Good morning, everyone, and welcome to the Herman Miller Inc. First Quarter Earnings Results Conference Call. This call is being recorded. This presentation will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include those risk factors discussed in the company's reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. Today's presentation will be hosted by Mr. Brian Walker, President and Chief Executive Officer; Mr. Greg Bylsma, Executive Vice President and Chief Financial Officer; and Mr. Jeff Stutz, Treasurer and Chief Accounting Officer. Mr. Walker will open the call with brief remarks, followed by a more detailed presentation of the financials by Mr. Bylsma and Mr. Stutz. We will then open the call to your questions. [Operator Instructions] At this time, I'd like to begin the presentation by turning the call over to Mr. Walker. Please go ahead, sir.

Good morning, everyone, and welcome. In recent quarters, we've demonstrated our ability to deliver solid business performance despite a continuing backdrop of uncertain economic conditions. Good demand in our North American [Audio Gap] and our core North American business including areas of recent strategic investments, combined with growth in emerging global markets, has served to offset slower sales of the federal government and healthcare as well as the challenges in continental Europe. In many respects, this morning's update is an echo of recent quarters. While order levels from the U.S. federal government and healthcare customers were again soft this quarter, the remainder of our business in North America remains solid, highlighted by good demand from our core commercial and Specialty and Consumer customers. Outside the U.S., order activity was again mixed, with growth in Asia offset by year-over-year decreases in Europe. The macroeconomic picture is today largely unchanged from when we last spoke in June. Corporate balance sheets remained healthy, supported by relatively high levels of available cash and continued profitability. Trends in service sector employment levels have continued at a modestly positive pace. New office construction activity, while reasonably stable in recent months, has yet to show significant signs of improvement. This is reflected in the most recent ABI data, which showed improvement in July. It has remained below the 50 mark for the past 4 months. With all that as a backdrop, the BIFMA forecast for market consumption in 2012 and 2013 was recently revised downward to increases of 2.9% and 3.6%, respectively. If you remember back to one of the questions I took on our last call, this 3% range is actually where we were at in June with our internal estimates of industry growth. My point is this: we built our plan and our performance targets…

Thanks, Brian. To begin, I'll remind everyone that our first quarter was comprised of 13 weeks while the comparable period last year included an extra week of operations in order to realign our fiscal calendar cut off. As I talk to the details, I'll quantify the impact of this additional week on our year-over-year comparisons. On a consolidated basis, net sales in the first quarter were $450 million. This represents a decline of 2% from the year ago period and a sequential quarter improvement of 7% from the fourth quarter of last fiscal year. Consolidated orders in the first quarter of $452 million were down 6% on a year-over-year basis and improved 2% sequentially. Adjusting for the last year's extra week of operations, pro forma sales were up 6% on a year-over-year basis while orders grew 1%. Net sales and orders within our North American reportable segment reflected the contrast in demand Bryan described among federal government, healthcare and core office furniture customers. In total, segment sales in the period of $320 million were down 3% from Q1 of last year. Orders this quarter were $307 million, an amount down 11% from the same period in fiscal 2012. Adjusting for the impact of the extra week of operations, sales increased 4% while orders were down 4%. However, when you factor out the concentrated weakness we've seen in the federal government and the healthcare sectors, the balance of the segment-reported solid growth was sales and orders increasing 16% and 5% over the prior year, respectively. Our Non-North America reportable segment posted net sales of $95 million in the quarter. This represents an 11% increase from the year ago period. Orders in the quarter of $99 million were flat with the prior year. Adjusting for the impact of the extra week of…

