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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
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(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended September 26, 2021
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Commission File Number 1-6682
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HASBRO, INC.
(Exact name of registrant as specified in its charter)
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Rhode Island
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05-0155090
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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1027 Newport Avenue
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Pawtucket,
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Rhode Island
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02861
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(Address of Principal Executive Offices)
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(Zip Code)
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(401) 431-8697
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, $0.50 par value per share |
HAS |
The NASDAQ Global Select Market |
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required
to submit such files). Yes [x] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See
definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
x
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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☐
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Emerging growth company
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. [
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No
[x]
The number of shares of Common Stock, par value $.50 per share,
outstanding as of September 26, 2021 was 137,946,906.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of Dollars Except Share Data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26,
2021 |
|
September 27,
2020 |
|
December 27,
2020 |
|
ASSETS
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents including restricted cash of $94.9
million, $71.2 million and $73.2 million
|
$ |
1,181.2 |
|
|
$ |
1,132.4 |
|
|
$ |
1,449.7 |
|
|
Accounts receivable, less allowance for doubtful accounts of $30.4
million, $23.7 million and $28.1 million
|
1,476.6 |
|
|
1,438.4 |
|
|
1,391.7 |
|
|
Inventories
|
544.1 |
|
|
540.0 |
|
|
395.6 |
|
|
Prepaid expenses and other current assets
|
528.5 |
|
|
648.2 |
|
|
609.6 |
|
|
|
|
|
|
|
|
Total current assets
|
3,730.4 |
|
|
3,759.0 |
|
|
3,846.6 |
|
|
Property, plant and equipment, less accumulated depreciation of
$607.6 million, $546.8 million and $553.0 million
|
441.9 |
|
|
477.2 |
|
|
489.0 |
|
|
Other assets
|
|
|
|
|
|
|
Goodwill
|
3,420.2 |
|
|
3,644.1 |
|
|
3,691.7 |
|
|
Other intangible assets, net of accumulated amortization of
$1,027.4 million, $885.8 million and $964.6 million
|
1,209.5 |
|
|
1,546.8 |
|
|
1,530.8 |
|
|
Other
|
1,428.4 |
|
|
1,276.1 |
|
|
1,260.2 |
|
|
Total other assets
|
6,058.1 |
|
|
6,467.0 |
|
|
6,482.7 |
|
|
Total assets
|
$ |
10,230.4 |
|
|
$ |
10,703.2 |
|
|
$ |
10,818.3 |
|
|
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Short-term borrowings
|
$ |
0.9 |
|
|
$ |
10.0 |
|
|
$ |
6.6 |
|
|
Current portion of long-term debt
|
187.6 |
|
|
369.3 |
|
|
432.6 |
|
|
Accounts payable
|
598.2 |
|
|
466.2 |
|
|
425.5 |
|
|
Accrued liabilities
|
1,663.7 |
|
|
1,470.1 |
|
|
1,538.6 |
|
|
|
|
|
|
|
|
Total current liabilities
|
2,450.4 |
|
|
2,315.6 |
|
|
2,403.3 |
|
|
Long-term debt
|
3,977.4 |
|
|
4,777.8 |
|
|
4,660.0 |
|
|
Other liabilities
|
722.5 |
|
|
778.5 |
|
|
793.9 |
|
|
Total liabilities
|
$ |
7,150.3 |
|
|
$ |
7,871.9 |
|
|
$ |
7,857.2 |
|
|
Redeemable noncontrolling interests
|
22.9 |
|
|
22.9 |
|
|
24.4 |
|
|
Shareholders' equity
|
|
|
|
|
|
|
Preference stock of $2.50 par value. Authorized 5,000,000 shares;
none issued
|
— |
|
|
— |
|
|
— |
|
|
Common stock of $0.50 par value. Authorized 600,000,000 shares;
issued 220,286,736 shares at September 26, 2021,
September 27, 2020, and December 27, 2020
|
110.1 |
|
|
110.1 |
|
|
110.1 |
|
|
Additional paid-in capital
|
2,388.9 |
|
|
2,311.4 |
|
|
2,329.1 |
|
|
Retained earnings
|
4,269.6 |
|
|
4,192.4 |
|
|
4,204.2 |
|
|
Accumulated other comprehensive loss
|
(208.6) |
|
|
(280.3) |
|
|
(195.0) |
|
|
Treasury stock, at cost; 82,359,425 shares at September 26,
2021; 83,256,622 shares at September 27, 2020; and 82,979,403
shares at December 27, 2020
|
(3,541.0) |
|
|
(3,559.9) |
|
|
(3,551.7) |
|
|
Noncontrolling interests
|
38.2 |
|
|
34.7 |
|
|
40.0 |
|
|
Total shareholders' equity
|
3,057.2 |
|
|
2,808.4 |
|
|
2,936.7 |
|
|
Total liabilities, noncontrolling interests and shareholders'
equity
|
$ |
10,230.4 |
|
|
$ |
10,703.2 |
|
|
$ |
10,818.3 |
|
See accompanying condensed notes to consolidated financial
statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Millions of Dollars Except Per Share Data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
September 26,
2021 |
|
September 27,
2020 |
|
September 26,
2021 |
|
September 27,
2020 |
|
Net revenues |
$ |
1,970.0 |
|
|
$ |
1,776.6 |
|
|
$ |
4,407.0 |
|
|
$ |
3,742.5 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of sales |
609.5 |
|
|
610.1 |
|
|
1,244.4 |
|
|
1,126.0 |
|
|
Program cost amortization |
187.9 |
|
|
85.4 |
|
|
396.1 |
|
|
268.2 |
|
|
Royalties |
171.8 |
|
|
176.9 |
|
|
392.2 |
|
|
387.1 |
|
|
Product development |
80.1 |
|
|
62.7 |
|
|
229.1 |
|
|
174.9 |
|
|
Advertising |
163.3 |
|
|
137.4 |
|
|
356.6 |
|
|
311.4 |
|
|
Amortization of intangibles |
27.7 |
|
|
36.2 |
|
|
90.3 |
|
|
107.7 |
|
|
Loss on disposal of business |
— |
|
|
— |
|
|
101.8 |
|
|
— |
|
|
Selling, distribution and administration |
361.8 |
|
|
325.4 |
|
|
1,004.7 |
|
|
885.7 |
|
|
Acquisition and related costs |
— |
|
|
5.9 |
|
|
— |
|
|
166.0 |
|
|
Total costs and expenses |
1,602.1 |
|
|
1,440.0 |
|
|
3,815.2 |
|
|
3,427.0 |
|
|
Operating profit |
367.9 |
|
|
336.6 |
|
|
591.8 |
|
|
315.5 |
|
|
Non-operating expense (income): |
|
|
|
|
|
|
|
|
Interest expense |
43.3 |
|
|
49.4 |
|
|
137.3 |
|
|
153.7 |
|
|
Interest income |
(1.8) |
|
|
(0.7) |
|
|
(4.2) |
|
|
(6.3) |
|
|
Other income (expense), net |
3.0 |
|
|
(11.3) |
|
|
(35.3) |
|
|
(15.4) |
|
|
Total non-operating expense, net |
44.5 |
|
|
37.4 |
|
|
97.8 |
|
|
132.0 |
|
|
Earnings before income taxes |
323.4 |
|
|
299.2 |
|
|
494.0 |
|
|
183.5 |
|
|
Income tax expense |
68.5 |
|
|
79.2 |
|
|
143.5 |
|
|
64.3 |
|
|
Net earnings |
254.9 |
|
|
220.0 |
|
|
350.5 |
|
|
119.2 |
|
|
Net earnings (loss) attributable to noncontrolling
interests |
1.7 |
|
|
(0.9) |
|
|
4.0 |
|
|
1.9 |
|
|
Net earnings attributable to Hasbro, Inc. |
$ |
253.2 |
|
|
$ |
220.9 |
|
|
$ |
346.5 |
|
|
$ |
117.3 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share: |
|
|
|
|
|
|
|
|
Basic |
$ |
1.83 |
|
|
$ |
1.61 |
|
|
$ |
2.51 |
|
|
$ |
0.86 |
|
|
Diluted |
$ |
1.83 |
|
|
$ |
1.61 |
|
|
$ |
2.51 |
|
|
$ |
0.85 |
|
|
Cash dividends declared per common share |
$ |
0.68 |
|
|
$ |
0.68 |
|
|
$ |
2.04 |
|
|
$ |
2.04 |
|
See accompanying condensed notes to consolidated financial
statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Earnings
(Millions of Dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
September 26,
2021 |
|
September 27,
2020 |
|
September 26,
2021 |
|
September 27,
2020 |
|
Net earnings |
$ |
254.9 |
|
|
$ |
220.0 |
|
|
$ |
350.5 |
|
|
$ |
119.2 |
|
|
Other comprehensive earnings: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments, net of tax
|
(31.4) |
|
|
40.8 |
|
|
(23.6) |
|
|
(98.1) |
|
|
Unrealized holding (gains) losses on available-for-sale securities,
net of tax |
(0.3) |
|
|
(0.8) |
|
|
(0.1) |
|
|
1.3 |
|
|
Net gains (losses) on cash flow hedging activities, net of
tax |
5.2 |
|
|
(5.7) |
|
|
7.8 |
|
|
15.7 |
|
|
|
|
|
|
|
|
|
|
Reclassifications to earnings, net of tax: |
|
|
|
|
|
|
|
|
Net losses (gains) on cash flow hedging activities |
1.1 |
|
|
(6.8) |
|
|
1.7 |
|
|
(15.8) |
|
|
Amortization of unrecognized pension and postretirement
amounts
|
0.2 |
|
|
0.3 |
|
|
0.6 |
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive (loss) earnings, net of tax |
$ |
(25.1) |
|
|
$ |
27.8 |
|
|
$ |
(13.6) |
|
|
$ |
(96.1) |
|
|
Total comprehensive earnings (loss) attributable to noncontrolling
interests |
1.7 |
|
|
(0.9) |
|
|
4.0 |
|
|
1.9 |
|
|
Total comprehensive earnings attributable to Hasbro,
Inc. |
$ |
228.1 |
|
|
$ |
248.7 |
|
|
$ |
332.9 |
|
|
$ |
21.2 |
|
See accompanying condensed notes to consolidated financial
statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of Dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
September 26,
2021 |
|
September 27,
2020 |
|
Cash flows from operating activities: |
|
|
|
|
Net earnings |
$ |
350.5 |
|
|
$ |
119.2 |
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
|
Depreciation of plant and equipment |
116.2 |
|
|
94.2 |
|
|
Amortization of intangibles |
90.3 |
|
|
107.7 |
|
|
Asset impairments |
— |
|
|
40.9 |
|
|
Loss on disposal of business |
101.8 |
