View:
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002 Commission file number 1-6682
HASBRO, INC.
--------------------
(Exact Name of Registrant, As Specified in its Charter)
Rhode Island 05-0155090
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1027 Newport Avenue, Pawtucket, Rhode Island 02862
---------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(401) 431-8697
----------------------
(Registrant's Phone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes X or No
--- ---
The number of shares of Common Stock, par value $.50 per share,
outstanding as of April 28, 2002 was 173,109,903.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands of Dollars Except Share Data)
(Unaudited)
March 31, Apr. 1, Dec. 30,
Assets 2002 2001 2001
-------- -------- --------
Current assets
Cash and cash equivalents $ 355,112 180,766 233,095
Accounts receivable, less allowance
for doubtful accounts of $47,900,
$55,300 and $49,300 287,379 255,450 572,499
Inventories:
Finished products 198,134 257,447 180,286
Work in process 16,518 22,508 19,639
Raw materials 17,518 26,669 17,554
--------- --------- ---------
Total inventories 232,170 306,624 217,479
Deferred income taxes 106,106 153,583 103,657
Prepaid expenses 217,642 237,013 241,888
--------- --------- ---------
Total current assets 1,198,409 1,133,436 1,368,618
Property, plant and equipment, net 227,086 279,184 235,360
--------- --------- ---------
Other assets
Goodwill, less accumulated amortization
of $269,448, $236,203 and $269,496 760,200 791,409 761,575
Other intangibles, less accumulated
amortization of $419,531, $336,696
and $398,183 780,822 872,809 805,027
Other 168,031 286,120 198,399
--------- --------- ---------
Total other assets 1,709,053 1,950,338 1,765,001
--------- --------- ---------
Total assets $3,134,548 3,362,958 3,368,979
========= ========= =========
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(Thousands of Dollars Except Share Data)
(Unaudited)
March 31, Apr. 1, Dec. 30,
Liabilities and Shareholders' Equity 2002 2001 2001
-------- -------- --------
Current liabilities
Short-term borrowings $ 33,728 90,483 34,024
Current installments of long-term debt 327,167 1,746 2,304
Accounts payable 93,547 129,591 123,109
Accrued liabilities 419,821 583,443 599,154
--------- --------- ---------
Total current liabilities 874,263 805,263 758,591
Long-term debt 840,399 1,167,528 1,165,649
Deferred liabilities 94,567 116,784 91,875
--------- --------- ---------
Total liabilities 1,809,229 2,089,575 2,016,115
--------- --------- ---------
Shareholders' equity
Preference stock of $2.50 par
value. Authorized 5,000,000
shares; none issued - - -
Common stock of $.50 par value.
Authorized 600,000,000 shares; issued
209,694,630 at March 31, 2002,
April 1, 2001 and December 30, 2001 104,847 104,847 104,847
Additional paid-in capital 455,824 463,468 457,544
Deferred compensation (2,572) (5,391) (2,996)
Retained earnings 1,600,152 1,553,199 1,622,402
Accumulated other comprehensive earnings (75,258) (69,967) (68,398)
Treasury stock, at cost, 36,611,811 at
March 31, 2002, 37,229,915 at April 1,
2001 and 36,736,156 shares at December 30,
2001 (757,674) (772,773) (760,535)
--------- --------- ---------
Total shareholders' equity 1,325,319 1,273,383 1,352,864
--------- --------- ---------
Total liabilities and
shareholders' equity $3,134,548 3,362,958 3,368,979
========= ========= =========
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Thousands of Dollars Except Per Share Data)
(Unaudited)
Quarter Ended
--------------------
March 31, Apr. 1,
2002 2001
-------- --------
Net revenues $452,267 463,286
Cost of sales 166,414 189,805
------- -------
Gross profit 285,853 273,481
------- -------
Expenses
Amortization 21,449 29,421
Royalties, research and development 84,669 56,735
Advertising 46,889 47,613
Selling, distribution and administration 139,191 153,819
------- -------
Total expenses 292,198 287,588
------- -------
Operating profit (loss) (6,345) (14,107)
------- -------
Nonoperating (income) expense
Interest expense 19,542 25,890
Other (income) expense, net (2,835) (4,765)
------- -------
Total nonoperating (income) expense 16,707 21,125
------- -------
Earnings (loss) before income taxes and
cumulative effect of accounting change (23,052) (35,232)
Income taxes (5,994) (11,274)
------- -------
Earnings (loss) before cumulative effect
of accounting change (17,058) (23,958)
Cumulative effect of accounting change - (1,066)
------- -------
Net earnings (loss) $(17,058) (25,024)
======= =======
Basic and diluted per common share
Earnings (loss) before cumulative effect of
accounting change $ (.10) (.14)
Cumulative effect of accounting change - (.01)
------- -------
Net earnings (loss) $ (.10) (.15)
======= =======
Cash dividends declared per common share $ .03 .03
======= =======
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2002 and April 1, 2001
(Thousands of Dollars)
(Unaudited)
2002 2001
---- ----
Cash flows from operating activities
Net earnings (loss) $(17,058) (25,024)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of plant and equipment 16,950 19,113
Other amortization 21,449 29,421
Deferred income taxes 8,736 40,810
Compensation earned under restricted stock plans 537 1,088
Change in operating assets and liabilities (other
than cash and cash equivalents):
Decrease in accounts receivable 282,100 419,897
Decrease (increase) in inventories (15,887) 18,671
Decrease (increase) in prepaid expenses 31,256 (23,422)
Decrease in accounts payable and accrued liabilities(194,032) (278,491)
Other 3,829 (8,291)
------- -------
Net cash provided by operating activities 137,880 193,772
------- -------
Cash flows from investing activities
Additions to property, plant and equipment (10,270) (10,424)
Investments and acquisitions, net of cash acquired (2,419) -
Other (2,596) 13,945
------- -------
Net cash provided (utilized) by investing activities (15,285) 3,521
------- -------
Cash flows from financing activities
Repayments of borrowings with original maturities
of more than three months - (25,000)
Net repayments of other short-term borrowings (370) (107,688)
Stock option transactions 1,028 472
Dividends paid (5,189) (5,173)
------- -------
Net cash utilized by financing activities (4,531) (137,389)
------- -------
Effect of exchange rate changes on cash 3,953 (6,253)
------- -------
Increase in cash and cash equivalents 122,017 53,651
Cash and cash equivalents at beginning of year 233,095 127,115
------- -------
Cash and cash equivalents at end of period $355,112 180,766
======= =======
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Three Months Ended March 31, 2002 and April 1, 2001
(Thousands of Dollars)
(Unaudited)
2002 2001
------- ------
Supplemental information
Cash paid (received) during the period for:
Interest $ 31,309 42,539
Income taxes $(45,906) (58,986)
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Earnings
(Thousands of Dollars)
(Unaudited)
Quarter Ended
--------------------
March 31, Apr. 1,
2002 2001
-------- --------
Net earnings (loss) $ (17,058) (25,024)
Cumulative effect of accounting change - (753)
Other comprehensive earnings (loss) (6,860) (24,496)
-------- --------
Total comprehensive earnings (loss) $ (23,918) (50,273)
======== ========
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)
(1) In the opinion of management and subject to year-end audit, the
accompanying unaudited interim financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly the
financial position of the Company as of March 31, 2002 and April 1, 2001, and
the results of operations and cash flows for the periods then ended.
