Provides Business Update Related to
COVID-19
- Completed acquisition of Entertainment One Ltd. (eOne) in
early fiscal 2020
- First quarter 2020 revenues for the combined company were
$1.11 billion
- Strong demand for Hasbro products, notably in gaming
- Later delivery timing for eOne content in 2020 versus 2019
- Supply chain positioned to meet full-year product demand
requirements leveraging growing retailer channels, including ecomm
and omni-channel
- Substantial liquidity and access to cash, including quarter
ending cash of $1.2 billion; operating cash flow of $291.6 million;
and availability of $1.5 billion under revolving credit
facility
- Net loss of $69.6 million or $0.51 per diluted share;
Excluding eOne acquisition-related expenses and purchased
intangible amortization, adjusted net earnings were $77.7 million,
or $0.57 per diluted share
- Hasbro supporting community efforts to obtain and supply
personal protective equipment, toy and game donations, books,
learning and nutritious meals for children and families in need as
well as a global campaign, Bring Home the Fun, to provide resources
to keep kids occupied and engaged around the world
Hasbro, Inc. (NASDAQ: HAS), a global play and entertainment
company, today reported financial results for the first quarter
2020 and provided a business update on COVID-19 related matters.
Hasbro completed its acquisition of Entertainment One Ltd. (eOne)
at the beginning of the first quarter. 2020 results are those of
the combined company, and 2019 results referenced herein reflect
the pro forma combined results. See the financial tables
accompanying this press release for a reconciliation of as reported
to pro forma and adjusted results.
Net revenues for the first quarter 2020 were $1.11 billion
versus $1.20 billion pro forma revenues in 2019. Foreign exchange
had an $11.7 million negative impact on first quarter 2020
revenues.
Net loss for the first quarter 2020 was $69.6 million, or $0.51
per diluted share, versus pro forma net earnings of $76.4 million,
or $0.56 per diluted share in 2019. First quarter 2020 net loss
included $127.5 million after tax of acquisition-related expenses
and $19.9 million after tax of purchased intangible amortization
associated with the eOne acquisition. Excluding these items,
adjusted net earnings for the first quarter 2020 were $77.7
million, or $0.57 per diluted share. First quarter 2019 pro forma
net earnings included $19.1 million after tax of purchased
intangible amortization at eOne and $9.3 million associated with
non-GAAP adjustments at eOne. Excluding these items, adjusted pro
forma net earnings for the first quarter 2019 were $104.8 million,
or $0.76 per diluted share.
"The first quarter highlights what truly differentiates Hasbro:
A global team that meets challenges creatively and nimbly; a
diverse brand portfolio and retailer base, including best in class
ecomm and omni-channel execution; a strong financial foundation and
balance sheet; and a commitment to our purpose of making the world
a better place for children and their families," said Brian
Goldner, Hasbro’s chairman and chief executive officer. "During the
quarter, families and friends connected through Hasbro's robust
portfolio of face-to-face games, created with PLAY-DOH and engaged
in content and imaginative play with our brands and entertainment
properties. Our teams worked tirelessly to ensure product could get
to consumers while managing the health and safety of our employees
and partners globally who are navigating a global supply chain and
retail landscape impacted by COVID-19. Point of sale at retail was
strong during the first quarter and continues to be up in
April.
"We've undertaken extensive scenario planning across the
business and geographies as we plan for a re-opening of the
economies globally," continued Goldner. "At the same time, we made
significant progress on the integration of eOne and while near term
much of the team's production work has been delayed due to
COVID-19, we are actively working together to unlock value from our
brands and the eOne enterprise. Hasbro is creating play and
entertainment experiences which are vital and desired by consumers
and audiences this year and for the years to come."
"Hasbro is operating from a solid financial position with
substantial liquidity available in both cash on hand and a
revolving credit facility," said Deborah Thomas, Hasbro’s chief
financial officer. "Upon closing the eOne acquisition, we drew down
on a $1 billion term loan and left our cash on the balance sheet
intact. This cash position increased to $1.2 billion at quarter
end, and is further supported by access to a $1.5 billion revolving
credit facility. The global team did a tremendous job navigating
the challenges of the first quarter. Toward the end of the quarter,
physical store closures and country-wide restrictions became more
prevalent and entertainment productions shut down. As a result of
COVID-19, we expect the second quarter to be more challenging than
the first quarter of the year with revenues and earnings down
versus pro forma 2019. We are taking prudent steps to lower
expenses and preserve capital while positioning to meet the
seasonal peak demand periods of the business in the second half of
the year, including the holiday season. While the ultimate impact
of COVID-19 will vary depending on how long it takes to reopen
markets around the world, we are currently seeing healthy demand
for our products and content."
COVID-19 Business Update
Supply Chain
- China: Third-party factories in
China represent approximately 55% of the Company's manufacturing
production. After operating at lower than planned production levels
during the first quarter due to COVID-19, these factories are
currently operating at planned capacity for this time of year.
China factories are making product across the business, including
games. As production typically builds to peak levels during the
summer months, the Company anticipates making up production lost in
the first quarter in the second quarter and to be well positioned
to meet holiday demand. These beliefs assume all production
continues to operate in all material respects without further
COVID-19 shutdowns.
