Hasbro, Inc.
Jul 20, 2009
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Hasbro Reports Second Quarter Results

Second Quarter Highlights

PAWTUCKET, R.I.--(BUSINESS WIRE)--Jul. 20, 2009--Hasbro, Inc. (NYSE: HAS) today reported net revenues of $792.2 million, compared to $784.3 million a year ago, an increase of 1%. Excluding the negative $44.5 million impact of foreign exchange, net revenues increased 7%. The Company reported net earnings of $39.3 million, or $0.26 per diluted share, compared to $37.5 million or $0.25 per diluted share in 2008. The 2009 second quarter results include a $0.06 per share dilutive impact from the Company’s investment in its joint venture with Discovery Communications, inclusive of one-time deal expenses and financing costs associated with its recent issuance of long-term debt.

“Hasbro performed well in what continues to be a challenging global environment. Our ability to deliver growth in both revenue and earnings per share, while including the dilution from the investment in our joint venture with Discovery Communications, was due to broad based strength across Hasbro’s core brand product portfolio and strong execution globally,” said Brian Goldner, President and Chief Executive Officer.

“For the remainder of this year, we will continue to invest in our business and closely manage our expenses. While there are challenges in 2009, we believe that the underlying strength of our brands and our commitment to our strategy should enable Hasbro to grow revenue and earnings per share, including the impact of our television investment -- absent a material deterioration in the global economy and the value of foreign currencies,” Goldner concluded.

U.S. and Canada segment net revenues were $490.9 million, compared to $467.7 million in 2008. The results reflect growth in TRANSFORMERS,

G.I. JOE, LITTLEST PET SHOP, NERF, PLAY-DOH, FURREAL FRIENDS and TONKA. The U.S. and Canada segment reported an operating profit of $56.3 million, compared to $43.7 million in 2008.

International segment net revenues were $276.2 million, compared to $293.7 million in 2008. The revenues include a negative foreign exchange impact of approximately $42.8 million. The results reflect growth in TRANSFORMERS, G.I. JOE, LITTLEST PET SHOP, NERF, PLAY-DOH and STAR WARS. The International segment reported an operating profit of $16.5 million

compared to operating profit of $14.0 million in 2008.

Entertainment and Licensing segment net revenues were $24.2 million, compared to $21.3 million in 2008. The results reflect increases in TRANSFORMERS, G.I. JOE and NERF. The Entertainment and Licensing segment reported an operating profit of $2.9 million compared to operating profit of $8.0 million in 2008. The 2009 results were impacted by one-time expenses associated with the investment in the joint venture with Discovery Communications. The Entertainment and Licensing segment includes television, movies, lifestyle and digital licensing and on-line entertainment operations.

“Our business performance in 2009 has continued to meet our expectations. Our integration of the joint venture with Discovery Communications is on track and we are very pleased with the favorable interest rates we were able to obtain on our recent long-term financing,” said Deborah Thomas, Chief Financial Officer.

Since the investment in the joint venture with Discovery Communications was finalized, the Company has reduced the expected dilution for 2009 and 2010. Due to lower financing costs and joint venture amortization expenses, the 2009 dilution the Company anticipates has been reduced to $0.15 to $0.20 per diluted share from the previous guidance of $0.25 to $0.30 per diluted share. In 2010, the expected dilution has been reduced to $0.25 to $0.30 per diluted share from the previous guidance of $0.30 to $0.35 per diluted share.

The Company will webcast its second quarter earnings conference call at 8:30 a.m. Eastern Time today. To listen to the live webcast, go to http://investor.hasbro.com, click on the webcast microphone. The replay will be available on Hasbro’s web site approximately 2 hours following completion of the call.

Hasbro, Inc. is a worldwide leader in children’s and family leisure time products and services with a rich portfolio of brands and entertainment properties that provides some of the highest quality and most recognizable play and recreational experiences in the world. As a brand-driven, consumer-focused global company, Hasbro brings to market a range of toys, games and licensed products, from traditional to high-tech and digital, under such powerful brand names as TRANSFORMERS, PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, CRANIUM and WIZARDS OF THE COAST. Come see how we inspire play through our brands at www.hasbro.com. © 2009 Hasbro, Inc. All Rights Reserved.