Thank you, Greg. Good morning, everyone. Cash flow from operations in the first quarter were approximately $29 million. Net changes in working capital had a minimal impact on cash flows in the period, as increases in AR and inventory were largely offset by reductions in prepaid expenses. Capital expenditures in the quarter were $16 million, and this amount reflects a $6 million payment for the acquisition of property for the planned construction of a new manufacturing facility in Ningbo, China. Cash pay for dividends in the first quarter totaled $1.3 million. We ended the period with total cash and equivalents of $184 million, an increase of $12 million from where we began the fiscal year. We also made progress this quarter in our U.S. pension transition strategy. At this point, the plans have been frozen and all current participants are now receiving benefits under a new defined contribution-style retirement program. The next phase of the process involves a variety of legal and administrative steps, which we anticipate will take 12 to 18 months to complete, at which time we'll make the final planned contributions necessary to complete the termination process. We remain in compliance with all of our debt covenants. And as of quarter-end, our gross debt to EBITDA ratio was approximately 1.4:1. The available capacity on our bank credit facility stands at $142 million with the only usage continuing to be from outstanding letters of credit. Given our current cash balance, ongoing cash flows from operations and our total borrowing capacity, we're confident we can meet the financing needs of the business as we move forward. That's the balance sheet and liquidity overview, and I'll now give the call back to Greg and he'll cover our Q2 sales and earnings guidance.

Okay. Thanks, Jeff. As we indicated in our press release, we're expecting net sales in the second quarter of between $445 million and $465 million. This implies flat to 4% growth relative to Q2 of last year. Earnings in the second quarter are expected to be between $0.17 and $0.21 per share on a diluted basis. This guidance reflects the impact from noncash pension settlement and amortization expenses in the quarter, which we anticipate will total between $15 million and $20 million due to an increase in benefits settlements related to our transition strategy. It will also include the impact from previously mentioned restructuring actions, which we estimate to be around $1 million in the period. Excluding the impact of these pension and restructuring costs, adjusted earnings per share in the quarter are expected to be in the range of $0.37 to $0.41. This earnings guidance assumes an effective tax rate of between 33% and 35%. As a reminder, we have provided an expected range for noncash pension charges expected in the second quarter. The actual amount recognized will ultimately depend on the amount of benefit -- pension benefits paid out or settled during the period, and as such, the amount we record could differ from our estimate. Either way, we'll be sure to clearly identify these charges in our reported results as we progress through the planned termination process. Several of the factors that negatively impacted our gross margin in the first quarter are not expected to repeat in the second quarter. We would also expect to begin capturing some benefit from the price increase that went into effect at the beginning of September. Accordingly, we are forecasting our Q2 gross margin to be in the range of 34.6%. Finally, total operating expenses in the second quarter are expected to be approximately $118 million at the midpoint of the revenue range we provided. And with that, I'll turn the call back over to the operator so we can take your questions.

[Operator Instructions] Our first question comes from Budd Bugatch of Raymond James.

The first question, I guess, is the 16% and 5% number, can you go over that again a little more slowly? I don't -- I'm not sure I quite understood what you were talking about in terms of the growth, excluding -- I guess it was the federal government for North American Furniture Solutions?

Yes, Budd, if you take a look at the North American segment, if you back out the impact that healthcare and government had on their number and you look at sort of what we'll call the core work business, those 2, that's where the 16% and the 5% come from. 16% in revenue and 5% in orders.

Okay, that's very helpful on that. And on the reconciliation for your -- for earnings, I take it what you did for the $15 million to $20 million was simply use the midpoint of that for both of the high and the low in your reconciliation? Is that correct?

Yes, Budd, this is Jeff. That's correct. We -- it gets a little difficult, so when you've got an estimated range within a broader EPS range, so we picked kind of the midpoint of that number.

Okay. And Jeff, how is that going to be accounted for? Is that going to wind up 1/2 in gross margin and 1/2 in SG&A again like it did this quarter? Or is it going to go somewhere else?

No, that should be about the same as what we saw in this quarter, Budd, about 1/2 and 1/2.

1/2 and 1/2, okay. And what -- what's so -- well, I know this may be harder to answer, what's -- what looks like beyond the second quarter?

