street product, as well as a continuation of Playskool Heroes. So again, category by category, lots of new initiatives. And in Games, a raft of new brands. Our retailers have been very pleased to see the rate of innovation, the pace of innovation. Again, we talked a bit about that. But whether it's a lot of our own new core Hasbro brands or some of the alliances we have, Where's My Water? and the Zynga brand games all coming out this fall. And so it's not just about the timing of initiatives but the fact of how we intend to execute our strategy to ensure we're growing profitability by putting inventory closer to consumer demand and then using increased marketing to drive through that higher-quality inventory.

Our next question is from the line of Rob Carroll with UBS.

Just 2 quick ones. One, in terms of the visibility in the second half, when we started out the year, obviously, you guys have been pointing to that 2 to 4 points seasonality differential. Now with a bit of a shift more towards Q4, is that in reaction to anything you've seen? Or is the normal, I guess, revenue outlook for the second half -- I guess to kind of put it into a number. With the percentage of the order book that covers the second half revenues as you guys are in peak manufacturing season, is what we're seeing in 2012 in line with what we've seen in other years? Or is there, I guess, somewhat greater uncertainty in that Q4 number?

No. I would say, in fact, I think that given where we are year-to-date, the fact that year-to-date the company is down $120 million, with growth in Entertainment and Licensing and International offset by the U.S., it is consistent with our plan. There is nothing per se exogenous that's driving us to hedge our bets. In fact, if you look at the last couple of years, the reason the fourth quarter probably was down a bit was because of performance in the fourth quarter in 2010 and 2011. So in fact, this is very consistent with consumer takeaway and very consistent with what retailers and Hasbro are planning. And we just wanted to make sure that we were clearly communicating this, given the opportunity we have now in the second quarter to show how we're beginning to achieve many of the important items that we had in our plan for the year, including returning the U.S. and Canada segment to historical levels of operating profit margin, stabilizing Games and growing revenues and EPS absent ForEx. We felt that this was additional color that we should provide at the time.

Great. And then one other just housekeeping. On the programming and amortization costs, obviously, the $10 million drop in the midpoint of the spending range with kind of that 4- to 5-year amortization schedule that you guys talked about would be a portion of that drop. Was there any change to the amortization schedule in terms of the average year that the prior spending had been spread out over?

No, Rob. This is Deb. Not really. Just as we kind of look at that and look at our final ultimate revenues as we're getting a bit more experience in this area, we see that we've got a lower level of amortization that we'll have in this year, given the full level of ultimates that we're expecting to see now. And the same with the cash spend. As we get a little bit more experienced at this, we've been able to gain efficiencies. So it's not that we're producing less programming or less -- lower-quality programming. That's not the case. It's just that we're able to gain efficiencies in the cash spend. So that impacts the amortization, as well as the cash spend numbers. So that's why they've both come down.

Yes. So if you look at by program, year 2010 to '11, we produced 335 half-hours. In 2011 to '12, we're producing nearly 300 half-hours. So in all, over 700 half-hours between the 2 years. And so again, no diminution of production, just being more efficient in the way we produce.

Our next question is from the line of Jaime Katz with Morningstar.

I guess there was a comment in the press release that said there were some great initiatives for the second half, and I'm not sure if that was kind of talking to the products that are coming out or kind of the promotional dollars that are being spent. Can you give us an idea maybe of how the cadence of promotional dollars that are being requested by some of the retail channels are looking versus last year? And then, also, if you guys can talk about maybe what acted as a drag on the Girls segment, if it was just a timing shift or if there was a different kind of product drag that wasn't discussed in the press release.