|
|
— |
|
|
Program cost amortization |
396.1 |
|
|
268.2 |
|
|
Deferred income taxes |
47.9 |
|
|
12.5 |
|
|
Stock-based compensation |
56.2 |
|
|
40.0 |
|
|
|
|
|
|
Other non-cash items |
5.7 |
|
|
(1.7) |
|
|
Change in operating assets and liabilities net of acquired
balances: |
|
|
|
|
(Increase) decrease in accounts receivable |
(83.8) |
|
|
165.6 |
|
|
Increase in inventories |
(159.4) |
|
|
(96.9) |
|
|
Decrease (increase) in prepaid expenses and other current
assets |
56.7 |
|
|
(10.0) |
|
|
Program spend, net |
(526.3) |
|
|
(294.6) |
|
|
Increase in accounts payable and accrued liabilities |
310.5 |
|
|
19.0 |
|
|
Change in net deemed repatriation tax |
(18.4) |
|
|
(18.3) |
|
|
Other |
(58.4) |
|
|
48.5 |
|
|
Net cash provided by operating activities |
685.6 |
|
|
494.3 |
|
|
Cash flows from investing activities: |
|
|
|
|
Additions to property, plant and equipment |
(98.1) |
|
|
(92.1) |
|
|
Acquisitions, net of cash acquired |
— |
|
|
(4,403.9) |
|
|
Proceeds from sale of business, net of cash |
379.2 |
|
|
— |
|
|
Other |
(3.6) |
|
|
24.3 |
|
|
Net cash provided (utilized) by investing activities |
277.5 |
|
|
(4,471.7) |
|
|
Cash flows from financing activities: |
|
|
|
|
Proceeds from borrowings with maturity greater than three
months |
127.6 |
|
|
1,036.0 |
|
|
Repayments of borrowings with maturity greater than three
months |
(1,062.1) |
|
|
(147.3) |
|
|
Net repayments of other short-term borrowings |
(6.2) |
|
|
(0.3) |
|
|
|
|
|
|
Stock-based compensation transactions |
24.6 |
|
|
1.8 |
|
|
Dividends paid |
(280.7) |
|
|
(279.4) |
|
|
Payments related to tax withholding for share-based
compensation |
(10.8) |
|
|
(5.9) |
|
|
Debt extinguishment costs |
(9.1) |
|
|
— |
|
|
Redemption of equity instruments |
— |
|
|
(47.4) |
|
|
|
|
|
|
|
|
|
|
Other |
(6.8) |
|
|
(7.0) |
|
|
Net cash (utilized) provided by financing activities |
(1,223.5) |
|
|
550.5 |
|
|
Effect of exchange rate changes on cash |
(8.1) |
|
|
(21.1) |
|
|
Net decrease in cash, cash equivalents and restricted
cash |
(268.5) |
|
|
(3,448.0) |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of
year |
1,449.7 |
|
|
4,580.4 |
|
|
Cash, cash equivalents and restricted cash at end of
period |
$ |
1,181.2 |
|
|
$ |
1,132.4 |
|
|
|
|
|
|
|
Supplemental information |
|
|
|
|
Cash paid during the period for: |
|
|
|
|
Interest |
$ |
123.7 |
|
|
$ |
123.6 |
|
|
Income taxes |
$ |
124.1 |
|
|
$ |
66.0 |
|
See accompanying condensed notes to consolidated financial
statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity and Redeemable
Noncontrolling Interests
(Millions of Dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 26, 2021 |
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Accumulated Other Comprehensive Loss |
|
Treasury
Stock |
|
Noncontrolling Interests |
|
Total
Shareholders'
Equity |
|
|
Redeemable Noncontrolling Interests |
|
Balance, June 27, 2021 |
$ |
110.1 |
|
|
2,361.2 |
|
|
4,110.3 |
|
|
(183.5) |
|
|
(3,547.6) |
|
|
39.9 |
|
|
$ |
2,890.4 |
|
|
|
$ |
24.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Hasbro, Inc. |
— |
|
|
— |
|
|
253.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
253.2 |
|
|
|
— |
|
|
Net earnings attributable to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.4 |
|
|
0.4 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings |
— |
|
|
— |
|
|
— |
|
|
(25.1) |
|
|
— |
|
|
— |
|
|
(25.1) |
|
|
|
— |
|
|
Stock-based compensation transactions |
— |
|
|
7.4 |
|
|
— |
|
|
— |
|
|
6.6 |
|
|
— |
|
|
14.0 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
— |
|
|
19.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19.1 |
|
|
|
— |
|
|
Dividends declared |
— |
|
|
— |
|
|
(93.9) |
|
|
— |
|
|
— |
|
|
— |
|
|
(93.9) |
|
|
|
— |
|
|
Distributions paid to noncontrolling owners and other foreign
exchange |
— |
|
|
1.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
(2.1) |
|
|
(0.9) |
|
|
|
(2.9) |
|
|
Balance, September 26, 2021 |
$ |
110.1 |
|
|
2,388.9 |
|
|
4,269.6 |
|
|
(208.6) |
|
|
(3,541.0) |
|
|
38.2 |
|
|
$ |
3,057.2 |
|
|
|
$ |
22.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 27, 2020 |
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Accumulated Other
Comprehensive Loss |
|
Treasury
Stock |
|
Noncontrolling Interests |
|
Total
Shareholders'
Equity |
|
|
Redeemable Noncontrolling Interests |
|
Balance, June 28, 2020 |
$ |
110.1 |
|
|
2,297.3 |
|
|
4,064.7 |
|
|
(308.1) |
|
|
(3,560.0) |
|
|
38.1 |
|
|
$ |
2,642.1 |
|
|
|
$ |
24.1 |
|
|
Noncontrolling interests related to acquisition of Entertainment
One Ltd. |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
Net earnings attributable to Hasbro, Inc. |
— |
|
|
— |
|
|
220.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
220.9 |
|
|
|
— |
|
|
Net earnings (loss) attributable to noncontrolling
interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.9) |
|
|
(0.9) |
|
|
|
— |
|
|
Other comprehensive earnings |
— |
|
|
— |
|
|
— |
|
|
27.8 |
|
|
— |
|
|
— |
|
|
27.8 |
|
|
|
— |
|
|
Stock-based compensation transactions |
— |
|
|
(0.3) |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
(0.3) |
|
|
|
— |
|
|
Buyout of noncontrolling interest |
— |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.6 |
|
|
|
— |
|
|
Stock-based compensation expense |
— |
|
|
13.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
13.9 |
|
|
|
— |
|
|
Dividends declared |
— |
|
|
— |
|
|
(93.2) |
|
|
— |
|
|
— |
|
|
— |
|
|
(93.2) |
|
|
|
— |
|
|
Distributions paid to noncontrolling owners and other foreign
exchange |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2.6) |
|
|
(2.6) |
|
|
|
(1.2) |
|
|
Balance, September 27, 2020 |
$ |
110.1 |
|
|
2,311.4 |
|
|
4,192.4 |
|
|
(280.3) |
|
|
(3,559.9) |
|
|
34.7 |
|
|
$ |
2,808.4 |
|
|
|
$ |
22.9 |
|
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity and Redeemable
Noncontrolling Interests
(Millions of Dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 26, 2021 |
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Accumulated Other
Comprehensive Loss |
|
Treasury
Stock |
|
Noncontrolling Interests |
|
Total
Shareholders'
Equity |
|
|
Redeemable Noncontrolling Interests |
|
Balance, December 27, 2020 |
$ |
110.1 |
|
|
2,329.1 |
|
|
4,204.2 |
|
|
(195.0) |
|
|
(3,551.7) |
|
|
40.0 |
|
|
$ |
2,936.7 |
|
|
|
$ |
24.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Hasbro, Inc. |
— |
|
|
— |
|
|
346.5 |
|
|
— |
|
|
— |
|
|
— |
|
|
346.5 |
|
|
|
|
|
Net earnings attributable to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.4 |
|
|
2.4 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings |
— |
|
|
— |
|
|
— |
|
|
(13.6) |
|
|
— |
|
|
— |
|
|
(13.6) |
|
|
|
— |
|
|
Stock-based compensation transactions |
— |
|
|
4.2 |
|
|
— |
|
|
— |
|
|
9.6 |
|
|
— |
|
|
13.8 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
— |
|
|
55.1 |
|
|
— |
|
|
— |
|
|
1.1 |
|
|
— |
|
|
56.2 |
|
|
|
— |
|
|
Dividends declared |
— |
|
|
— |
|
|
(281.1) |
|
|
— |
|
|
— |
|
|
— |
|
|
(281.1) |
|
|
|
— |
|
|
Distributions paid to noncontrolling owners and other foreign
exchange |
— |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
— |
|
|
(4.2) |
|
|
(3.7) |
|
|
|
(3.1) |
|
|
Balance, September 26, 2021 |
$ |
110.1 |
|
|
2,388.9 |
|
|
4,269.6 |
|
|
(208.6) |
|
|
(3,541.0) |
|
|
38.2 |
|
|
$ |
3,057.2 |
|
|
|
$ |
22.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 27, 2020 |
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Accumulated Other
Comprehensive Loss |
|
Treasury
Stock |
|
Noncontrolling Interests |
|
Total
Shareholders'
Equity |
|
|
Redeemable Noncontrolling Interests |
|
Balance, December 29, 2019 |
$ |
110.1 |
|
|
2,275.7 |
|
|
4,354.6 |
|
|
(184.2) |
|
|
(3,560.7) |
|
|
— |
|
|
$ |
2,995.5 |
|
|
|
$ |
— |
|
|
Noncontrolling interests related to acquisition of Entertainment
One Ltd. |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
38.6 |
|
|
38.6 |
|
|
|
26.2 |
|
|
Net earnings attributable to Hasbro, Inc. |
— |
|
|
— |
|
|
117.3 |
|
|
— |
|
|
— |
|
|
— |
|
|
117.3 |
|
|
|
— |
|
|
Net earnings (loss) attributable to noncontrolling
interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.1 |
|
2.1 |
|
|
|
(0.1) |
|
|
Buyout of noncontrolling interest |
— |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.6 |
|
|
|
— |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
(96.1) |
|
|
— |
|
|
— |
|
|
(96.1) |
|
|
|
— |
|
|
Stock-based compensation transactions |
— |
|
|
(4.6) |
|
|
— |
|
|
— |
|
|
0.5 |
|
|
— |
|
|
(4.1) |
|
|
|
— |
|
|
Stock-based compensation expense |
— |
|
|
39.7 |
|
|
— |
|
|
— |
|
|
0.3 |
|
|
— |
|
|
40.0 |
|
|
|
— |
|
|
Dividends declared |
— |
|
|
— |
|
|
(279.5) |
|
|
— |
|
|
— |
|
|
— |
|
|
(279.5) |
|
|
|
— |
|
|
Distributions paid to noncontrolling owners and other foreign
exchange |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5.9) |
|
|
(5.9) |
|
|
|
(3.2) |
|
|
Balance, September 27, 2020 |
$ |
110.1 |
|
|
2,311.4 |
|
|
4,192.4 |
|
|
(280.3) |
|
|
(3,559.9) |
|
|
34.7 |
|
|
$ |
2,808.4 |
|
|
|
$ |
22.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying condensed notes to consolidated financial
statements.
