Mattel, Inc. (MAT) Q4 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Mattel's Fourth Quarter 2012 Earnings Conference. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference, Mr. Drew Vollero, Senior Vice President of Investor Relations. Mr. Vollero, please begin.

Thanks, Janine. As you know, this morning, we reported Mattel's 2012 fourth quarter and fiscal year-end financial results. We provided you with a slide presentation to help guide our discussion today. The slide presentation and the information required by Regulation G regarding non-GAAP financial measures is available on the Investors and Media section of our corporate website, corporate.mattel.com. In a few minutes, Bryan Stockton, Mattel's Chairman and CEO; and Kevin Farr, Mattel's CFO, will provide comments on the results, and then the call will be open for your questions. Certain statements made during the call may include forward-looking statements related to the future performance of our overall business, brands and product lines. These statements are based on currently available information, and they are subject to a number of significant risks and uncertainties, which could cause our actual results to differ materially from those projected in the forward-looking statements. We describe some of these uncertainties in the Risk Factors section of our 2011 annual report on Form 10-K, in our 2012 quarterly reports on Form 10-Q and in other filings we make with the SEC from time to time, as well as in other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so. Now I'd like to turn the call over to Bryan.

Thank you, Drew, and good day, everyone. For those of you who know me, my personal professional mantra is "happy, never satisfied." And as I reflect on my first year as CEO, I believe that is an appropriate summary of how I feel. As I look back on 2012, we continue to remain positive about the toy industry and feel good about how it performed throughout the year and in the all-important holiday season. In a year where the industry was challenged by strong economic headwinds and a light entertainment mix, we saw it grow globally again. The growth in the emerging and developing markets in Eastern Europe, Latin America and Asia more than offset slight declines in the mature markets, such as the U.S. and Europe. And as we've been saying all year, innovation is a key driver to growth, and where the industry had innovation, it grew, particularly in the dolls and for preschool and construction categories, as defined by NPD. And as we've seen every year, the consumer showed up in the fourth quarter to buy toys for their children and grandchildren. I was also pleased with Mattel's performance for the year. We had our third straight year of sales growth, with record sales for both the total company and our international division, having eclipsed the $7 billion in gross sales for the first time. We had growth in all regions for the quarter and the year, including the North America division and across all of our international regions, including Europe, Latin America and Asia, as we grew share in the U.S. and Euro 5 , according to NPD as well. As I mentioned before, Mattel has the best portfolio of brands, countries and customers in the toy business. Looking at our brands, the performance of our…

Thank you, Bryan, and good morning, everyone. Throughout 2012, we focused on 3 global strategic priorities: Consistent growth; continuous improvement to operating margin; and generation of significant cash flow to allow for disciplined, opportunistic and value-enhancing capital deployment. I'm pleased to report that we've made meaningful progress along each of these dimensions over the past year. As I review the year, what stands out most to me is the strength of our business model to generate cash and our strong cash position. In 2012, we generated about $1.3 billion in cash from operations, deployed $1.4 billion of cash in 2012 and ended the year with over $1.3 billion in cash. This strong position gives us the flexibility and financial strength to continue to grow our business and reward shareholders. As we've done in the past, we continue to deploy our cash in value-added ways. First, by reinvesting in the business to grow our core brands, create new franchises, expand our international presence and by driving effectiveness and efficiency in the business through investments, including IT infrastructure. Specifically, the $685 million acquisition of HIT Entertainment in February gave us our fifth core brand, Thomas & Friends, and an organization ready to deliver, whether it's leveraging heritage brands, like Bob the Builder, or developing new ones, like Mike the Knight. Our retail expansion of American Girl in Houston, Miami and St. Louis have been big winners for us, with all 3 stores outperforming expectations today. Our investment in our new subsidiary in Russia is off to a very strong start in growing this market. And our IT investments have positioned us for future growth and given us the capabilities to manage our cost base more effectively. We're upgrading American Girl's e-commerce infrastructure to drive further growth and leverage it to support our…

[Operator Instructions] And the first question comes from Sean McGowan of Needham & Company. Sean P. McGowan - Needham & Company, LLC, Research Division: First, can you give us a little bit more clarity on exactly what you saw, POS domestically, as well as outside the U.S.? Was it down, was it up? You know, the industry seems to be down a bit in 2012. How did you guys perform?