- Outside of China: Manufacturing
and warehouse partners outside of China operated at close to normal
levels during much of the first quarter. Beginning in mid-March and
through today, these locations are operating at varying levels of
productivity depending on local government and safety
considerations, with some markets operating at lower than normal
production levels and other facilities have been closed for a
period of time. Currently closed facilities include manufacturing
in Massachusetts, Texas and Ireland, primarily for games, as well
as manufacturing locations in India.
- The global Hasbro team is utilizing its diverse global supply
chain to meet demand from open facilities, existing inventory and
to rapidly make up lost production. The COVID-19 situation is very
fluid and based on our understanding of local governments
directions at this time, we expect closed facilities to reopen over
the summer. We will be using our full complement of sourcing
partners globally to ensure a quick recapture of any lost
production on priority items.
Demand
- Hasbro brands are resonating as people spend more time at home,
including games for families to play together and PLAY-DOH as kids
engage in more creative play. First Quarter
Consumer Demand Up for Hasbro Brands, Led by Games
- Global consumer point of sale increased mid-single digits, led
by double-digit gains in North America.
- Hasbro's total gaming category revenues, including MAGIC: THE
GATHERING, MONOPOLY and Hasbro Gaming, grew 40% and point of sale
was up globally over 25% (note: point of sale does not include
Wizards of the Coast brands).
- PLAY-DOH point of sale increased mid-single digits.
- Hasbro launched Bring Home the Fun, a global initiative created
to further the Company’s purpose to make the world a better place
for children and their families. The initiative provides parents
and caregivers resources to help keep kids occupied and engaged
during extended time at home and indoors.
- MAGIC: THE GATHERING revenues were up significantly in the
first quarter, on strong sales of new card releases. Certain
shipments were accelerated into the first quarter to ensure
delivery to distributors. Ikoria: Lair of Behemoths, launched on
schedule in Arena on April 16, but due to store closures the team
delayed physical product releases until May 15 in most regions. The
game trailer has been viewed close to 30 million times online.
Players are taking advantage of new ways the Wizards team has
launched to play MAGIC games while in person play events are not
happening. Where possible, events have shifted to digital play via
the Magic: The Gathering Arena platform. Leveraging Digital-First Orientation Across Diverse
Retail Network
- Hasbro is creatively finding ways to accelerate online, expand
omni-channel and skip the shopping cart to get our products into
cars and homes.
- Ecomm revenues increased double digits in the first quarter,
with meaningful point of sale gains. Mass/Hyper market retailers as
well as drug and grocery channels also increased revenues during
the quarter.
- Retailers and regions with developed ecomm businesses performed
well, while retailers and countries which rely on physical stores,
such as toy specialty retail, are experiencing greater
difficulties.
- Global store closures increased toward the end of the first
quarter, and are expected to more negatively impact the second
quarter results than during the first quarter. Ecomm, continues to
be strong, but this strength is not expected to offset declines at
physical retail. Entertainment Release
Schedule Shifting; High Viewer Engagement
- In the first quarter, entertainment revenues were down due to
planned later delivery timing for eOne content.
- Beginning late in the first quarter, production and delivery of
television and film projects for Hasbro's eOne TV and Film business
have been delayed, negatively impacting the level and timing of
revenues. The eOne team continues to develop new projects and work
on animation production which can be done remotely. The team now
expects to deliver finished episodes and film projects later in the
year than planned.
- Several film release dates have moved to later in 2020, into
2021 and in some instances are going straight to video on
demand/EST windows impacting the timing and level of anticipated
revenues.
- As more people are home, content viewership is high which bodes
well for long-term brand engagement
Liquidity
- Hasbro is in a good financial position and ended the first
quarter with $1.2 billion in cash.
- The Company's $1.5 billion revolving credit facility is also
available.
- The Company remains well within its financial covenants for its
$1 billion term loan and revolving credit facility.
- The next major debt maturity is $300 million in May 2021.
- The Board remains committed to the dividend. Hasbro paid $93.2
million in cash dividends to shareholders during the first quarter
2020. The next quarterly cash dividend payment of $0.68 per common
share is scheduled for May 15, 2020 to shareholders of record at
the close of business on May 1, 2020.
- The Company had previously suspended its share repurchase
program as it prioritizes deleveraging.
- Walmart, Target and Amazon were the Company's largest customers
in the first quarter.
- Hasbro remains very focused on managing credit risk of its
customers.
- The Company has identified areas to manage expenses and
preserve cash in the near term, including managing variable costs
and lowering content production cash spend, which is now expected
in the range of approximately $500-$600 million due to production
shutdowns. The Company spent $168.0 million in the first quarter
2020.
Community
- The health and safety of Hasbro employees, stakeholders and
communities are our top priority. Hasbro global offices, outside of
China, were closed on March 16 and remain closed today. The timing
of re-opening offices will be informed by local governmental,
health and safety guidelines. Our China offices reopened in March
following shutdowns during the first quarter.
- Hasbro has committed additional support through global
philanthropic initiatives that aim to bring relief to children and
their families worldwide during this difficult time. Hasbro is
proud to support Save the Children and No Kid Hungry in their
effort to address the most urgent needs of children, including
providing nutritious meals and distributing books and learning
resources to those children and families most in need. In addition
to providing financial support, Hasbro donated thousands of toys
and games to low-income communities to continue to inspire
creativity and fun for vulnerable children during the COVID-19
pandemic.
- In partnership with Cartamundi, Hasbro-sourced manufacturing
locations are producing personal protective equipment (PPE) for
front-line medical workers, including 50,000 face shields per week
for the next several weeks, to be donated to local hospitals.
