Hasbro, Inc.
Feb 7, 2013
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Hasbro Reports Fourth Quarter and Full-Year 2012 Financial Results and Declares 11% Increase in Quarterly Dividend

PAWTUCKET, R.I.--(BUSINESS WIRE)-- Hasbro, Inc. (NASDAQ: HAS) today reported financial results for the full-year and fourth quarter 2012. Net revenues for the full-year 2012 were $4.09 billion compared to $4.29 billion in 2011. Excluding a negative $98.5 million impact of foreign exchange, net revenues declined 2% to $4.19 billion.

Net earnings for the full-year 2012 were $336.0 million, or $2.55 per diluted share, versus $385.4 million, or $2.82 per diluted share, in 2011. 2012 net earnings include $47.2 million pre-tax, or $0.26 per diluted share, of restructuring charges. Excluding these charges, net earnings were $370.8 million, or $2.81 per diluted share. Additionally, full-year 2012 earnings per share include $0.10 per diluted share from the negative impact of foreign exchange.

The Company's reported 2011 earnings per diluted share included the impact of a $20.5 million favorable tax adjustment, or $0.15 per diluted share, and pre-tax expense of $14.4 million, or $0.07 per diluted share, related to costs associated with establishing Hasbro's Gaming Center of Excellence in Rhode Island. Earnings per diluted share for 2011 excluding these two items were $2.74.

For the fourth quarter 2012, the Company reported net revenues of $1.28 billion compared to $1.33 billion in 2011. Foreign exchange had an $8.2 million negative impact on revenues in the quarter. The Company reported net earnings for the quarter of $130.3 million or $0.99 per diluted share, including $36.0 million pre-tax, or $0.21 per share, in restructuring charges, versus $139.1 million or $1.06 per diluted share in 2011. Excluding these charges, fourth quarter net earnings were $157.4 million, or $1.20 per diluted share.

"In 2012, we achieved many important objectives for the year, including improving the U.S. and Canada segment operating profit margin to 15.1%, growing our Games and Girls categories and driving 16% revenue growth in the emerging markets while improving profitability," said Brian Goldner, Hasbro's President and Chief Executive Officer. "We did, however, face difficult year-over-year comparisons and a challenging holiday season in certain geographies."

"We also began an important next step in realizing our full potential as brand builders, with the implementation of a cost savings initiative designed to better align resources and costs while delivering $100 million in annual savings by 2015," continued Goldner. "Our strategy during the past several years has focused on delivering compelling brand innovation while investing in and establishing the capabilities required for developing content-rich brand initiatives that consumers and retailers around the world want. With the investments in these capabilities in place, we are now taking the next step to increase our organization's focus around fewer multi-platform global brand opportunities that are integrating play through digital and analog experiences."

"Hasbro remains in a strong financial position," said Deborah Thomas, Hasbro's Chief Financial Officer. "In 2012, we generated $535 million in operating cash flow, reduced inventory at Hasbro and at our retailers and we improved our operating profit margin, absent restructuring charges, versus 2011. We are taking the steps we believe necessary to lower our cost base and better align our resources behind our greatest long-term opportunities. We remain committed to investing in the long-term growth of Hasbro and delivering strong shareholder returns including our dividend and share repurchase program. Our ability to raise the dividend for the ninth time in ten years is based on the confidence we have in the long-term prospects for Hasbro."

Dividend and Share Repurchase

Hasbro's Board of Directors has declared a quarterly cash dividend of $0.40 per common share. This represents an increase of $0.04 per share, or 11%, from the previous quarterly dividend of $0.36 per common share. The dividend will be payable on May 15, 2013 to shareholders of record at the close of business on May 1, 2013.

The Company paid $225.5 million in cash dividends to shareholders during 2012, including the $46.6 million accelerated payment of its fourth quarter dividend historically paid in February.

Additionally, Hasbro repurchased a total of 2.7 million shares of common stock during 2012 at a total cost of $100.0 million and an average price of $37.11 per share. At year-end, $127.3 million remained available in the current share repurchase authorization.