The quarters ended March 31, 2002 and April 1, 2001 are thirteen week
periods.
The results of operations for the quarter ended March 31, 2002 are not
necessarily indicative of results to be expected for the full year.
(2) Earnings per share data for the fiscal quarters ended March 31, 2002 and
April 1, 2001 were computed as follows:
2002 2001
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Earnings (loss) before cumulative
effect of accounting change $(17,058) (17,058) (23,958) (23,958)
======= ======= ======= =======
Average shares outstanding 172,594 172,594 171,933 171,933
Effect of dilutive securities;
Options and warrants - - - -
------- ------- ------- -------
Equivalent shares 172,594 172,594 171,933 171,933
======= ======= ======= =======
Earnings (loss) per share before
cumulative effect of accounting
change $ (.10) (.10) (.14) (.14)
======= ======= ======= =======
Options and warrants to acquire shares totaling 36,409 at March 31, 2002 and
38,774 at April 1, 2001, were excluded from the calculation of diluted
earnings per share because to include them would have been antidilutive. The
Company also has contingent convertible debt under which potentially issuable
shares were not included as the contingency features were not met. If the
contingent conversion features are met, the impact of conversion of the
debentures will result in an additional 11,574 shares being included in the
calculation of diluted earnings per share.
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)
(3) Other comprehensive earnings (loss) for the quarters ended March 31, 2002
and April 1, 2001 consist of the following:
2002 2001
------ ------
Foreign currency translation adjustments $(6,135) (19,764)
Changes in value of available-for-sale securities (1,417) (8,574)
Gains on cash flow hedging activities, net of tax 943 3,810
Reclassifications to income (251) 32
------ ------
$(6,860) (24,496)
====== ======
Reclassification adjustments from other comprehensive earnings to earnings of
$251 for the quarter ended March 31, 2002 represent net gains on cash flow
hedging derivatives for which the related transaction has impacted earnings
and was reflected in cost of sales. This $255 gain is net of losses on cash
flow hedges reclassified to earnings as the result of hedge ineffectiveness of
$4. Losses relating to hedge ineffectiveness were $32 for the quarter ended
April 1, 2001. Additionally, in the quarter ended April 1, 2001, a loss of $60
was recognized in earnings relating to changes in fair value of derivatives
which the Company excluded from its assessment of hedge effectiveness. There
was no such amount for the quarter ended March 31, 2002. The Company expects
the remaining deferred gain of $2,669 on derivative hedging instruments in
accumulated other comprehensive earnings to be reclassified to earnings within
the next twelve months. The remainder of the balance in accumulated other
comprehensive earnings relates primarily to losses on the translation of
foreign currency financial statements.
(4) Effective at the beginning of fiscal 2002, the Company adopted Statement
of Financial Accounting Standards No. 141, "Business Combinations", and No.
142, "Goodwill and other Intangible Assets." As a result of adopting these
statements, the Company's goodwill and certain intangible assets are no longer
amortized. In addition, the Company evaluated its existing intangible assets
and goodwill acquired in prior purchase business combinations based on the
requirements included in Statement 141 and reassessed the useful lives and
residual values of those intangible assets other than goodwill. As a result of
this assessment, the lives of product rights totaling $75,700 obtained in the
Company's acquisition of Milton Bradley in 1984 and Tonka in 1991 were
adjusted to an indefinite life and tested for impairment in accordance with
the provisions of Statement 142. No other reclassifications or adjustments of
remaining useful lives were made as a result of this assessment.
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)
Statement 142 requires the Company, within six months of the date of
adoption, to perform an assessment of whether there is an indication that
goodwill is impaired as of the date of adoption. If indicators exist that
goodwill is impaired, the Company has up to an additional six months to
calculate the impairment of goodwill. The Company is in the process of
performing the initial assessment. Because of the extensive efforts needed to
perform this assessment, the Company cannot estimate the impact, if any, at
this time of adopting the provisions of Statement 142. Upon completion of all
required assessments, should an impairment arise, this transitional impairment
loss will be recognized as the cumulative effect of a change in accounting
principle in the Company's statement of operations.
The following table provides a reconciliation of the reported net income by
quarter for 2001 to adjusted net income had SFAS 142 been applied as of the
beginning of fiscal year 2001:
Quarter
-----------------------------------
First Second Third Fourth Full Year
----- ------ ----- ------ ---------
Reported net earnings (loss)$(25,024) (18,331) 50,602 52,485 59,732
Add back amortization:
Goodwill 10,564 10,209 10,902 12,175 43,850
Indefinite life intangible
assets 2,451 2,451 2,451 2,452 9,805
Tax impact (5,142) (4,680) (412) 1,592 (8,642)
------- ------- ------ ------ -------
Adjusted net earnings (loss)$(17,151) (10,351) 63,543 68,704 104,745
======= ======= ====== ====== =======
Basic and Diluted Earnings
per Share
Reported net earnings (loss)$ (.15) (.11) .29 .30 .35
Add back amortization:
Goodwill .06 .06 .06 .07 .25
Indefinite life intangible
assets .02 .02 .02 .02 .06
Tax impact (.03) (.03) - .01 (.05)
------- ------- ------ ------ -------
Adjusted net earnings (loss)$ (.10) (.06) .37 .40 .61
======= ======= ====== ====== =======
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)
(5) Hasbro is a worldwide leader in children's and family leisure time and
entertainment products and services, including the design, manufacture and
marketing of games and toys ranging from traditional to high-tech. The
Company's main reportable segments are U.S. Toys, Games, and International.