- The Wizards of the Coast team is supporting its Wizards Play
Network (WPN) member stores during this challenging time. The team
launched a reprint of Mystery Booster and will be allocating these
boosters to WPN member stores at no charge, for sale to consumers
at a later date. As local game stores are closed, they may run
tournaments on Magic: The Gathering Arena.
Withdrawing 2020 Guidance
Due to the uncertainty related to COVID-19 including its impact on
the Company's supply chain, global retailer operations, timing and
production of entertainment and the global macroeconomic
environment, the Company is withdrawing its 2020 Outlook issued at
its Toy Fair presentation on February 21, 2020.
eOne Update The combination
of Hasbro’s extensive brand portfolio, product innovation and
licensing capabilities with eOne’s story-led brand skills and
proven content development and monetization expertise, creates a
business that can deliver long-term value and growth to
shareholders. The integration is progressing well and the Company
remains on track to deliver planned synergies of $130 million by
the end of 2022.
Family Brands – Resilience in Animated Content Offsets Lower
Consumer Product Demand
- Strong demand for animated content across all platforms offset
lower licensee shipments to consumer product retailers in the
Family Brands business. PEPPA PIG is now the most viewed preschool
show in the world on the YouTube platform and PJ MASKS is one of
the most streamed children’s shows on Netflix in the U.K. and
U.S.
- Key opportunities for Family Brands include the RICKY ZOOM
brand rollout, The World of Peppa Pig app in digital gaming and new
PJ MASKS content available on free-to-air platforms and on
Disney+.
- Development continues on a number of new properties with
greenlights for new shows expected in the coming months.
Television, Film & Music – Strong Demand for Content and an
Active Development Pipeline
- Television and film development and writing teams remain very
active and not materially impacted by COVID-19 issues during the
quarter. However, ongoing production lockdowns and theatrical
closures are now in place and likely to negatively impact revenues
over the short term. The development slate is strong, currently
with approximately 100 active development projects in television
(15 from the Hasbro portfolio) and over 60 projects in the film
pipeline (21 from the Hasbro portfolio).
- Television: Planned phasing of the delivery of television half
hours were less first quarter weighted this year, reducing half
hours of produced/acquired content from 339 in the prior year
period to 276 in the current quarter. Before the impact of
COVID-19, the half hours of produced/acquired content were
anticipated to increase for the full year over the prior year, but
are now expected to be down.
- Film: Box office performance was up and driven by the key
release 1917, supported by award season success. An active
development pipeline includes projects with Paramount and 21st
Century Fox.
- Music: Mainly a digital business, with gains in recorded music
and publishing more than offsetting declines in management and live
shows.
- Strong demand for content provide ongoing revenue
opportunities.
First Quarter 2020 Major Segment and
Brand Performance
Major Segments
Net Revenues
Operating (Loss)
Profit
($ Millions)
($ Millions)
Pro Forma
Pro Forma
Q1 2020
Q1 2019
% Change
Q1 2020
Q1 2019
% Change
U.S. and Canada
$428.6
$357.9
20%
$71.8
$13.5
>100%
International
$250.4
$282.6
-11%
$(26.7)
$(30.4)
12%
Entertainment, Licensing and
Digital1
$84.0
$92.0
-9%
$5.2
$30.0
-83%
eOne1
$342.5
$466.2
-27%
$(33.1)
$103.2
-132%
Brand Portfolio
Net Revenues ($
Millions)
Pro Forma
Q1 2020
Q1 2019
% Change
Franchise Brands
$396.5
$393.6
1%
Partner Brands
$182.3
$172.0
6%
Hasbro Gaming2
$140.1
$107.6
30%
Emerging Brands3
$94.1
$116.1
-19%
TV/Film/Entertainment4
$292.5
$409.5
-29%
1Both periods above are as reported, with 2019 including the pro
forma results from eOne. Adjusted segment operating profit excludes
Non-GAAP adjustments. A reconciliation is in the attached schedule
“Reconciliation of As Reported to Pro Forma Adjusted Operating
Results.” Non-GAAP adjustments recorded in the Corporate and
Eliminations segment include $51.2 million of pre-tax eOne
acquisition-related costs.
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 $340.5 million for
the first quarter 2020, up 40% versus $243.4 million for the first
quarter 2019. Hasbro believes its gaming portfolio is a competitive
differentiator and views it in its entirety.
3Emerging Brands portfolio includes eOne brands PEPPA PIG, PJ
MASKS and RICKY ZOOM as of first quarter 2020. For comparability,
Q1 2019 includes the pro forma revenues for those brands, which
amounted to $56.8 million.
4TV/Film/Entertainment represents the remaining eOne revenues.
For comparability, Q1 2019 includes the pro forma revenues.
- U.S. and Canada segment delivered higher revenues and
profits behind strong growth in Gaming, including MAGIC: THE
GATHERING tabletop, MONOPOLY, DUNGEONS AND DRAGONS and many other
Hasbro games such as THE GAME OF LIFE, JENGA, CONNECT 4 and
OPERATION. Partner Brand revenues also increased led by Hasbro
products for Disney's Frozen 2. Ecomm and omni-channel retail
performed well as other retail stores closures began late in the
first quarter. Operating profit growth resulted from higher
revenues and lower expenses.