We -- it is harder to answer, Budd, because what -- it ultimately -- as Greg alluded to, it depends on the degree to which actual planned benefit settlements take place, which we can't necessarily predict. That being said, we do estimate that we'll see somewhere in the range of $3 million of -- or about $1.5 million per quarter of additional settlements. And then on top of that, about another $3 million of amortization. So you're looking at about $4.5 million per quarter of additional charges.

For how many more quarters?

Well, that'd be for the balance of the fiscal year, and then we will ultimately -- we'll have these related charges up until the point we actually finally terminate the programs, Budd. So that's the 12- to 18-month range that we mentioned. And there likely will be, on the interim quarter, somewhere in the range that I just alluded to for the second half of the year per quarter. And then, of course, we've got a big slug that will come through when we make the final plan distribution or the benefit distributions to participants at the very end of the process.

You'll know a little bit more once you file the final termination request to the PBGC, Budd, which is the trigger point because I've got to go through their review.

Okay. And Greg, on the 34.6% gross margin, I take it that's excluding any of the pension amortization?

Got it. Yes, Budd. Yes.

That would be -- that would compare against the 33.6%, which excluded the $1.6 million or $1.5 million in [indiscernible]?

Correct. So it'd be about a 100 basis point improvement.

And why? What causes that?

Well, look, there's a broad mix of things, Budd. We had some inefficiencies with our plant consolidations, that's one. We had the euro moved down against us during the quarter but then back up. So it started and ended the quarter at about the same time. So our sales in euros, especially in July, a lot of those components are either sourced in the U.K. or the U.S., and so that went against us. So that is now back to where it was. We lost some pass-through sales that -- for our dealer in Australia because of a carpet manufacturer had a fire in Australia. And some of those things that we thought we were gonna get from a margin perspective, we didn't get. So we'll get those in the second quarter as well as our mix picture. We can already see in our backlog, this is changing to be more towards seating in the second quarter, plus with the additional price increase, we'll get a little bit of benefit there. So all those things all add up to be back to that kind of 34.5-ish spot.

And the price increase is helping you by what? A 0.5% per quarter or 1% per quarter? I mean, what ratio? What's the...

Yes. It's sort of you build momentum. The first quarter you don't get a ton and then you just -- it slowly evolves over the course of the next 12 months.

To what? To what kind of level?

We usually capture about 30% to 50% of the price increase.

And how much is the price increase, I want to know, overall?

3.5%.

I guess in that 3% to 3.5% range, Budd.

Think you'll get about a point at the overall?

Yes. Now, that -- of course, Budd. The question's going to be how much of that do we have to see on the commodity side. Right now, we -- commodities have been pretty well behaved.

Yes, I understand that, Brian. I definitely...

So the last week has been a little bit -- I'm sure what -- you see we're all moving around, so...

No? Okay. And my last question is can you kind of detail what POSH was the -- what's the impact of POSH on the quarter on both revenues and costs?

Sure, Budd. It's Greg. We did about $13 million in revenue, and it was about in that neighborhood of 5% operating income.

Terrific. I know you've got a lot of moving parts in the -- it doesn't help that compare against a 14-week quarter, which also confuses the issues, but it was a credible performance.

No kidding. Hey, Budd, I know you asked a question and you had a comment in your stuff about organic and what was the postumer on the organic. Essentially, this is where we try to get rid of moving parts where they offset each other. If you look at it, the effect of currency plus divestitures in POSH sort of washed each other out. That's why we didn't explain it in detail in the press release because they kind of -- they mixed each other and it got down to really the extra week in currency were the ones that pay attention to, so...

Our next question comes from Todd Schwartzman of Sidoti & Company.

On the core corporate office business, can you speak a little to any deferrals, whether or not you saw any deferrals of orders or cancellations in the quarter or subsequent to quarter's end?