I'll start with we're pleased with our share performance overall. If we look at the toy category in general, we were pleased with it, particularly in the U.S. in the fourth quarter. And we think the performance of the toy category was particularly encouraging, especially in light of, I think, the, I'll call it the 1-2-3 punch of a declining GDP, fiscal cliff anxiety on the part of consumers and also a decline in consumer confidence. So from a category standpoint, we felt pretty good about that. And in Europe in particular, very difficult consumer and economic situation. The fact that the category was down a couple points was encouraging. And frankly, if you take Spain out, which is probably one of the most challenged economies, the category is only down about 1 point, I think. So we felt good about the category in terms of POS. Our analysis shows that if you look at the Entertainment-heavy year, I'll call it, for 2011, that probably contributed 1 point or 2 of growth to the category in '11. So overall, we feel good about the category. Our performance, we feel good about, from a POS standpoint, as I mentioned, share grew. In the U.S., POS was positive in the fourth quarter. If you strip out the impact of Cars 2 on us, it was a little bit more positive for the year and for the quarter. So we liked that. So we felt very positive about it. And our shares in Europe grew over the 2012, so we think our position is pretty strong leaving the year. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. When you were going through the list of things that you have coming up in 2013, do you guys not have the rights to Monster U?

We do, Sean. That's on the list. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. And could you tell us -- I mean, the cash flow from operations really strong in the quarter, ended the year with more cash than expected. But the buyback, not as robust as it's been in the past. What are your thoughts on that?

I'll comment on that. Over the last 3 years, Sean, we've repurchased over $1.1 billion of stock, including $78 million in 2013. And if you look at 2012 repurchases, we're lower, principally due to the acquisition of HIT in the first quarter for $685 million. But as you mentioned, record revenues and operating margins and tight management of working capital exceed -- equal to record cash flow from operations. And as you know, we collected a substantial portion of that cash flow in the -- late in the year. And based upon our consistent historical discipline deploying excess cash over the last decade, you know that, over time, as we look forward, we'll deploy cash consistent with our framework. So over time, you can expect that we'll deploy our excess cash consistent with our capital investment framework. The target is year-end cash of $800 million to $1 billion and debt to total capital of about 35%. And deploying cash for dividends and share purchases is essential to achieving total shareholder returns in the top third to top quartile in the S&P 500.

The next question is from Tim Conder of Wells Fargo Securities.

A couple of things here, to follow on the cash question, you've kept that above the $1 billion here now for 3 years. And granted your -- the HIT acquisition at this point last year had not closed, but obviously, now it has and you're sitting at $1.3 billion, you did -- you've raised the dividend, you've repurchased some stock. I guess, kind of talk to us why you're sustaining it above that high end of your framework, number one. And then sort of in relation to that, you give the 50% to 60% payout ratio, yet you've kind of kept towards the lower end of that range. Is that sort of the intent, still, going forward?

Yes. I think I'd answer the second one first. When you look at the payout ratio, we're really looking at it versus 2012 actual EPS. So when you look at our dividend payout ratio for the increase today of 16% to -- from $0.31 to $0.36, which translates into a $1.44 dividend, if you look backwards, based upon adjusted EPS, that's about 58% payout ratio. With respect to -- going to year-end cash, again, as I just mentioned, we did purchase less shares this year, principally due to the acquisition of HIT. And also, the cash flow reflected the fact that we collected that cash late in the year. And if you look at the balance of $1.3 billion this year, yes, we've been over that $1 billion range the last 2 years. That has included pre-funding of debt at the end of 2010, I think, of about $250 million. And when you look at 2011, we pre-funded the acquisition of HIT, which included about $600 million that was on the balance sheet at the end of the year. So if you back those amounts out of 2010 and 2011, we'd be back in that $800 million to $1 billion range.

Okay, okay. And then if I may, Bryan, with Barbie, you guys have -- you got it dialed in, the last several years, you had a good run here with Barbie. I guess, do you feel comfortable with the good -- a good problem of tough comps, do you feel comfortable with ongoing growth here? And you already talked about Monster High. But from that perspective, and then I guess, as it plays into also, the gross margin, with the tough comps on Barbie, Fisher-Price looking to grow, do you feel comfortable kind of sustaining slightly above it, it appears, that 50% long-term goal?