- International segment revenues declined. The European
region started the year strong and revenues increased 6% for the
quarter with physical store closures increasing late in the
quarter. Latin America revenues were down, as the team works
through high retail inventory at the start of the year. Store
closures began later in Latin America, however, ecomm is a small
percentage of Latin America revenues. Asia Pacific revenues
declined as much of Asia was impacted by COVID-19 during the first
quarter. Pacific revenues increased. The International segment
operating loss improved led by gains in Europe including favorable
product mix and lower expenses.
- Entertainment, Licensing and Digital segment revenues
were down, primarily due to lower digital gaming revenues.
Operating profit includes a $20.8 million charge associated with
the write-down of certain assets resulting from the transition to
eOne's entertainment strategy following the acquisition. Adjusted
operating profit declined primarily due to lower revenues.
- eOne pro forma revenues declined compared to the strong
first quarter in 2019. TV and film revenues were down
year-over-year as television half hours deliveries and film release
slate timing was planned for later in 2020 than in 2019. eOne
released the award-winning film 1917 in the first quarter 2020, its
highest box office grossing film ever, and delivered box office
growth on fewer theatrical releases versus the same quarter in the
prior year. In Family Brands, the transition from agency agreements
to direct management of brands in certain territories negatively
impacted PEPPA PIG revenues as well as the comparison to the
benefit last year of the Chinese New Year of the Pig. PJ MASKS
revenue decline was a result of retailers winding down higher stock
levels than the prior year quarter. First quarter 2020 operating
loss includes eOne acquisition-related expenses of $77.7 million
and purchased intangible amortization of $25.0 million. First
quarter 2019 pro forma operating profit includes prior
restructuring and other costs of $12.0 million and purchased
intangible amortization of $24.6 million. Adjusted pro forma
operating profit declined primarily as a result of the phasing of
deliveries in television and film.
Conference Call Webcast
Hasbro will webcast its first quarter 2020 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
and Entertainment Experiences. From toys, games and consumer
products to television, movies, digital gaming, live action, music,
and virtual reality experiences, Hasbro connects to global
audiences by bringing to life great innovations, stories and brands
across established and inventive platforms. Hasbro’s iconic brands
include NERF, MAGIC: THE GATHERING, MY LITTLE PONY, TRANSFORMERS,
PLAY-DOH, MONOPOLY, BABY ALIVE, POWER RANGERS, PEPPA PIG and PJ
MASKS, as well as premier partner brands. Through its global
entertainment studio eOne, Hasbro 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 nine years. We
routinely share important business and brand updates on our
Investor Relations website, Newsroom and social channels (@Hasbro
on Twitter and Instagram).
© 2020 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, which
may be identified by the use of forward-looking words or phrases,
include statements relating to: the impact of, and actions and
initiatives taken and planned to be taken to, try and manage the
negative impact of the global coronavirus outbreak on our business,
including on the negative impact on supply of products and
production of entertainment content, demand for our products and
entertainment, our liquidity and our community; the expected
adequacy of supply and operation of our manufacturing facilities;
and the ability to achieve our financial and business goals; the
integration of eOne; expected synergies by 2022 in connection with
our acquisition of eOne; and our working capital and liquidity. Our
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. For example, the global
coronavirus outbreak has resulted, and may continue to result, in
significant disruptions in the markets in which we and our
employees, consumers, customers, partners, suppliers and
manufacturers operate. We have experienced, and expect to continue
to experience, disruptions in supply of products and production of
entertainment content, negative impact on sales due to changes in
consumer purchasing behavior and availability of product to
consumers, including due to retail store closures and limitations
on the capacity of e-commerce; delays or postponements of
productions and releases of entertainment content both internally
and by our partners; and challenges of working remotely. Our
efforts to develop and execute plans to help mitigate the negative
impact of the coronavirus to our business will not prevent our
business from being adversely affected, and the longer the outbreak
continues the more negative the impact will be on our business,
revenues, earnings and liquidity, and the more limited our ability
will be to try and make up for delayed or lost product development,
production and sales. Other factors that might cause such a
difference include, but are not limited to:
- our ability to design, develop, produce, manufacture, source
and ship products on a timely and cost-effective and profitable
basis;
- rapidly changing consumer interests in the types of products
and entertainment we offer;
- the challenge of developing and offering products and
storytelling experiences that are sought after by children,
families and audiences given increasing technology and
entertainment offerings available;
- our ability to develop and distribute engaging storytelling
across media to drive brand awareness;
- our dependence on third party relationships, including with
third party manufacturers, licensors of brands, studios, content
producers and entertainment distribution channels;
- our ability to successfully compete in the global play and
entertainment industry, including with manufacturers, marketers,
and sellers of toys and games, digital gaming products and digital
media, as well as with film studios, television production
companies and independent distributors and content producers;
- our ability to successfully evolve and transform our business
and capabilities to address a changing global consumer landscape
and retail environment, including changing inventories policies and
practices of our customers;
- our ability to develop new and expanded areas of our business,
such as through eOne, Wizards of the Coast, and our other
entertainment, digital gaming and esports initiatives;
- risks associated with international operations, such as
currency conversion, currency fluctuations, the imposition of