When we talk about new initiatives, we're talking about the fact that both within our core brands and well -- as well in our partners' brand, lots of new products and innovations launching into the market across the different categories from Games, Girls, Preschool and Boys. And it also has to do with the fact that we will have significant marketing programs and additional marketing spend versus prior years. Again, the way we've rebalanced the profitability in the U.S., returning it to historical levels of operating profit margin has also allowed us to spend more promotionally in stores and strategically with retailers. But spending less on flowing inventories throughout the year, a less productive use of money, putting inventories in an advanced consumer demand and rather spending the money when the consumer is most likely to want to purchase the product and allowing us the opportunity to get closer to the consumer demand, which allows us to know which products we want to manufacture more of. It also allows us to manage our tooling expense because we are able to see more just-in-time results around our initiatives. So that's all what's driving the initiatives comment in the press release. And in terms of Girls, we're very excited about our Girls business. I have seen great POS gains in My Little Pony, where we've put together the full branded play blueprint. And the POS in the U.S. in the first quarter and year-to-date has been up significantly. We have new Littlest Pet Shop launching now with the fairy segments and the new television around Blythe and the pet shop coming into the U.S. and then international markets in spring of 2013. Obviously, Furby is launching this fall. That's registered within the Girls category, although we think that's a product line that both girls and boys are going to really enjoy. And we also have a One Direction product line that's launching. Again, that will be measured within Girls, and that's around the band from the U.K. that, if you ask any little girl, they know all about. So that's sort of the plan for the year.

Okay, so that was just a timing shift really as the product goes through the channel a little bit differently, the revenue decline of 13%?

Yes. Again, it has to do with where the new initiatives are coming exactly.

Our next question is from Sean McGowan of Needham & Company. Sean P. McGowan - Needham & Company, LLC, Research Division: I also have a couple of questions. I want to drill down on a couple of things. Back to the issue of the amortization cost, could you remind us what the expectation was? And is there a degree of the reduction in the expense that's related to fewer episodes being aired or less revenue being recognized? Or is it just a function of lower spending?

Sean, it's a little bit of both. But to remind us, it was $60 million to $70 million with the amortization range before, and now we're saying it's $50 million to $60 million. And it's a function of the longer-term ultimate revenues that the costs will be spread over going up a bit, so that's a piece of it, as well as the cost of production coming down. So it's really a function of those 2 items that you're saying impact our estimate for the full year this year. So higher estimated ultimate revenues result in lower amortization.

So Sean, as we're beginning to distribute our programming across all these different digital platforms and we're putting in place longer-term deals, we're seeing the revenue projections go up, which allow us to spread the amortization over more time, a longer waterfall, if you will. And so that's really -- should be viewed as good news. Sean P. McGowan - Needham & Company, LLC, Research Division: So it's a longer tail, not -- I didn’t even realize the magnitude of the revenue, right, it's more the timing of the revenue?

Right. Well, it's really both, and you see it -- obviously, you see it in the quarter. We had always said, when we had the conversation about the television strategy, that we were going to go get revenues from a lot of different places, including the distribution of programming internationally. That -- the additional merchandise that it would sell and the fact that we would sell and distribute our shows across every platform kids were watching, and in fact, that's what we are doing. So you see it both in terms of revenues in the quarter, and as well the reduced amort is just recognizing that we're able to now spread our revenues, a growing base of revenues over more time as we have these longer-term deals in place. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. Another question. In Preschool, if you were to exclude Sesame, how did that compare to last year?

I don't know that I have that broken out, but I will say that the Preschool year-to-date POS is up very strongly. And one of the biggest bright spots within that is the Play-Doh business, overall up a bit, and that's a big global brand for us. It's probably one of our most widely distributed brands globally. And then lots of new business coming in our Playskool Heroes business, so Transformers Rescue Bots, the Jedi Force from Star Wars, Spider-Man Adventures and the Super Hero Squad, Super Hero Adventures, all that. So whether it be Marvel, Lucas and Transformers, those are some of the biggest increases within Preschool. So again, Marvel, Star Wars, Transformers. So that -- again, the Playskool Heroes lines are contributing significantly. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. And then my last question is on G.I. JOE: RETALIATION. It appears that maybe either Target didn't get the memo that it was put off until next year or they're expecting a different product from what they already had. So you can talk a little bit about what the product strategy is. Is it going to be the same product that you would have had, just brought out a year later? Or will they be a different products based on a different focus that the movie might have after the reboot?

We'll have -- it's a little of both. We'll have some products that were out. Clearly, there's some core heroes in the movie that we're going after, and with Dwayne Johnson, The Rock, and Bruce Willis and some other heroes, clearly, some folks to focus on that kids really enjoy. But we also are working on some new segments that gives us a bit of time to work on some new segments and to work with our retailers in strategic ways to bring out and enhance some new play patterns. And we haven't really talked about those yet but, clearly, gives us an opportunity to go after some additional segments with G.I. Joe.