 

Full-Year 2012 Major Segment Performance

         
    Net Revenues ($ Millions)   Operating Profit ($ Millions)
  FY 2012   FY 2011   % Change   FY 2012   FY 2011   % Change
U.S. and Canada   $2,116.3   $2,253.5   -6%   $319.1   $278.4   +15%
International   $1,782.1   $1,861.9   -4%   $215.5   $270.6   -20%
Entertainment and Licensing   $181.4   $162.2   +12%   $53.2   $42.8   +24%
       

U.S. and Canada segment net revenues were $2.12 billion compared to $2.25 billion in 2011. The segment's results reflect growth in the Girls and Games categories, which was more than offset by declines in Boys and Preschool. The U.S. and Canada segment reported 15% operating profit growth to $319.1 million, or 15.1% of revenues, compared to $278.4 million, or 12.4% of revenues, in 2011.

Net revenues in the International segment grew 1% absent the negative $97.9 million impact of foreign exchange. Including the impact of foreign exchange, International segment net revenues were $1.78 billion, down 4%, compared to $1.86 billion in 2011. Revenue in the International segment reflects 8% growth in Latin America offset by a decline in Europe and Asia Pacific. Additionally, the Games and Preschool category were flat in 2012, while Boys and Girls declined. The International segment reported an operating profit of $215.5 million compared to $270.6 million in 2011.

Entertainment and Licensing segment net revenues increased 12% to $181.4 million compared to $162.2 million in 2011. The segment continued to benefit from the sale of television programming in all formats in the U.S. and internationally offset by lower movie-related revenues. The Entertainment and Licensing segment reported 24% operating profit growth to $53.2 million compared to $42.8 million in 2011.

 

Full-Year 2012 Product Category Performance

   

 

    Net Revenues ($ Millions)
  FY 2012   FY 2011   % Change
Boys   $1,577.0   $1,821.5   -13%
Games   $1,192.1   $1,169.7   +2%
Girls   $792.3   $741.4   +7%
Preschool   $527.6   $553.0   -5%
   

In the Boys category, net revenues decreased 13% to $1.58 billion. MARVEL branded products, driven primarily by MARVEL'S THE AVENGERS and THE AMAZING SPIDER-MAN, posted strong year-over-year gains globally. This growth was more than offset by expected declines in TRANSFORMERS and BEYBLADE products following a strong 2011 for both lines.

Net revenues in the Games category increased 2% to $1.19 billion. MAGIC: THE GATHERING, TWISTER, BATTLESHIP and Boys Action Gaming, including TRANSFORMERS BOT SHOTS and ANGRY BIRDS STAR WARS, all helped the category grow in 2012.

The Girls category net revenues increased 7% to $792.3 million. FURBY was very successful in 2012 and will launch globally in 2013. MY LITTLE PONY posted strong growth for the year and the addition of ONE DIRECTION to the Girls category was favorable.

Net revenues in the Preschool category declined 5% to $527.6 million. The PLAYSKOOL HEROES line had a strong 2012 and PLAY-DOH product revenues grew in the year. The category faced difficult comparisons against the initial launch of SESAME STREET products in 2011.

Hasbro will webcast its fourth quarter and full-year 2012 earnings conference call at 5:00 p.m. Eastern Time today. To listen to the live webcast, go to http://investor.hasbro.com. The replay of the call will be available on Hasbro's web site approximately 2 hours following completion of the call. Additionally, presentation slides associated with today's conference call are available on Hasbro's website at http://investor.hasbro.com.

