- Third quarter 2019 revenues were $1.58 billion compared to
$1.57 billion a year ago; Absent a negative $20.5 million impact of
foreign exchange, third quarter 2019 revenues grew 2%
- Revenues increased 20% in the Entertainment, Licensing and
Digital segment; Revenues decreased 2% in the U.S. and Canada
segment; Revenues were flat in the International segment, but
increased 4% absent a negative $19.9 million impact of foreign
exchange
- Partner Brands revenue increased 40%; Franchise Brands
revenue decreased 8%; Hasbro Gaming revenues decreased 17%;
Emerging Brands revenue was flat
- On August 22, Hasbro entered into an agreement to acquire
Entertainment One (eOne) for approximately £3.3 billion; On October
17, eOne shareholders approved the transaction; The transaction,
which remains subject to receipt of additional regulatory approvals
and customary closing conditions, is anticipated to close in the
fourth quarter 2019
- Including a $20.9 million after-tax loss related to hedging
part of the British Pound purchase price of eOne, net earnings were
$212.9 million or $1.67 per diluted share; Excluding this loss,
adjusted net earnings were $233.8 million, or $1.84 per diluted
share
- Quarter ending cash of $1.1 billion and operating cash flow
of $389.6 million
Hasbro, Inc. (NASDAQ: HAS), a global play and entertainment
company, today reported financial results for the third quarter
2019. Net revenues for the third quarter 2019 were $1.58 billion
versus $1.57 billion in 2018. Absent a negative $20.5 million
impact of foreign exchange, third quarter 2019 revenues grew
2%.
During the third quarter 2019, Hasbro entered into a definitive
agreement to acquire Entertainment One Ltd. (eOne) in an all-cash
transaction valued at approximately £3.3 billion. As a result of
hedging part of the British Pound purchase price of eOne, Hasbro
recognized an after-tax foreign exchange loss of $20.9 million
after-tax charge, or $0.16 per diluted share. Third quarter 2018
net earnings include a favorable $17.3 million, or $0.14 per
diluted share, tax benefit from U.S. tax reform. Including these
items in both periods, net earnings for the third quarter 2019
decreased to $212.9 million, or $1.67 per diluted share, versus
$263.9 million, or $2.06 per diluted share, for the third quarter
of 2018. Excluding the charges, third quarter 2019 adjusted net
earnings decreased to $233.8 million, or $1.84 per diluted share
compared to third quarter 2018 adjusted net earnings of $246.5
million, or $1.93 per diluted share.
“Hasbro remains on track to deliver profitable revenue growth in
2019, behind innovation in gaming, toys and around Hasbro's Brand
Blueprint. However, as we've communicated, the threat and enactment
of tariffs reduced revenues in the third quarter and increased
expenses to deliver product to retail," said Brian Goldner,
Hasbro’s chairman and chief executive officer. "The team drove
continued growth in the Wizards of the Coast gaming brands, MAGIC:
THE GATHERING and DUNGEONS & DRAGONS, and delivered significant
new holiday initiatives. To start the fourth quarter, we are seeing
a strong consumer response to the global launch of Hasbro's line
for Disney's Frozen 2 and Star Wars: The Rise of Skywalker as well
as the U.S. launch of the new NERF Ultra."
"In addition, we are pleased with the progress toward completing
our acquisition of eOne, including last week's overwhelming
approval by eOne shareholders. We expect to close the transaction
during the fourth quarter," continued Goldner. "The strategic
opportunity to bring onboard the brands, capabilities and talent
from eOne is compelling to our long-term prospects as a leading
global play and entertainment company and we look forward to
sharing more about our plans after the close."
“Hasbro's global teams are executing within a dynamic trade
environment that is impacting the timing of revenues, driving
incremental expenses and putting upward pressure on our underlying
tax rate,” said Deborah Thomas, Hasbro’s chief financial officer.
"In addition, third quarter operating profit was negatively
impacted versus last year from lower Entertainment, Licensing and
Digital segment margins, a higher revenue mix of lower margin
Partner Brands and incremental shipping and warehousing costs which
partially offset our cost savings. We anticipate disruption
throughout the remainder of 2019 as retailers work to manage costs
and inventory and we are working to mitigate the impact on
consumers this holiday season. Our teams are delivering an
innovative slate across demographics and categories, including in
digital gaming, that we are supporting with robust marketing
programs and investment. Hasbro's financial position is strong and
we ended the quarter with $1.1 billion in cash on our balance
sheet."