The Company has two other segments, Operations and Retail, which meet the
quantitative thresholds for reportable segments. In 2002, the Company has
further refined its business segments. This refinement includes the
realignment of the U.S. Tiger toy lines to the U.S. Toys segment, from the
Games segment where all Tiger products had been included. Certain Tiger
electronic games, primarily handheld, remain in the Games segment. In
addition, the International operations of Tiger and Wizards of the Coast are
now managed as part of the International segment beginning in January 2002.
The results of these units had been included in and managed as part of the
Games segment. Prior year amounts have been reclassified to reflect the
Company's current focus.
In the United States, the U.S. Toys segment includes the design, marketing and
selling of boys' action figures, vehicles and playsets, girls' toys, preschool
toys and infant products, creative play products, electronic interactive
products, children's consumer electronics, electronic learning aids, and toy-
related specialty products. The Games segment includes the development,
manufacturing, marketing and selling of traditional board games and puzzles,
handheld electronic games, trading card and role-playing games. Within the
International segment, the Company develops, manufactures, markets and sells
both toy and certain game products in non-U.S. markets. The Operations segment
sources product for the majority of the Company's segments. The Retail segment
operates retail shops, which sell games products and offers an area for
organized play of trading card and role-playing games. The Company also has
other segments which license out certain toy and game properties. These other
segments do not meet the quantitative thresholds for reportable segments and
have been combined for reporting purposes.
Segment performance is measured at the operating profit level. Included in
Corporate and eliminations are general corporate expenses, the elimination of
intersegment transactions and assets not identified with a specific segment.
Intersegment sales and transfers are reflected in management reports at
amounts approximating cost.
The accounting policies of the segments are the same as those described in
note 1 to the Company's consolidated financial statements for the fiscal year
ended December 30, 2001, except for the Company's adoption of Statement of
Financial Accounting Standards No. 142 described in Note 4.
Results shown for the quarter are not necessarily representative of those
which may be expected for the full year 2002 nor were those of the 2001 first
quarter representative of those actually experienced for the full year 2001.
Similarly, such results are not necessarily those which would be achieved were
each segment an unaffiliated business enterprise.
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)
Information by segment and a reconciliation to reported amounts for the three
months ended March 31, 2002 and April 1, 2001 are as follows:
Quarter Ended Quarter Ended
March 31, 2002 April 1, 2001
-------------- -------------
External Affiliate External Affiliate
Net revenues -------- --------- -------- ---------
U.S. Toys $ 200,860 1,636 158,504 11,727
Games 92,849 4,243 124,620 7,207
International 136,145 17,297 156,864 16,203
Operations (a) 2,678 93,580 3,486 52,072
Retail 8,868 - 9,485 -
Other segments 10,867 2,578 10,327 709
Corporate and eliminations - (119,334) - (87,918)
--------- --------- --------- ---------
$ 452,267 - 463,286 -
========= ========= ========= =========
Quarter ended Quarter ended
March 31, 2002 April 1, 2001
-------------- --------------
Operating profit (loss)
U.S. Toys $ 26,240 (14,956)
Games (2,501) 16,092
International (29,090) (22,755)
Operations (2,771) (3,545)
Retail (5,422) (6,805)
Other segments 6,393 5,955
Corporate and eliminations 806 11,907
--------- ---------
$ (6,345) (14,107)
========= =========
March 31, 2002 April 1, 2001
-------------- -------------
Total assets
U.S. Toys $ 870,981 995,538
Games 1,045,987 1,011,243
International 1,032,991 1,159,945
Operations 477,112 371,360
Retail 25,172 43,184
Other segments 47,037 21,311
Corporate and eliminations (364,732) (239,623)
--------- ---------
$3,134,548 3,362,958
========= =========
(a) The Operations segment derives substantially all of its revenues and
operating results from intersegment activities.
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)
The following table presents consolidated net revenues by class of principal
products for the quarters ended March 31, 2002 and April 1, 2001:
2002 2001
------- -------
Boys toys $ 188,800 85,100
Games and puzzles 151,000 204,100
Preschool toys 33,200 28,300
Creative play 26,300 40,100
Girls toys 12,000 9,100
Other 40,967 96,586
------- -------
Net revenues $ 452,267 463,286
======= =======
(6) Effective December 31, 2001, the Company adopted Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets. The adoption of this statement did not have an impact on
the Company's consolidated results of operations and financial position.
Also effective December 31, 2001, the Company adopted the remaining provisions
of the Emerging Issues Task Force Issue No. 01-9, "Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendor's Products)" (Issue No. 01-9), which addresses vendor recognition,
reporting characterization, timing of recognition and classification in the
statement of operations of certain consideration given to a customer in
connection with the sale of the vendor's products. The adoption of these
provisions did not materially impact revenue and expense classifications in
the statement of operations or reported net earnings.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Thousands of Dollars Except Per Share Data)
RESULTS OF OPERATIONS
- ---------------------
Net loss for the first quarter of 2002 was $(17,058) compared with $(25,024)
in the first quarter of 2001. Basic and diluted loss per share for the quarter
was $(.10) in 2002 compared with $(.15) in 2001. The net loss and basic and
diluted earnings per share for 2001 include a cumulative effect of accounting
change of $(1,066) or $(.01) per share relating to the adoption of SFAS 133.
Consolidated net revenues for the quarter ended March 31, 2002 were $452,267
compared to $463,286 for the quarter ended April 1, 2001, a decrease of 2%.
Most of the Company's revenues and operating earnings are derived from its
three principal segments, U.S. Toys, Games and International. In 2002, the
Company has reclassified its segment results for 2001 to reflect the
realignment of certain operating divisions within its major segments. Toy
lines included in the U.S. Tiger product lines have been reclassed to the U.S.
Toys segment from the Games segment, where all Tiger products had been
included. Certain Tiger electronic games, primarily handheld, remain in the
Games segment. In addition, the international operations of Tiger and Wizards
of the Coast, previously managed as part of the Games segment, are now managed
as part of the International segment.