tariffs, quotas, border adjustment taxes or other protectionist
measures, and other challenges in the territories in which we
operate;
- our ability to successfully implement actions to lessen the
impact of potential and enacted tariffs imposed on our products,
including any changes to our supply chain, inventory management,
sales policies or pricing of our products;
- downturns in global and regional economic conditions impacting
one or more of the markets in which we sell products, which can
negatively impact our retail customers and consumers, result in
lower employment levels, consumer disposable income, retailer
inventories and spending, including lower spending on purchases of
our products;
- other economic and public health conditions or regulatory
changes in the markets in which we and our customers, suppliers and
manufacturers operate, such as higher commodity prices, labor costs
or transportation costs, or outbreaks of disease, such as the
coronavirus, the occurrence of which could create work slowdowns,
delays or shortages in production or shipment of products,
increases in costs or delays in revenue;
- the success of our key partner brands, including the ability to
secure, maintain and extend agreements with our 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;
- fluctuations in our business due to seasonality;
- the concentration of our customers, potentially increasing the
negative impact to our business of difficulties experienced by any
of our customers or changes in their purchasing or selling
patterns;
- the bankruptcy or other lack of success of one of our
significant retailers, such as the bankruptcy of Toys“R”Us in the
United States and Canada;
- the bankruptcy or other lack of success of one or more of our
licensees and other business partners;
- risks relating to the use of third party manufacturers for the
manufacturing of our products, including the concentration of
manufacturing for many of our products in the People’s Republic of
China and our ability to successfully diversify sourcing of our
products to reduce reliance on sources of supply in China;
- our ability to attract and retain talented employees;
- our ability to realize the benefits of cost-savings and
efficiency and/or revenue efficiency enhancing initiatives
including initiatives to integrate eOne into our business;
- our ability to protect our assets and intellectual property,
including as a result of infringement, theft, misappropriation,
cyber-attacks or other acts compromising the integrity of our
assets or intellectual property;
- risks relating to the impairment and/or write-offs of acquired
products and films and television programs we acquire and
produce;
- risks relating to investments and acquisitions, such as our
acquisition of eOne, which risks include: integration difficulties;
inability to retain key personnel; diversion of management time and
resources; failure to achieve anticipated benefits or synergies of
acquisitions or investments; and risks relating to the additional
indebtedness incurred in connection with a transaction;
- the risk of product recalls or product liability suits and
costs associated with product safety regulations;
- changes in tax laws or regulations, or the interpretation and
application of such laws and regulations, which may cause us to
alter tax reserves or make other changes which significantly impact
our reported financial results;
- the impact of litigation or arbitration decisions or settlement
actions; and
- other risks and uncertainties as may be detailed from time to
time in our public announcements and U.S. Securities and Exchange
Commission (“SEC”) filings.
The statements contained herein are based on our current beliefs
and expectations. We undertake 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.
Non-GAAP Financial Measures 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 eOne
acquisition-related expenses and purchased intangible amortization.
For Q1 2019, Pro Forma Adjusted operating profit, Pro Forma
Adjusted net earnings and Pro Forma Adjusted earnings per diluted
share exclude certain charges incurred by eOne related to prior
restructuring programs and acquisition-related charges. Also
included in the financial tables are the non-GAAP financial
measures of EBITDA, Adjusted EBITDA and Pro Forma 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/gains 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 our business absent
unusual events. Management believes that EBITDA and Adjusted EBITDA
are appropriate measures for evaluating the operating performance
of our business 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 our 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)
March 29, 2020
March 31, 2019
ASSETS
Cash and Cash Equivalents
$
1,237,884
$
1,196,634
Accounts Receivable, Net
963,823
638,417
Inventories
444,406
491,751
Prepaid Expenses and Other Current
Assets
672,390
305,056
Total Current Assets
3,318,503
2,631,858
Property, Plant and Equipment, Net
455,945
395,624
Goodwill
3,572,650
485,528
Other Intangible Assets, Net
1,615,778
682,063
Other Assets
1,461,483
739,700
Total Assets
$
10,424,359
$
4,934,773
LIABILITIES, NONCONTROLLING INTERESTS
AND SHAREHOLDERS' EQUITY
Short-term Borrowings
$
9,405
$
13,409
Current Portion of Long-term Debt
64,441
—
Payables and Accrued Liabilities
1,657,443
935,316
Total Current Liabilities
1,731,289
948,725
Long-term Debt
5,156,290
1,695,462
Other Liabilities
738,965
636,055
Total Liabilities
7,626,544
3,280,242
Noncontrolling Interests
61,324
—
Total Shareholders' Equity
2,736,491
1,654,531
Total Liabilities, Noncontrolling
Interests and Shareholders' Equity
$
10,424,359
$
4,934,773
HASBRO, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(Thousands of Dollars and Shares, Except
Per Share Data)
Quarter Ended
March 29, 2020
% Net Revenues
March 31, 2019
% Net Revenues
Net Revenues
$
1,105,570
100.0
%
$
732,510
100.0
%
Costs and Expenses:
Cost of Sales
262,694
23.8
%
259,987
35.5
%
Program Production Cost Amortization
132,146
12.0
%
6,575
0.9
%
Royalties
112,822
10.2
%
59,888
8.2
%
Product Development
53,829
4.9
%
56,260
7.7
%
Advertising
101,641
9.2
%
76,604
10.5
%
Amortization of Intangibles
36,811
3.3
%
11,816
1.6
%
Selling, Distribution and
Administration
279,128
25.2
%
225,253
30.8
%
Acquisition-Related Expenses
149,782
13.5
%
—
0.0
%
Operating (Loss) Profit
(23,283
)
-2.1
%
36,127
4.9
%
Interest Expense
54,725
4.9
%
22,314
3.0
%
Other Income, Net
(6,126
)
-0.6
%
(15,782
)
-2.2
%
(Loss) Earnings before Income Taxes
(71,882
)
-6.5
%
29,595
4.0
%
Income Tax (Benefit) Expense
(4,072
)
-0.4
%
2,868
0.4
%
Net (Loss) Earnings
(67,810
)
-6.1
%
26,727
3.6
%
Net Earnings Attributable to
Noncontrolling Interests
1,827
0.2
%
—
0.0
%
Net (Loss) Earnings Attributable to
Hasbro, Inc.