Third Quarter 2019 Major Segment
Performance
Net Revenues ($
Millions)
Operating Profit ($
Millions)
Q3 2019
Q3 2018
% Change
Q3 2019
Q3 2018
% Change
U.S. and Canada1
$898.3
$912.2
-2%
$193.7
$223.1
-13%
International
$561.1
$560.7
—%
$67.2
$66.3
1%
Entertainment, Licensing and
Digital1
$115.8
$96.8
20%
$24.6
$37.1
-34%
1The Entertainment and Licensing segment is now the
Entertainment, Licensing and Digital segment. For the quarter ended
September 30, 2018, Wizards of the Coast digital gaming revenues of
$12.0 million, and operating profit of $3.5 million, were
reclassified from the U.S. and Canada Segment to the Entertainment,
Licensing and Digital segment.
Third quarter 2019 U.S. and Canada segment net revenues
decreased 2% to $898.3 million compared to $912.2 million in 2018.
Partner Brands and Emerging Brands revenue increased while
Franchise Brands and Hasbro Gaming declined. The enacted and
proposed tariffs negatively impacted revenues in the quarter. The
segment reported operating profit of $193.7 million versus $223.1
million in 2018. Lower revenues and a higher percentage of lower
operating margin Partner Brand sales, including higher royalty
expense, contributed to the decline. In addition, the segment
recorded higher shipping and warehousing expenses as a result of
the disruption and shift of retailer order patterns from
tariffs.
International segment net revenues for the third quarter 2019 of
$561.1 million were essentially flat with $560.7 million in 2018.
Excluding a negative $19.9 million impact of foreign exchange,
International segment revenues increased 4%.
Q3 2019 International Segment
Revenue by Region
% Change as Reported
% Change Absent FX
Europe
-4%
—%
Latin America
+4%
+9%
Asia Pacific
+7%
+10%
Total International
—%
+4%
Within the International segment, Partner Brands and Emerging
Brands revenue grew while Franchise Brands and Hasbro Gaming
declined. The International segment reported an operating profit of
$67.2 million compared to $66.3 million in 2018. The improvement in
gross margin and favorable cost management was partially offset by
higher royalty expense and intangible amortization in the
segment.
Entertainment, Licensing and Digital segment net revenues
increased 20% to $115.8 million compared to $96.8 million in 2018.
Revenue growth was driven by Magic: The Gathering Arena and
Transformers: Bumblebee film revenues, partially offset by lower
digital streaming revenues for Hasbro television programming.
Operating profit decreased to $24.6 million, or 21.2% of net
revenues, versus $37.1 million, or 38.3% of net revenues in 2018.
The decline in operating profit was the result of several factors,
including higher operating profit margin in the third quarter of
2018 due to the multi-year digital streaming agreement for Hasbro
television programming. In addition, program production
amortization increased in the third quarter of 2019 and the Company
continued investing in digital gaming initiatives, including Magic:
The Gathering Arena and future digital games. Given the timing of
Bumblebee revenues, the Company now estimates full-year 2019
program production amortization to be greater than historical
levels, but remaining under 2.0% of total net revenues.
Third Quarter 2019 Brand Portfolio
Performance
Net Revenues ($
Millions)
Q3 2019
Q3 2018
% Change
Franchise Brands
$779.7
$847.7
-8%
Partner Brands
$427.0
$305.8
40%
Hasbro Gaming2
$232.3
$280.8
-17%
Emerging Brands
$136.2
$135.3
1%
2Hasbro’s total gaming category, including all gaming
revenue, most notably MAGIC: THE GATHERING and MONOPOLY which are
included in Franchise Brands in the table above, totaled $449.4
million for the third quarter 2019, up slightly versus $447.8
million for the third quarter 2018. Hasbro believes its gaming
portfolio is a competitive differentiator and views it in its
entirety.