U.S. TOYS
U.S. Toys net revenues increased 27% from $158,504 for the quarter ended April
1, 2001 to $200,860 for the quarter ended March 31, 2002. The increase was
primarily due to shipments of products related to STAR WARS: EPISODE II:
ATTACK OF THE CLONES, which is scheduled for release on May 16, 2002. The
increase is also partly due to shipments of product related to BOB THE BUILDER
as well as increased sales of certain core products, including GI JOE and
TRANSFORMERS products. These increases were partially offset by decreased
sales of electronic interactive products, such as POO-CHI, as well as
decreased sales of creative play products. U.S. Toys operating profit
increased from an operating loss of $(14,956) for the quarter ended April 1,
2001 to an operating profit of $26,240 for the quarter ended March 31, 2002.
This increase was primarily due to increased revenues combined with decreased
selling, distribution, and administrative expenses. Decreased selling,
distribution and administration costs resulted from the Company's cost
reduction initiatives, including the combination of its U.S. Toys group in
essentially one location, a process begun in late 2000. During the remainder
of 2002, the Company expects higher sales of STAR WARS related products due to
the theatrical release of STAR WARS: EPISODE II: ATTACK OF THE CLONES, in May.
Sales of product related to entertainment-based properties, such as STAR WARS,
typically carry a higher gross margin. These products also typically carry a
higher royalty rate and the resulting operating profit is not as high as it is
for revenues derived from the sale of owned brands.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
Higher amortization expense relating to the product rights associated with
STAR WARS was offset by decreased amortization of goodwill and product rights
deemed to have an indefinite life as the result of the Company's adoption of
Statement of Financial Accounting Standards No. 142 ("FAS 142") at the
beginning of fiscal 2002. FAS 142 eliminates the amortization of goodwill and
certain intangibles deemed to have an indefinite life.
GAMES
Games net revenues decreased by 25% from $124,620 for the quarter ended April
1, 2001 to $92,849 for the quarter ended March 31, 2002. Approximately 64% of
this decrease relates to decreased sales of POKEMON and MAGIC: THE GATHERING
trading card games. The decrease in MAGIC: THE GATHERING is principally due to
an additional release in 2001 versus 2002. The remaining decrease is primarily
due to decreased sales of traditional board games offset somewhat by sales of
STAR WARS and HARRY POTTER trading card games. Games operating profit
decreased from an operating profit of $16,092 for the quarter ended April 1,
2001 to an operating loss of $(2,501) for the quarter ended March 31, 2002.
The decrease in operating profit was primarily due to decreased gross margin
as the result of the decrease in sales as well as increased research and
development expenses. Partially offsetting these factors were decreased
selling, distribution and administrative expenses primarily due to the
Company's cost reduction initiatives, and reduced intangible amortization
expense as the result of the adoption of Statement of Financial Accounting
Standards No. 142, which eliminates amortization of goodwill and certain
intangibles deemed to have indefinite lives.
INTERNATIONAL
International net revenues decreased by 13% from $156,864 for the quarter
ended April 1, 2001 to $136,145 for the quarter ended March 31, 2002. This
decrease is partly the result of decreased sales of POKEMON products as well
as decreased sales of electronic interactive products. The sale of POKEMON
products was still strong internationally in the first and second quarter of
2001. These decreases were partially offset by shipments of DISNEY product
related to the international release of MONSTERS, INC. International revenues
were adversely impacted by approximately $5,400 from the stronger U.S. dollar.
International operating loss increased from $(22,755) for the quarter ended
April 1, 2001 to $(29,090) for the quarter ended March 31, 2002. The increase
in operating loss was primarily the result of decreased sales and, to a lesser
extent, increased royalty expenses due to increased sales of licensed
products.
OTHER SEGMENTS
Revenues from the Retail segment decreased 7% from $9,485 for the quarter
ended April 1, 2001 to $8,868 for the quarter ended March 31, 2002. Operating
loss for the retail segment decreased from $(6,805) for the quarter ended
April 1, 2001 to $(5,422) for the quarter ended March 31, 2002. The decrease
in revenues and operating loss was primarily due to the closing of certain
underperforming stores in 2001.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
GROSS PROFIT
- ------------
The Company's gross margin increased from 59.0% for the quarter ended April 1,
2001 to 63.2% for the quarter ended March 31, 2002. This increase was due to
changes in product mix with increased sales of STAR WARS products and sales of
DISNEY product, which were partially offset by decreased sales of trading
card games, all of which have higher gross margins. The increase is also due,
to a lesser extent, to reduced inventory closeout sales in the first quarter
of 2002 as a result of the Company's improved inventory management. The
Company has maintained lower levels of inventory in the first quarter of 2002,
attempting to avoid unnecessary expenditures of cash and potential charges
related to obsolescence. The Company's failure to accurately predict and
respond to consumer demand could result in overproduction of less popular
items, which could result in higher obsolescence costs. The Company
anticipates higher gross margins in 2002 as a result of increased sales of
entertainment based-products, such as STAR WARS products due to the scheduled
theatrical release of STAR WARS: EPISODE II: ATTACK OF THE CLONES in May 2002
and DISNEY products due to the scheduled release of LILO and STITCH in June
2002. The expected increase in margins will be partially offset by increased
royalty expense relating to these sales as well as increased amortization of
related product rights.
EXPENSES
- --------
Amortization expense of $21,449 in the first quarter of 2002 decreased from
$29,421 in the first quarter of 2001. This decrease is related to the
Company's adoption of Statements of Financial Accounting Standards 141 and
142, which require that goodwill and other intangible assets with indefinite
useful lives no longer be amortized, but instead, be tested for impairment at
least annually. The decrease related to the adoption of these statements is
partially offset by increased amortization of the product rights related to
STAR WARS as a result of increased sales of STAR WARS product in anticipation
of the May 2002 release of STAR WARS EPISODE II: ATTACK OF THE CLONES.
Royalties, research and development expenses for the quarter increased to
$84,669 or 18.7% of net revenues in the first quarter of 2002 from $56,735 or
12.2% of net revenues in the first quarter of 2001. Approximately 90% of this
increase was due to increased royalty expense as a result of increased sales
of entertainment based product, primarily STAR WARS related. The remainder of
the increase relates to increased research and development expense as a result
of the Company's continued focus on efforts to develop its core brand
strategy. As noted above, the Company expects a higher level of royalties in
2002 as the result of product sales related to the theatrical releases of STAR
WARS EPISODE II: ATTACK OF THE CLONES and Disney's LILO & STICH.