HAS-E

About Hasbro

Hasbro, Inc. (NASDAQ: HAS) is a branded play company dedicated to fulfilling the fundamental need for play for children and families through creative expression of the Company's world class brand portfolio, including TRANSFORMERS, MONOPOLY, PLAY-DOH, MY LITTLE PONY, MAGIC: THE GATHERING, NERF, LITTLEST PET SHOP and G.I. JOE. From toys and games, to television programming, motion pictures, digital gaming and a comprehensive licensing program, Hasbro strives to delight its global customers with innovative play and entertainment experiences, in a variety of forms and formats, anytime and anywhere. The Company's Hasbro Studios develops and produces television programming for more than 170 markets around the world, and for the U.S. on The Hub TV Network, part of a multi-platform joint venture between Hasbro and Discovery Communications (NASDAQ: DISCA, DISCB, DISCK). Through the Company's deep commitment to corporate social responsibility, including philanthropy, Hasbro is helping to build a safe and sustainable world for future generations and to positively impact the lives of millions of children and families every year. It has been recognized for its efforts by being named one of the "World's Most Ethical Companies," is ranked as one of Corporate Responsibility Magazine's "100 Best Corporate Citizens" and was named in the top 10 of the Civic 50 for its efforts to improve the quality of life in the communities where it does business. Learn more at www.hasbro.com.

© 2013 Hasbro, Inc. All Rights Reserved.

Certain statements 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 the future, including with respect to its planned cost savings initiative and profitability, 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) global economic conditions, including recessions, credit crises or other economic shocks or downturns affecting the United States, Europe or any of the Company's other markets which can negatively impact the retail and/or credit markets, the financial health of the Company's retail customers and consumers, and consumer and business confidence, and which can result in lower employment levels, less consumer disposable income, and lower consumer spending, including lower spending on purchases of the Company's products; (iii) other factors which can lower discretionary consumer spending, such as higher costs for fuel and food, drops in the value of homes or other consumer assets, and high levels of consumer debt; (iv) potential difficulties or delays the Company may experience in implementing cost savings and efficiency enhancing initiatives in an effective manner; (v) 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 disease 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; (vi) 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; (vii) 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 or changes by the Company's customers in their purchasing or selling patterns; (viii) greater than expected costs, or unexpected delays or difficulties, associated with The Hub TV Network, the Company's joint venture television network with Discovery Communications, LLC, Hasbro Studios, or the creation of new content to appear on The Hub TV Network and elsewhere; (ix) consumer interest in and acceptance of The Hub TV Network, and programming created by Hasbro Studios, and other factors impacting the financial performance of the network and Hasbro Studios; (x) greater than expected costs or unexpected delays or difficulties associated with the creation of Hasbro's Gaming Center of Excellence and the execution of the Company's strategy for driving innovation and immersive play experiences in its gaming business; (xi) unexpected delays or difficulties in the Company's execution of its plans to drive growth and increased profitability in its U.S. and Canada business; (xii) the inventory policies of the Company's retail customers, including retailers' potential decisions to lower the inventories they are willing to carry, even if it results in lost sales, as well as the concentration of the Company's revenues in the second half and fourth quarter of the year, which coupled with reliance by retailers on quick response inventory management techniques increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve tight and compressed shipping schedules; (xiii) delays, increased costs or difficulties associated with any of our planned entertainment initiatives; (xiv) work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product in a timely and cost-effective manner; (xv) 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; (xvi) 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; (xvii) 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; (xviii) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xix) 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; (xx) the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization; and (xxi) other risks and uncertainties as may be detailed from time to time in the Company's public announcements and Securities and Exchange Commission ("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 press release includes a non-GAAP financial measure as defined under SEC rules, specifically EBITDA. EBITDA represents net earnings excluding interest expense, income taxes, depreciation and amortization. As required by SEC rules, we have provided reconciliation on the attached schedule of this measure to the most directly comparable GAAP measure. 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 press release also includes the Company's Consolidated and International segment net revenues, net earnings and earnings per share excluding the impact of changes in exchange rates. Management believes that the presentation of Consolidated and International segment net revenues, net earnings and earnings per share excluding 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. Further, the Company provided the 2012 and 2011 diluted earnings per share absent restructuring charges and favorable tax adjustment as well as 2012 and 2011 operating profit and operating proft margin absent restructing charges to assist investors in understanding the comparability of the Company's results.