Franchise Brands revenue decreased 8% to $779.7 million. MAGIC:
THE GATHERING, MONOPOLY and TRANSFORMERS revenues increased in the
quarter, but were more than offset by declines in NERF, MY LITTLE
PONY, BABY ALIVE and PLAY-DOH. Franchise Brands revenue declined in
the U.S. and Canada and International segments, but grew in the
Entertainment, Licensing and Digital segment where Magic: The
Gathering Arena and Transformers: Bumblebee revenue
contributed.
Partner Brands revenue increased 40% to $427.0 million. Revenues
grew behind Hasbro product for the October 4th Frozen 2 and Star
Wars merchandising events ahead of the movie premieres, as well as
increases in revenue for Hasbro's products for the Avengers and
Spider-Man franchises from Marvel and Disney's Descendants 3.
Partner Brand revenues increased in the U.S. and Canada and
International segments. Given the current forecasted mix of Partner
Brand revenues, the Company currently estimates full-year 2019
royalty expense to be approximately 8.5% of revenues.
Hasbro Gaming revenue decreased 17% to $232.3 million. Revenue
gains from DUNGEONS & DRAGONS and select other gaming titles,
including new titles for the holiday, were more than offset by
declines in PIE FACE and SPEAK OUT among other games. Hasbro Gaming
revenues decreased in all three operating segments. Hasbro’s total
gaming category was up slightly to $449.4 million.
Emerging Brands revenue increased 1% to $136.2 million driven by
shipments of POWER RANGERS and PLAYSKOOL, including MR. POTATO
HEAD, offset by declines in Quick Strike collectible offerings.
Emerging Brands revenue grew in the U.S. and Canada and
International segments, but declined in the Entertainment,
Licensing and Digital segment.
Dividend and Share
Repurchase
The Company paid $85.9 million in cash dividends to shareholders
during the third quarter 2019. The next quarterly cash dividend
payment of $0.68 per common share is scheduled for November 15,
2019 to shareholders of record at the close of business on November
1, 2019.
During the third quarter, Hasbro repurchased 14,345 shares of
common stock at a total cost of $1.5 million and an average price
of $104.82 per share. Through the first nine months of 2019, the
Company repurchased 689,641 shares of common stock at a total cost
of $60.1 million and an average price of $87.18. At quarter-end,
$367.8 million remained available in the current share repurchase
authorization, however, in anticipation of the eOne acquisition,
the Company plans to suspend its share repurchase program while it
prioritizes achieving its gross Debt to EBITDA target of 2.00 to
2.50X.
Conference Call Webcast
Hasbro will webcast its third quarter 2019 earnings conference
call at 8:00 a.m. Eastern Time today. To listen to the live webcast
and access the accompanying presentation slides, please go to
https://investor.hasbro.com. The replay of the call will be
available on Hasbro’s web site approximately 2 hours following
completion of the call.
About Hasbro
Hasbro (NASDAQ: HAS) is a global play and entertainment company
committed to Creating the World's Best Play Experiences. From toys
and games to television, movies, digital gaming and consumer
products, Hasbro offers a variety of ways for audiences to
experience its iconic brands, including NERF, MY LITTLE PONY,
TRANSFORMERS, PLAY-DOH, MONOPOLY, BABY ALIVE, MAGIC: THE GATHERING
and POWER RANGERS, as well as premier partner brands. Through its
entertainment labels, Allspark Pictures and Allspark Animation, the
Company is building its brands globally through great storytelling
and content on all screens. Hasbro is committed to making the world
a better place for children and their families through corporate
social responsibility and philanthropy. Hasbro ranked No. 13 on the
2019 100 Best Corporate Citizens list by CR Magazine, and has been
named one of the World’s Most Ethical Companies® by Ethisphere
Institute for the past eight years. Learn more at www.hasbro.com,
and follow us on Twitter (@Hasbro) and Instagram (@Hasbro).
© 2019 Hasbro, Inc. All Rights Reserved.
