UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 23, 2007
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HASBRO, INC.
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(Exact name of registrant as specified in its charter)
RHODE ISLAND 1-6682 05-0155090
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(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
1027 NEWPORT AVE., PAWTUCKET, RHODE ISLAND 02862
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(Address of Principal Executive Offices) (Zip Code)
(401) 431-8697
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 23, 2007, we announced our financial results for the fiscal
quarter ended July 1, 2007, and certain other information. The press
release, which has been attached as Exhibit 99, discloses a
financial measure, Earnings before Interest, Taxes, Depreciation and
Amortization ("EBITDA"), that is considered a non-GAAP financial
measure as defined under SEC rules. Generally, a non-GAAP financial
measure is a numerical measure of a company's performance, financial
position, or cash flows that either excludes or includes amounts
that are not normally excluded or included in the most directly
comparable measure calculated and presented in accordance with
generally accepted accounting principles. Management believes that
EBITDA is one of the appropriate measures for evaluating our
operating performance, 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, and not as a substitute for, or superior to, net earnings or
other measures of financial performance prepared in accordance with
generally accepted accounting principles as more fully discussed in
our financial statements and filings with the SEC. The EBITDA
measures included in our press release have been reconciled to the
most directly comparable GAAP measures as is required under SEC
rules regarding the use of non-GAAP financial measures.
This press release also includes the diluted earnings per share for
the quarter ended July 1, 2007 excluding the impact of the mark to
market expense for the Lucas warrants. Management believes that the
presentation of diluted earnings per share absent the impact of the
Lucas warrant mark to market expense is helpful to an investor's
understanding of the results of the Company's underlying operations
and business as the mark to market expense is primarily based on
changes in the Company's stock price which are beyond the control of
management.
As used herein, "GAAP" refers to accounting principles generally
accepted in the United States of America.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99 Press Release, dated July 23, 2007, of Hasbro, Inc.
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 hereunto duly authorized.
HASBRO, INC.
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(Registrant)
Date: July 23, 2007 By: /s/ David D.R. Hargreaves
--------------------------
David D. R. Hargreaves
Executive Vice President,
Finance and Global
Operations, and Chief
Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
HASBRO, INC.
Current Report on Form 8-K
Dated July 23, 2007
Exhibit Index
Exhibit
No. Exhibits
- ------- --------
99 Press Release, dated July 23, 2007, of Hasbro, Inc.
EXHIBIT 99
For Immediate Release | Contact: Karen A. Warren (Investor Relations) |
July 23, 2007 | 401-727-5401 |
Wayne S. Charness (News Media) | |
401-727-5983 |
Hasbro Reports Second Quarter Results
Highlights
·
Net revenues of $691.4 million for the quarter, an increase of $163.6 million or 31% from a year ago;
·
Operating profit improved 171% to $55.8 million or 8.1% of revenue;
·
Net earnings of $4.8 million, or $0.03 per diluted share (net earnings of $41.3 million or $0.24 per diluted share excluding a $0.21 impact from the final Lucas mark to market expense) for the quarter, compared to $27.1 million, or $0.07 per diluted share last year;
·
North American segment net revenues were up 24% and International segment net revenues were up 49% in the second quarter;
·
Growth driven by shipments of TRANSFORMERS and MARVEL movie-related products, as well as strong performances from LITTLEST PET SHOP, NERF, FURREAL FRIENDS, PLAYSKOOL and board games.
Pawtucket, RI (July 23, 2007) -- Hasbro, Inc. (NYSE: HAS) today reported second quarter net revenues of $691.4 million, an increase of $163.6 million or 31% compared to $527.8 million a year ago. The Company reported net earnings for the quarter of $4.8 million or $0.03 per diluted share, compared to $27.1 million or $0.07 per diluted share in 2006. The results for the quarter include a final mark to market expense of $36.5 million or $0.21 per diluted share related to the repurchase of the Lucas warrants. Excluding the final Lucas mark to market expense, earnings for the quarter would have been $41.3 million or $0.24 per diluted share.
“We are very pleased with our second quarter and first half performance,” said Alfred J. Verrecchia, President and Chief Executive Officer. “Our core brands, especially TRANSFORMERS and LITTLEST PET SHOP; and new product initiatives have performed very well both domestically and internationally, contributing to second quarter revenue growth of 31% and first half revenue growth of 32%.”
“In addition, our second quarter operating margin improved to 8.1% compared to 3.9% in the prior year and our first half operating margin improved to 8.3% from 1.9% a year earlier,” Verrecchia added.