$
(69,637
)
-6.3
%
$
26,727
3.6
%
Per Common Share
Net (Loss) Earnings
Basic
$
(0.51
)
$
0.21
Diluted
$
(0.51
)
$
0.21
Cash Dividends Declared
$
0.68
$
0.68
Weighted Average Number of Shares
Basic
137,147
126,287
Diluted
137,147
126,816
HASBRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(Thousands of Dollars)
Quarter Ended
March 29, 2020
March 31, 2019
Cash Flows from Operating Activities:
Net (Loss) Earnings
$
(67,810
)
$
26,727
Other Non-Cash Adjustments
208,565
58,996
Changes in Operating Assets and
Liabilities
150,872
178,771
Net Cash Provided by Operating
Activities
291,627
264,494
Cash Flows from Investing Activities:
Additions to Property, Plant and
Equipment
(30,833
)
(25,201
)
Acquisition, Net of Cash Acquired
(4,403,929
)
—
Other
4,271
(1,800
)
Net Cash Utilized by Investing
Activities
(4,430,491
)
(27,001
)
Cash Flows from Financing Activities:
Proceeds from Long-term Debt
1,017,689
—
Repayments of Long-term Debt
(50,186
)
—
Net (Repayments of) Proceeds from
Short-term Borrowings
(1,424
)
3,419
Purchases of Common Stock
—
(47,479
)
Stock-Based Compensation Transactions
1,830
2,335
Dividends Paid
(93,162
)
(79,274
)
Employee Taxes Paid for Shares
Withheld
(5,307
)
(11,880
)
Redemption of Equity Instruments
(47,399
)
—
Deferred Acquisition Payments
—
(87,500
)
Other
(2,572
)
—
Net Cash Provided (Utilized) by Financing
Activities
819,469
(220,379
)
Effect of Exchange Rate Changes on
Cash
(23,090
)
(2,851
)
Cash and Cash Equivalents at Beginning of
Year
4,580,369
1,182,371
Cash and Cash Equivalents at End of
Period
$
1,237,884
$
1,196,634
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
PRO FORMA SEGMENT RESULTS
(Unaudited)
(Thousands of Dollars)
For comparability, the first quarter of
2019 includes the pro forma results for the eOne Segment. See
"Reconciliation of 2019 As Reported to Pro Forma Results" for the
pro forma adjustments.
Quarter Ended
March 29, 2020
Pro Forma March 31,
2019
% Change
Segment
Results
U.S. and Canada
Segment:
External Net Revenues
$
428,647
$
357,851
20
%
Operating Profit
71,780
13,532
>100
%
Operating Margin
16.7
%
3.8
%
International
Segment:
External Net Revenues
250,403
282,649
-11
%
Operating Loss
(26,691
)
(30,411
)
12
%
Operating Margin
-10.7
%
-10.8
%
Entertainment,
Licensing and Digital Segment:
External Net Revenues
84,027
91,994
-9
%
Operating Profit
5,174
30,020
-83
%
Operating Margin
6.2
%
32.6
%
eOne
Segment:
External Net Revenues
342,493
466,212
-27
%
Operating (Loss) Profit
(33,081
)
103,167
-132
%
Operating Margin
-9.7
%
22.1
%
International
Segment Net Revenues by Major Geographic Region
Europe
162,249
153,379
6
%
Latin America
33,921
62,777
-46
%
Asia Pacific
54,233
66,493
-18
%
Total
$
250,403
$
282,649
Net Revenues by
Brand Portfolio
Franchise Brands
$
396,497
$
393,574
1
%
Partner Brands
182,331
171,989
6
%
Hasbro Gaming
140,084
107,565
30
%
Emerging Brands (1)
94,145
116,135
-19
%
TV/Film/Entertainment (2)
292,513
409,459
-29
%
Total
$
1,105,570
$
1,198,722
Hasbro's total gaming category, including all gaming revenue,
most notably MAGIC: THE GATHERING and MONOPOLY, totaled $340,480
for the quarter ended March 29, 2020, up 39.9% from revenues of
$243,390 for the quarter ended March 31, 2019.
(1) Emerging Brands includes the preschool brands, PEPPA PIG, PJ
MASKS and RICKY ZOOM, acquired as part of the eOne Acquisition. For
comparability, the first quarter of 2019 includes the pro forma net
revenues for those brands, which amounted to $56,753.
(2) TV/Film/Entertainment includes all other brands not detailed
in (1) above acquired as part of the eOne Acquisition. For
comparability, the first quarter of 2019 includes the pro forma net
revenues of $409,459.
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF AS REPORTED TO PRO
FORMA ADJUSTED OPERATING RESULTS
(Unaudited)
(Thousands of Dollars)
For comparability, the first quarter of
2019 includes the pro forma results for the eOne Segment. See
"Reconciliation of 2019 As Reported to Pro Forma Results" for the
pro forma and non-GAAP adjustments.