 
HASBRO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
(Thousands of Dollars)

December 30,
2012

December 25,
2011

ASSETS
Cash and Cash Equivalents $ 849,701 $ 641,688
Accounts Receivable, Net 1,029,959 1,034,580
Inventories 316,049 333,993
Other Current Assets   312,493   243,431
Total Current Assets 2,508,202 2,253,692
Property, Plant and Equipment, Net 230,414 218,021
Other Assets   1,586,771   1,659,061
Total Assets $ 4,325,387 $ 4,130,774
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term Borrowings $ 224,365 $ 180,430
Payables and Accrued Liabilities   736,070   761,914
Total Current Liabilities 960,435 942,344
Long-term Debt 1,396,421 1,400,872
Other Liabilities   461,152   370,043
Total Liabilities 2,818,008 2,713,259
Total Shareholders' Equity   1,507,379   1,417,515
Total Liabilities and Shareholders' Equity $ 4,325,387 $ 4,130,774
 
 
HASBRO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Thousands of Dollars and Shares Except Per Share Data)   Quarter Ended   Year Ended
           

Dec. 30,
2012

% Net
Revenues

Dec. 25,
2011

% Net
Revenues

Dec. 30,
2012

% Net
Revenues

Dec. 25,
2011

% Net
Revenues

Net Revenues $ 1,283,529 100.0 % $ 1,329,338 100.0 % $ 4,088,983 100.0 % $ 4,285,589 100.0 %
Costs and Expenses:
Cost of Sales 516,444 40.2 % 591,483 44.5 % 1,671,980 40.9 % 1,836,263 42.8 %
Royalties 89,515 7.0 % 104,537 7.9 % 302,066 7.4 % 339,217 7.9 %
Product Development 57,686 4.5 % 47,351 3.5 % 201,197 4.9 % 197,638 4.6 %
Advertising 142,900 11.1 % 135,248 10.2 % 422,239 10.3 % 413,951 9.7 %
Amortization of Intangibles 15,777 1.2 % 14,269 1.1 % 50,569 1.3 % 46,647 1.1 %
Program Production Cost Amortization 15,850 1.3 % 17,716 1.3 % 41,800 1.0 % 35,798 0.8 %
Selling, Distribution and Administration   245,202 19.1 %   202,155 15.2 %   847,347 20.7 %   822,094 19.2 %
Operating Profit 200,155 15.6 % 216,579 16.3 % 551,785 13.5 % 593,981 13.9 %
Interest Expense 22,573 1.8 % 22,320 1.7 % 91,141 2.2 % 89,022 2.1 %
Other (Income) Expense, Net   3,922 0.3 %   5,115 0.4 %   7,242 0.2 %   18,566 0.4 %
Earnings before Income Taxes 173,660 13.5 % 189,144 14.2 % 453,402 11.1 % 486,393 11.4 %
Income Taxes   43,361 3.3 %   50,014 3.7 %   117,403 2.9 %   101,026 2.4 %
Net Earnings $ 130,299 10.2 % $ 139,130 10.5 % $ 335,999 8.2 % $ 385,367 9.0 %
 
Per Common Share
Net Earnings
Basic $ 1.00 $ 1.08 $ 2.58 $ 2.88
Diluted $ 0.99 $ 1.06 $ 2.55 $ 2.82
 
Cash Dividends Declared $ 0.36 $ 0.30 $ 1.44 $ 1.20
 
Weighted Average Number of Shares
Basic   129,824   129,126   130,067   133,823
Diluted   131,581   131,668   131,926   136,697
 
 
HASBRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
(Thousands of Dollars)
Year Ended
Dec. 30, 2012 Dec. 25, 2011
Cash Flows from Operating Activities:
Net Earnings $ 335,999 $ 385,367
Non-cash Adjustments

195,435

205,808
Changes in Operating Assets and Liabilities  

3,362

    (195,106 )
Net Cash Provided by Operating Activities   534,796     396,069  
 
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment (112,091 ) (99,402 )
Other   5,919     (8,213 )
Net Cash Utilized by Investing Activities   (106,172 )   (107,615 )
 
Cash Flows from Financing Activities:
Net Proceeds from Short-term Borrowings 43,106 167,339
Purchases of Common Stock (98,005 ) (423,008 )
Stock-based Compensation Transactions 69,440 39,455
Dividends Paid (225,464 ) (154,028 )
Other   (8,456 )   (5,443 )
Net Cash Utilized by Financing Activities   (219,379 )   (375,685 )
 