And maybe not having Channing Tatum's character die in first 5 minutes, you mean? Just kidding.

Our next question is from the line of Tim Conder of Wells Fargo.

A couple of -- Brian, should we take away from all the comments that have been made that Avengers and Spider-Man has offset the Transformers and Beyblade decline year-to-date? Is that fair at retail, and then at wholesale?

Well, our POS -- as David mentioned, our POS in Boys is up in the U.S. Once we get the best data, it's up in a few other categories. But overall, I would not say that revenues have replaced Transformers' revenues. Remember, last year, the biggest shipping quarter for Transformers was the second quarter, given the total performance. So we have not offset those revenues. But what we can say is that, and have said that, Avengers is ahead of expectations, performing very, very well. At this point, as we speak to you, Spider-Man is really off to a great start, but still much more business to be done given the timing of the movie release. We have the DVDs, obviously, coming in the second half of the year, as well as a lot of the major marketing initiatives from retailers in partnership with us. So the Boys business is really -- we've got to look at as a fourth quarter business. A lot of new initiatives coming in Beyblade, I'd mentioned as well. Year-to-date, the POS, particularly in our major markets like the U.S., has been particularly strong. And we learned a lot from the last time Beyblade came out to ensure that we had new innovation coming in the second half of this year with BEYWHEELZ and some other new innovations. And those innovations are highlighted in the story arc of the animation, which, again, is new for the brand. It was something that we hadn't done the last time around. So again, lots of business to still be done across the company in third and fourth quarter, particularly in Boys. But we're at a -- we're in a good spot thus far in the year.

Including Nerf, also? That's one of the -- I forgot to ask that piece.

Sure. In Nerf, we've got the whole new reinvention of the Nerf line with Nerf Elite with real performance opportunity, meaning the Nerf Elite product line now shoots 75 feet, very high performance product. The Nerf players really love this product in research. The retailers are very excited. And so you'll see Nerf Elite in broad distribution this third and fourth quarter. So that's -- again, that brand gets completely reinvented for the second half.

Okay. And then Deb, you gave some color on gross margin. But in addition, you had some closeouts last year also, so you benefited from that. Was there anything that helped you in gross margin here in the second quarter in particular? From, basically, you paying retailers to take product last year to now you're going more to the pull strategy with the shift in revenue, so you're not paying them this year. Did that help gross margin also? And if it did, any color on that as quantification?

It did help gross margin, Tim, because we had a higher level of revenue coming in to support those costs. But as we said, we are reallocating those dollars toward promotional advertising dollars. We'll probably spend more later in the year. So that has helped the gross margin a bit, but probably the largest -- the other 2 items that impacted gross margin this year were the higher revenue from our Wizards of the Coast business, which is just a higher gross margin business to begin with, as well as Entertainment and Licensing. So those are really the other 2 items besides the lack of or the lower level of closeouts this year compared to a year ago.

Okay. And then, lastly, on inventories, if you look at inventories as a percent of sales -- and granted, sales are down for the reasons you've talked about. But if you look at it as a percent of sales over the last 5 years, you’re kind of at the high-end of a range here. Any color on that? And as it relates to preparing for the back half of the year, just any additional things you can give us on the inventories?

So I think what you're seeing, Tim, is we're getting extraordinary growth in some of these new markets overseas. And as we get that growth, obviously, we're having to put inventory in place to support that. So for example, during the second quarter of 2012, we've opened a new warehouse in Russia to support that business. Previously, we used to ship a product there from the Soest warehouse in Germany. So obviously, as we go into these newer markets, we had to put language-specific inventory in place, so we can't just use English language from the U.S. or the U.K. So we have to put language-specific inventory in place. And as we grow, we start to have warehouses -- additional warehouses. So yes, our inventory is up a bit by historic standards, but it's primarily driven by those new international markets.

So this is all good inventory related to second half of the year initiatives.

Our next question is from Eric Handler of MKM Partners.

A couple of things on the Entertainment side. First, can you tell us, was any revenue booked from your Netflix licensing deal in the second quarter? Or is that a third quarter issue? And then with regard to the Battleship movie, the movie actually did decently internationally. The revenue contributions from your gross participation deal, is that mostly going to be in the third quarter as well? And then as a follow-up on the Girls business, given the timing of new programming, as well as -- I thought you said that Furby would be shipping in the third quarter. Does that mean that the Girls business might sort of go positive in the third quarter this year?