Non-GAAP
Adjustments Impacting Operating (Loss) Profit
Quarter Ended
March 29, 2020
Pro Forma March 31,
2019
Pre-tax Adjustments
Post-tax Adjustments
Pre-tax Adjustments
Post-tax Adjustments
Acquisition-Related Expenses (1)
$
149,782
$
127,450
$
—
$
—
Acquired Intangible Amortization (2)
25,028
19,885
24,597
19,063
Pro Forma eOne Adjustments
—
—
12,004
9,303
$
174,810
$
147,335
$
36,601
$
28,366
(1) In association with the Company's acquisition of eOne, the
Company incurred related expenses of $149.8 million ($127.5 million
after-tax) in the first quarter of 2020, comprised of the
following:
(i) Acquisition and integration costs of
$95.7 million, including expense associated with the acceleration
of eOne stock-based compensation and advisor fees settled at the
closing of the acquisition, as well as integration costs; and
(ii) Restructuring and related costs of $54.1
million, including severance and retention costs, as well as
impairment charges for certain definite-lived intangible and
production assets.
(2) The Company incurred incremental intangible amortization
costs related to the intangible assets acquired in the eOne
Acquisition.
Reconciliation of
Operating (Loss) Profit Results
Quarter Ended March 29,
2020
Pro Forma Quarter Ended
March 31, 2019
As Reported
Non-GAAP Adjustments
Adjusted
As Reported
Non-GAAP Adjustments
Adjusted
% Change
Adjusted Company
Results
External Net Revenues
$
1,105,570
$
—
$
1,105,570
$
1,198,722
$
—
$
1,198,722
-8
%
Operating (Loss) Profit
(23,283
)
174,810
151,527
139,294
36,601
175,895
-14
%
Operating Margin
-2.1
%
15.8
%
13.7
%
11.6
%
3.1
%
14.7
%
Adjusted Segment
Results
U.S. and Canada
Segment:
External Net Revenues
$
428,647
$
—
$
428,647
$
357,851
$
—
$
357,851
20
%
Operating Profit
71,780
—
71,780
13,532
—
13,532
>100%
Operating Margin
16.7
%
—
16.7
%
3.8
%
—
3.8
%
International
Segment:
External Net Revenues
250,403
—
250,403
282,649
—
282,649
-11
%
Operating Loss
(26,691
)
—
(26,691
)
(30,411
)
—
(30,411
)
12
%
Operating Margin
-10.7
%
—
-10.7
%
-10.8
%
—
-10.8
%
Entertainment,
Licensing and Digital Segment:
External Net Revenues
84,027
—
84,027
91,994
—
91,994
-9
%
Operating Profit
5,174
20,831
26,005
30,020
—
30,020
-13
%
Operating Margin
6.2
%
24.8
%
30.9
%
32.6
%
—
32.6
%
eOne
Segment:
External Net Revenues
342,493
—
342,493
466,212
—
466,212
-27
%
Operating (Loss) Profit
(33,081
)
102,757
69,676
103,167
36,601
139,768
-50
%
Operating Margin
-9.7
%
30.0
%
20.3
%
22.1
%
7.9
%
30.0
%
Corporate and Eliminations: The
Corporate and Eliminations segment included non-GAAP adjustments of
$51,222 for the quarter ended March 29, 2020, consisting of eOne
acquisition-related expenses.
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF 2019 AS REPORTED TO
PRO FORMA RESULTS
(Unaudited)
(Thousands of Dollars)
Pro forma results were prepared by
combining the results of Hasbro and eOne for the quarter ended
March 31, 2019, after giving effect to the eOne Acquisition as if
it had been consummated on December 31, 2018.
These pro forma results do not represent
financial results that would have been realized had the acquisition
actually occurred on December 31, 2018, nor are they intended to be
a projection of future results. The pro forma financial information
is presented for illustrative purposes only and does not reflect
the costs of any integration activities or cost savings or
synergies that may be achieved as a result of the acquisition.
Quarter Ended March 31,
2019
Hasbro As Reported
eOne (under U.S. GAAP)
Pro Forma Adjustments
(1)
Pro Forma Combined
Net Revenues
$
732,510
$
466,212
$
—
$
1,198,722
Operating Profit
$
36,127
$
115,647
$
(12,480
)
$
139,294
Non-GAAP Adjustments
—
24,121
12,480
36,601
Adjusted Operating Profit *
$
36,127
$
139,768
$
—
$
175,895
* Reconciliation to Pro Forma Adjusted
results is as follows:
Net Earnings (Loss)
$
26,727
$
74,167
$
(24,489
)
$
76,405
Interest Expense
22,314
12,563
19,105
53,982
Other (Income) Expense, Net
(15,782
)
4,556
(526
)
(11,752
)
Income Tax (Benefit) Expense
2,868
21,632
(6,570
)
17,930
Net Earnings Attributable to
Noncontrolling Interests
—
2,729
—
2,729
Operating Profit (Loss)
36,127
115,647
(12,480
)
139,294
Non-GAAP
Adjustments
eOne:
Restructuring and Related Charges
—
11,275
—
11,275
Acquisition Costs - eOne Deals
—
729
—
729
Acquired Intangible Amortization
—
12,117
12,480
24,597
—
24,121
12,480
36,601
Adjusted Operating Profit
$
36,127
$
139,768
$
—
$
175,895
(1) The pro forma results include certain pro forma adjustments
to net earnings that were directly attributable to the acquisition,
as if the acquisition had occurred on December 31, 2018, including
the following:
- additional amortization expense of $12.5 million that would
have been recognized as a result of the allocation of purchase
consideration to definite-lived intangible assets subject to
amortization;
- estimated differences in interest expense of $19.1 million as a
result of incurring new debt and extinguishing historical eOne
debt; and
- the income tax effect of the pro forma adjustments in the
amount of $6.6 million, calculated using a blended statutory income
tax rate of 22.5% for the eOne adjustments and 21% for the Hasbro
interest adjustments.