Certain statements contained in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include expectations concerning the Company’s potential performance in 2009, including with respect to its revenues and earnings per share, potential future dilution associated with the joint venture with Discovery Communications, future opportunities and the Company’s ability to achieve its other financial and business goals and may be identified by the use of forward-looking words or phrases. The Company's actual actions or results may differ materially from those expected or anticipated in the forward-looking statements due to both known and unknown risks and uncertainties. Specific factors that might cause such a difference include, but are not limited to: (i) the Company's ability to design, manufacture, source and ship new and continuing products on a timely and cost-effective basis, as well as interest in and purchase of those products by retail customers and consumers in quantities and at prices that will be sufficient to profitably recover the Company’s development, manufacturing, marketing, royalty and other costs; (ii) recessions or other economic downturns which negatively impact the retail and credit markets, and the financial health of the Company’s retail customers and consumers, and which can result in lower employment levels, less consumer disposable income, lower consumer confidence and, as a consequence, lower consumer spending, including lower spending on purchases of the Company’s products, (iii) other economic and public health conditions in the markets in which the Company and its customers and suppliers operate which impact the Company's ability and cost to manufacture and deliver products, such as higher fuel and other commodity prices, higher labor costs, higher transportation costs, outbreaks of SARs, bird flu or other diseases which affect public health and the movement of people and goods, and other factors, including government regulations, which can create potential manufacturing and transportation delays or impact costs, (iv) currency fluctuations, including movements in foreign exchange rates, which can lower the Company’s net revenues and earnings, and significantly impact the Company’s costs; (v) the concentration of the Company's customers, potentially increasing the negative impact to the Company of difficulties experienced by any of the Company’s customers; (vi) greater than expected costs, or unexpected delays or difficulties, associated with the Company’s investment in its joint venture with Discovery Communications, LLC, the rebranding of the joint venture network and the creation of new content to appear on the network, (vii) consumer interest in and acceptance of the joint venture network, and other factors impacting the financial performance of the joint venture, (viii) the inventory policies of the Company’s retail customers, including the concentration of the Company's revenues in the second half and fourth quarter of the year, together with increased reliance by retailers on quick response inventory management techniques, which increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve tight and compressed shipping schedules; (ix) work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product in a timely and cost-effective manner; (x) the bankruptcy or other lack of success of one of the Company's significant retailers which could negatively impact the Company's revenues or bad debt exposure; (xi) the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees in a competitive environment; (xii) concentration of manufacturing for many of the Company’s products in the People’s Republic of China and the associated impact to the Company of public health conditions and other factors affecting social and economic activity in China, affecting the movement of products into and out of China, and impacting the cost of producing products in China and exporting them to other countries; (xiii) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xiv) other market conditions, third party actions or approvals and the impact of competition which could reduce demand for the Company’s products or delay or increase the cost of implementation of the Company's programs or alter the Company's actions and reduce actual results; (xv) the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization; and (xvi) other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances occurring after the date of this release.

This presentation includes a non-GAAP financial measure as defined under rules of the Securities and Exchange Commission (“SEC”), specifically EBITDA. As required by SEC rules, we have provided reconciliation on the attached schedule of this measure to the most directly comparable GAAP measure. EBITDA (earnings before interest, taxes, depreciation and amortization) represents net earnings excluding interest expense, income taxes, depreciation and amortization. Management believes that EBITDA is one of the appropriate measures for evaluating the operating performance of the Company because it reflects the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet, and make strategic acquisitions. However, this measure should be considered in addition to, not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with GAAP as more fully discussed in the Company's financial statements and filings with the SEC. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. This presentation also includes the Company’s Consolidated and International segment net revenues excluding the impact of changes in exchange rates. Management believes that the presentation of Consolidated and International segment net revenues minus the impact of exchange rate changes provides information that is helpful to an investor’s understanding of the underlying business performance absent exchange rate fluctuations which are beyond the Company’s control.

(Tables Attached)



HASBRO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

           

 
(Unaudited)
     

     
(Thousands of Dollars)   June 28, 2009

June 29, 2008
 

ASSETS
       
Cash and Cash Equivalents   $ 392,034   $ 594,621
Accounts Receivable, Net     652,557     562,502
Inventories     346,814     375,033
Other Current Assets     210,824  

 
187,200
Total Current Assets     1,602,229     1,719,356
Property, Plant and Equipment, Net     222,937     210,641
Other Assets     1,653,010

  1,275,314
Total Assets   $ 3,478,176   $ 3,205,311
       

   


           
  LIABILITIES AND SHAREHOLDERS' EQUITY    

 
Short-term Borrowings

$ 11,958  

$
192,941
Current Portion of Long-term Debt     -     135,127
Payables and Accrued Liabilities     600,765

  610,994
Total Current Liabilities     612,723     939,062
Long-term Debt     1,134,723     709,723
Other Liabilities    

341,060
    248,309
Total Liabilities     2,088,506     1,897,094
Total Shareholders' Equity    

1,389,670     1,308,217
Total Liabilities and Shareholders' Equity   $ 3,478,176   $ 3,205,311
           

 
   

       

HASBRO, INC.