Todd, nothing other than, I would say, kind of the normal stuff. We haven't seen any major change in it. I mean, there's always a little bit going on where people are -- the building is not ready. The only one of any size in the whole business globally was the one that Greg mentioned in Australia, which wasn't really the customer making the decision as much as we had an issue with this carpet where they couldn't install the furniture. But that was more not economic-related. It just was timing.

And looking at it another way, have you seen any anecdotal evidence or otherwise, evidence from your dealers that the corporate customers are maybe taking a pause until after the election for any reason?

Not really. I mean, I would say to you overall -- I mean, if you wash out all the noise of extra weeks and all that kind of good stuff and you look at it, things look relatively, I would call it, stable more than I -- which is kind of what we said at the end of the fourth quarter. It's not like we see robust growth now, some of that is -- some sectors are good, some aren't. But when you look at it in total, it's stable and it's not a rocket up, but we haven't seen anything super negative, either.

And staying with that core business with -- on the commercial side only ex-government, in North America, what are the pockets of strength and weakness among the verticals?

Todd, this is Jeff. So if you look at -- are you talking customer sectors or among the verticals? I would say -- I want to make sure I understand your question.

The customer sectors.

Yes. So we've seen -- I would say pretty much strength when you x out the healthcare, which we've already talked at length about, and a bit of weakness in financials. It's been fairly decent across the board with the customer sectors: manufacturing; insurance, obviously; energy, based on not just the Exxon project win but more broad-based than that. So I think it's been pretty broad-based with the exception of a little bit of a hiccup in the financial sectors.

Business services in the high-tech have also been pretty good, kind of the electronics and communication.

Right.

Okay. Energy, obviously, has been doing well for a while now. But of any of the verticals that you just named, which, if any, have accelerated from Q4?

That's funny. Manufacturing has actually been pretty good from Q4 to now. And we've also seen pretty good in the business services side, so the both of those have been pretty decent. But it's always hard to tell whether that's related to those sectors or it's related to we just happen to have particular customers in that area that did a large volume that quarter in terms of orders or shipments.

And in Europe, what were the puts and takes there by country? Anything you'd want to call out in terms of pockets of strength or weakness?

Well, I think, as we noted, for us, of course, the timing is much less of a factor. I mean, we play there, but we play kind of a little in every country. So it's hard to really get a pattern out of that. Although generally, I would say, as you hear from a lot of people, that was not great. But like I say, we're sort of a niche player there. The U.K. for us is the bulk of our European business. That's the one that we saw the biggest weakness. Again, we think some of that related to stuff going on around the Olympics and the Jubilee as well as the general tenor in the U.K. If you look at our EMEA group in total, the places where they saw strength were in the Middle East, Africa and sort of the places that are outside of the Continental Europe.

Okay. And lastly, I just want to get my arms around the blueprint, the ramp, the timing of the ramp of investment spending, balance of the year, R&D, maybe sequentially looking out to Q2 from Q1. Any incremental SG&A expense of a recurring nature that you're expecting in Q2 from Q1?

Well, Todd, we did -- on the guidance provided, we did $115 million and we're going, I think, up to $118 million. So there's some projects in there, there's some facility stuff we're working on, the R&D ramp up in 3 or probably 5 or 6 product lines. Those are probably the big ones moving forward.

They're not really people-related as much, Todd, as they're going to be related to programmatic expenses around engineering services, prototyping, those kind of things more than it's marketing program expenses. People-wise, we haven't added a ton of people. We've been very strategic about bringing in, particularly on the creative side, some sales folks that we mentioned around the small business. Those folks were in for about 3/4 of the first quarter. And so there's a little bit of that, that I will call ongoing. The R&D one, of course, it'll be there through the balance of the year because we have a lot of programmatic expenses in the last 3 quarters.

Yes, Todd, this is Jeff. One other point of clarification to Budd's earlier question. That $118 million guidance, of course, strips out this pension-related item that Greg talked about in the guidance going forward. So we wanted to make sure we x that out so that there's no misunderstanding there.