North American segment net revenues for the quarter were $449.4 million, an increase of $87.4 million or 24% compared to $362.0 million in 2006. The growth in revenue is attributable to shipments of the TRANSFORMERS and MARVEL product lines, as well as growth in other Hasbro brands including FURREAL FRIENDS, LITTLEST PET SHOP, PLAYSKOOL, NERF, OPERATION, SORRY! and PLAY-DOH. The North American segment reported an operating profit of $41.8 million, which includes a $10.4 million provision related to the EASY-BAKE OVEN product recall announced last week. This compares to $30.4 million in operating profit in 2006.
International segment net revenues for the quarter were $227.6 million, an increase of $74.4 million or 49% compared to $153.2 million in 2006. The revenues include a positive foreign exchange impact of approximately $11.7 million or 8%. The results reflect shipments of the TRANSFORMERS and MARVEL product lines, as well as growth in core brands including LITTLEST PET SHOP, MY LITTLE PONY, PLAYSKOOL and board games. The International segment reported an operating profit of $11.3 million compared to an operating loss of ($8.1) million in 2006.
“Having delivered a very successful first half, we are focused on delivering a strong second half, laying the foundation for future revenue growth and maintaining the financial discipline that has allowed us to significantly improve profitability and create value for our shareholders,” said David Hargreaves, Executive Vice President and Chief Financial Officer.
On May 9, 2007 Hasbro exercised its call option to repurchase all of the outstanding warrants for Hasbro’s common stock held by Lucasfilm Ltd. and Lucas Licensing Ltd. (together “Lucas”). At the time of the call Lucas held exercisable warrants (the “Warrants”) to purchase an aggregate of 15,750,000 shares of Hasbro’s common stock. On May 24, 2007 Hasbro paid Lucas $200 million in cash and closed the repurchase of all of the Warrants. In connection with the repurchase, Hasbro recognized a final mark to market charge of $36.5 million in the second quarter of 2007 related to these warrants.
The Company will web cast its second quarter earnings conference call at 8:30 a.m. Eastern Standard Time today. Investors and the media are invited to listen at http://www.hasbro.com (select "Corporate Info" from the home page, click on "Investor Information," and then click on the web cast microphone).
Hasbro is a worldwide leader in children's and family leisure time entertainment products and services, including the design, manufacture and marketing of games and toys ranging from traditional to high-tech. Both internationally and in the U.S., its PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, TIGER, and WIZARDS OF THE COAST brands and products provide the highest quality and most recognizable play experiences in the world.
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 future opportunities and ability to achieve its financial goals and 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." Such 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 limit ed to: the Company's ability to design, manufacture, source and ship new and continuing products on a timely and cost-effective basis, interest in and acceptance and purchase of those products by retail customers and consumers in quantities and at prices that will be sufficient to profitably recover development, manufacturing, marketing, royalty and other costs of products; economic and public health conditions in the various markets in which the Company and its customers and suppliers operate throughout the world, including factors which impact the retail market, disposable income or consumer demand for the Company’s products, the Company's ability to manufacture and deliver products, higher fuel and other commodity prices, higher transportation costs and potential transportation delays, currency fluctuations and government regulation; the concentration of the Company's customers; 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; work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product in a timely and cost-effective manner; 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; market conditions, third party actions or approvals and the impact of competition which could reduce demand for the Company’s products or delay or increas e the cost of implementation of the Company's programs or alter the Company's actions and reduce actual results; the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization; and 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 further discusses diluted earnings per share for the quarter ended July 1, 2007 excluding the impact of the mark to market expense for the Lucas warrants. The Company is required to assess if these warrants, classified as a liability, have a more dilutive impact on earnings per share assuming they were treated as an equity contract. For the quarter ended July 1, 2007, had the warrants been treated as an equity contract, the mark to market expense of $36.5 million would have been added to net earnings, and diluted shares would have been increased by 3.1 million (representing the weighted average shares related to the warrants outstanding during the period), in the computation of diluted earnings per share. In addition, excluding the mark to market expense for the quarter would require a further adjustment to the diluted earnings per share computation to add back to net earnings interest expense on the convertible debentures totaling $1.1 m illion and to increase diluted shares by 11.6 million. For the quarter ended July 2, 2006, the mark to market income related to the Lucas warrants was excluded from net earnings and the diluted impact of the warrants were included in the share count in the computation of reported diluted earnings per share. Management believes that the presentation of diluted earnings per share absent the impact of the Lucas warrant mark to market expense is helpful to an investor’s understanding of the results of the Company’s underlying operations and business as the mark to market expense is primarily based on changes in the Company’s stock price which are beyond the control of management.