Yes, a couple of things. First, in the second quarter, there was some revenue from Netflix. Second, on Battleship, we were paid some moneys as producer fees when the movie was first greenlit, so that mitigates or would offset some ultimates that we might get paid in Battleship, so that happened back third or fourth quarter of last year. But again, as the movie plays through all the different elements, you would get residual payments at whatever level would be appropriate through the DVD window and/or international TV distribution, whatever it might be. In the Girls business, I'm not going to guide on third versus fourth quarter revenues. But clearly, we are very excited both about One Direction and Furby. Furby does break in English-speaking markets in September, so late in the third quarter. And One Direction would begin hitting in earnest in August, and that would be in all markets, except for the U.K. U.K. and Ireland would not be included.

Our next question is from Michael Kelter of Goldman Sachs.

So U.S. toy industry sales are down this year meaningfully enough, and I guess I'm curious because games and action figures, specifically some of your core categories, seem to be particularly affected, down worse than the trough of the recession. I'd love to hear what you think is going on and whether it means you should be doing anything differently.

Well, if you actually look across the landscape of what we've done in a brand like Transformers, it's indicative of the opportunity we have to expand those brand franchises. So a year ago in Transformers, it was much more boys action-oriented, and this year, we have significant initiatives that are in Boys Action Gaming. We have significant initiatives that are in our Preschool business. So I think it has, to some degree, a question of measurement versus what we're meaningfully doing around some of these brands. That's not to say that we aren't reinventing lots of elements of our action figure business, and you'll continue to see that. And performance in The Avengers and Spider-Man, you'll see the expansion of categories beyond just action figures to be in role play and several other categories, including, as I said, gaming. In the Games business, we have been and are 1 year into the reinvention of that business. We're reinventing that business across a number of different platforms. For us, it's about providing games consumers what they're really looking for across every platform. And so long as we can continue to create great games that have the kinds of high operating profit margin we've enjoyed in our Games business and are more right for the consumer, more consumer-centric and more consistent with the way consumers want to play, then we'll be in a great position, and you see that beginning to be reflected in the second quarter as revenues were down less than the point-of-sale declines. And we're beginning to ship those initiatives, and the performance of Boys Action Gaming, in particular, has been quite good. So I think we're redefining ways to play with our brands, and we recognize that innovation will be the lifeblood of both of those categories.

I think the other thing, Michael, is you're looking at big industry trends. I mean, certainly, going forward, we don't see the U.S. being as high growth market as some of our emerging markets. But I think as you're looking at big trends, what you also see is as industries mature, they tend to consolidate more. So if you look what's happening now, we've gained share, and Mattel has gained share, and LEGO have gained share. So what tends to happen is industries tend to mature. The big tend to get bigger and pick up market share. That goes back to the sort of Coke-Pepsi, Levi's-Lee type scenario. So I think even in a relatively mature, not a high-growth market -- I'm not saying it's tiny, but not a high-growth market, there's clearly opportunities for us to grow our business and gain market share go-forwards.

And you guys have mentioned you want to get the margins up to historical levels here in the U.S., and it was a good quarter. But more broadly, have you guys thought about a more formal restructuring to downsize the U.S., right-size, I guess, the cost structure given the realities of the environment and the declines in sales you've experienced? Or is it really just going to be kind of picking around the edges?

No, we actually have been well underway and really restructuring the way we go to market in our business. Today, we have half of our employees outside of the U.S. That wasn't true just 2 or 3 years ago. If you look at the changes to our employment base, we've hired hundreds of people outside the U.S., and as you know, earlier, we made an adjustment and took people out of the business as we looked at growth opportunities versus opportunities for operating profit margin expansion. So we're continuing to look at this in a meaningful way. We're going to continue to look at our growth initiatives. But we also are investing in the growth platforms like our games innovation, in our marketing and selling and in our global brands and global brand organization and R&D. And so we'll continue to make the right investments. But we've also focused on more broad experiences, more immersive experiences over far fewer SKUs. And that's part of the strategy as well as how we look at product development is we're spending more per SKU and getting more innovation out of our product line.