Yes, of course. So that would be sequentially compared with $115.7 million for Q2?

Actually -- yes. The $115.7 million -- so that actually included -- so the $114.9 million, we reported $114.9 million of OpEx in the press release. And then we had, on top of that, $0.5 million of restructure, right? And that one...

My bad, it's $113.3 million.

Yes.

So, regarding the product development. Did those expenses ramp more quickly in the back half as opposed to Q2?

I see that right now, to be frank, Todd, that bit will sort of depend on how they progress with the programs. I mean, actually, this quarter, we would have thought it would have been a little higher than the first quarter than what it turned out to be. So I think -- to be frank, I think the estimate for the second quarter, I don't know that we see a big jump from that to the third and the fourth. Typically, we're down a little bit in the third just because of seasonality of other things. So I think the question will be, as we get closer to the back half, particularly the fourth quarter, it would -- the question will really be more around as we enter the initial market launch of some of those things, what do we do from a marketing perspective? And then I think we'll know more as we get through the second quarter and make sure that the schedules are on track.

[Operator Instructions] Our next question comes from Matt McCall of BB&T Capital Markets.

All right, so a couple of questions. I guess, I understand the adjustments to the orders and the shipments. I finally understand something Budd doesn't. So that's the first, I think, since I've been covering his news. But the question I have really is about the government and healthcare. Is it a comp issue? Is there a pipeline of activity out there at all? I mean, because there was such strong trends for a while. So do we get to a period where the comps get easier and therefore the results will get better? Or is it just not the pipeline to replenish that source of business?

Well, I mean, I'd say -- well, first of all, obviously, at some point, the comps will get to be where they're comparable. And that really starts in Q3 where we'll start to see that. I think this is an interesting one. I don't -- from a government perspective, I mean, we have some pending business that we've won that we've not ordered yet that will help with some of what we see in terms of pipeline. The healthcare side, everything tells us construction in the commercial side of healthcare looks pretty good as you get into '13 and '14. And I'll be straight, I mean, the nervousness that you got is, yes, that other stuff's out there, you got to go get the orders, get them entered. And so predicting it is a little bit -- a bit shaky, especially when you're not seeing it. We're pretty good about telling you guys what we can see and not trying to sell you on futures that we don't know about. Overall, I would say, the government -- we know that there was some fairly strong activity in the government over the last few years, both on the healthcare and the non -- on the admin side, as they did a lot of the BRAC realignment. And that certainly helped on the government side. There is not the same catalyst right now in the government the way that there was back then. And as you know, given what's going on with the potential change in administration or even if the current administration goes forward, the pressure on budget or deficit reduction leads us to say, "Hey, look. If we're not expecting big increases on the government side, we got to go do it on -- in healthcare, particularly on the commercial end."

And so I know you're doing some -- and Greg, you talked about the asset realignment in Sheboygan and so there's -- I think for healthcare, there's this specific and direct profitability impact, right? I mean, I understand most of the government furniture, office furniture, would go to the existing facilities. But -- so my question is about the profit impact. How much of that profit -- how much was the profit impact? I guess you can bring out or call out healthcare. How much was the profitability impact in the quarter? And how much are you going to be able to combat with some of those measures you were talking about?

That's a great question, Matt. First of all, I think you're right. I mean, largely you're not talking about different resources on the government, and I call it, on the core admin side. There's not really any difference in terms of facilities and/or people other than sales because that's really the typical model where we're leveraging back and forth those folks with the dealers. So with that one, you really can't combat it, for the most part, with cost reduction to the side that's a big deal. Certainly in healthcare, we've been working really hard at trying to make sure we get the capacity side right on the make end. That's both because of work we've done around HMPS that we thought was another chapter that we would expect as we got further along the Nemschoff. I would say, given what we saw with demand, we accelerated some of those plans as we got into this year to make sure that we were adjusted as well as we could. In healthcare so far, to be frank, we've been pretty adamant about making sure that we're continuing to build the sale side because we thought that the longer term demographics were going to be there. And so we've been willing to sort of put up with a little bit more profitability in that area while we got to see in some of the turnaround in the construction side. So I would say right now, Greg gave a number, I think it was $2 million to $3 million a year that we know is out there that we'll start to capture as we get through some of this capacity stuff at Nemschoff, which is virtually complete. I would guess we'll still have a little bit of disruption this quarter. We should start to see that annualized in when we get to the third and fourth quarter. And then from there, we're -- hopefully, we start to see some volume on the other side.