Safe Harbor
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 and
the Company’s ability to achieve its financial and business goals,
such as the belief the Company will return to profitable growth in
2019, the Company’s actions, plans, and strategies relating to the
application of tariffs to the Company’s products, the proposed
acquisition of Entertainment One, and estimates for full-year
program production amortization expense and royalty expense, 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, develop,
produce, manufacture, source and ship products on a timely and
cost-effective basis, as well as achieve and maintain interest in
and purchase of those products by retail customers and consumers in
quantities and at prices that will be sufficient to recover the
Company’s costs and earn a profit; (ii) downturns in economic
conditions impacting one or more of the markets in which the
Company sells products, including, without limitation, changes in
exchange rates or other macroeconomic conditions that impact
customers and consumers for the Company’s products in the United
Kingdom, Brazil, and Russia, which can negatively impact the
Company’s retail customers and consumers, and which can result in
lower employment levels, consumer disposable income, retailer
inventories and spending, including lower spending on purchases of
the Company’s products; (iii) 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) consumer interest in entertainment properties
for which the Company is developing and marketing and sales of
products or content associated with such entertainment properties;
(v) the Company’s ability to successfully evolve and transform its
business to address a changing global consumer landscape and retail
environment, one in which online shopping and digital first
marketing are increasingly critical, traditional retailers face
challenges from disintermediation and our success depends on
developing additional retail channels and paths to our consumers,
and difficulties or delays the Company may experience in
successfully implementing and developing new capabilities and
making the changes to its business that are required to be
successful under these changing marketplace conditions; (vi) the
application of tariffs to some or all of the Company’s products
being imported into other markets, which would significantly
increase the price of the Company’s products and substantially harm
sales if applied to any significant amount of the Company’s
products; (vii) the ability of the Company to successfully
implement actions to lessen the impact of the application of
tariffs imposed on our products, including any changes to our
supply chain, inventory management, sales policies or pricing of
our products; (viii)our ability to successfully develop, launch and
grow new areas of our business, such as Magic: The Gathering Arena
and esports initiatives from our Wizards of the Coast business;
(ix) other economic and public health conditions or regulatory
changes in the markets in which the Company and its customers and
suppliers operate which could create delays or increase the
Company’s costs, such as higher commodity prices, labor costs or
transportation costs, or outbreaks of disease; (x) 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; (xi) 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 in their purchasing or selling patterns; (xii)
the ability of the Company to successfully develop, produce and
distribute movies under its relationship with Paramount Pictures
Corporation, and consumer interest in those movies and related
merchandise; (xiii) consumer interest in programming created by
Hasbro Studios, and other factors impacting the financial
performance of Hasbro Studios and the Discovery Family Channel;
(xiv) existing retail inventories, which can depress purchases of
new products by retailers and/or other aspects of the inventory
policies of the Company’s retail customers, including retailers’
potential decisions to lower their inventories, 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 compressed shipping schedules; (xv) the success of our key
partner brands, including the Company’s ability to maintain and
extend solid relationships with its key partners or the risk of
delays, increased costs or difficulties associated with any of our
or our partners’ planned digital applications or media initiatives;
(xvi) work disruptions, which may impact the Company's ability to
manufacture or deliver product in a timely and cost-effective
manner; (xvii) the bankruptcy or other lack of success of one of
the Company's significant retailers, such as the recent bankruptcy
of Toys“R”Us in the United States and Canada, or the bankruptcy or
lack of success of a smaller retail customer of the Company, such
as Sears Holdings Corporation, any of which could negatively impact
the Company's revenues or bad debt exposure and create challenges
to the Company and its financial performance as the Company
attempts to recapture this lost business through other customers or
channels and faces suppressed sales of new products caused by the
liquidation of existing retail inventories into the market; (xviii)
ability to realize the benefits of cost-savings and efficiency
enhancing initiatives; (xix) the impact of competition on revenues,
margins and other aspects of the Company's business, including the
ability to offer Company products which consumers choose to buy
instead of competitive products, the ability to secure, maintain
and renew popular licenses and the ability to attract and retain
talented employees; (xx) 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 social, economic or public
health conditions and other factors affecting China, the movement
of products into and out of China, the cost of producing products
in China and exporting them to other countries, including without
limitation, the application of tariffs to some or all of the
products the Company purchases from vendors in China, and imports
into the United States, which would significantly increase the
price of the Company’s products and substantially harm sales if
applied to any significant amount of the Company’s products; (xxi)
the ability of the Company to successfully diversify sourcing of
its products to reduce reliance on sources of supply in China;
(xxii) risks relating to investments and acquisitions, such as the
Company’s proposed acquisition of Entertainment One, which risks
include: uncertainty of the satisfaction of closing conditions;
unexpected costs, liabilities or delays; integration difficulties;
inability to retain key personnel; diversion of management time and
resources; failure to achieve anticipated benefits or synergies of
acquisitions or investments; inability to complete financings on
satisfactory terms or at all; risks relating to the additional
indebtedness incurred in connection with a transaction; and
fluctuations in foreign exchange rates; (xxiii) the Company’s
ability to protect its assets and intellectual property, including
as a result of infringement, theft, misappropriation, cyber-attacks
or other acts compromising the integrity of the Company’s assets or
intellectual property; (xxiv) the risk of product recalls or
product liability suits and costs associated with product safety
regulations; (xxv) the impact of other market conditions, third
party actions or approvals and 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; (xxvi) changes in tax laws or
regulations, or the interpretation and application of such laws and
regulations, which may cause the Company to alter tax reserves or
make other changes which significantly impact its reported
financial results; (xxvii) the impact of litigation or arbitration
decisions or settlement actions; and (xxviii) 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 statements contained herein are based on the Company’s
current beliefs and expectations. 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.