# # #
(Tables Attached)
HASBRO, INC. | ||||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||||
(Thousands of Dollars) | July 1, 2007 | July 2, 2006 | ||||||||
ASSETS | ----------- | ----------- | ||||||||
Cash and Cash Equivalents | $ 525,573 | $ 417,087 | ||||||||
Short-term Investments | - | 72,625 | ||||||||
Accounts Receivable, Net | 417,687 | 290,480 | ||||||||
Inventories | 352,457 | 258,500 | ||||||||
Other Current Assets | 238,229 | 229,662 | ||||||||
---------------- | ---------------- | |||||||||
Total Current Assets | 1,533,946 | 1,268,354 | ||||||||
Property, Plant and Equipment, Net | 184,905 | 164,057 | ||||||||
Other Assets | 1,190,093 | 1,302,954 | ||||||||
---------------- | ---------------- | |||||||||
Total Assets | $2,908,944 | $2,735,365 | ||||||||
========= | ========= | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
Short-term Borrowings | $ 89,051 | $ 10,017 | ||||||||
Payables and Accrued Liabilities | 530,309 | 629,736 | ||||||||
---------------- | --------------- | |||||||||
Total Current Liabilities | 619,360 | 639,753 | ||||||||
Long-term Debt | 494,658 | 494,359 | ||||||||
Other Liabilities | 247,982 | 143,732 | ||||||||
---------------- | --------------- | |||||||||
Total Liabilities | 1,362,000 | 1,277,844 | ||||||||
Total Shareholders' Equity | 1,546,944 | 1,457,521 | ||||||||
---------------- | --------------- | |||||||||
Total Liabilities and Shareholders' Equity | $2,908,944 | $2,735,365 | ||||||||
========= | ========= | |||||||||
HASBRO, INC. | ||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||
(Thousands of Dollars and Shares Except Per Share Data) | July 1, 2007 | July 2, 2006 | July 1, 2007 | July 2, 2006 | ||||||||||
----------- | ----------- | ----------- | ----------- | |||||||||||
Net Revenues | $ 691,408 | $ 527,764 | $1,316,675 | $995,945 | ||||||||||
Cost of Sales | 273,212 | 210,369 | 516,664 | 396,461 | ||||||||||
-------------- | --------------- | -------------- | -------------- | |||||||||||
Gross Profit | 418,196 | 317,395 | 800,011 | 599,484 | ||||||||||
Amortization | 17,574 | 19,140 | 35,532 | 37,392 | ||||||||||
Royalties | 62,524 | 30,200 | 112,784 | 56,190 | ||||||||||
Research and Product Development | 38,787 | 39,606 | 74,097 | 77,770 | ||||||||||
Advertising | 78,995 | 60,466 | 146,630 | 115,320 | ||||||||||
Selling, Distribution and Administration | 164,539 | 147,384 | 321,464 | 294,339 | ||||||||||
-------------- | --------------- | -------------- | -------------- | |||||||||||
Operating Profit | 55,777 | 20,599 | 109,504 | 18,473 | ||||||||||
Interest Expense | 6,661 | 6,812 | 12,845 | 13,938 | ||||||||||
Other (Income) Expense, Net | 27,155 | (18,715 | ) | 25,098 | (22,514) | |||||||||
-------------- | --------------- | -------------- | -------------- | |||||||||||
Earnings Before Income Taxes | 21,961 | 32,502 | 71,561 | 27,049 | ||||||||||
Income Taxes | 17,160 | 5,414 | 33,870 | 4,860 | ||||||||||
-------------- | --------------- | -------------- | -------------- | |||||||||||
Net Earnings | $ 4,801 | $ 27,088 | $ 37,691 | $ 22,189 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Per Common Share | ||||||||||||||
Net Earnings | ||||||||||||||
Basic | $ 0.03 | $ 0.16 | $ 0.23 | $ 0.13 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Diluted | $ 0.03 | $ 0.07 | $ 0.23 | $ 0.06 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Cash Dividends Declared | $ 0.16 | $ 0.12 | $ 0.32 | $ 0.24 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Weighted Average Number of Shares | ||||||||||||||
Basic | 160,398 | 169,648 | 160,661 | 173,475 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Diluted | 164,643 | 177,376 | 176,436 | 181,046 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
HASBRO, INC. | ||||||||||||||
Supplemental Financial Data | ||||||||||||||
Major Segment Results and EBITDA | ||||||||||||||