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(Unaudited)
(1)
Basis of Presentation
In the opinion of management, the accompanying unaudited interim
consolidated financial statements contain all normal and recurring
adjustments necessary to present fairly the consolidated financial
position of Hasbro, Inc. and all majority-owned subsidiaries
("Hasbro" or the "Company") as of September 26, 2021 and
September 27, 2020, and the results of its operations and cash
flows and shareholders' equity for the periods then ended in
accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP"). The preparation of
consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and
notes thereto. Actual results could differ from those
estimates.
The quarters ended September 26, 2021 and September 27,
2020 were each 13-week periods. The nine-month periods ended
September 26, 2021 and September 27, 2020 were each
39-week periods.
The results of operations for the quarter ended September 26,
2021 are not necessarily indicative of results to be expected for
the full year 2021, nor were those of the comparable 2020 period
representative of those actually experienced for the full year
2020.
Segment Realignment
Beginning with the first quarter of 2021, the Company realigned its
financial reporting segments and business units, in order to align
its reportable segments more closely with its current business
structure. Reclassifications of certain prior year financial
information has been made to conform to the current-year
presentation. None of the changes impact the Company's previously
reported consolidated net revenue, operating profits (losses), net
earnings (losses) or net earnings (losses) per share. See Note 14
for more information on the Company’s 2021 segment
realignment.
Legal Settlement
During the first quarter of 2021, the Company realized a gain of
$26.7 million from a legal settlement related to a dispute
associated with historical Entertainment One Ltd. ("eOne"). The
gain is included in other income, net within the Company's
consolidated financial statements, included in Part I of this Form
10-Q.
Significant Accounting Policies
The Company's significant accounting policies are summarized in
Note 1 to the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended
December 27, 2020 ("2020 Form 10-K").
These consolidated financial statements have been prepared without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and
disclosures normally included in the consolidated financial
statements prepared in accordance with U.S. GAAP have been
condensed or omitted pursuant to such rules and
regulations. The Company filed with the SEC audited
consolidated financial statements for the fiscal year ended
December 27, 2020 in its 2020 Form 10-K, which includes all such
information and disclosures and, accordingly, should be read in
conjunction with the financial information included
herein.
Recently Adopted Accounting Standards
In August 2018, the FASB issued Accounting Standards Update No.
2018-14 (ASU 2018-14) Compensation – Retirement Benefits –
Defined Benefit Plans – General (Subtopic 715-20)- Disclosure
Framework – Changes to the Disclosure Requirements for Defined
Benefit Plans.
The amendments in this update modify the disclosure requirements
for employers that sponsor defined benefit pension or other
postretirement plans. For public companies, this standard is
effective for annual reporting periods beginning after December 15,
2020, and early adoption is permitted. The Company adopted the
standard in the first quarter of 2021 and the adoption of the
standard did not have a material impact on its consolidated
financial statements.
In December 2019, the FASB issued Accounting Standards Update No.
2019-12 (ASU 2019-12), Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes.
The amendments in this update remove certain exceptions for
performing intra-period tax allocations, recognizing deferred taxes
for investments, and calculating income taxes in interim periods.
The guidance also simplifies the accounting for franchise taxes,
transactions that result in a step-up in the tax basis of goodwill,
and
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
the effect of enacted changes in tax laws or rates in interim
periods. ASU 2019-12 is effective for fiscal years beginning after
December 15, 2020 and early adoption is permitted. The Company
adopted the standard in the first quarter of 2021 and the adoption
of the standard did not have a material impact on its consolidated
financial statements.
Issued Accounting Pronouncements
In March of 2020, the FASB issued Accounting Standards Update
No. 2020-04 (ASU 2020-04) Reference Rate Reform (Topic
848):
Facilitation of the Effects of Reference Rate Reform on Financial
Reporting.
The amendments in this update provide optional expedients and
exceptions for applying U.S. GAAP to contracts, hedging
relationships, and other transactions, for a limited period of
time, to ease the potential burden of recognizing the effects of
reference rate reform on financial reporting. The amendments in
this update apply to contracts, hedging relationships and other
transactions that reference the London Inter-Bank Offered Rate
("LIBOR") or another reference rate expected to be discontinued due
to the global transition away from LIBOR and certain other
interbank offered rates. An entity may elect to apply the
amendments provided by this update beginning March 12, 2020 through
December 31, 2022. The Company does not currently expect the change
from LIBOR to an alternate rate to have a material impact on its
consolidated financial statements, and is continuing to evaluate
the standard's potential impact to its consolidated financial
statements.
(2)
Revenue Recognition
Revenue Recognition
Revenue is recognized when control of the promised goods or content
is transferred to the customers, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for
transferring those goods or content. The Company accounts for
a contract when it has approval and commitment from both parties,
the rights of the parties are identified, payment terms are
identified, the contract has commercial substance, and
collectability of consideration is probable.
Contract Assets and Liabilities
Within our Consumer Products and Entertainment segments the Company
may receive royalty payments from licensees in advance of the
licensees’ subsequent sales to their customers, or in advance of
the Company’s performance obligation being satisfied. In
addition, the Company may receive payments from its digital gaming
business in advance of the recognition of the revenues. The Company
defers revenues on these advanced payments until its performance
obligation is satisfied and records the aggregate deferred revenues
as contract liabilities. The current portion of contract
liabilities was recorded within Accrued Liabilities and the
long-term portion was recorded as Other Non-current Liabilities in
the Company’s consolidated balance sheets. The Company records
contract assets in the case of (1) minimum guarantees, which are
recognized ratably over the term of the respective license period,
being recognized in advance of contractual invoicing, and (2) film
and television distribution revenue recorded for content delivered
but for which payment will occur over the license term. The current
portion of contract assets was recorded in Prepaid Expenses and
Other Current Assets, respectively, and the long-term portion was
recorded as Other Long-Term Assets.
At September 26, 2021, September 27, 2020 and
December 27, 2020 the Company had the following contract assets and
liabilities in its consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2021 |
|
September 27, 2020 |
|
December 27, 2020 |
|
Assets |
|
|
|
|
|
|
Contract assets - current |
$ |
263.3 |
|
|
$ |
271.8 |
|
|
$ |
284.4 |
|
|
Contract assets - long
term |
108.1 |
|
|
84.9 |
|
|
77.0 |
|
|
Total |
$ |
371.4 |
|
|
$ |
356.7 |
|
|
$ |
361.4 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Contract liabilities -
current |
$ |
147.0 |
|
|
$ |
147.6 |
|
|
$ |
161.0 |
|
|
Contract liabilities - long
term |
9.7 |
|
|
17.9 |
|
|
18.2 |
|
|
Total |
$ |
156.7 |
|
|
$ |
165.5 |
|
|
$ |
179.2 |
|
For the nine months ended September 26, 2021, the Company
collected $35.0 million of the contract assets and recognized $88.9
million of contract liabilities that were included in the December
27, 2020 balances.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Unsatisfied performance obligations
Unsatisfied performance obligations relate primarily to
in-production television content to be delivered in the future
under existing agreements with partnering content providers such as
broadcasters, distributors, television networks and subscription
video on demand services. As of September 26, 2021,
unrecognized revenue attributable to unsatisfied performance
obligations expected to be recognized in the future were $456.0
million. Of this amount, we expect to recognize $195.5 million in
the remainder of 2021, $252.7 million in 2022, $4.3 million in 2023
and $3.5 million in 2024. These amounts include only fixed
considerations.
Disaggregation of revenues
The Company disaggregates its revenues from contracts with
customers by reportable segment: Consumer Products, Entertainment,
and Wizards of the Coast and Digital Gaming. The Company
further disaggregates revenues within its Consumer Products segment
by major geographic region: North America, Europe, Latin America,
and Asia Pacific; and within its Entertainment segment by category:
Film & TV, Family Brands, and Other. Finally, the Company
disaggregates its revenues by brand portfolio into five brand
categories: Franchise Brands, Partner Brands, Hasbro Gaming,
Emerging Brands, and TV/Film/Entertainment. We believe these
collectively depict how the nature, amount, timing and uncertainty
of revenue and cash flows are affected by economic factors. See
Note 14 for further information.
(3)
Business Combination
On December 30, 2019, the Company completed its acquisition of
eOne, a global independent studio that specializes in the
development, acquisition, production, financing, distribution and
sales of entertainment content. The aggregate purchase price of
$4.6 billion was comprised of $3.8 billion of cash consideration
for shares outstanding and $0.8 billion related to the redemption
of eOne's outstanding senior secured notes and the payoff of eOne's
revolving credit facility. The Company financed the acquisition
with proceeds from the following debt and equity financings: (1)
the issuance of senior unsecured notes in an aggregate principal
amount of $2.4 billion in November 2019, (2) the issuance
of 10.6 million shares of common stock at a public offering
price of $95.00 per share in November 2019 (resulting in
net proceeds of $975.2 million) and (3) $1.0 billion in
term loans provided by a term loan agreement, which were borrowed
on the date of closing. See Note 8 for further discussion of the
issuance of the senior unsecured notes and term loan
agreement.
The addition of eOne accelerates the Company's brand blueprint
strategy by expanding our brand portfolio with eOne's global
preschool brands, adding proven TV and film expertise and executive
leadership as well as by enhancing brand building capabilities and
our storytelling capabilities to strengthen Hasbro
brands.
eOne's results of operations and financial position have been
included in the Company's consolidated financial statements and
accompanying condensed footnotes since the date of the
acquisition.
The acquisition was accounted for as a business combination under
FASB Accounting Standards Codification Topic 805, Business
Combinations (“Topic 805”). Pursuant to Topic 805, the Company
allocated the eOne purchase price to tangible and identifiable
intangible assets acquired and liabilities assumed based on their
estimated fair values as of the acquisition date, December 30,
2019. The excess of the purchase price over those fair values was
recorded to goodwill.
The following table summarizes the intangible assets acquired as
part of the eOne Acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Intangible assets acquired |
Amortization Period |
|
Fair Value |
|
Established brands |
10 years |
|
$ |
615.0 |
|
|
Trade names |
15 years |
|
100.0 |
|
|
Artist relationships |
14 years |
|
100.0 |
|
|
Music catalogs |
12 years |
|
120.0 |
|
|
Other |
8 years |
|
121.0 |
|
|
Total intangible assets acquired |
11 years |
|
$ |
1,056.0 |
|
|
|
|
|
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Intangible assets consisted of intellectual property associated
with established brands, eOne artist relationships, eOne music
catalogs and trademarks and trade names with estimated useful lives
ranging from 7 to 15 years, determined based on when the
related cash flows are expected to be realized.
The fair value of the intangible assets acquired
was determined based on the estimated future cash flows to be
generated from the acquired assets, considering assumptions related
to contract renewal rates and estimated brand franchise revenue
growth. eOne acquired intangible asset amortization expense for the
quarter and nine months ended September 26, 2021 were $19.7
million and $66.4 million, respectively. For the quarter and nine
months ended September 27, 2020, eOne acquired intangible
asset amortization expense was $24.7 million and $72.3 million,
respectively.