Tim, when we think about Barbie, we always think about Barbie in the context of our total Girls portfolio. And our total Girls portfolio has had quite a run over the past couple of years. We've been growing the category. Our share has been growing. Monster High, as you know, has been an incredible success. It's now a $1 billion brand at retail. Disney Princess grew double digits last year. So when thinking about Barbie's performance, we're actually pretty pleased with what I would call a solid year. Per share of the total toy category was flat. If you take out the impact of currency in international, Barbie shipments for the year were essentially flat, and we think that's quite a performance, given all the activity that we've been generating around the brand. As we look to our plans for next year, I'm not going to give guidance on growth on Barbie, but what I can tell you is that we're pretty pleased with the programs. I mentioned Barbie Life in the Dreamhouse in my comments. That's something that has taken off and has pleased us in terms of the engagement with girls, particularly older girls. And because of the success of that content, we're now building on that, and we'll have a more complete promotional and toy line around that. I think, Kevin, maybe comment on your gross margin question.

Yes, Tim. 2012, we delivered operating income of 11% and operating margin of 18%, excluding the impact of the litigation charge. And we delivered gross margins of at least 50% for the last 4 consecutive years. And our goal is to grow operating income 6% to 8%, which is consistent with delivering top third to top quartile TSR over time. As we said, we've got many levers that we can use to work towards achieving growth in our operating income and essentially expanding our operating margins. And as I told you in November, assuming the mix tailwinds continue in our portfolio of brands, coupled with lower volatility in input costs and foreign exchange, we could see gross margins above 50% over the near term. And this approach aligns with delivering top third to top quartile TSR.

The next question is from Drew Crum of Stifel, Nicolaus. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: I want to go back to the cash topic. Can you talk, Kevin, a little bit about the working capital benefit you saw, how sustainable that is? And in terms of accounting for this litigation charge, you accrued it in the fourth quarter, when does the cash outflow occur with that?

Okay. So let me just cover the second one first. The cash outflow, I would expect would be 2013, but that's still subject to working it through the court system. So second, with regard to the working capital, I think that's more or less -- some of it is timing with regard to accrued liabilities, and some of it is a onetime. So when we look at the cash flow generation from the business, I think it is very strong. It's -- are delivering operating margins of 18% of net sales, delivering strong cash flow. And again, working capital, over time, as our -- we grow our business, should be a slight reduction in our cash flow from operations. But we did see great cash flow this year as we tightly managed our working capital. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. And Bryan, can you talk about the American Girl business in a little more detail? Obviously, a very strong 2012, an acceleration of top line growth. How are you feeling about 2013? What are some of the key drivers for that business? Is this level of growth sustainable?

Well, I would say again, I'm not going to give guidance on the growth of American Girl. But I would tell you, if you look at what's made this brand successful over the last few years, it's been really 2 things: One has been the continued expansion of our retail footprint; and then secondly is really continuing the strong relationship we have with girls through both our historical dolls and also our Girl of the Year. Last year, McKenna was a great success for us in terms of Girl of the Year. We had 3 stores open up. So we think that's really been a positive formula for us. As we look at 2013, we're going to continue to build on expanding stores. We've announced one location, and stay tuned for perhaps more news on that later. And the new girl, Sage, seems to be off to a pretty good start. It's early, it's just February 1. But I think if you look at the core of what this brand has done well, and that's delivered growth pretty consistently, that formula works well, and we would expect that formula to continue to deliver what it has historically. So we're looking forward to it. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then 2 last quick ones for me. Can you guys comment on how HIT performed against the revenue guidance you gave at the beginning of 2012, I think it was $150 million? And then secondly, just in terms of protocol with respect to this new franchise launch, do you intend to announce a new franchise at the end of '13? Or will you have new product on shelves at the end of 13?

Yes. I'll cover the first one, which is we're pleased with the performance of HIT with respect to acquiring these great brands and actually working to integrate it into the company, as well as to get brand awareness in regions like Latin America. So we've accomplished a lot in 2012 to set us up for growth on a global basis, consistent with our acquisition model in the future. So with respect to providing details, we really don't provide that level of detail of HIT, so I'm not going to give you more details with respect to revenues.

Drew, regarding the new franchise, we keep sort of teasing you all, but we'll have an announcement sometime later in the year, and I think I'll leave the news to that level of detail at the moment. But if you look at, historically, how we've been able to successfully grow and create these new franchises, we've launched them with content. In the case of Monster High, it was a lot of webisodes and storytelling through that medium. We talked about Max Steel, launching the content and all the digital engagement this spring with the toy line and consumer products coming out in the fall. So I think we've been following a pretty solid model in terms of creating the demand and the characters and the content, then fill that demand with toys and consumer products. So we'll be able to tell you more later in the year on the new franchise. But I would look at the models we've used in the past and let that be your guide.