Advertising expense decreased marginally in amount to $46,889 in 2002 from
$47,613 in 2001 and stayed consistent as a percentage of revenues at 10.4% in
2002 compared with 10.3% in 2001.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
The Company's selling, distribution and administration expenses, which, with
the exception of distribution costs, are largely fixed, decreased to $139,191
or 30.8% of net revenues in the first quarter of 2002 from $153,819 or 33.2%
of net revenues in the first quarter of 2001. In dollars, approximately 82% of
this decrease relates to decreased marketing and sales expenses as a result of
the Company's focus on improved supply chain management as well as other cost
reduction efforts of the Company.
NONOPERATING (INCOME) EXPENSE
- -----------------------------
Interest expense for the first quarter of 2002 was $19,542 compared with
$25,890 in the first quarter of 2001. The decrease is related to lower long-
term interest rates in 2002 due to the issuance of $250,000 of 2.75%
convertible senior debentures in the fourth quarter of 2001, the proceeds of
which were used to repurchase debt with higher interest rates, as well as
decreases in average short-term borrowings outstanding during the first
quarter of 2002.
INCOME TAXES
- ------------
Income tax benefit as a percentage of pretax loss in the first quarter of 2002
was 26% compared to 32% in the first quarter of 2001. The income tax rate for
the full year 2001 was 36.8%. The decrease in rate is primarily due to the
adoption of Statement of Financial Accounting Standards No. 142, which
eliminates amortization of goodwill and certain intangibles deemed to have an
indefinite life and, to a lesser extent, smaller operating losses in
jurisdictions with no tax benefit.
OTHER INFORMATION
- -----------------
Typically, due to the seasonal nature of its business, the Company expects the
second half of the year and within that half, the fourth quarter, to be more
significant to its overall business for the full year. The Company expects
that this trend will generally continue, although the first half of 2002 may
represent a greater proportion of full year revenues than the first half of
2001, principally because of the May 2002 release of STAR WARS: EPISODE II:
ATTACK OF THE CLONES. The concentration of sales in the second half of the
year and, specifically, the fourth quarter increases the risk of (a)
underproduction of popular items, (b) overproduction of less popular items and
(c) failure to achieve tight and compressed shipping schedules. The business
of the Company is characterized by customer order patterns which vary from
year to year largely because of differences in the degree of consumer
acceptance of a product line, product availability, marketing strategies,
inventory levels, policies of retailers and differences in overall economic
conditions. The trend of retailers over the past few years has been to
purchase a greater percentage of product within or close to the fourth quarter
holiday consumer selling season, which includes Christmas. Quick response
inventory management practices now being used result in fewer orders being
placed in advance of shipment and more orders being placed for immediate
delivery.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
Consequently, unshipped orders on any date in a given year are not necessarily
indicative of sales for the entire year. In addition, it is a general industry
practice that orders are subject to amendment or cancellation by customers
prior to shipment. At April 28, 2002 and April 29, 2001, the Company's
unshipped orders were approximately $241,000 and $287,000, respectively.
On January 1, 2001, the Company implemented Statement of Financial Accounting
Standards No. 133, as amended by Statement of Financial Accounting Standards
No. 138, which require that all derivative instruments, such as foreign
exchange contracts, be recorded on the balance sheet at fair value. The effect
of adopting these standards on earnings, net of taxes, was $(1,066) while the
effect on Accumulated Other Comprehensive Earnings was $(753), which was
reclassified to earnings over the final three quarters of 2001 through cost of
sales.
During 2001, the Company received two inquiries from the Office of Fair
Trading in the United Kingdom (the "OFT") into allegedly anti-competitive
pricing practices by the Company's United Kingdom ("U.K.") subsidiary, Hasbro
U.K. Ltd. ("Hasbro U.K."). In May of 2002 the OFT issued preliminary decisions
proposing to find that Hasbro U.K. had entered into agreements with certain
retailers and distributors in the U.K. to fix prices in violation of U.K.
competition laws. These decisions are not final and the Company is in the
process of preparing a comprehensive response to the OFT. If a fine is imposed
pursuant to the OFT inquiry, the Company currently estimates that the amount
of the fine could range from approximately $236 to approximately $38,300.
Because of a number of factors, including the lack of precedent under the
applicable U.K. statute and the significant appeal rights available to the
Company in the event of an adverse final determination by the OFT, there is no
amount within this range which is a better estimate than any other amount in
the range. The Company accrued a charge to earnings in 2001 equal to the low
end of the range set forth above. As a result, any fine that is imposed in
excess of this accrued amount would have an adverse effect on the Company's
results of operations in the quarter in which such additional liability is
fixed or resolved. While the Company believes that some fine will be imposed,
it is the Company's position that the amount of any fine should be at or near
the low end of the range set forth above, and it will be vigorously pursuing
this position in its discussions with the OFT.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Hasbro has historically generated a significant amount of cash from normal
operations. The Company funds its operations and liquidity primarily through
cash flows from operations, as well as utilizing borrowings under the
Company's secured and unsecured credit facilities when needed. The seasonality
of the Company's business results in the interim cash flow statements not
being representative of that which may be expected for the full year.
Historically, the majority of the Company's cash collections occur late in the
fourth quarter and early in the first quarter of the subsequent year. As
receivables are collected, the proceeds are used to repay a significant
portion of outstanding short-term debt. During 2002, the Company expects to
continue to fund its working capital needs primarily through operations and,
when needed, through its revolving credit facility and believes that the funds
available to it are adequate to meet its needs. However, unforeseen
circumstances, such as severe softness in or a collapse of the retail
environment may result in a significant decline in revenues and operating
results of the Company, thereby causing the Company to be in non-compliance
with its debt covenants. Non-compliance with its debt covenants could result
in the Company being unable to utilize borrowings under its revolving credit
facility, a circumstance most likely to occur when operating shortfalls would
most require supplementary borrowings.
Because of this seasonality in cash flow, management believes that on an
interim basis, rather than discussing only its cash flows, a better
understanding of its liquidity and capital resources can be obtained through a
discussion of the various balance sheet categories as well. Also, as several
of the major categories, including cash and cash equivalents, accounts
receivable, inventories and short-term borrowings, fluctuate significantly
from quarter to quarter, again due to the seasonality of its business,
management believes that a comparison to the comparable period in the prior
year is generally more meaningful than a comparison to the prior year-end.
Cash flows provided by operating activities were $137,880 and $193,772 for the
first quarters of 2002 and 2001, respectively. Receivables were $287,379 at
March 31, 2002 compared to $255,450 at April 1, 2001. The increase in
receivables is due to the mix of products sold in the first quarter of 2002.