Deferred tax liabilities within other liabilities were adjusted to
record the deferred tax impact of purchase price accounting
adjustments, primarily related to intangible assets.
Investments in productions and content, or IIP and IIC, were valued
at $564.8 million on the acquisition date, and include the fair
value of completed films and television programs which have been
produced by eOne or for which eOne has acquired distribution
rights, as well as the fair value of films and television programs
in production, pre-production and development. For films and
television programs, fair values were estimated based on forecasted
cash flows, discounted to present value. For titles less than 3
years old and titles in development, the content assets will be
amortized using the individual film forecast method, wherein the
amortization will phase to the revenues incurred. For titles over 3
years old, the estimated useful life is 10 years, and will be
amortized straight-line over that period.
Goodwill of $3.2 billion represents the excess of the purchase
price over the fair value of the underlying tangible and
identifiable intangible assets acquired and liabilities assumed.
The acquisition goodwill represents the value placed on the
combined company’s brand building capabilities, our storytelling
capabilities and franchise economics in TV, film and other mediums
to strengthen Hasbro brands. In addition, the acquisition goodwill
depicts added benefits of long-term profitable growth through
in-sourcing toy and game production for the acquired preschool
brands and cost-synergies, as well as future revenue growth
opportunities. The goodwill recorded as part of this acquisition
was included within the Entertainment and Consumer Products
segments for the year ended December 27, 2020. The goodwill
associated with the acquisition will not be amortized for financial
reporting purposes and will not be deductible for federal tax
purposes. See Note 5 for information on the Company's goodwill
reallocation during the first quarter of 2021 and the goodwill
impairment charge recorded in the second quarter of 2021 as a
result of the sale of the eOne music business, which was completed
during the third quarter of 2021.
For the quarter and nine months ended
September 27, 2020,
the Company incurred $5.9 million and $166.0 million,
respectively, of charges related to the eOne Acquisition, which
were recorded in acquisition and related costs within the Company’s
Consolidated Statement of Operations. Included within the
Entertainment segment results for the nine months ended
September 27, 2020
were $98.5 million of acquisition and related charges. The
remaining charges were included in Corporate and
Other.
The acquisition and related costs for the quarter and nine months
ended
September 27, 2020
consisted of the following:
•Acquisition
and integration costs of $4.6 million and $104.3 million for the
quarter and nine months ended September 27, 2020,
respectively, including, for the nine months ended
September 27, 2020, $47.4 million of expense associated with
the acceleration of eOne stock-based compensation and $38.2 million
of advisor fees settled at the closing of the acquisition, as well
as integration costs; and
•Restructuring
and related costs of $1.4 million and $61.7 million for the quarter
and nine months ended September 27, 2020, respectively,
including severance and retention costs for the quarter and nine
months ended September 27, 2020 of $1.4 million and $20.8
million, respectively, as well as $40.9 million in impairment
charges for certain definite-lived intangible and production assets
for the nine months ended September 27, 2020. The impairment
charges of $40.9 million were driven by the change in strategy for
the combined company’s entertainment assets.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(4)
Earnings Per Share
Net earnings per share data for the quarters and nine months ended
September 26, 2021 and September 27, 2020 were computed
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
Quarter |
Basic |
|
Diluted |
|
Basic |
|
Diluted |
|
Net earnings attributable to Hasbro, Inc. |
$ |
253.2 |
|
|
253.2 |
|
|
$ |
220.9 |
|
|
220.9 |
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding |
138.1 |
|
|
138.1 |
|
|
137.3 |
|
|
137.3 |
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Options and other share-based awards |
— |
|
|
0.4 |
|
|
— |
|
|
0.2 |
|
|
Equivalent Shares |
138.1 |
|
|
138.5 |
|
|
137.3 |
|
|
137.5 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Hasbro, Inc. per common
share |
$ |
1.83 |
|
|
1.83 |
|
|
$ |
1.61 |
|
|
1.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
Nine Months |
Basic |
|
Diluted |
|
Basic |
|
Diluted |
|
Net earnings attributable to Hasbro, Inc. |
$ |
346.5 |
|
|
346.5 |
|
|
$ |
117.3 |
|
|
117.3 |
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding |
137.9 |
|
|
137.9 |
|
|
137.2 |
|
|
137.2 |
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Options and other share-based awards |
— |
|
|
0.4 |
|
|
— |
|
|
0.3 |
|
|
Equivalent Shares |
137.9 |
|
|
138.3 |
|
|
137.2 |
|
|
137.5 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Hasbro, Inc. per common
share |
$ |
2.51 |
|
|
2.51 |
|
|
$ |
0.86 |
|
|
0.85 |
|
For the quarter and nine months ended September 26, 2021,
options and restricted stock units totaling 2.1 million and 2.2
million respectively, were excluded from the calculation of diluted
earnings per share because to include them would have been
anti-dilutive. For the quarter and nine months ended
September 27, 2020, options and restricted stock units
totaling 2.9 million and 3.0 million, respectively, were excluded
from the calculation of diluted earnings per share because to
include them would have been anti-dilutive.
(5)
Goodwill
During the first quarter of 2021, the Company realigned its
financial reporting structure creating the following three
principal reportable segments: Consumer Products, Wizards of the
Coast and Digital Gaming and Entertainment. In our realignment,
some, but not all, of our reporting units were changed. As a result
of these changes, the Company reallocated its goodwill among the
revised reporting units based on the change in relative fair values
of the respective reporting units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products |
|
Wizards of the Coast and Digital Gaming |
|
Entertainment |
|
Total |
|
2021 |
|
|
|
|
|
|
|
|
|
Balance at December 27, 2020 |
|
$ |
1,385.7 |
|
53.1 |
|
2,252.9 |
|
$ |
3,691.7 |
|
Goodwill allocation |
|
199.4 |
|
254.2 |
|
(453.6) |
|
— |
|
Foreign exchange translation |
|
(0.1) |
|
0.2 |
|
(0.6) |
|
(0.5) |
|
Impairment during the period |
|
— |
|
— |
|
(101.8) |
|
(101.8) |
|
Goodwill associated with the disposal of business |
|
— |
|
— |
|
(169.2) |
|
(169.2) |
|
Balance at September 26, 2021 |
|
$ |
1,585.0 |
|
307.5 |
|
1,527.7 |
|
$ |
3,420.2 |
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
In conjunction with the goodwill reallocation described above,
during the first quarter of 2021, the Company performed an
impairment test of goodwill balances held by the reporting units
impacted by the segment realignment. The reporting units were
tested as of December 28, 2020 and included our Europe, Asia
Pacific, Global Consumer Products Licensing, Wizards of the Coast
and Family Brands reporting units. Based on the results of the
goodwill assessment, we determined that the fair values of each of
these reporting units exceeded their carrying values, and as such,
we concluded that there was no indication of goodwill impairment
for these reporting units as of December 28, 2020.
During the second quarter of 2021, the Company entered into a
definitive agreement to sell the Entertainment One Music business
("eOne Music") for an aggregate sales price of $385.0 million,
subject to certain closing adjustments related to working capital
and net debt. Based on the value of the net assets held by eOne
Music, which included goodwill and intangible assets allocated to
eOne Music as part of the eOne acquisition, the Company recorded a
pre-tax non-cash goodwill impairment charge of $101.8 million,
during the second quarter of 2021, within Loss on Disposal of
Business in the Consolidated Statements of Operations, and within
the Entertainment segment. On June 29, 2021, during the Company's
fiscal third quarter, the eOne Music sale was completed and
associated goodwill and intangible assets were removed from the
consolidated financial statements.
(6)
Other Comprehensive Earnings (Loss)
Components of other comprehensive earnings (loss) are presented
within the consolidated statements of comprehensive earnings
(loss). The following table presents the related tax effects on
changes in other comprehensive earnings (loss) for the quarters and
nine months ended September 26, 2021 and September 27,
2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
September 26,
2021 |
|
September 27,
2020 |
|
September 26,
2021 |
|
September 27,
2020 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (loss), tax effect: |
|
|
|
|
|
|
|
|
Tax benefit (expense) on unrealized holding gains
(losses) |
$ |
0.1 |
|
|
$ |
0.2 |
|
|
$ |
— |
|
|
(0.4) |
|
|
Tax (expense) benefit on cash flow hedging activities |
(0.3) |
|
|
0.3 |
|
|
(0.7) |
|
|
(5.5) |
|
|
Tax benefit on foreign currency translation
adjustments
|
— |
|
|
— |
|
|
— |
|
|
8.4 |
|
|
|
|
|
|
|
|
|
|
Reclassifications to earnings, tax effect: |
|
|
|
|
|
|
|
|
Tax expense (benefit) on cash flow hedging activities |
(0.3) |
|
|
1.9 |
|
|
(0.3) |
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized pension and postretirement
amounts
|
(0.1) |
|
|
(0.1) |
|
|
(0.2) |
|
|
(0.2) |
|
|
|
|
|
|
|
|
|
|
Total tax effect on other comprehensive earnings (loss) |
$ |
(0.6) |
|
|
$ |
2.3 |
|
|
$ |
(1.2) |
|
|
5.7 |
|
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Changes in the components of accumulated other comprehensive
earnings (loss) for the nine months ended September 26, 2021
and September 27, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and
Postretirement
Amounts |
|
Gains
(Losses) on
Derivative
Instruments |
|
Unrealized
Holding
Gains
(Losses) on
Available-
for-Sale
Securities |
|
Foreign
Currency
Translation
Adjustments |
|
Total
Accumulated
Other
Comprehensive
Loss |
|
2021 |
|
|
|
|
|
|
|
|
|
|
Balance at December 27, 2020 |
$ |
(40.7) |
|
|
(22.1) |
|
|
0.4 |
|
|
(132.6) |
|
|
(195.0) |
|
|
Current period other comprehensive earnings (loss) |
0.6 |
|
|
9.5 |
|
|
(0.1) |
|
|
(23.6) |
|
|
(13.6) |
|
|
Balance at September 26, 2021 |
$ |
(40.1) |
|
|
(12.6) |
|
|
0.3 |
|
|
(156.2) |
|
|
(208.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2019 |
$ |
(36.1) |
|
|
(5.2) |
|
|
(0.2) |
|
|
(142.6) |
|
|
(184.2) |
|
|
|
|
|
|
|
|
|
|
|
|
Current period other comprehensive earnings (loss) |
0.8 |
|
|
(0.1) |
|
|
1.3 |
|
|
(98.1) |
|
|
(96.1) |
|
|
Balance at September 27, 2020 |
$ |
(35.3) |
|
|
(5.3) |
|
|
1.1 |
|
|
(240.8) |
|
|
(280.3) |
|
Gains (Losses) on Derivative Instruments
At September 26, 2021, the Company had remaining net deferred
gains on foreign currency forward contracts, net of tax, of $3.2
million in accumulated other comprehensive earnings (loss)
("AOCE"). These instruments hedge payments related to inventory
purchased in the third quarter of 2021 or forecasted to be
purchased during the remainder of 2021 through 2022, intercompany
expenses expected to be paid or received during 2021, television
and movie production costs paid in 2021, and cash receipts for
sales made at the end of the third quarter of 2021 or forecasted to
be made in the remainder of 2021 and, to a lesser extent, 2022
through 2023. These amounts will be reclassified into the
consolidated statements of operations upon the sale of the related
inventory or recognition of the related sales or
expenses.