The financial tables accompanying this press release include
non-GAAP financial measures as defined under SEC rules,
specifically Adjusted operating profit, Adjusted net earnings and
Adjusted earnings per diluted share, which exclude, where
applicable, the impact of acquisition-related charges relating to
hedging the British Pound purchase price of eOne, the impact of
charges associated with the settlement of the Company’s pension
plan, Toys“R”Us liquidation, severance costs and U.S. tax reform.
Also included in the financial tables are the non-GAAP financial
measures of EBITDA and Adjusted EBITDA. EBITDA represents net
earnings attributable to Hasbro, Inc. excluding interest expense,
income taxes, depreciation and amortization. Adjusted EBITDA also
excludes the impact of the charges noted above. As required by SEC
rules, we have provided reconciliations on the attached schedules
of these measures to the most directly comparable GAAP measure.
Management believes that Adjusted net earnings, Adjusted earnings
per diluted share and Adjusted operating profit provides investors
with an understanding of the underlying performance of the
Company’s business absent unusual events. Management believes that
EBITDA and Adjusted EBITDA are appropriate measures for evaluating
the operating performance of the Company because they reflect the
resources available for strategic opportunities including, among
others, to invest in the business, strengthen the balance sheet and
make strategic acquisitions. These non-GAAP measures 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
consolidated financial statements and filings with the SEC. As used
herein, "GAAP" refers to accounting principles generally accepted
in the United States of America.
HAS-E
HASBRO, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(Thousands of Dollars)
September 29, 2019
September 30, 2018
ASSETS
Cash and Cash Equivalents
$
1,060,432
$
907,107
Accounts Receivable, Net
1,416,879
1,391,242
Inventories
589,132
610,918
Other Current Assets
346,687
283,183
Total Current Assets
3,413,130
3,192,450
Property, Plant and Equipment,
Net (1)
371,881
255,150
Other Assets
1,769,613
2,047,729
Total Assets
$
5,554,624
$
5,495,329
LIABILITIES AND SHAREHOLDERS'
EQUITY
Short-term Borrowings
$
7,903
$
20,307
Payables and Accrued Liabilities
(1)
1,458,832
1,301,616
Total Current Liabilities
1,466,735
1,321,923
Long-term Debt
1,696,204
1,694,721
Other Liabilities (1)
550,778
591,404
Total Liabilities
3,713,717
3,608,048
Total Shareholders' Equity
1,840,907
1,887,281
Total Liabilities and
Shareholders' Equity
$
5,554,624
$
5,495,329
(1) In January 2019, the Company adopted Financial Accounting
Standards Update 2016-02, Leases, which requires the recognition of
lease assets and lease liabilities. As a result, the Company has
recorded operating lease right-of-use assets of $127,005 included
in Property, Plant and Equipment, Net at September 29, 2019, as
well as operating lease liabilities of $144,455, of which $29,489
are recorded in Payables and Accrued Liabilities and $114,966 are
included in Other Liabilities, at September 29, 2019.