The Company had lower sales of trading card games, which generally have
shorter payment terms. In addition, products related to STAR WARS: EPISODE II:
ATTACK OF THE CLONES began shipping late in the quarter to meet scheduled
retail introduction requirements, and were not yet due for payment.
Inventories decreased approximately 24% from last year's levels, primarily
reflecting improved inventory management. Prepaid expenses decreased to
$217,642 at March 31, 2002 from $237,013 at April 1, 2001. The Company has
been actively seeking to reduce expenditures and this decreased level of
spending is reflected in decreased prepaid expenses, as well as in decreased
liabilities. Partially offsetting these decreases were increased advance
royalties, primarily relating to STAR WARS products. A substantial portion of
these royalties was considered long-term in 2001 and included in other assets.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
Accounts payable and accrued liabilities decreased by $199,666 from $713,034
at April 1, 2001 to $513,368 at March 31, 2002. Approximately 28% of the
decrease was due to amounts accrued in the prior year for contingent
consideration related to the Wizards of the Coast acquisition, while 16% of
the decrease relates to decreased restructuring provisions relating to the
Company's December 2000 consolidation plan as a result of payments made. The
remaining decrease is primarily due to reduced accounts payable as a result of
the lower level of inventory and expenses accrued at March 31, 2002.
Collectively, property, plant and equipment and other assets decreased
$293,383 from the comparable period in the prior year, primarily reflecting
amortization of intangibles and depreciation of property, plant and equipment,
partially offset by additions to property, plant and equipment. The remainder
of the decrease is primarily related to the reclassification of prepaid STAR
WARS royalties from long-term to current as a result of the anticipated
realization of these royalties in connection with the theatrical release of
STAR WARS EPISODE II: ATTACK OF THE CLONES in May 2002. On December 31, 2001,
the Company adopted Statements of Financial Accounting Standards 141 and 142,
which eliminates the amortization of goodwill and certain other intangibles
deemed to have an indefinite life. These intangibles and goodwill will instead
be tested for impairment on an annual basis.
Net borrowings (short and long-term borrowings less cash and cash equivalents)
decreased to $846,182 at March 31, 2002 from $1,078,991 at April 1, 2001. This
reflects an increase in cash of $174,346, primarily as the result of increased
cash flows from operations, which has also resulted in a decrease in short-
term borrowings. The Company has $324,873 of 7.95% Notes due March 2003, which
have been reclassified to current installments of long-term debt at March 31,
2002. It is the Company's intention that cash provided by operations will be
used to settle this obligation. At December 30, 2001, the Company had a
committed secured revolving credit agreement of $325,000, maturing in February
2003. In March 2002, the Company entered into an amended and restated
revolving credit facility with its existing bank group, which extended the
term of the facility through March 2005, increased the amount available to the
Company for borrowing under this facility to $380,000, and eased certain
restrictions regarding the retirement of long-term debt prior to stated
maturity. The amended and restated facility is secured by substantially all
domestic accounts receivable and inventory, as well as certain intangible
assets of the Company. In addition to this available committed line, the
Company also has available uncommitted lines approximating $47,000. At March
31, 2002, approximately $56,000 of these committed and uncommitted lines were
in use. The Company believes that funds provided by operations and amounts
available for borrowing from time to time under these lines of credit are
adequate to meet its needs in 2002.
The Company has letters of credit of approximately $21,900 and inventory
purchase commitments of $80,900 outstanding at March 31, 2002.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
Critical Accounting Policies and Significant Estimates
- ------------------------------------------------------
The Company prepares its consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America. As
such, management is required to make certain estimates, judgments and
assumptions that they believe are reasonable based on the information
available. These estimates and assumptions affect the reported amounts of
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses for the periods presented. The
significant accounting policies which management believes are the most
critical to aid in fully understanding and evaluating the Company's reported
financial results include sales allowances, inventory valuation,
recoverability of goodwill and intangible assets, and recoverability of
royalty advances and commitments.
Sales allowances for customer promotions, discounts and returns are recorded
as a reduction of revenue when the related revenue is recognized. This net
revenue is reflected as such in the Company's financial statements. The
Company routinely commits to promotional allowance programs with customers.
These allowances primarily relate to fixed programs, with the customer earning
the allowances based on purchases of Company products during the year.
Discounts are recorded as a reduction of related revenue at the time of sale.
While many of the allowances are based on fixed amounts, certain of the
allowances, such as the returns allowance, are based on market data,
historical trends and information from customers and are therefore subject to
estimation.
Inventory is valued at the lower of cost or market. Based upon a consideration
of quantities on hand, actual and projected sales volume, anticipated product
selling price and product lines planned to be discontinued, slow-moving and
obsolete inventory is written down to its net realizable value. Failure to
accurately predict and respond to consumer demand could result in the Company
underproducing popular items or overproducing less popular items. Management
estimates are monitored on a quarterly basis and a further adjustment to
reduce inventory to its net realizable value is recorded when deemed
necessary.
On December 31, 2001, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets", which eliminates
the amortization of goodwill, as well as amortization of intangible assets
deemed to have an indefinite life. Under this Statement, goodwill and
intangible assets are allocated to applicable reporting units. Goodwill and
intangible assets deemed to have indefinite lives will be tested for
impairment annually using a two step process that begins with an estimation of
fair value of the reporting unit. The first step is a screen for potential
impairment while the second step measures the amount of impairment if there is
an indication from the first step that one exists.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
Intangible assets, other than those with indefinite lives, are reviewed for
indications of impairment whenever events or changes in circumstances indicate
the carrying value may not be recoverable. Recoverability of these intangible
assets is measured by a comparison of the assets' carrying value to the
estimated future undiscounted cash flows expected to be generated by the
asset. If such assets were considered to be impaired, the impairment would be
measured by the amount by which the carrying value of the asset exceeds its
fair value based on estimated discounted cash flows. The preparation of future
cash flows and calculation of fair values of reporting units requires
significant judgments and estimates with respect to future revenues related to
the respective asset or assets and the future cash outlays related to those
revenues. Actual revenues and related cash flows or changes in anticipated
revenues and related cash flows could result in a change in these assessments
and result in an impairment charge. The preparation of discounted cash flows
also requires the selection of an appropriate discount rate. The use of
different assumptions would increase or decrease estimated discounted cash
flows and could increase or decrease the related impairment charge.