And then, lastly, on a different topic. Marvel seems to be coming increasingly important to sales. Is that contract -- as far as I recall, that goes through 2017, and if -- I wanted to verify if that was true or not. And then beyond that, now that Marvel is owned by Disney, which has historically had relationships with Mattel, do you see any risk that you might lose that license? How are you approaching that as you look forward?

The contract currently goes through 2018. And we have had a great long-term relationship with the Walt Disney Company. They are great partners for us and have been in a number of categories and, certainly, over time. We've continued to work with Marvel and with Disney to really supercharge the Marvel brand and the Marvel business. We really love where Marvel is going. We feel very good about our ability to innovate as leaders in the Boys Action business and the willingness to innovate across multiple platforms and pursuing boys action play patterns across any number of new initiatives and the ability to spend money in R&D and market it globally. And as we've invested in these international markets, clearly, that lines up really well with the growth in the motion picture business, which is growing more in emerging markets as more multiplexes are being built in Brazil, in Russia, in China. And so as we have our own marketing and sales personnel on the ground, we would expect that our international business is very much in line with and very complementary to a global entertainment company strategy.

Our next question is from Greg Badishkanian of Citigroup.

Just on the Entertainment business side. Just talked -- I know you've talked a bit about it. But lump sum payments there and as we go through the back half of the year 2013, how would you expect that to trend because it was such a big year-over-year growth in the second quarter?

You're talking about Entertainment and Licensing, Greg?

Yes, exactly.

Okay. So what you're seeing is what we'd said would happen, which is that as we produced television programming and began to distribute it internationally and began to distribute it across platforms, we begin to get payments. Not every quarter will be the same because that digital distribution happens at a different pace. Some quarters will be more up, and some quarters will be more modest. So I'm not saying that it's going to grow every quarter, and I'm not saying that every quarter might be as big as second quarter. But it will be, on average, growing over time. That is our intention. It does have to do with supercharging our business around entertainment and our television strategy. And so we'd expect that Entertainment and Licensing would continue to grow over time based on producing television programming and distributing it around the world.

Anything you see from a timing difference in the back half that we should be thinking about because it is such -- seems like it's a little bit of a volatile number year-over-year?

Well, again, I'm not going to comment by quarter. But to try to give some color, I wouldn't expect that, as I said, every quarter to be identical. I think we got movies -- the movie payments we talked about, like Battleship, we got a payment last year. So you wouldn't expect a payment like that this fall, so that could be offsetting. But again, overall, the trend would be increasing over time. But again, not up every quarter. And so that will be a bit of up and down in some of those payments as we make digital deals.

Right. Okay, good. And then just looking out, I know it might be a little bit too early, but 2013 movie lineup versus 2012. How do you see that versus what your lineup was this year?

Yes, we think it's going to be -- it will be a great movie year for us in 2013. We've clearly seen the momentum in Marvel, and we feel great about the fact that in Iron Man 3, which comes -- currently planned to come in May. The Wolverine from Fox. We have Thor in the fall. As you know, we've -- we're reinventing and partnering with Paramount and J.J. Abrams for Star Trek, which comes next May. G.I. Joe is at the end of the first quarter. And then we mentioned -- although I can't speak specifically, but we did mention that at the end of August, Lucasfilm would be making further announcements about their initiatives, and I'll leave it to them to give you the specifics. But I think we've highlighted that Lucasfilm does have major plans for 3D for 2013.

Great. And just one final one. As a percent of sales, how big is Europe for you right now globally? And overall, how did that specific market do?

In terms of a percentage, I don't know it off the top of my head. In terms of total international, it's about 50% nowadays, or 50% of our revenues during the quarter were outside of a U.S. headwind [ph]. And as we said, Europe's has done okay. Absent FX rate, it was, I think, 1% down. Within that, we've had markets like Spain, which we said are very challenging or down. But we’ve also had markets like Turkey and Russia, which are significantly up.

Our next question is from Gerrick Johnson of BMO Capital Markets.

I was wondering if you could tell us the currency impact to EPS on the quarter, as well as the first 6 months. And then, I'm sure Deb had some benefits from hedging in there. I was wondering what that might have been and what lines in the income statement you would have seen benefits from hedging.