HASBRO, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Quarter Ended
Nine Months Ended
(Thousands of Dollars and Shares
Except Per Share Data)
September 29, 2019
% Net Revenues
September 30, 2018
% Net Revenues
September 29, 2019
% Net Revenues
September 30, 2018
% Net Revenues
Net Revenues
$
1,575,173
100.0
%
$
1,569,686
100.0
%
$
3,292,220
100.0
%
$
3,190,485
100.0
%
Costs and Expenses:
Cost of Sales
627,119
39.8
%
655,597
41.8
%
1,230,800
37.4
%
1,249,090
39.2
%
Royalties
128,008
8.1
%
105,265
6.7
%
258,957
7.9
%
240,962
7.6
%
Product Development
67,354
4.3
%
65,807
4.2
%
189,246
5.7
%
183,050
5.7
%
Advertising
140,256
8.9
%
134,384
8.6
%
309,659
9.4
%
290,001
9.1
%
Amortization of Intangibles
11,814
0.8
%
8,841
0.6
%
35,445
1.1
%
19,873
0.6
%
Program Production Cost
Amortization
28,028
1.8
%
14,088
0.9
%
58,105
1.8
%
33,419
1.0
%
Selling, Distribution and
Administration
275,384
17.5
%
272,368
17.4
%
748,338
22.7
%
853,585
26.8
%
Operating Profit
297,210
18.9
%
313,336
20.0
%
461,670
14.0
%
320,505
10.0
%
Interest Expense
22,764
1.4
%
22,779
1.5
%
67,096
2.0
%
68,391
2.1
%
Other Expense (Income), Net
14,700
0.9
%
(5,237)
-0.3
%
99,125
3.0
%
(23,416)
-0.7
%
Earnings before Income Taxes
259,746
16.5
%
295,794
18.8
%
295,449
9.0
%
275,530
8.6
%
Income Tax Expense
46,797
3.0
%
31,933
2.0
%
42,340
1.3
%
63,862
2.0
%
Net Earnings
$
212,949
13.5
%
$
263,861
16.8
%
$
253,109
7.7
%
$
211,668
6.6
%
Per Common Share
Net Earnings
Basic
$
1.68
$
2.08
$
2.00
$
1.68
Diluted
$
1.67
$
2.06
$
1.99
$
1.67
Cash Dividends Declared
$
0.68
$
0.63
$
2.04
$
1.89
Weighted Average Number of
Shares
Basic
126,453
127,161
126,356
125,982
Diluted
127,204
127,892
126,956
126,774
HASBRO, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands of Dollars)
Nine Months Ended
September 29, 2019
September 30, 2018
Cash Flows from Operating
Activities:
Net Earnings
$
253,109
$
211,668
Non-Cash Pension Charge
110,777
—
Other Non-Cash Adjustments
204,726
174,717
Changes in Operating Assets and
Liabilities
(179,044)
(211,639)
Net Cash Provided by Operating
Activities
389,568
174,746
Cash Flows from Investing
Activities:
Additions to Property, Plant and
Equipment
(90,800)
(104,015)
Investments and Acquisitions, Net
of Cash Acquired
—
(155,451)
Other
4,340
8,587
Net Cash Utilized by Investing
Activities
(86,460)
(250,879)
Cash Flows from Financing
Activities:
Net Repayments of Short-term
Borrowings
(1,425)
(131,629)
Purchases of Common Stock
(60,137)
(187,850)
Stock-Based Compensation
Transactions
29,737
28,827
Dividends Paid
(250,760)
(229,562)
Employee Taxes Paid for Shares
Withheld
(13,061)
(58,336)
Deferred Acquisition Payments
(100,000)
—
Debt Issuance Costs
(21,534)
—
Net Cash Utilized by Financing
Activities
(417,180)
(578,550)
Effect of Exchange Rate Changes
on Cash
(7,867)
(19,444)
Cash and Cash Equivalents at
Beginning of Year
1,182,371
1,581,234
Cash and Cash Equivalents at End
of Period
$
1,060,432
$
907,107
HASBRO, INC.