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

What kind of price increases are you implementing for this year? And also, can you remind us what you implemented last year at this time, and did those stick, meaning did you end up having to give some of that back later in sales allowances or promotions?

Okay, so Gerrick, I think when we look at 2013, we continue to operate in an inflationary environment with a lot of volatility as the economy slowly recovers and input costs continue to rise. As you know, we look forward to continuing to work on manufacturing efficiency programs, O.E. 3.0, cost savings programs, to offset as much as we can. But as we look at our last lever, which is pricing actions for 2013, to sustain gross margins above 50% in the near term, we've implemented this low single-digit global price increase effective January 1, 2013. If you look at 2012, we did a mid-single-digit price increase. And overall, that stuck. I'd like to note, though, that we did have higher sales adjustments in the fourth quarter and full year. But sales and margins were up, and we managed the business appropriately. This was about everyday execution. And we did thoughtful retail promotions, aligned shipments with POS to optimize our inventories and retail inventories. And given economic concerns, we saw a more challenging environment when it came to consumer demand as the holiday approached, and we shifted our resources to support retail program levers. The best time to talk to consumers, as you know, Gerrick, is in the holiday season, and we adjusted our everyday execution accordingly. And we'll continue our disciplined approach in managing our business and striking the right balance between shipping, POS and inventories. As you can see for the full year, we delivered strong gross margins of above 53%, which was consistent with our 4-year track record of delivering gross margins at or above 50%.

Okay. Very thorough, Kevin. On Asia -- one more question for you. On Asia, 27% growth, would you consider that same-store sales gains, if you will? Or are there new doors or new countries that you're opening, that you weren't in before? And then the impact of China, if you could discuss that, on your results in the fourth quarter.

Sure. Well, we're pleased with our business in Asia. And I would say it's a combination of a number of factors. Number one, we have been investing in our brands, particularly in countries that have great scale potential, like China and India. So if you look at Barbie and Fisher-Price in particular, you see those brands very well represented, and consumers are really getting engaged with those brands. So we're trying to create demand by getting girls to understand what fashion doll play is all about, by they getting moms to understand that infant preschool toys can, in fact, help your child develop. And Fisher-Price is the best choice to make if you want to buy an infant preschool toy. So we're making marketing investments. As you can imagine, a lot of the retail partners that we have in China in particular, and throughout Asia, are expanding the number of stores. So we do have some growth there. But it's really a combination of factors: New distribution, store growth, but I would say brand investment is something that's been pretty consistent that we've been doing, particularly in China and India, over the last 10 years.

The next question is from Linda Bolton-Weiser of B. Riley Caris. Linda Bolton-Weiser - B. Riley & Co., LLC, Research Division: 's I was just curious about -- you had talked, sort of SKU reduction initiatives a while back. And we haven't heard much mention of it. Is it still something you're focused on, and can you report on any progress on that? Or do you actually think it's not as much of a priority? I mean, you've certainly had good sales growth without it. I guess that would be my first question.

Linda, we're constantly looking at our product lines in terms of what's the right balance of the offering to the consumer, how do we have the right presence at retail, what's the right way to make sure that we provide differentiation across our retail customers. So we're constantly looking at our SKU lineup. We like productive SKUs. Our customers like productive SKUs. So we're always looking at trying to figure out what we can do to make our SKUs profitable and growing. If I look at Fisher-Price, for example, as I'd say a living, breathing example of SKU management, we spend a lot of time really focusing in on what are the segments of the business that really support the mom positioning. And so that's why, for example, last year, we've put a lot of emphasis behind Little People and Imaginext because those are 2 products lines that really support the brand positioning quite well. And you probably saw us put a little less emphasis on maybe a few other lines that we might have traditionally supported at Fisher-Price. So we think that's a way to really focus our marketing support, focus our engagement, have more productive SKUs, both for us and for our retailers. So it's really become more of a, I call it, a way of life here, as opposed to a special project.

Yes. And I'll just add to that. I think as we look at O.E. 2.0 and again, with O.E. 3.0, it's really about productivity of SKUs. And we're looking for opportunities as we focus on strategic growth investments and strategic areas to grow, to really first look at reallocating resources from SKUs that aren't performing well to areas where we can focus in on product categories or product lines with greater productivity. So that's a continuous evolution of really constantly managing this area, as Bryan has indicated. Linda Bolton-Weiser - B. Riley & Co., LLC, Research Division: Can I ask a second question?