Effect of Exchange Rate Changes on Cash (1,232 ) 1,123
 
Cash and Cash Equivalents at Beginning of Year   641,688     727,796  
 
Cash and Cash Equivalents at End of Year $ 849,701   $ 641,688  
 
 
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
(Unaudited)
(Thousands of Dollars)   Quarter Ended     Year Ended  

Dec. 30, 2012

  Dec. 25, 2011  

% Change

  Dec. 30, 2012   Dec. 25, 2011 % Change  

Major Segment Results

U.S. and Canada Segment:

External Net Revenues $ 606,185 $ 592,794 2 % $ 2,116,297 $ 2,253,458 -6 %
Operating Profit 89,494 50,830 76 % 319,072 278,356 15 %
Operating Margin 14.8 % 8.6 % 15.1 % 12.4 %
 

International Segment:

External Net Revenues 607,753 669,788 -9 % 1,782,119 1,861,901 -4 %
Operating Profit 105,224 137,822 -24 % 215,489 270,578 -20 %
Operating Margin 17.3 % 20.6 % 12.1 % 14.5 %
 

Entertainment and Licensing Segment:

External Net Revenues 65,812 64,089 3 % 181,430 162,233 12 %
Operating Profit 26,539 21,490 23 % 53,191 42,784 24 %
Operating Margin 40.3 % 33.5 % 29.3 % 26.4 %
 

International Segment Net Revenues by Major Geographic Region

Europe $ 402,763 $ 464,141 -13 % $ 1,154,310 $ 1,254,427 -8 %
Latin America 125,599 125,267 0 % 362,689 334,887 8 %
Asia Pacific   79,391     80,380   -1 %   265,120     272,587   -3 %
Total $ 607,753   $ 669,788   $ 1,782,119   $ 1,861,901  
 

Net Revenues by Product Class

Boys $ 414,052 $ 536,271 -23 % $ 1,577,010 $ 1,821,544 -13 %
Games 428,630 373,279 15 % 1,192,090 1,169,672 2 %
Girls 292,561 249,982 17 % 792,292 741,394 7 %
Preschool   148,286     169,806   -13 %   527,591     552,979   -5 %
Total Net Revenues $ 1,283,529   $ 1,329,338   $ 4,088,983   $ 4,285,589  
 

Reconciliation of EBITDA

Net Earnings $ 130,299 $ 139,130 $ 335,999 $ 385,367
Interest Expense 22,573 22,320 91,141 89,022
Income Taxes 43,361 50,014 117,403 101,026
Depreciation 24,605 28,782 99,718 113,821
Amortization of Intangibles   15,777     14,269     50,569     46,647  
EBITDA $ 236,615   $ 254,515   $ 694,830   $ 735,883  
 
 

Operating Profit, as Adjusted

Year Ended
Dec. 30, 2012

% Net Revenues

Dec. 25, 2011 % Net Revenues
Operating Profit, as Reported $ 551,785 13.5 % $ 593,981 13.9 %
Restructuring Charges   47,176     1.2 %   14,385     0.3 %
Operating Profit, as Adjusted $ 598,961     14.7 % $ 608,366     14.2 %
 
 

Net Earnings and Earnings per Share Excluding

Restructuring Charges and Tax Benefit

Year Ended

Dec. 30, 2012

Diluted Per
Share Amount

Dec. 25, 2011

Diluted Per
Share Amount

Net Earnings, as Reported $ 335,999 $ 2.55 $ 385,367 $ 2.82
Restructuring Charges, Net of Tax 34,762 0.26 9,178 0.07
2011 Tax Benefit   -     -     (20,477 )   (0.15 )
Net Earnings, as Adjusted $ 370,761   $ 2.81   $ 374,068   $ 2.74  

Hasbro, Inc.
Investor Relations
Debbie Hancock, 401-727-5401
or
News Media
Wayne Charness, 401-727-5983

Source: Hasbro, Inc.

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