SUPPLEMENTAL FINANCIAL
DATA
(Unaudited)
(Thousands of Dollars)
Quarter Ended
Nine Months Ended
September 29, 2019
September 30, 2018
% Change
September 29, 2019
September 30, 2018
% Change
Major Segment
Results (1)
U.S. and Canada
Segment:
External Net Revenues
$
898,269
$
912,179
-2
%
$
1,766,649
$
1,714,536
3%
Operating Profit
193,686
223,061
-13
%
313,795
269,539
16%
Operating Margin
21.6%
24.5%
17.8%
15.7%
International
Segment:
External Net Revenues
561,137
560,704
0
%
1,221,224
1,229,093
-1%
Operating Profit
67,238
66,274
1
%
51,410
10,359
> 100%
Operating Margin
12.0%
11.8%
4.2%
0.8%
Entertainment,
Licensing and Digital Segment:
External Net Revenues
115,766
96,803
20
%
304,266
246,747
23%
Operating Profit
24,594
37,113
-34
%
62,550
76,016
-18%
Operating Margin
21.2%
38.3%
20.6%
30.8%
International
Segment Net Revenues by Major Geographic Region
Europe
$
319,277
$
331,353
-4
%
$
673,728
$
686,490
-2%
Latin America
151,987
145,703
4
%
305,106
308,065
-1%
Asia Pacific
89,873
83,648
7
%
242,390
234,538
3%
Total
$
561,137
$
560,704
$
1,221,224
$
1,229,093
Net Revenues by
Brand Portfolio
Franchise Brands
$
779,659
$
847,745
-8
%
$
1,749,948
$
1,715,986
2%
Partner Brands
427,029
305,827
40
%
812,466
714,424
14%
Hasbro Gaming
232,287
280,832
-17
%
463,272
520,334
-11%
Emerging Brands
136,198
135,282
1
%
266,534
239,741
11%
Total
$
1,575,173
$
1,569,686
$
3,292,220
$
3,190,485
Hasbro's total gaming category, including all gaming revenue,
most notably MAGIC: THE GATHERING and MONOPOLY, totaled $449,393
and $1,086,151 for the quarter and nine months ended September 29,
2019, respectively, up 0.3% and up 12.7%, respectively, from
revenues of $447,844 and $964,159 for the quarter and nine months
ended September 30, 2018, respectively.
(1) For the quarter and nine months ended September 30, 2018,
revenues of $11,999 and $33,271, respectively, and operating profit
of $3,455 and $9,825, respectively, were reclassified from the U.S.
and Canada segment to the Entertainment, Licensing and Digital
segment.
HASBRO, INC.
SUPPLEMENTAL FINANCIAL
DATA
RECONCILIATION OF AS REPORTED
TO ADJUSTED OPERATING RESULTS
(Unaudited)
(Thousands of Dollars)
Non-GAAP
Adjustments Impacting Operating Profit
For the quarter and nine months
ended September 29, 2019, and the quarter ended September 30, 2018,
there were no non-GAAP adjustments impacting operating profit.
Nine Months Ended
September 29, 2019
September 30, 2018
Pre-tax Adjustments
Post-tax Adjustments
Pre-tax Adjustments
Post-tax Adjustments
Incremental costs impact of
Toys"R"Us (1)
$
—
$
—
$
70,428
$
61,372
Severance (2)
—
—
17,349
15,699
$
—
$
—
$
87,777
$
77,071
(1) In the first quarter of 2018, Toys"R"Us announced a
liquidation of its U.S. operations, as well as other retail impacts
around the globe. As a result, the Company recognized incremental
bad debt expense on outstanding Toys"R"Us receivables, royalty
expense, inventory obsolescence as well as other related costs.
(2) In the first quarter of 2018, the Company incurred severance
charges, primarily outside the U.S., related to actions associated
with a new go-to-market strategy designed to be more omni-channel
and e-commerce focused. These charges were included in Corporate
and Eliminations.
Reconciliation of
Operating Profit Results
For the quarter and nine months ended
September 29, 2019, and the quarter ended September 30, 2018, there
were no non-GAAP adjustments made to operating profit.