In addition to foreign currency forward contracts, the Company
entered into hedging contracts on future interest payments related
to the 3.15% Notes, that were repaid in full in the aggregate
principal amount of $300.0 million during the first quarter of 2021
(See Note 8), and the 5.10% Notes due 2044. At the date of
debt issuance, these contracts were terminated and the fair value
on the date of settlement was deferred in AOCE and is being
amortized to interest expense over the life of the related notes
using the effective interest rate method. At September 26,
2021, deferred losses, net of tax of $15.7 million related to these
instruments remained in AOCE. For the quarters ended
September 26, 2021 and September 27, 2020, previously
deferred losses of $0.2 million and $0.5 million, respectively,
were reclassified from AOCE to net earnings. For the nine-month
periods ended September 26, 2021 and September 27, 2020,
previously deferred losses of $1.0 million and $1.3 million,
respectively, were reclassified from AOCE to net
earnings.
Of the amount included in AOCE at September 26, 2021, the
Company expects net gains of approximately $2.2 million to be
reclassified to the consolidated statements of operations within
the next 12 months. However, the amount ultimately realized in
earnings is dependent on the fair value of the hedging instruments
on the settlement dates.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(7)
Accrued Liabilities
Components of accrued liabilities for the periods ended
September 26, 2021, September 27, 2020 and
December 27, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2021
|
|
September 27, 2020
|
|
December 27, 2020
|
|
Participations and residuals |
$ |
272.9 |
|
|
$ |
309.2 |
|
|
$ |
295.6 |
|
|
Royalties |
203.9 |
|
|
206.6 |
|
|
229.2 |
|
|
Deferred revenue |
147.0 |
|
|
147.6 |
|
|
161.0 |
|
|
Payroll and management incentives |
156.1 |
|
|
89.2 |
|
|
132.4 |
|
|
Dividends |
93.8 |
|
|
93.2 |
|
|
93.4 |
|
|
Other taxes |
69.9 |
|
|
70.6 |
|
|
81.9 |
|
|
Advertising |
148.5 |
|
|
131.5 |
|
|
58.6 |
|
|
Severance |
33.0 |
|
|
41.7 |
|
|
49.7 |
|
|
Lease liability - Current |
43.9 |
|
|
42.8 |
|
|
45.0 |
|
|
Freight |
72.6 |
|
|
35.8 |
|
|
32.3 |
|
|
Accrued income taxes |
55.3 |
|
|
18.4 |
|
|
29.7 |
|
|
|
|
|
|
|
|
Other |
366.8 |
|
|
283.5 |
|
|
329.8 |
|
|
Total accrued liabilities |
$ |
1,663.7 |
|
|
$ |
1,470.1 |
|
|
$ |
1,538.6 |
|
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(8)
Financial Instruments
The Company's financial instruments include cash and cash
equivalents, accounts receivable, short-term borrowings, accounts
payable and certain accrued liabilities. At September 26,
2021, September 27, 2020 and December 27, 2020, the
carrying cost of these instruments approximated their fair value.
The Company's financial instruments at September 26, 2021,
September 27, 2020 and December 27, 2020 also include
certain assets and liabilities measured at fair value (see Notes 11
and 12) as well as long-term borrowings. The carrying costs, which
are equal to the outstanding principal amounts, and fair values of
the Company's long-term borrowings as of September 26, 2021,
September 27, 2020 and December 27, 2020 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2021 |
|
September 27, 2020 |
|
December 27, 2020 |
|
Carrying
Cost |
|
Fair
Value |
|
Carrying
Cost |
|
Fair
Value |
|
Carrying
Cost |
|
Fair
Value |
|
3.90% Notes Due 2029
|
$ |
900.0 |
|
|
1,001.7 |
|
|
$ |
900.0 |
|
|
947.5 |
|
|
$ |
900.0 |
|
|
1,011.2 |
|
|
3.55% Notes Due 2026
|
675.0 |
|
|
737.2 |
|
|
675.0 |
|
|
716.1 |
|
|
675.0 |
|
|
752.7 |
|
|
3.00% Notes Due 2024
|
500.0 |
|
|
529.1 |
|
|
500.0 |
|
|
531.9 |
|
|
500.0 |
|
|
540.6 |
|
|
6.35% Notes Due 2040
|
500.0 |
|
|
702.3 |
|
|
500.0 |
|
|
587.4 |
|
|
500.0 |
|
|
636.5 |
|
|
3.50% Notes Due 2027
|
500.0 |
|
|
546.2 |
|
|
500.0 |
|
|
518.8 |
|
|
500.0 |
|
|
544.5 |
|
|
2.60% Notes Due 2022
(1)
|
— |
|
|
— |
|
|
300.0 |
|
|
310.7 |
|
|
300.0 |
|
|
311.5 |
|
|
5.10% Notes Due 2044
|
300.0 |
|
|
375.0 |
|
|
300.0 |
|
|
313.4 |
|
|
300.0 |
|
|
338.1 |
|
|
3.15% Notes Due 2021
(2)
|
— |
|
|
— |
|
|
300.0 |
|
|
303.5 |
|
|
300.0 |
|
|
302.3 |
|
|
6.60% Debentures Due 2028
|
109.9 |
|
|
137.2 |
|
|
109.9 |
|
|
130.3 |
|
|
109.9 |
|
|
137.4 |
|
|
Variable % Notes Due December 30, 2022
(3)
|
— |
|
|
— |
|
|
400.0 |
|
|
400.0 |
|
|
300.0 |
|
|
300.0 |
|
|
Variable % Notes Due December 30, 2024
(4)
|
505.0 |
|
|
505.0 |
|
|
577.5 |
|
|
577.5 |
|
|
577.5 |
|
|
577.5 |
|
|
Production Financing Facilities |
204.7 |
|
|
204.7 |
|
|
121.4 |
|
|
121.4 |
|
|
165.5 |
|
|
165.5 |
|
|
Total long-term debt |
$ |
4,194.6 |
|
|
4,738.4 |
|
|
$ |
5,183.8 |
|
|
5,458.5 |
|
|
$ |
5,127.9 |
|
|
5,617.8 |
|
|
Less: Deferred debt expenses |
29.6 |
|
|
— |
|
|
36.8 |
|
|
— |
|
|
35.3 |
|
|
— |
|
|
Less: Current portion |
187.6 |
|
|
— |
|
|
369.3 |
|
|
— |
|
|
432.6 |
|
|
— |
|
|
Long-term debt |
$ |
3,977.4 |
|
|
4,738.4 |
|
|
$ |
4,777.8 |
|
|
5,458.5 |
|
|
$ |
4,660.0 |
|
|
5,617.8 |
|
(1)
During the third quarter of 2021, the Company repaid in full
its
2.60%
Notes, in the aggregate principal amount of $300.0 million due in
November 2022.
(2)
During the first quarter of 2021, the Company repaid in full
its
3.15%
Notes, in the aggregate principal amount of $300.0 million due in
May 2021.
(3)
During the second quarter of 2021, the Company repaid $250.0
million of the Variable % Notes Due December 30, 2022 and during
the third quarter of 2021, the Company repaid the remaining balance
of $50.0 million of the Variable % Notes Due December 30,
2022.
(4)
During the third quarter of 2021, the Company repaid $50.0 million
of the Variable % Notes Due December 30, 2024.
In November 2019, in conjunction with the Company's acquisition of
eOne, the Company issued an aggregate of $2.4 billion of
senior unsecured debt securities (the "Notes") consisting of the
following tranches: $300.0 million of notes due 2022 (the
"2022 Notes") that bear interest at a fixed rate
of 2.60%, $500.0 million of notes due 2024 (the
"2024 Notes") that bear interest at a fixed rate
of 3.00%, $675.0 million of notes due 2026 (the
"2026 Notes") that bear interest at a fixed rate
of 3.55% and $900.0 million of notes due 2029
(the "2029 Notes") that bear interest at a fixed rate
of 3.90%. Net proceeds from the issuance of the Notes, after
deduction of $20.0 million of underwriting discount and
fees, totaled $2.4 billion. These costs are being amortized
over the life of the Notes outstanding, which range from five years
to ten years from the date of issuance. During the third
quarter of 2021, the Company repaid in full the $300.0 million of
2022 Notes and recorded $9.1 million of debt extinguishment
costs within other expense (income) in the Consolidated Statements
of Operations.
The Notes bear interest at the stated rates but may be subject to
upward adjustment if the credit rating of the Company is reduced by
Moody's or Standard & Poors. The adjustment can be
from 0.25% to 2.00% based on the extent of the
ratings decrease. The Company may redeem the Notes at its option at
the greater of the principal amount of the Notes or the
present
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
value of the remaining scheduled payments discounted using the
effective interest rate on applicable U.S. Treasury bills at the
time of repurchase, plus (1) 25 basis points (in the case of the
2024 Notes); (2) 30 basis points (in the case of the 2026 Notes);
and (3) 35 basis points (in the case of the 2029 Notes). In
addition, on and after October 19, 2024 for the 2024 Notes,
September 19, 2026 for the 2026 Notes and August 19, 2029 for the
2029 Notes, such series of Notes will be redeemable, in whole at
any time or in part from time to time, at the Company's option at a
redemption price equal to 100% of the principal amount of
the Notes to be redeemed plus any accrued and unpaid
interest.
In September 2019, the Company entered into a $1.0 billion Term
Loan Agreement (the "Term Loan Agreement”) with Bank of America
N.A. (“Bank of America”), as administrative agent, and certain
financial institutions as lenders, pursuant to which such lenders
committed to provide, contingent upon the completion of the eOne
Acquisition and certain other customary conditions to funding, (1)
a three-year senior unsecured term loan facility in an aggregate
principal amount of $400.0 million (the “Three-Year Tranche”) and
(2) a five-year senior unsecured term loan facility in an aggregate
principal amount of $600.0 million (the “Five-Year Tranche” and
together with the Three-Year Tranche, the “Term Loan Facilities”).
The full amount of the Term Loan Facilities were drawn down on
December 30, 2019, the closing date of the eOne Acquisition. During
2020, the Company made $122.5 million in payments towards the $1.0
billion term loan notes consisting of $100.0 million on the
principal balance of the Three-Year Tranche loans in addition to
the required quarterly principal amortization payments totaling
$22.5 million on the Five-Year Tranche loans. During the first nine
months of 2021, the Company paid $372.5 million toward the $1.0
billion term loan notes consisting of the remaining $300.0 million
of the principal balance of the Three-Year Tranche loans as well as
$50.0 million principal balance and principal amortization payments
totaling $22.5 million on the Five-Year Tranche loans.