Of course. Linda Bolton-Weiser - B. Riley & Co., LLC, Research Division: You had mentioned -- you had made some reference to the creation of the new North American division. And I'm kind of interested in hearing a little bit more about that and how -- like what the positive effects of that are, because it seems like that could have really long-term benefits to growth.

Well, if I start with the reason of why we put that in place, it's, number one, we wanted to get decision-making closer to the consumer and to the -- our retail partners here in the U.S. And that's why we decided to have a group that was really more focused on the commercial side of the business, more akin to how we ran the international business. So the U.S. organization now looks just like the French organization or Chinese organization or Mexican organization, in terms of how they deal with our customers and consumers. That then freed us up to also have our global brand teams, so teams on Barbie, Monster High, Hot Wheels, Fisher-Price, Thomas, et cetera. They are now spending more time focusing on what they can do to build brands outside of the U.S., because prior to the last year or 2, they were really more focused on developing products for the U.S. As we've said, we expect international to grow. We'd like it to become about 60% of our overall revenues. And to do that, frankly, we needed to spend more time and attention with our brand groups outside of the U.S. Having said that, I did mention that I expect our POS situation in the U.S. to continue to improve over the next few years. It's really about everyday execution. And I was really pleased at how well the North American division did, I would say in the holiday season this year. I mentioned earlier that it was a little choppy this year. Consumers were concerned about the fiscal cliff. Consumer confidence went down. We now know the GDP was shrinking. So you can imagine in a backdrop like that, consumers would likely be a little more retail promotion-sensitive than they might be advertising-sensitive, for example. So we took that in consideration in working with our retail partners. And that's the kind of thinking that I think we saw come out of the North America division because they're so focused on our customers and execution that we made the right choices across all the things they can do to create demand, to have a successful year. So I could probably talk about this forever because I'm very excited about it. But that's -- that would be my top line, Linda. Linda Bolton-Weiser - B. Riley & Co., LLC, Research Division: And can I just sneak in one last one on -- I think you said we're going to hear maybe about another global brand platform to be developed, this year we'll hear about it. Do you think we'll hear about it in the first half or the second half of the year? And then secondly, you had mentioned a while back that you had some agreement with Stan Lee for some kind of development of something. Is that agreement still in place and is that a future thing we'll hear about at some point?

Can you repeat the second part of your question? I couldn't quite hear it. Linda Bolton-Weiser - B. Riley & Co., LLC, Research Division: In terms of your agreement with the developer or creator of the Spiderman and all of those, I think his name is Stan Lee. I think you had announced something a while back that you had an agreement with him, his organization, to develop a new brand platform. Is that agreement still in place?

Well, let me answer the second question first. We're still working on developing a relationship and what we're interested in doing and what they may be interested in doing. So as soon as we have something substantive to tell you about, I'm sure we'll be more than happy to share that. But I'd say it's still a work in progress. As it relates to our announcement on our new property, it could be in the first half, it could be in the second half, it could be a Boys property, it could be a Girls property, so stay tuned.

The next question comes from Michael Kelter of Goldman Sachs.

So Bryan, you had said in your prepared remarks that you weren't happy with U.S. consumer POS takeaway. So I guess I'm curious what you'll be doing differently in '13 and beyond given that? I mean, I know you have some new product lines, but every year, there's some new stuff. So what will you be doing differently to change the trajectory?

Well, let me build off the answer that I gave Linda regarding the North America division. I think this is going to be the first full year that we have the organization in place. We've got some new leadership in place there that we're very excited about. I think our customers -- the feedback that I've received so far are very positive on how we're working, we're bringing our toy group and our consumer products groups together in this new organization. So I think they've had a year to sort of get their feet wet on how we can do this. And so this year, I think -- I frankly expect even better execution and partnering with our retailers from an execution standpoint. From a consumer standpoint, I think we're going to have great consumer engagement. Particularly in the digital area, we've been making a lot of investments, both in -- whether it's websites, digital gaming, other ways to engage. If I think about digital with toys, we had a terrific success with Barbie, Photo Fashion Barbie. And one of the things that I think we learned very well this year is that when we think about digital amplification of play patterns, we need to try and do more work in terms of doing that within core play patterns, the more traditional play patterns, and we think that worked. So I think there'll be more consumer engagement and better execution. And that's what gives me confidence that we can expect more out of our U.S. business.