Nine Months Ended September
30, 2018
As Reported
Non-GAAP Adjustments
Adjusted
Adjusted
Company Results
External Net Revenues
$
3,190,485
$
—
$
3,190,485
Operating Profit
320,505
87,777
408,282
Operating Margin
10.0%
2.8%
12.8%
Adjusted
Segment Results
U.S. and
Canada Segment:
External Net Revenues
$
1,714,536
$
—
$
1,714,536
Operating Profit
269,539
52,277
321,816
Operating Margin
15.7%
3.0%
18.8%
International Segment:
External Net Revenues
1,229,093
—
1,229,093
Operating Profit
10,359
11,151
21,510
Operating Margin
0.8%
0.9%
1.8%
Entertainment, Licensing and Digital Segment:
External Net Revenues
246,747
—
246,747
Operating Profit
76,016
—
76,016
Operating Margin
30.8%
—
30.8%
Corporate and Eliminations:
The Corporate and Eliminations segment
included non-GAAP adjustments of $24.3 million for the nine months
ended September 30, 2018, consisting of $17.3 million of severance;
and $7.0 million of royalty expense related to Toys"R"Us
losses.
HASBRO, INC.
SUPPLEMENTAL FINANCIAL
DATA
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(Unaudited)
(Thousands of Dollars and Shares,
Except Per Share Data)
Reconciliation of Net Earnings and Earnings per
Share
Quarter Ended
(all adjustments reported after-tax)
September 29, 2019
Diluted Per Share
Amount
September 30, 2018
Diluted Per Share
Amount
Net Earnings, as Reported
$
212,949
$
1.67
$
263,861
$
2.06
Impact of Tax Reform (1)
—
—
(17,336)
(0.14)
Acquisition-related foreign exchange loss
(2)
20,886
0.16
—
—
Net Earnings, as Adjusted
$
233,835
$
1.84
$
246,525
$
1.93
Nine Months Ended
(all adjustments reported after-tax)
September 29, 2019
Diluted Per Share
Amount
September 30, 2018
Diluted Per Share
Amount
Net Earnings, as Reported
$
253,109
$
1.99
$
211,668
$
1.67
Incremental costs impact of Toys"R"Us
—
—
61,372
0.48
Severance
—
—
15,699
0.12
Impact of Tax Reform (1)
—
—
30,454
0.24
Acquisition-related foreign exchange loss
(2)
20,886
0.16
—
—
Pension (3)
85,852
0.68
—
—
Net Earnings, as Adjusted
$
359,847
$
2.83
$
319,193
$
2.52
(1) The Company made adjustments to provisional U.S. Tax Reform
amounts recorded in the fourth quarter of 2017 based on additional
regulations issued in the first quarter of 2018.
(2) In the third quarter of 2019, the Company and Entertainment
One Ltd. ("eOne") announced that they entered into a definitive
agreement under which the Company will acquire eOne in an all-cash
transaction, to be paid in British pound sterling. The Company
hedged a portion of its exposure to fluctuations in the British
pound sterling in relation to the acquisition using a series of
both foreign exchange forward and option contracts. These contracts
do not qualify for hedge accounting and, as such, were marked to
market through other expense in the Company's Consolidated
Statement of Operations. The Q3 2019 impact was a loss of $25.5
million, or $20.9 million after-tax.
(3) In the second quarter of 2019, the Company recognized a
$110.8 million non-cash charge ($85.9 million after-tax) related to
the settlement of its U.S. defined benefit pension plan.
Reconciliation of EBITDA
Quarter Ended
Nine Months Ended
September 29, 2019
September 30, 2018
September 29, 2019
September 30, 2018
Net Earnings
$
212,949
$
263,861
$
253,109
$
211,668
Interest Expense
22,764
22,779
67,096
68,391
Income Taxes (including Tax
Reform)
46,797
31,933
42,340
63,862
Depreciation
38,608
42,623
101,016
104,915
Amortization of Intangibles
11,814
8,841
35,445
19,873
EBITDA
$
332,932
$
370,037
$
499,006
$
468,709
Non-GAAP Adjustments (see
above)
(25,533)
—
(136,310)
87,777
Adjusted EBITDA
$
358,465
$
370,037
$
635,316
$
556,486
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191022005547/en/
Investor Contact: Debbie Hancock | Hasbro, Inc. | (401) 727-5401
| debbie.hancock@hasbro.com
Press Contact: Julie Duffy | Hasbro, Inc. | (401) 727-5931 |
julie.duffy@hasbro.com
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