So that $2 million to $3 million, that's the expected savings. And then, what was the profitability pressure? How much did you lose there, if any, in the current quarter?

Matt, you mean from the consolidation project, specifically?

Well, no. Not -- no, just from the operation. Was there -- did you make money in healthcare or did you lose money in healthcare?

So Matt, I mean, if you think about year-on-year, I think we had a drop of volume in the neighborhood of, I guess, $14 million or $15 million. I mean, so you can do the math on our normal leverage about what that $14 million or $15 million does to the bottom line.

Right. But I don't know the starting point from last year. That's okay. All right. So next question. The consumer business, strong orders there. Is that -- and you specifically called out Collections is very strong on a year-over-year basis. Is Collections the same type of model where it's made to order? I'm assuming there's going to be more of a stocking element there, where you're stocking some of those retailers first. Is that responsible for part of that big spike in orders on a year-over-year basis?

No. In fact -- that's a great question, the way you framed it, Matt. Because when we talk about the Collection, we're largely talking about the contract side of those products. And actually, the growth was on the contract side, not on the retail side. And that is made-to-order. So there's a little bit of stocking, particularly in some of the products that we have alliances with, the value in company. So there's a little bit of inventory there. But not a big change and it certainly was -- none of the order flow was because of customers giving us orders. It's sort of a pipeline filler. If anything, where we were a little lighter was on the retail side, particularly in the big box retail side, where we have sort of deemphasized some of the work we were doing with folks like Costco. So we've seen good move -- we saw a pretty good activity on the specialty side of retail. But again, we didn't see as much on the big box side, but that was purposeful on our part.

Okay, okay. And my final question. Brian, you said that -- you were talking about new product introductions and the expectation for some of the new products coming out in the fall of this year. And I felt like you said in that, that was -- that you saw evidence of the success and I was -- and you referenced the Exxon win. I'm trying to connect those 2 dots. If the products aren't out yet, how is that evidence? Did I not misunderstand you?

No. I think what we're saying, the evidence of the work that we're doing around trying to help our customers envision the future of the workplace. And, in particular, with Exxon, it was -- not only did we end up selling them some of our current products, we actually did kind of a co-development exercise with them, which actually will ultimately feed our longer term product pipeline as well. Because some of the ideas we'll work on with them will eventually commercialize into standard products as well.

Our next question comes from David MacGregor of Longbow Research.

I wonder if you could just talk -- in discussing the gross margin like you -- looks like the seating segment, talked about the fact that you expect a little more seating in the mix next quarter. I wonder if you could just talk a little bit about what you're seeing in the seating category right now from a demand, pricing and competition standpoint?

Yes. I don't think we're seeing those dynamics change from where they've been. I mean, it's -- I would say that's not part of the environment that has changed much.

Can you elaborate a little more on that?

I mean, I guess, if you want to get right down the nits, there's not any major change in price positioning at all. We continue to see good growth in our newer product lines. Setu, SAYL, those have done quite well. We're pleased in where they're going, particularly, by the way, in the case of SAYL in our Asian markets, where -- in Latin America, where we're seeing very good hit rate on that product where it's in the right sweet spot from a price standpoint. Not from a discount standpoint, but just simply the net price of the product and the way we position it has been good. No real tenor or change in any of the other products. Embody has continued to grow in strength particularly in the consumer side, as well as we've seen some pretty good large customers adopt Embody. It's still not one of our larger product lines in terms of units, but it's actually certainly holding its own.