Gerrick, for the quarter, as we've said in the past, and it was consistent this quarter, about 10% of the impact of revenue is the impact on earnings for the quarter. So we had about a $0.02 negative impact in the quarter from foreign exchange. We also had the benefit of having done a higher level of hedges at this point in the year. So those hedges were -- they are pretty good compared to our pricing, and given what’s happened with the euro recently, we were probably able to protect more of our cost earlier in the year than later in the year. So as we go forward, good rule of thumb from a translational standpoint, 10% of the impact on revenue will go to the bottom line. And we may have a bit more than that as we have less product hedged later in the year. But again, it depends on where the euro -- primarily the euro goes.

Okay. And any benefits that you might have accrued from hedging, where would have been they placed in the income statement?

They would have primarily been in cost of sales, and we had a little bit in the quarter. But again, we just -- we hedge to try to protect our prices, not to time the market so...

Right, understood. Just trying to get to a good gross profit number, excluding the benefit of hedge.

Right. That was not a significant item in gross profit.

It had more to do with the quality of inventory and closeout.

Okay. And then on the games reorg side, those moves that you've undertaken over the past year, on an annual run rate, what are you saving in terms of costs there? And how might that have impacted the second quarter?

I wouldn't -- I'm not going to give you that, although that wasn't really our intention in making the changes. The intention was to supercharge our ability to create innovation and revenues growth. Obviously, if we're working better together, there are efficient -- net efficiencies. But I wouldn't look there to say that, that's why the quarter's performance was better. In fact, our games initiative did have a lot -- or games brand did have a lot to do with the performance in the quarter, and that's the significant growth that we have seen at Wizards of the Coast, particularly in Magic: The Gathering, which is very emblematic of the kinds of games initiatives that we're often driving. The fact that we have both Wizards of the Coast, Magic online, as well as the trading card game, Duel Masters out of Japan, the launch of Kaijudo, which is our new trading card game brand, with television programming that's begun to air and the way that we're going to marry our games business, analog and digital. So it's really spending more to create great initiatives versus just cost-saving measures.

Our next question is from the line of Michael Swartz of SunTrust Robinson.

A real quick question around The Hub. I mean, it may be too early to tell, but did you see any kind of ratings lift in light of the whole DIRECTV, Viacom stalemate? And are there any indications if that is the case, that, that could be more than a temporary lift as the year progresses?

Well, 2 things. One is that The Hub's performance in Q2, which is -- would not include that period when DIRECTV and Viacom were in that argument, was the best in The Hub's history. That June was our best month in the network's history, that we saw a 54% ratings growth in Q2 2012 versus '11 in total day, particularly with kids 2 to 11. So The Hub's performance is already showing great momentum and, in percentage terms, was the fastest-growing kids network in the period. We did see additional growth. I think it was noted in some articles. The Hub have showed additional great growth. I think the more widely The Hub is distributed, the better the performance is. So clearly as we got the additional distribution during that window, we saw great performance gains. And The Hub is now available in 64 million homes, so up from our launch. And again, every distribution gain is of significant benefit to continuing to gain ratings.

And was there anything you did to maybe take advantage of that dislocation over the past couple of weeks or not really?

I think the biggest growth driver for us has more to do with our summer schedule, which kicked off in late May and early June. Margaret Loesch and her team have done a great job in programming the network around our highest performing brands. The summer schedule is really showing great strength, day part per day part. We're beginning to beat our competition in several day parts throughout the week, and I think it bodes well for the momentum in the network and viewership. And then, of course, some of our shows -- the earlier seasons of some of our shows, not the original content on The Hub, but some of the earlier seasons, are also available on lots of different services, including Netflix as we mentioned. And that gives us additional homes to drive interest in the brands. Netflix has, what, 24 million homes, and so that's additional interest in the brand to drive the incremental merchandising around our brands.

Our last question comes from Jim Chartier with Monness, Crespi. James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division: Just a quick question. Deb, I believe in February you said gross margin would be about 58% for the year. Is that still your expectation?

Yes. We are on track to deliver the 58% gross margin for the year.

I would now like to turn the floor back over to Debbie Hancock for closing comments.

Thank you to everyone for joining the call today. The replay will be available on our website in approximately 2 hours. Additionally, management's prepared remarks will be posted on our website following this call. Our third quarter earnings release is tentatively scheduled for Monday, October 22. Also, for those of you listening overseas, we will be participating in UBS' Best of Americas Conference in London on September 6 and 7. We look forward to speaking with you in the coming months.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.