(Thousands of Dollars) | ||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||
July 1, 2007 | July 2, 2006 | % Change | July 1, 2007 | July 2, 2006 | % Change | |||||||||
----------- | ----------- | ----------- | ----------- | ----------- | ---------- | |||||||||
Major Segment Results | ||||||||||||||
North American Segment | ||||||||||||||
External Net Revenues | $ 449,403 | $ 361,956 | 24 % | $ 870,487 | $ 672,260 | 29 % | ||||||||
Operating Profit | 41,754 | 30,402 | 37 % | 87,079 | 35,172 | 148 % | ||||||||
International Segment | ||||||||||||||
External Net Revenues | 227,644 | 153,244 | 49 % | 415,320 | 298,735 | 39 % | ||||||||
Operating Profit (Loss) | 11,293 | (8,093) | 240 % | 11,185 | (16,416) | 168 % | ||||||||
Reconciliation of EBITDA | |||||||||||
Net Earnings | $ 4,801 | $ 27,088 | $ 37,691 | $ 22,189 | |||||||
Interest Expense | 6,661 | 6,812 | 12,845 | 13,938 | |||||||
Income Taxes | 17,160 | 5,414 | 33,870 | 4,860 | |||||||
Depreciation | 21,764 | 18,341 | 38,624 | 31,936 | |||||||
Amortization | 17,574 | 19,140 | 35,532 | 37,392 | |||||||
------------ | ------------ | ------------ | ------------ | ||||||||
EBITDA | $ 67,960 | $ 76,795 | $ 158,562 | $ 110,315 | |||||||
======= | ======= | ======= | ======= |
HASBRO, INC. | ||||||||||||||
Supplemental Financial Data | ||||||||||||||
(Thousands of Dollars and Shares, except Per Share Data) | ||||||||||||||
Net Earnings Per Share | 2007 | 2006 | ||||||||||||
Quarter | Basic | Diluted | Basic | Diluted | ||||||||||
---------- | ----------- | ----------- | ----------- | ----------- | ||||||||||
Net earnings | $ 4,801 | $ 4,801 | $ 27,088 | $ 27,088 | ||||||||||
Effect of dilutive securities: | ||||||||||||||
Change in fair value of liabilities | ||||||||||||||
potentially settleable in common stock | - | - | - | (15,270) | ||||||||||
-------------- | -------------- | -------------- | -------------- | |||||||||||
$ 4,801 | $ 4,801 | $ 27,088 | $ 11,818 | |||||||||||
======== | ======== | ======== | ======== | |||||||||||
Average shares outstanding | 160,398 | 160,398 | 169,648 | 169,648 | ||||||||||
Effect of dilutive securities: | ||||||||||||||
Liabilities potentially settleable in | ||||||||||||||
common stock | - | - | - | 6,036 | ||||||||||
Options and warrants | - | 4,245 | - | 1,692 | ||||||||||
-------------- | -------------- | -------------- | -------------- | |||||||||||
Equivalent shares | 160,398 | 164,643 | 169,648 | 177,376 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Net earnings per share | $ 0.03 | $ 0.03 | $ 0.16 | $ 0.07 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Six Months | ||||||||||||||
--------------- | ||||||||||||||
Net earnings | $ 37,691 | $ 37,691 | $ 22,189 | $ 22,189 | ||||||||||
Effect of dilutive securities: | ||||||||||||||
Change in fair value of liabilities | ||||||||||||||
potentially settleable in common stock | - | - | - | (11,940) | ||||||||||
Interest expense on Contingent | ||||||||||||||
Convertible Debentures due 2021 | - | 2,130 | - | - | ||||||||||
-------------- | -------------- | -------------- | -------------- | |||||||||||
$ 37,691 | $ 39,821 | $ 22,189 | $ 10,249 | |||||||||||
======== | ======== | ======== | ======== | |||||||||||
Average shares outstanding | 160,661 | 160,661 | 173,475 | 173,475 | ||||||||||
Effect of dilutive securities: | ||||||||||||||
Liabilities potentially settleable in | ||||||||||||||
common stock | - | - | - | 5,656 | ||||||||||
Options and warrants | - | 4,206 | - | 1,915 | ||||||||||
Contingent Convertible Debentures due 2021 | - | 11,569 | - | - | ||||||||||
-------------- | -------------- | -------------- | -------------- | |||||||||||
Equivalent shares | 160,661 | 176,436 | 173,475 | 181,046 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||
Net earnings per share | $ 0.23 | $ 0.23 | $ 0.13 | $ 0.06 | ||||||||||
======== | ======== | ======== | ======== | |||||||||||