And the sales adjustment line, the trade spend, you addressed it a little earlier. I just wanted to follow up on that because it was up about $40 million versus the run rate of the past several years' fourth quarters. Was that all late year discounting in response to slow sales early in the Christmas season? Because it seems like a big number, especially in light of the fact that Barbie, Hot Wheels and Fisher-Price were all still down in the U.S. even despite the increase in spend there.

Yes, Michael, let me start, and I'll have Kevin fill in the gaps here. I think when -- the way we look at sales adjustments under 2 perspectives. The first one is, it's one of the many levers that we pull, whether it's advertising, consumer promotion, retail promotions, et cetera. And when we look at the year, our sales were up, our shares reported by NPD was up, our inventory was down, our gross margins were up, our operating profit was up, our TSR was up, so we think overall, all those various levers that we pulled delivered a very solid year, particularly for our shareholders. The second one is, I keep going back to the 1-2-3 punch that we believe consumers were facing. It's GDP shrinking, consumer confidence was waning pretty badly, as you recall during the fourth quarter, and there was a lot of discussion about the fiscal cliff and worries about taxes going up, frankly, for everyone at the beginning of the year. So that's that 1-2-3 economic punch. And if you think about what would you do to think about how to engage consumers and support our retail partners, you would think in that environment that consumers will be more sensitive to retail promotions. And so as I said, our North America division made that choice. We had some international countries also make that choice in markets where we thought there was a lot of pressure on consumers. So it was a conscious decision on our part to shift our mix a little bit, given the environment. Kevin, do you want to add?

Yes, just to add to that, we did a mid-single-digit price increase for the year, and our gross margins improved by 290 basis points. And we did execute in the holiday season when consumers are coming out. We wanted to sell-in and sell-through products. And I think we were very successful in aligning our shipments and our POS and ended the year with our inventories being in good shape, and overall, retail inventories being in good shape. And some of that increase related to the growth programs around the world, where retailers met their growth programs and received customer benefits for that.

Okay. And then one last, just a very quick clarification. When you mentioned that POS was slightly negative for the year and slightly positive in the fourth quarter, does that include the accretion of HIT, meaning organically, were you down a little bit more than that?

Really, the accretion of HIT relates to the licensing business, and that's really excluded from the POS numbers we're giving you, because that's really consumer products. We're giving you POS on the toy products.

And on the -- like the Thomas toy products, I guess what I'm asking is, is that both in the year ago and in the current? Or is it only in the current, because you didn't own it a year ago?

No, it's in both. Because of the Fisher-Price license, we were distributing the die-cast and plastic for -- since 2010, so it's been in the base since 2010.

The final question will come from Greg Badishkanian of Citi.

This is Alvin Concepcion on for Greg. I just wanted to see if you could discuss or quantify your retail inventory position in Europe and any other international markets would be helpful. And then secondly, how do you feel about the industry retail inventory levels in the United States at the end of the year?

So let me start with really thinking about the U.S. I think on all fronts, you should probably talk to our retail partners first. Most of them just finished their fiscal years yesterday, and so I'm sure they're busy doing that. But I really don't want to get into trying to predict what's going on at retail. I would tell you that we're feeling pretty good about our situation at retail. As I mentioned, in the U.S., our inventories are down. International, we feel like we're in pretty good shape. Obviously, there's some markets that are up and some markets that are down. But overall, we feel pretty good about our inventory position.

Great. And then are you noticing any difference in terms of core brands versus Entertainment properties, in terms of how inventories are at retail?

No, not really. I think retailers have demonstrated over the last couple of years that they're buying what's selling, and so we're, I think, in pretty good shape across our portfolio.

I think I would just add to that, retailers for the last several years have been tightly managing inventories, retail inventories. And as we looked out at the end of '11 to '12 and looked at our first quarter, we saw that retailers continue to tightly manage inventories in the first half of the year, as our retail POS in early in the year was leading and our shipments were lagging. So I think it's a phenomenon where they're going to tightly manage retail inventories, consistent with their historical practice of being very tight about it on a global basis.

Thank you. There will be a replay of this call available beginning at 11:30 a.m. today. The number to call for the replay is area code (404) 537-3406, and the passcode is 91283277. Thank you for participating in today's call.

Ladies and gentlemen, thank you for joining the program today. This does conclude the conference, and you may all disconnect. Everyone, have a great day.