The recoverability of royalty advances and contractual obligations with
respect to minimum guaranteed royalties is assessed by comparing the remaining
minimum guaranty to the estimated future sales forecasts and related cash flow
projections to be derived from the related product. If sales forecasts and
related cash flows from the particular product do not support the
recoverability of the remaining minimum guaranty or, if the Company decides to
discontinue a product line with royalty advances or commitments, a charge to
write-off the remaining minimum guaranty is required. The preparation of
revenue forecasts and related cash flows for these products requires judgments
and estimates. Actual revenues and related cash flows or changes in the
assessment of anticipated revenues and cash flows related to these products
could result in a change to the assessment of recoverability of remaining
minimum guaranteed royalties.
FINANCIAL RISK MANAGEMENT
- -------------------------
The Company is exposed to market risks attributable to fluctuations in foreign
currency exchange rates primarily as a result of sourcing products in U.S.
dollars, Hong Kong dollars and Euros while marketing those products in more
than thirty currencies. Results of operations may be affected primarily by
changes in the value of the U.S. dollar, Hong Kong dollar, Euro, British
pound, Canadian dollar and Mexican peso and, to a lesser extent, other
currencies, including those in Latin American countries.
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
To manage this exposure, the Company has hedged a portion of its estimated
upcoming fiscal year foreign currency transactions using forward foreign
exchange contracts. From time to time, the Company may also hedge foreign
currency exposure using purchased foreign currency options. The Company is
also exposed to foreign currency risk with respect to its net cash and cash
equivalents or short-term borrowing positions in other than the U.S. dollar.
The Company believes, however, that the on-going risk on the net exposure
should not be material to its financial condition. In addition, the Company's
revenues and costs have been and will likely continue to be affected by
changes in foreign currency rates. The Company does not speculate in, and,
other than set forth above, the Company does not hedge foreign currencies. The
Company reflects all derivatives at their fair value as an asset or liability
on the balance sheet.
FORWARD-LOOKING STATEMENTS
- --------------------------
This Quarterly Report on Form 10-Q contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements may be identified by the use of forward-looking words or
phrases such as "anticipate," "believe," "could," "expect," "intend," "look
forward," "may," "planned," "potential," "should," "will," and "would" or any
variations of words with similar meanings. These forward-looking statements
are inherently subject to known and unknown risks and uncertainties. The
Company's actual actions or results may differ materially from those expected
or anticipated in the forward-looking statements. Specific factors that might
cause such a difference include, but are not limited to, the Company's ability
to manufacture, source and ship new and continuing products on a timely basis
and the acceptance of those products by customers and consumers at prices that
will be sufficient to profitably recover development, manufacturing,
marketing, royalty and other costs of products; economic conditions, including
higher fuel prices, currency fluctuations and government regulations and other
actions in the various markets in which the Company operates throughout the
world; the inventory policies of retailers, including the concentration of the
Company's revenues in the second half and fourth quarter of the year, together
with the 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; 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; 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; the
ability of the Company to generate sufficient available cash flow to service
its outstanding debt; restrictions on the Company contained in the Company's
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(Thousands of Dollars Except Per Share Data)
credit agreements; market conditions, third party actions or approvals and the
impact of competition that could delay or increase the cost of implementation
of the Company's consolidation programs, prevent the Company from fully
realizing advance royalties paid in connection with licensed products, result
in an impairment of the goodwill associated with acquired companies or
impacted product lines, reduce actual results, and cause anticipated benefits
of acquisitions to be delayed or reduced in their realization; and other risks
and uncertainties as are or may be detailed from time to time in the Company's
public announcements and filings with the SEC such as Forms 8-K, 10-Q and 10-
K. The Company undertakes no obligation to revise the forward-looking
statements contained in this Quarterly Report on Form 10-Q to reflect events
or circumstances occurring after the date of the filing of this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is included in Part I Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is incorporated herein by reference.
PART II. Other Information
Item 1. Legal Proceedings.
During 2001, the Company received two inquiries from the Office of Fair
Trading in the United Kingdom (the "OFT") into allegedly anti-competitive
pricing practices by the Company's United Kingdom ("U.K.") subsidiary, Hasbro
U.K. Ltd. ("Hasbro U.K."). In May of 2002 the OFT issued preliminary decisions
proposing to find that Hasbro U.K. had entered into agreements with certain
retailers and distributors in the U.K. to fix prices in violation of U.K.
competition laws. These decisions are not final and the Company is in the
process of preparing a comprehensive response to the OFT. If a fine is imposed
pursuant to the OFT inquiry, the Company currently estimates that the amount
of the fine could range from approximately $236,000 to approximately $38.3
million. Because of a number of factors, including the lack of precedent
under the applicable U.K. statute and the significant appeal rights available
to the Company in the event of an adverse final determination by the OFT,
there is no amount within this range which is a better estimate than any other
amount in the range. The Company has accrued a charge to earnings in 2001
equal to the low end of the range set forth above. As a result, any fine that
is imposed in excess of this accrued amount would have an adverse effect on
the Company's results of operations in the quarter in which such additional
liability is fixed or resolved. While the Company believes that some fine will
be imposed, it is the Company's position that the amount of any fine should be
at or near the low end of the range set forth above, and it will be vigorously
pursuing this position in its discussions with the OFT.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Restated Articles of Incorporation of the Company. (Incorporated
by reference to Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)
3.2 Amendment to Articles of Incorporation, dated June 28, 2000.
(Incorporated by reference to Exhibit 3.4 to the Company's
Quarterly Report on Form 10-Q for the period ended July 2, 2000,
File No. 1-6682.)
PART II. Other Information (continued)
Item 6. Exhibits and Reports on Form 8-K. (continued)
(a) Exhibits (continued)
3.3 Amended and Restated Bylaws of the Company, as amended.
(Incorporated by reference to Exhibit 3(c) to the Company's
Annual Report on Form 10-K for the year ended December 30, 2001,
File No. 1-6682.)
3.4 Certificate of Designations of Series C Junior Participating
Preference Stock of Hasbro, Inc. dated June 29, 1999.
(Incorporated by reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the period ended July 2, 2000,
File No. 1-6682.)
3.5 Certificate of Vote(s) authorizing a decrease of class or series
of any class of shares. (Incorporated by reference to Exhibit
3.3 to the Company's Quarterly Report on Form 10-Q for the
period ended July 2, 2000, File No 1-6682.)