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(Unaudited)
(Thousands of Dollars and Shares, Except
Per Share Data)
For comparability, the first quarter of
2019 includes the pro forma results for the eOne Segment. See
"Reconciliation of 2019 As Reported to Pro Forma Results" for the
pro forma and non-GAAP adjustments.
Reconciliation of
Net Earnings and Earnings per Share
Quarter Ended
(all adjustments reported after-tax)
March 29, 2020
Diluted Per Share
Amount
Pro Forma March 31,
2019
Pro Forma Diluted Per Share
Amount (1)
Net (Loss) Earnings Attributable to
Hasbro, Inc., as Reported
$
(69,637)
$
(0.51)
$
76,405
$
0.56
Acquisition-Related Expenses
127,450
0.93
—
—
Acquired Intangible Amortization
19,885
0.14
19,063
0.14
Pro Forma eOne Adjustments
—
—
9,303
0.07
Net Earnings Attributable to Hasbro, Inc.,
as Adjusted
$
77,698
$
0.57
$
104,771
$
0.76
(1) 2019 Pro Forma Diluted Per Share Amount is calculated using
weighted average shares outstanding of 137,586, which includes the
pro forma impact of issuing shares associated with the financing of
the eOne Acquisition.
Reconciliation of
EBITDA
Quarter Ended
Quarter Ended March 31,
2019
March 29, 2020
Hasbro As Reported
eOne (under U.S. GAAP)
Pro Forma Adjustments
Pro Forma Combined
Net (Loss) Earnings Attributable to
Hasbro, Inc.
$
(69,637)
$
26,727
$
74,167
$
(24,489)
$
76,405
Interest Expense
54,725
22,314
12,563
19,105
53,982
Income Tax (Benefit) Expense
(4,072)
2,868
21,632
(6,570)
17,930
Net Earnings Attributable to
Noncontrolling Interests
1,827
—
2,729
—
2,729
Depreciation
23,666
27,028
1,856
—
28,884
Amortization of Intangibles
36,811
11,816
12,117
12,480
36,413
EBITDA
$
43,320
$
90,753
$
125,064
$
526
$
216,343
Non-GAAP Adjustments (see above)
149,782
—
12,004
—
12,004
Adjusted EBITDA
$
193,102
$
90,753
$
137,068
$
526
$
228,347
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
eOne - FY2019 RESULTS OF OPERATIONS
(REPORTED UNDER U.S. GAAP)
(Unaudited)
(Thousands of Dollars)
Quarter Ended
Year Ended
March 2019
June 2019
September 2019
December 2019
December 2019
Net Revenues
$
466,212
$
231,091
$
283,310
$
235,160
$
1,215,773
Costs and Expenses:
Cost of Sales
14,141
17,053
11,497
24,878
67,569
Program Production Cost Amortization
160,857
64,527
92,662
90,414
408,460
Royalties
81,147
55,865
49,533
39,659
226,204
Advertising
21,173
32,870
30,593
37,241
121,877
Amortization of Intangibles
12,117
16,025
14,871
16,552
59,565
Selling, Distribution and
Administration
61,130
63,791
61,860
92,996
279,777
Operating Profit (Loss)
115,647
(19,040
)
22,294
(66,580
)
52,321
Interest Expense
12,563
12,208
10,302
10,772
45,845
Other Expense (Income), Net
4,556
21,236
2,687
(759
)
27,720
Earnings (Loss) before Income Taxes
98,528
(52,484
)
9,305
(76,593
)
(21,244
)
Income Tax Expense (Benefit)
21,632
(3,354
)
4,025
(26,815
)
(4,512
)
Net Earnings (Loss)
76,896
(49,130
)
5,280
(49,778
)
(16,732
)
Net Income Attributable to Noncontrolling
Interests
2,729
6,465
10,673
10,677
30,544
Net Earnings (Loss) Attributable to
eOne
$
74,167
$
(55,595
)
$
(5,393
)
$
(60,455
)
$
(47,276
)
The eOne financial results above include certain charges that
would have been excluded to calculate Adjusted results, as
historically reported by eOne. Those charges are outlined below for
each quarter in fiscal year 2019.
Non-GAAP
Adjustments
Quarter Ended
Year Ended
March 2019
June 2019
September 2019
December 2019
December 2019
Restructuring and Related Charges
$
11,275
$
7,373
$
3,234
$
11,526
$
33,408
Acquisition Costs - eOne Deals
729
8,664
1,324
458
11,175
Hasbro Transaction Costs
—
—
3,244
3,245
6,489
Selling, Distribution and
Administration
12,004
16,037
7,802
15,229
51,072
Debt Refinancing Costs
—
19,812
—
19,812
Other Expense (Income), Net
—
19,812
—
—
19,812
Total
$
12,004
$
35,849
$
7,802
$
15,229
$
70,884
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200429005311/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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