Loans under the remaining Five-Year Tranche bear interest at the
Company’s option, at either the Eurocurrency Rate or the Base Rate,
plus a per annum applicable rate that fluctuates between 100.0
basis points and 187.5 basis points, in the case of loans priced at
the Eurocurrency Rate, and between 0.0 basis points and 87.5 basis
points, in the case of loans priced at the Base Rate, in each case,
based upon the non-credit enhanced, senior unsecured long-term debt
ratings of the Company by Fitch Ratings Inc., Moody’s Investor
Service, Inc. and S&P Global Rankings, subject to certain
provisions taking into account potential differences in ratings
issued by the relevant rating agencies or a lack of ratings issued
by such rating agencies. Loans under the Five-Year Tranche require
principal amortization payments that are payable in equal quarterly
installments of 5.0% per annum of the original principal amount
thereof for each of the first two years after funding, increasing
to 10.0% per annum of the original principal amount thereof for
each subsequent year. The Term Loan Agreement contains affirmative
and negative covenants typical of this type of facility, including:
(i) restrictions on the Company’s and its domestic subsidiaries’
ability to allow liens on their assets, (ii) restrictions on the
incurrence of indebtedness, (iii) restrictions on the Company’s and
certain of its subsidiaries’ ability to engage in certain mergers,
(iv) the requirement that the Company maintain a Consolidated
Interest Coverage Ratio of no less than 3.00:1.00 as of the end of
any fiscal quarter and (v) the requirement that the Company
maintain a Consolidated Total Leverage Ratio of no more than,
depending on the gross proceeds of equity securities issued after
the effective date of the acquisition of eOne, 5.65:1.00 or
5.40:1.00 for each of the first, second and third fiscal quarters
ended after the funding of the Term Loan Facilities, with periodic
step downs to 3.50:1.00 for the fiscal quarter ending December 31,
2023 and thereafter.
The Company may redeem its 5.10% notes due in 2044 (the "2044
Notes") at its option, at the greater of the principal amount of
the notes or the present value of the remaining scheduled payments,
discounted using the effective interest rate on applicable U.S.
Treasury bills at the time of repurchase.
Current portion of long-term debt at
September 26, 2021
of
$187.6 million,
as shown on the consolidated balance sheet, represents
the current portion of required quarterly principal amortization
payments for the Term Loan Facilities and production financing
facilities.
All of the Company’s other long-term borrowings have contractual
maturities that occur subsequent to the third quarter of
2024.
The fair values of the Company's long-term debt are considered
Level 3 fair values (see Note 11 for further discussion of the fair
value hierarchy) and are measured using the discounted future cash
flows method. In addition to the debt terms, the valuation
methodology includes an assumption of a discount rate that
approximates the current yield on a similar debt security. This
assumption is considered an unobservable input in that it reflects
the Company's own assumptions about the inputs that market
participants would use in pricing the asset or liability. The
Company believes that this is the best information available for
use in the fair value measurement.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Production Financing
In addition to the Company's financial instruments, the Company
uses production financing to fund certain of its television and
film productions
which are typically arranged on an individual production basis by
special purpose production subsidiaries.
Production financing facilities are secured by the assets and
future revenue of the individual production subsidiaries and are
non-recourse to the Company's assets.
Production financing facilities typically have maturities of less
than two years, while the titles are in production, and are repaid
once delivered and all credits, broadcaster pre-sales and
international sales have been received. The production financing
facilities as of September 26, 2021, September 27, 2020
and December 27, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2021
|
|
September 27, 2020 |
|
December 27, 2020 |
|
Production financing held by production subsidiaries |
$ |
204.7 |
|
|
$ |
121.4 |
|
|
$ |
165.5 |
|
|
Other loans
(1)
|
— |
|
|
9.0 |
|
|
5.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
204.7 |
|
|
$ |
130.4 |
|
|
$ |
170.9 |
|
|
|
|
|
|
|
|
|
Production financing included in the consolidated balance sheet
as: |
|
|
|
|
|
|
Non-current |
$ |
47.0 |
|
|
$ |
82.2 |
|
|
$ |
62.9 |
|
|
Current |
157.7 |
|
|
39.2 |
|
|
102.6 |
|
|
Total |
$ |
204.7 |
|
|
$ |
121.4 |
|
|
$ |
165.5 |
|
(1)
Other loans consist of production related demand loans, and are
recorded within Short-term Borrowings in the Company's consolidated
balance sheets.
Interest is charged at bank prime rate plus a margin based on the
risk of the respective production. The weighted average interest
rate on all production financing as of September 26, 2021 was
2.9%.
The Company has Canadian dollar and U.S. dollar production credit
facilities with various banks. The carrying amounts are denominated
in the following currencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian Dollars |
|
U.S. Dollars |
|
Total |
|
As of September 26, 2021
|
$ |
37.0 |
|
|
$ |
167.7 |
|
|
$ |
204.7 |
|
The following table represents the movements in production
financing and other related loans during the first nine months of
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Financing |
|
Other Loans |
|
Total |
|
December 27, 2020 |
$ |
165.5 |
|
|
$ |
5.4 |
|
|
$ |
170.9 |
|
|
Drawdowns |
127.6 |
|
|
16.7 |
|
|
144.3 |
|
|
Repayments |
(89.6) |
|
|
(22.9) |
|
|
(112.5) |
|
|
Foreign exchange differences |
1.2 |
|
|
0.8 |
|
|
2.0 |
|
|
Balance at September 26, 2021
|
$ |
204.7 |
|
|
$ |
— |
|
|
$ |
204.7 |
|
(9)
Investments in Productions and Investments in Acquired Content
Rights
Investments in productions and investments in acquired content
rights are predominantly monetized on a title-by-title basis and
are recorded within other assets in the Company's consolidated
balance sheets, to the extent they are considered recoverable
against future revenues. These amounts are being amortized to
program cost amortization using a model that reflects the
consumption of the asset as it is released through various channels
including broadcast licenses, theatrical release and home
entertainment. Amounts capitalized are reviewed periodically on an
individual film basis and any portion of the unamortized amount
that appears not to be recoverable from future net revenues is
expensed as part of program cost amortization during the period the
loss becomes evident.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
The Company's unamortized investments in productions and
investments in acquired content rights consisted of the following
at September 26, 2021, September 27, 2020, and
December 27, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2021
|
|
September 27, 2020 |
|
December 27, 2020 |
|
|
|
|
Film and TV Programming |
|
|
|
|
|
|
|
|
|
|
Released, net of amortization |
|
$ |
512.6 |
|
|
$ |
477.3 |
|
|
$ |
428.0 |
|
|
|
|
|
Completed and not released |
|
20.1 |
|
|
18.1 |
|
|
17.3 |
|
|
|
|
|
In production |
|
202.1 |
|
|
51.0 |
|
|
185.5 |
|
|
|
|
|
Pre-production |
|
91.9 |
|
|
41.1 |
|
|
67.6 |
|
|
|
|
|
|
|
826.7 |
|
|
587.5 |
|
|
698.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Programming |
|
|
|
|
|
|
|
|
|
|
Released, net of amortization |
|
3.9 |
|
|
11.5 |
|
|
13.7 |
|
|
|
|
|
Completed and not released |
|
0.4 |
|
|
3.4 |
|
|
2.1 |
|
|
|
|
|
In production |
|
5.9 |
|
|
9.1 |
|
|
5.4 |
|
|
|
|
|
Pre-production |
|
2.5 |
|
|
8.0 |
|
|
7.6 |
|
|
|
|
|
|
|
12.7 |
|
|
32.0 |
|
|
28.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Program Investments |
|
$ |
839.4 |
|
|
$ |
619.5 |
|
|
$ |
727.2 |
|
|
|
|
The Company recorded $396.1 million of program cost amortization
related to released programming in the nine months ended
September 26, 2021, consisting of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Production |
|
Investment in Content |
|
Other |
|
Total |
|
Program cost amortization |
|
$ |
334.6 |
|
|
$ |
59.9 |
|
|
$ |
1.6 |
|
|
$ |
396.1 |
|
(10)
Income Taxes
The Company and its subsidiaries file income tax returns in the
United States and various state and international jurisdictions. In
the normal course of business, the Company is regularly audited by
U.S. federal, state and local, and international tax authorities in
various tax jurisdictions.
Our effective tax rate ("ETR") from continuing operations was 29.0%
for the nine months ended September 26, 2021 and 35.0% for the
nine months ended September 27, 2020.
The following items caused the year-to-date ETR to be significantly
different from the prior year ETR:
•during
the nine months ended September 26, 2021, the Company recorded
a net discrete tax expense of $8.8 million. The expense is
primarily associated with (i) the revaluation of net deferred tax
liabilities as a result of the United Kingdom's ("UK") enactment of
Finance Act 2021 during the second quarter, which increases the UK
corporate income tax rate from 19% to 25% as of April 1, 2023; (ii)
a one-time tax charge related to an ongoing tax audit; (iii) a
release of a valuation allowance on net operating losses that
offsets income received from a one-time legal settlement; and (iv)
certain tax benefits, including the reversal of uncertain tax
positions and operational tax planning;
•the
year-to-date ETR also includes a goodwill impairment charge on the
sale of the eOne Music business, recorded during the second quarter
of 2021 for which there is no corresponding tax benefit;
and
•during
the nine months ended September 27, 2020, the Company recorded
a net discrete tax benefit of $5.3 million primarily associated
with (i) a tax benefit resulting from the eOne acquisition and
related costs incurred; (ii) a tax expense related to the
revaluation of net deferred tax liabilities as a result of the UK's
enactment during the third quarter of Finance Act 2020 which
maintained the corporate income tax rate at 19%; and (iii) a tax
expense related to an increase of uncertain tax
positions.
In May 2019, a public referendum held in Switzerland approved the
Swiss Federal Act on Tax Reform and AHV Financing ("TRAF")
proposals previously approved by the Swiss Parliament. The Swiss
tax reform measures were effective on January 1, 2020. Changes in
tax reform include the abolishment of preferential tax regimes for
holding companies, domicile companies
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
and mixed companies at the cantonal level. The enacted changes in
Swiss federal tax were not material to the Company’s financial
statements. Swiss cantonal tax was enacted in December 2019. The
Company is still assessing the transitional provision options it
may elect; however, the legislation is not expected to have a
material effect on the Company’s financial statements.
The Company is no longer subject to U.S. federal income tax
examinations for years before 2012. With few exceptions, the
Company is no longer subject to U.S. state or local and non-U.S.
income tax examinations by tax authorities in its major
jurisdictions for years before 2015. The Company is currently under
income tax examination by the Internal Revenue Service and in
several U.S. state and local and non-U.S.
jurisdictions.
(11)
Fair Value of Financial Instruments
The Company measures certain financial instruments at fair value.