 
           

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)    

         
   

    Quarter Ended

Six Months Ended
 

               

 
(Thousands of Dollars and Shares Except Per Share Data)   June 28, 2009   June 29, 2008   June 28, 2009   June 29, 2008
Net Revenues   $ 792,202     $ 784,286     $ 1,413,542   $ 1,488,506  
Cost of Sales    

319,452       308,222       564,205

  579,383  

Gross Profit  

472,750    

476,064    

849,337    

909,123
 
Amortization

  18,792  

  20,644  

  38,679  

39,082  


Royalties
    73,826

    68,167

    128,279

  126,589  
Research and Product Development    

43,529
     

45,432
     

80,660
    87,202

Advertising  

81,677    

86,234    

143,986    

163,217
 
Selling, Distribution and Administration

  181,853  

    190,078      

343,443
    366,271  
Operating Profit

  73,073  

  65,509  

  114,290  

126,762  


Interest Expense
    17,503

    12,950

    27,218

  24,378  
Other (Income) Expense, Net     (1,284 )    

(2,726 )  

 
1,631    

(8,571 )


Earnings before Income Taxes
    56,854

    55,285

    85,441

  110,955  
Income Taxes     17,579    

 
17,799  

  26,436     35,999  
Net Earnings   $ 39,275    

$
37,486     $ 59,005   $ 74,956  


               

 
Per Common Share        

     
  Net Earnings            

 
    Basic   $ 0.28     $

0.27
    $ 0.42   $ 0.53  
    Diluted   $ 0.26     $

0.25
    $ 0.40   $ 0.50  
           

       

  Cash Dividends Declared

$ 0.20     $ 0.20  

  $ 0.40

$ 0.40  
     

             
Weighted Average Number of Shares              

  Basic

  139,967  

    140,246      

140,007
    141,311  
  Diluted     152,979

 
    155,081      

152,968
    155,695  
           

               

 
 

               

           
HASBRO, INC.
Supplemental Financial Data
Net Earnings Per Share


(Unaudited)
   

 
         
 

               

(Thousands of Dollars and Shares Except Per Share Data)


    2009

2008
 

  Basic  

Diluted
  Basic  

Diluted
 

Quarter



               
  Net earnings  

$
39,275   $ 39,275   $ 37,486   $ 37,486
  Effect of dilutive securities:            

 
  Interest expense on contingent convertible debentures due 2021     -

  1,092     -  

 
1,059
  Adjusted net earnings   $ 39,275   $ 40,367   $ 37,486   $ 38,545
           

     
  Average shares outstanding  

139,967    

139,967
    140,246

  140,246


Effect of dilutive securities:    

         
  Contingent convertible debentures due 2021     -     11,566     -     11,566
  Options and other share-based awards     -  

 
1,446    

-     3,269
  Equivalent shares     139,967

  152,979     140,246  

 
155,081
         

       

  Net earnings per share

$ 0.28  

$
0.26   $ 0.27   $ 0.25
     

           
 

Six Months

           

 
  Net earnings   $ 59,005   $ 59,005   $ 74,956   $ 74,956
  Effect of dilutive securities:    

 

     

 

 
  Interest expense on contingent convertible debentures due 2021     -

  2,174     -  

 
2,118
  Adjusted net earnings   $ 59,005   $ 61,179   $ 74,956   $ 77,074
           

     
  Average shares outstanding  

140,007    

140,007
    141,311

  141,311


Effect of dilutive securities:    

         
  Contingent convertible debentures due 2021     -     11,566     -     11,566
  Options and other share-based awards     -  

 
1,395    

-     2,818
  Equivalent shares     140,007

  152,968     141,311  

 
155,695
         

       

  Net earnings per share

$ 0.42  

$
0.40   $ 0.53   $ 0.50
     

               

 
 

               

     
HASBRO, INC.


Supplemental Financial Data
Major Segment Results and EBITDA
(Unaudited)
(Thousands of Dollars)
     

Quarter Ended       Six Months Ended    
   

June 28, 2009   June 29, 2008   % Change  

June 28, 2009   June 29, 2008   % Change  
Major Segment Results            

         
   

               

   


U.S. and Canada Segment

   

               

External Net Revenues  

$
490,877   $ 467,663   5 %   $ 895,379   $ 896,185   0 %
Operating Profit     56,318     43,693   29 %     97,868     81,004   21 %
           

             

International Segment

           

         
External Net Revenues     276,231     293,688   -6 %     465,423     541,943   -14 %
Operating Profit     16,450     13,978   18 %     1,979     27,005   -93 %
           

             

Entertainment and Licensing Segment

           

         
External Net Revenues     24,153     21,305   13 %     51,386     47,591   8 %
Operating Profit     2,939     8,031   -63 %     16,566     20,424   -19 %
           

             
Reconciliation of EBITDA    

               

             

           
Net Earnings   $ 39,275   $ 37,486       $ 59,005   $ 74,956    
Interest Expense     17,503     12,950        

27,218
    24,378

 
Income Taxes

  17,579  

17,799    

  26,436  

35,999    
Depreciation    

25,282
    20,459

      40,510     35,772    
Amortization     18,792  

 
20,644         38,679

  39,082    
  EBITDA   $ 118,431   $ 109,338       $ 191,848   $ 210,187    

 

 

Source: Hasbro, Inc.

Karen A. Warren
Debbie Hancock
(Investor Relations)
401-727-5401
or
Wayne S. Charness
(News Media)
401-727-5983


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