4.1 Indenture, dated as of July 17, 1998, by and between the Company
and Citibank, N.A. as Trustee. (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
July 14, 1998, File No. 1-6682.)
4.2 Indenture, dated as of March 15, 2000, by and between the
Company and the Bank of Nova Scotia Trust Company of New York.
(Incorporated by reference to Exhibit 4(b)(i) to the Company's
Annual Report on Form 10-K for the year ended December 26, 1999,
File No. 1-6682.)
4.3 Indenture, dated as of November 30, 2001, by and between the
Company and the Bank of Nova Scotia Trust Company of New York.
(Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3, File No. 333-83250, filed
February 22, 2002.)
4.4 Second Amended and Restated Revolving Credit Agreement dated as
of March 19, 2002 by and among the Company, the Banks party
thereto, and Fleet National Bank, as Agent for the Banks.
(Incorporated by reference to Exhibit 4(d) to the Company's
Annual Report on Form 10-K for the year ended December 30, 2001,
File No. 1-6682.)
Item 6. Exhibits and Reports on Form 8-K. (continued)
(a) Exhibits. (continued)
4.5 Rights Agreement, dated as of June 16, 1999, between the Company
and Fleet National Bank (the Rights Agent). (Incorporated by
reference to Exhibit 4 to the Company's Current Report on Form
8-K dated as of June 16, 1999.)
4.6 First Amendment to Rights Agreement, dated as of December 4,
2000, between the Company and the Rights Agent. (Incorporated by
reference to Exhibit 4(f) to the Company's Annual Report on Form
10-K for the year ended December 31, 2000, File No. 1-6682.)
11 Computation of Earnings Per Common Share - Quarters Ended
March 31, 2002 and April 1, 2001.
12 Computation of Ratio of Earnings to Fixed Charges -
Quarter Ended March 31, 2002.
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated April 22, 2002, was filed by
the Company and included the Press Release dated April 22, 2002
announcing the Company's results for the first quarter of 2002.
Consolidated Statements of Earnings (without notes) for the
quarters ended March 31, 2002 and April 1, 2001 and
Consolidated Condensed Balance Sheets (without notes) as of said
dates were also filed with the Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HASBRO, INC.
------------
(Registrant)
Date: May 15, 2002 By: /s/ David D. R. Hargreaves
---------------------------
David D. R. Hargreaves
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
HASBRO, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Period Ended March 31, 2002
Exhibit Index
Exhibit
No. Exhibits
- ------- --------
3.1 Restated Articles of Incorporation of the Company. (Incorporated
by reference to Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)
3.2 Amendment to Articles of Incorporation, dated June 28, 2000.
(Incorporated by reference to Exhibit 3.4 to the Company's
Quarterly Report on Form 10-Q for the period ended July 2, 2000,
File No. 1-6682.)
3.3 Amended and Restated Bylaws of the Company, as amended.
(Incorporated by reference to Exhibit 3(c) to the Company's
Annual Report on Form 10-K for the year ended December 30, 2001,
File No. 1-6682.)
3.4 Certificate of Designations of Series C Junior Participating
Preference Stock of Hasbro, Inc. dated June 29, 1999.
(Incorporated by reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the period ended July 2, 2000,
File No. 1-6682.)
3.5 Certificate of Vote(s) authorizing a decrease of class or series
of any class of shares. (Incorporated by reference to Exhibit
3.3 to the Company's Quarterly Report on Form 10-Q for the
period ended July 2, 2000, File No 1-6682.)
4.1 Indenture, dated as of July 17, 1998, by and between the Company
and Citibank, N.A. as Trustee. (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
July 14, 1998, File No. 1-6682.)
4.2 Indenture, dated as of March 15, 2000, by and between the
Company and the Bank of Nova Scotia Trust Company of New York.
(Incorporated by reference to Exhibit 4(b)(i) to the Company's
Annual Report on Form 10-K for the year ended December 26, 1999,
File No. 1-6682.)
4.3 Indenture, dated as of November 30, 2001, by and between the
Company and the Bank of Nova Scotia Trust Company of New York.
(Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3, File No. 333-83250, filed
February 22, 2002.)
4.4 Second Amended and Restated Revolving Credit Agreement dated as
of March 19, 2002 by and among the Company, the Banks party
thereto, and Fleet National Bank, as Agent for the Banks.
(Incorporated by reference to Exhibit 4(d) to the Company's
Annual Report on Form 10-K for the year ended December 30, 2001,
File No. 1-6682.)
4.5 Rights Agreement, dated as of June 16, 1999, between the Company
and Fleet National Bank (the Rights Agent). (Incorporated by
reference to Exhibit 4 to the Company's Current Report on Form
8-K dated as of June 16, 1999.)
4.6 First Amendment to Rights Agreement, dated as of December 4,
2000, between the Company and the Rights Agent. (Incorporated by
reference to Exhibit 4(f) to the Company's Annual Report on Form
10-K for the year ended December 31, 2000, File No. 1-6682.)
11 Computation of Earnings Per Common Share - Quarters Ended
March 31, 2002 and April 1, 2001.
12 Computation of Ratio of Earnings to Fixed Charges -
Quarter Ended March 31, 2002.
EXHIBIT 11
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
Quarters Ended March 31, 2002 and April 1, 2001
(Thousands of Dollars and Shares Except Per Share Data)
2002 2001
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Earnings (loss) before cumulative
effect of accounting change $ (17,058) (17,058) (23,958) (23,958)
======= ======= ======= =======
Weighted average number of shares
Outstanding:
Outstanding at beginning of
period 172,537 172,537 171,886 171,886
Exercise of stock options
and warrants:
Actual 57 57 47 47
Assumed - - - -
------- ------- ------- -------
Total 172,594 172,594 171,933 171,933
======= ======= ======= =======
Per common share:
Earnings (loss) before cumulative
effect of accounting change $ (.10) (.10) (.14) (.14)
======= ======= ======= =======
EXHIBIT 12
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Quarter Ended March 31, 2002
(Thousands of Dollars)
Earnings available for fixed charges:
Net loss $(17,058)
Add:
Fixed charges 24,374
Income taxes (5,994)
-------
Total $ 1,322
=======
Fixed Charges:
Interest on long-term debt $ 18,404
Other interest charges 1,138
Amortization of debt expense 448
Rental expense representative
of interest factor 4,384
-------
Total $ 24,374
=======
Ratio of earnings to fixed charges 0.05
=======