The fair value hierarchy consists of three levels: Level 1 fair
values are based on quoted market prices in active markets for
identical assets or liabilities that the entity has the ability to
access; Level 2 fair values are those based on quoted prices for
similar assets or liabilities, quoted prices in markets that are
not active, or other inputs that are observable or can be
corroborated by observable data for substantially the full term of
the assets or liabilities; and Level 3 fair values are based on
inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or
liabilities.
Accounting standards permit entities to measure many financial
instruments and certain other items at fair value and establish
presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement
attributes for similar assets and liabilities. The Company elected
the fair value option for certain available-for-sale investments
using net asset value per share and during 2020, the Company
liquidated these investments as part of its global cash management
strategy. At September 27, 2020, prior to their liquidation,
these investments totaled $13.4 million and were included in
prepaid expenses and other current assets within the Company's
consolidated balance sheet. The Company recorded a net gain of $1.1
million and a net loss of $0.1 million, respectively, on these
investments in other (income) expense, net, related to the change
in fair value of such instruments net for the quarter and nine
months ended September 27, 2020.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
At September 26, 2021, September 27, 2020 and
December 27, 2020, the Company had the following assets and
liabilities measured at fair value in its consolidated balance
sheets (excluding assets for which the fair value is measured using
net asset value per share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using: |
|
Fair
Value |
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1) |
|
Significant
Other
Observable
Inputs
(Level 2) |
|
Significant
Unobservable
Inputs
(Level 3) |
|
September 26, 2021 |
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Available-for-sale securities |
$ |
2.0 |
|
|
2.0 |
|
|
— |
|
|
— |
|
|
Derivatives |
9.8 |
|
|
— |
|
|
9.8 |
|
|
— |
|
|
Total assets |
$ |
11.8 |
|
|
2.0 |
|
|
9.8 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Derivatives |
$ |
1.7 |
|
|
— |
|
|
1.7 |
|
|
— |
|
|
Option agreement |
21.8 |
|
|
— |
|
|
— |
|
|
21.8 |
|
|
Total liabilities |
$ |
23.5 |
|
|
— |
|
|
1.7 |
|
|
21.8 |
|
|
|
|
|
|
|
|
|
|
|
September 27, 2020 |
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Available-for-sale securities |
$ |
3.7 |
|
|
3.7 |
|
|
— |
|
|
— |
|
|
Derivatives |
15.7 |
|
|
— |
|
|
15.7 |
|
|
— |
|
|
Total assets |
$ |
19.4 |
|
|
3.7 |
|
|
15.7 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Derivatives |
$ |
0.4 |
|
|
— |
|
|
0.4 |
|
|
— |
|
|
Option agreement |
20.6 |
|
|
— |
|
|
— |
|
|
20.6 |
|
|
Total liabilities |
$ |
21.0 |
|
|
— |
|
|
0.4 |
|
|
20.6 |
|
|
|
|
|
|
|
|
|
|
|
December 27, 2020 |
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Available-for-sale securities |
$ |
2.1 |
|
|
2.1 |
|
|
— |
|
|
— |
|
|
Derivatives |
4.8 |
|
|
— |
|
|
4.8 |
|
|
— |
|
|
Total assets |
$ |
6.9 |
|
|
2.1 |
|
|
4.8 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Derivatives |
$ |
12.7 |
|
|
— |
|
|
12.7 |
|
|
— |
|
|
Option agreement |
20.6 |
|
|
— |
|
|
— |
|
|
20.6 |
|
|
Total Liabilities |
$ |
33.3 |
|
|
— |
|
|
12.7 |
|
|
20.6 |
|
Available-for-sale securities include equity securities of one
company quoted on an active public market.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
The Company's derivatives consist of foreign currency forward and
option contracts. The Company uses current forward rates of the
respective foreign currencies to measure the fair value of these
contracts. The Company’s option agreement relates to an equity
method investment in Discovery Family Channel ("Discovery"). The
option agreement is included in other liabilities at
September 26, 2021, September 27, 2020 and
December 27, 2020, and is valued using an option pricing model
based on the fair value of the related investment. Inputs used in
the option pricing model include the volatility and fair value
of the underlying company which are considered unobservable inputs
as they reflect the Company's own assumptions about the inputs that
market participants would use in pricing the asset or liability.
The Company believes that this is the best information available
for use in the fair value measurement. There were no changes in
these valuation techniques during the quarter ended
September 26, 2021.
The following is a reconciliation of the beginning and ending
balances of the fair value measurements of the Company's financial
instruments which use significant unobservable inputs (Level
3):
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
Balance at beginning of year |
$ |
(20.6) |
|
|
$ |
(22.1) |
|
|
Gain from change in fair value |
(1.2) |
|
|
1.5 |
|
|
Balance at end of third quarter |
$ |
(21.8) |
|
|
$ |
(20.6) |
|
(12)
Derivative Financial Instruments
Hasbro uses foreign currency forward contracts to mitigate the
impact of currency rate fluctuations on firmly committed and
projected future foreign currency transactions. These
over-the-counter contracts, which hedge future currency
requirements related to purchases of inventory, product sales,
television and film production cost and production financing loans
(see Note 8) as well as other cross-border transactions not
denominated in the functional currency of the business unit, are
primarily denominated in United States and Hong Kong dollars, and
Euros. All contracts are entered into with a number of
counterparties, all of which are major financial institutions. The
Company believes that a default by a single counterparty would not
have a material adverse effect on the financial condition of the
Company. Hasbro does not enter into derivative financial
instruments for speculative purposes.
Cash Flow Hedges
All of the Company's designated foreign currency forward contracts
and zero-cost collar options are considered to be cash flow hedges.
These instruments hedge a portion of the Company's currency
requirements associated with anticipated inventory purchases,
product sales, certain production financing loans and other
cross-border transactions in 2021 through 2022.
At September 26, 2021, September 27, 2020 and
December 27, 2020, the notional amounts and fair values of the
Company's foreign currency forward contracts designated as cash
flow hedging instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2021 |
|
September 27, 2020 |
|
December 27, 2020 |
|
Hedged transaction |
Notional
Amount |
|
Fair
Value |
|
Notional
Amount |
|
Fair
Value |
|
Notional
Amount |
|
Fair
Value |
|
Inventory purchases |
$ |
261.8 |
|
|
6.0 |
|
|
$ |
315.9 |
|
|
9.1 |
|
|
$ |
316.8 |
|
|
(10.0) |
|
|
Sales |
164.5 |
|
|
(0.5) |
|
|
111.8 |
|
|
3.9 |
|
|
111.6 |
|
|
1.4 |
|
|
Production financing and other |
261.4 |
|
|
0.3 |
|
|
115.2 |
|
|
2.2 |
|
|
89.9 |
|
|
0.3 |
|
|
Total |
$ |
687.7 |
|
|
5.8 |
|
|
$ |
542.9 |
|
|
15.2 |
|
|
$ |
518.3 |
|
|
(8.3) |
|
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
The Company has a master agreement with each of its counterparties
that allows for the netting of outstanding forward contracts. The
fair values of the Company's foreign currency forward contracts
designated as cash flow hedges are recorded in the consolidated
balance sheets at September 26, 2021, September 27, 2020
and December 27, 2020 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26,
2021 |
|
September 27,
2020 |
|
December 27,
2020 |
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
Unrealized gains |
$ |
8.6 |
|
|
$ |
13.4 |
|
|
$ |
2.3 |
|
|
Unrealized losses |
(3.7) |
|
|
(1.7) |
|
|
(1.6) |
|
|
Net unrealized gains |
$ |
4.9 |
|
|
$ |
11.6 |
|
|
$ |
0.7 |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
Unrealized gains |
$ |
2.0 |
|
|
$ |
4.2 |
|
|
$ |
1.1 |
|
|
Unrealized losses |
(0.1) |
|
|
(0.2) |
|
|
— |
|
|
Net unrealized gains |
$ |
1.9 |
|
|
$ |
4.0 |
|
|
$ |
1.1 |
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
Unrealized gains |
$ |
0.3 |
|
|
$ |
0.7 |
|
|
$ |
3.0 |
|
|
Unrealized losses |
(1.3) |
|
|
(1.0) |
|
|
(12.9) |
|
|
Net unrealized losses |
$ |
(1.0) |
|
|
$ |
(0.3) |
|
|
$ |
(9.9) |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
Unrealized gains |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Unrealized losses |
— |
|
|
(0.1) |
|
|
(0.2) |
|
|
Net unrealized losses |
$ |
— |
|
|
$ |
(0.1) |
|
|
$ |
(0.2) |
|
Net gains on cash flow hedging activities have been reclassified
from other comprehensive earnings (loss) to net earnings for the
quarters and nine months ended September 26, 2021 and
September 27, 2020 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
September 26,
2021 |
|
September 27,
2020 |
|
September 26,
2021 |
|
September 27,
2020 |
|
Statements of Operations Classification |
|
|
|
|
|
|
|
|
Cost of sales |
$ |
(2.0) |
|
|
$ |
7.1 |
|
|
$ |
(4.4) |
|
|
16.7 |
|
|
Net revenues |
0.1 |
|
|
1.2 |
|
|
1.4 |
|
|
2.4 |
|
|
Other |
0.8 |
|
|
0.9 |
|
|
2.0 |
|
|
1.4 |
|
|
Net realized gains |
$ |
(1.1) |
|
|
$ |
9.2 |
|
|
$ |
(1.0) |
|
|
20.5 |
|
Undesignated Hedges
The Company also enters into foreign currency forward contracts to
minimize the impact of changes in the fair value of intercompany
loans due to foreign currency changes. The Company does not use
hedge accounting for these contracts as changes in the fair values
of these contracts are substantially offset by changes in the fair
value of the intercompany loans. Additionally, to manage
transactional exposure to fair value movements on certain monetary
assets and liabilities denominated in foreign currencies, the
Company has implemented a balance sheet hedging program. The
Company does not use hedge accounting for these contracts as
changes in the fair values of these contracts are offset by changes
in the fair value of the balance sheet items. As of
September 26, 2021, September 27, 2020 and
December 27, 2020 the total notional amounts of the Company's
undesignated derivative instruments were $663.2 million, $538.9
million and $590.6 million, respectively.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
At September 26, 2021, September 27, 2020 and
December 27, 2020, the fair values of the Company's
undesignated derivative financial instruments were recorded in the
consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26,
2021 |
|
September 27,
2020 |
|
December 27,
2020 |
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
Unrealized gains |
$ |
6.5 |
|
|
$ |
3.3 |
|
|
$ |
3.5 |
|
|
Unrealized losses |
(3.4) |
|
|
(3.2) |
|
|
(0.5) |
|
|
Net unrealized gains |
$ |
3.1 |
|
|
$ |
0.1 |
|
|
$ |
3.0 |
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
Unrealized gains |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Unrealized losses |
(0.8) |
|
|
— |
|
|
(2.6) |
|
|
Net unrealized losses |
$ |
(0.8) |
|
|
$ |
— |
|
|
$ |
(2.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrealized gains (losses), net |
$ |
2.3 |
|
|
$ |
0.1 |
|
|
$ |
0.4 |
|
The Company recorded net gains of $3.6 million and $2.9 million on
these instruments to other (income) expense, net for the quarter
and nine months ended September 26, 2021, respectively, and
net losses of $(6.9) million and $(20.1) million for the quarter
and nine months ended September 27, 2020, respectively,
relating to the change in fair value of such derivatives,
substantially offsetting gains and losses from the change in fair
value of intercompany loans to which the contracts
relate.