Yes, and this is Jeff. I would just tag onto that. So I think part of what's implied in the guidance, too, is that when we look at our overall mix of product, keep in mind, we -- our international business has tended to have a higher mix of seating. And there is a couple of specific items that were alluded to on the prepared remarks, in particular, the supply disruption in Australia as well as the kind of the slowdown in the summer months in the U.K. related to the Olympics and the Queen's Jubilee, that held up some activity that we think will pick up in terms of overall mix of seating in Q2 relative to Q1. I think that's played -- plays into the -- our outlook as well.

If I could also play off of the question or the comments Greg made about mix change from Q1 to Q2, that was less to do with mix between major product lines as it was mix within product lines. We saw -- you don't -- so that uniform profitability even in a whole category. In this quarter, we saw a mix of some things within particularly the systems category in filing that wasn't as favorable as we normally run. And we think some of that is going to turn around when we get to the next quarter. That's not really related to seating, specifically. It was related to other categories.

Okay. Just maybe to pick up on that point for a moment. There's been a lot of talk, I guess, about the fact that the systems business is perhaps a little -- priced a little more aggressively. It's a little less profitable than the day-to-day business. Is the spread in the margin between the systems business and the day-to-day business, is that spread opening up?

Well, let me make sure I understand your question. So are you asking -- I mean, seating has exactly the same dynamics at one level as systems, in the sense that there's both day-to-day business and there's project business. So they both run that same route. One doesn't sell differently than the other, because you're trying to win projects and then you have filler business. In both cases, you generally do see a bit of a difference between project business and day-to-day business that's actually -- really, most often you're trying to build it in contractually. I wouldn't say that, that spread is getting bigger. In fact, that's a -- if anything, maybe it's getting a little narrower that you don't get as much difference from one spot to the other. So I don't think there's a huge difference between those 2 spots.

Okay. My last question is you obviously have -- as Budd said, a lot of moving parts here, there's international manufacturing, you have new product development, brand building infrastructure. How do you think about sort of incremental return on invested capital and payback horizons on the investments you're making? I realize it's probably all built into that 2015 $2.2 billion, 10% EBIT margin. I guess I'm trying to reconcile this.

Yes. That's an interesting question. But the net of it is, generally, we try to look for things to cover the cost of capital in a 3- to 5-year horizon. So when we look at an acquisition, we try to tell ourselves we can get the breakeven from a cost of capital perspective over 3 years, and hopefully by the end of the fifth year, we're positive. New products are a little bit different than that because, obviously, we have less of an additional capital load. So in general, you get through a little bit quicker on those. I would say it's dramatically different, sort of dependent on a multiple line on an acquisition. Manufacturing plants, most of the stuff we're doing around manufacturing -- set aside China for a second -- most of that where we're really setting up is large assembly facilities. So other than the cost of the building itself, there's not a heavy equipment thing. In the case of China, in some ways, what we're doing there is moving our current facility, which we already leased, to a new facility and combining it with some of the needs we have around POSH. So we'll actually end up bringing volume together. So that one, the getting over the curve, it should be a little bit quicker because we're not trying to build out like 20 years in advance. So if that makes sense?

At this time, I'm not showing any further questions. I'd like to turn the call over back to Mr. Walker for any further remarks.

Thank you all for joining us on the call. Again, we do realize there's lots of moving parts. We got a lot of things that are in development right now, not only from new products but initiatives we've got to align our cost structures with volume, and particularly in the healthcare business, as well as new activities to create new market potential. Would always continue to endeavor to try to give you the information that we think is relevant to help you understand where we're going, and do that as transparently as possible so that you can make informed decisions as an investor or as the investors that in fact you talk to. We look forward to talking to you all next quarter and giving you further updates on our progress. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.