For additional information related to the Company's derivative
financial instruments (see Notes 6 and 11).
(13)
Leases
The Company occupies offices and uses certain equipment under
various operating lease arrangements. The Company has no finance
leases. These leases have remaining lease terms of 1 to 18 years,
some of which include options to extend lease terms or options to
terminate current lease terms at certain times, subject to notice
requirements set out in the lease agreement. Payments under certain
of the lease agreements may be subject to adjustment based on a
consumer price index or other inflationary indices. The lease
liability for such lease agreements as of the adoption date, was
based on fixed payments as of the adoption date. Any adjustments to
these payments based on the related indices will be recorded to
expense as incurred. Leases with an expected term of 12 months
or less are not capitalized. Lease expense under such leases is
recorded straight line over the life of the lease. The Company
capitalizes non-lease components for equipment leases, but expenses
non-lease components as incurred for real estate
leases.
For the quarter and nine months ended September 26, 2021, the
Company's operating lease and other rental expenses were $21.8
million and $66.0 million, respectively. For the quarter and nine
months ended September 27, 2020, the Company's operating lease
and other rental expenses were $22.3 million and $67.6 million,
respectively. Expense related to short-term leases (expected terms
less than 12 months) and variable lease payments was not material
in the quarter or nine months ended September 26, 2021 or
September 27, 2020.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Information related to the Company’s leases for the quarter and
nine months ended September 26, 2021 and September 27,
2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
September 26,
2021 |
|
September 27,
2020 |
|
September 26,
2021 |
|
September 27,
2020 |
|
Cash paid for amounts included in the measurement of lease
liabilities: |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
$ |
13.7 |
|
|
$ |
13.2 |
|
|
$ |
39.9 |
|
|
38.8 |
|
|
Right-of-use assets obtained in exchange for lease
obligations: |
|
|
|
|
|
|
|
|
Operating leases |
$ |
10.4 |
|
|
$ |
2.1 |
|
|
$ |
21.8 |
|
|
102.5 |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term |
|
|
|
|
|
|
|
|
Operating leases |
5.6 years |
|
6.2 years |
|
5.6 years |
|
6.2 years |
|
Weighted Average Discount Rate |
|
|
|
|
|
|
|
|
Operating leases |
3.1 |
% |
|
3.1 |
% |
|
3.1 |
% |
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
The following is a reconciliation of future undiscounted cash flows
to the operating liabilities, and the related right of use assets,
included in our Consolidated Balance Sheets as of
September 26, 2021:
|
|
|
|
|
|
|
September 26,
2021 |
|
2021 (excluding the nine months ended September 26,
2021) |
$ |
13.2 |
|
|
2022 |
49.8 |
|
|
2023 |
41.6 |
|
|
2024 |
29.9 |
|
|
2025 |
23.9 |
|
|
2026 and thereafter |
49.9 |
|
|
Total future lease payments |
208.3 |
|
|
Less imputed interest |
25.2 |
|
|
Present value of future operating lease payments |
183.1 |
|
|
Less current portion of operating lease liabilities
(1)
|
43.9 |
|
|
Non-current operating lease liability
(2)
|
139.2 |
|
|
Operating lease right-of-use assets, net
(3)
|
$ |
165.6 |
|
(1)
Included in Accrued liabilities on the consolidated balance
sheets.
(2)
Included in Other liabilities on the consolidated balance
sheets.
(3)
Included in Property, plant, and equipment on the consolidated
balance sheets.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(14)
Segment Reporting
Hasbro is a global play and entertainment company with a broad
portfolio of brands and entertainment content spanning toys, games,
licensed products ranging from traditional to digital, as well as
film and television entertainment. In the first quarter of 2020 the
Company completed its acquisition of the global independent studio,
eOne. Throughout 2020, the Company successfully integrated many
parts of the eOne business and started to achieve synergies as a
combined company. Effective for the three months ended March 28,
2021, the Company realigned its reportable segment structure to:
(1) align with changes to its business structure subsequent to the
integration of eOne; and (2) reflect changes to its reporting
structure and provide transparency into how operating performance
is measured. The Company's three principal reportable segments are
(i) Consumer Products, (ii) Wizards of the Coast and Digital
Gaming, and (iii) Entertainment.
The Consumer Products segment engages in the sourcing, marketing
and sales of toy and game products around the world. The Consumer
Products business also promotes the Company's brands through the
out-licensing of our trademarks, characters and other brand and
intellectual property rights to third parties, through the sale of
branded consumer products such as toys and apparel. The Wizards of
the Coast and Digital Gaming business engages in the promotion of
the Company's brands through the development of trading card,
role-playing and digital game experiences based on Hasbro and
Wizards of the Coast games. The Entertainment segment engages in
the development, acquisition, production, financing, distribution
and sale of world-class entertainment content including film,
scripted and unscripted television, family programming, digital
content and live entertainment.
The significant accounting policies of the Company's segments are
the same as those referenced in Note 1.
Results shown for the quarter and nine months ended
September 26, 2021 are not necessarily representative of those
which may be expected for the full year 2021, nor were those of the
comparable 2020 periods representative of those actually
experienced for the full year 2020. Similarly, such results are not
necessarily those which would be achieved were each segment an
unaffiliated business enterprise.
Reclassifications of certain prior year segment results and account
balances have been made to conform to the current-year
presentation. None of the segment changes impact the Company's
previously reported consolidated net revenue, operating profits,
net earnings or net earnings per share.
On June 29, 2021, the Company completed the sale of eOne Music. The
financial results of eOne Music were recorded within the Company's
Entertainment segment through the date of the closing of the sale.
The assets and liabilities of eOne Music were de-consolidated as of
the closing date and there are no remaining carrying amounts in the
Company's Consolidated Balance Sheets as of September 26, 2021. The
sale of eOne Music in 2021 did not impact the Company's previously
reported 2020 net revenues, operating profits, earnings, assets or
liabilities.
Information by segment and a reconciliation to reported amounts for
the quarters and nine months ended September 26, 2021 and
September 27, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
September 26, 2021 |
|
September 27, 2020 |
|
Net revenues |
External |
|
Affiliate
(b)
|
|
External |
|
Affiliate
(b)
|
|
Consumer Products |
$ |
1,282.7 |
|
|
$ |
(149.6) |
|
|
$ |
1,317.8 |
|
|
$ |
(110.1) |
|
|
Wizards of the Coast and Digital Gaming |
360.2 |
|
|
(38.0) |
|
|
273.4 |
|
|
(23.4) |
|
|
Entertainment |
327.1 |
|
|
(13.7) |
|
|
185.4 |
|
|
(2.2) |
|
|
Corporate and Other
(b)
|
— |
|
|
201.3 |
|
|
— |
|
|
135.7 |
|
|
|
$ |
1,970.0 |
|
|
$ |
— |
|
|
$ |
1,776.6 |
|
|
$ |
— |
|
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
September 26, 2021 |
|
September 27, 2020 |
|
Net revenues |
External |
|
Affiliate
(b)
|
|
External |
|
Affiliate
(b)
|
|
Consumer Products |
$ |
2,625.8 |
|
|
$ |
(316.8) |
|
|
$ |
2,409.8 |
|
|
$ |
(268.8) |
|
|
Wizards of the Coast and Digital Gaming |
1,008.7 |
|
|
(93.1) |
|
|
670.7 |
|
|
(56.4) |
|
|
Entertainment |
772.5 |
|
|
(40.4) |
|
|
662.0 |
|
|
(3.9) |
|
|
Corporate and Other
(b)
|
— |
|
|
450.3 |
|
|
— |
|
|
329.1 |
|
|
|
$ |
4,407.0 |
|
|
$ |
— |
|
|
$ |
3,742.5 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
Operating profit (loss) |
September 26,
2021 |
|
September 27,
2020 |
|
September 26,
2021 |
|
September 27,
2020 |
|
Consumer Products |
$ |
210.4 |
|
|
$ |
226.2 |
|
|
$ |
260.5 |
|
|
$ |
171.2 |
|
|
Wizards of the Coast and Digital Gaming |
159.4 |
|
|
141.6 |
|
|
462.3 |
|
|
311.5 |
|
|
Entertainment |
22.4 |
|
|
(28.3) |
|
|
(74.3) |
|
|
(106.1) |
|
|
Corporate and Other
(b)
|
(24.3) |
|
|
(2.9) |
|
|
(56.7) |
|
|
(61.1) |
|
|
|
$ |
367.9 |
|
|
$ |
336.6 |
|
|
$ |
591.8 |
|
|
$ |
315.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
September 26,
2021 |
|
September 27,
2020 |
|
December 27,
2020 |
|
Consumer Products
(a)
|
$ |
4,754.0 |
|
|
$ |
6,323.4 |
|
|
$ |
5,552.5 |
|
|
Wizards of the Coast and Digital Gaming |
915.1 |
|
|
926.9 |
|
|
585.7 |
|
|
Entertainment
(b)
|
5,570.0 |
|
|
6,199.7 |
|
|
6,003.0 |
|
|
Corporate and Other
(b)
|
(1,008.7) |
|
|
(2,746.8) |
|
|
(1,322.9) |
|
|
|
$ |
10,230.4 |
|
|
$ |
10,703.2 |
|
|
$ |
10,818.3 |
|
(a) During the second quarter of 2021, the Company adjusted certain
inter-segment balance sheet amounts which impacted the Consumer
Products and Corporate and Other total asset values. These
adjustments did not impact the Company's total assets.
(b) Certain long-term assets, including property, plant and
equipment, goodwill and other intangibles, which benefit multiple
operating segments, are included in both Entertainment and
Corporate and Other. Allocations of certain Corporate and Other
expenses, related to these assets are made to the individual
operating segments at the beginning of the year based on budgeted
amounts. Any differences between actual and budgeted amounts are
reflected in Corporate and Other because allocations are translated
from the U.S. Dollar to local currency at budgeted rates when
recorded. Corporate and Other also includes the elimination of
inter-company balance sheet amounts.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
The following table represents consolidated Consumer Products
segment net revenues by major geographic region for the quarters
and nine months ended September 26, 2021 and
September 27, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
September 26,
2021 |
|
September 27,
2020 |
|
September 26,
2021 |
|
September 27,
2020 |
|
North America |
$ |
805.0 |
|
|
$ |
830.1 |
|
|
$ |
1,559.1 |
|
|
$ |
1,434.9 |
|
|
Europe |
304.2 |
|
|
316.8 |
|
|
669.2 |
|
|
615.4 |
|
|
Asia Pacific |
75.5 |
|
|
78.2 |
|
|
208.7 |
|
|
197.1 |
|
|
Latin America |
98.0 |
|
|
92.7 |
|
|
|