Market Overview

Hasbro Reports Full-Year and Fourth Quarter 2018 Financial Results

Share:

Board of Directors Increases Quarterly Dividend 8%, or $0.05 per
share, to $0.68 per share

Full-Year 2018

  • 2018 full-year net revenues of $4.58 billion decreased 12%,
    including an unfavorable $43.0 million impact of foreign exchange;
  • 2018 revenues grew in the Entertainment and Licensing segment, but
    declined in the U.S. and Canada and International operating segments;
  • Retailer inventories declined significantly in the U.S. and Europe,
    reflecting the loss of Toys"R"Us in addition to the Company's and
    retailers' continued efforts to reduce retail inventory levels;
  • Reported net earnings for the full-year 2018 were $220.4 million or
    $1.74 per diluted share; Adjusted net earnings were $488.8 million, or
    $3.85 per diluted share, excluding aggregate after-tax charges
    detailed below of $268.4 million, or $2.11 per diluted share;
  • Company remains in strong financial position including year-end
    cash and cash equivalents of $1.18 billion; Generated $646.0 million
    in operating cash flow; Returned $559.4 million to shareholders in
    2018; $309.3 million in dividends and $250.1 million in share
    repurchases.

Fourth Quarter 2018

  • Fourth quarter net revenues decreased 13% to $1.39 billion,
    including an unfavorable $35.1 million impact of foreign exchange;
  • Reported net earnings for the fourth quarter 2018 were $8.8 million
    or $0.07 per diluted share; Adjusted net earnings were $169.6 million,
    or $1.33 per diluted share, excluding net after-tax charges detailed
    below of $160.8 million, or $1.26 per diluted share.

Hasbro,
Inc.
(NASDAQ:HAS) today reported financial results for the
full-year and fourth quarter 2018. Net revenues for the full-year 2018
decreased 12% to $4.58 billion versus $5.21 billion in 2017. The lower
revenues reflect lost Toys"R"Us revenues throughout 2018 in the U.S.,
Europe and Asia Pacific, as well as a more meaningful impact than
expected from the liquidation of Toys"R"Us inventory into these markets.
In addition, revenues declined internationally, most notably in Europe
where the Company addressed changing consumer shopping behaviors, a
rapidly evolving retail landscape and reduced retail inventory, amidst
challenging economies in key markets, notably the U.K. 2018 net revenues
also include an unfavorable $43.0 million impact from foreign exchange.

As reported net earnings for the full-year 2018 were $220.4 million, or
$1.74 per diluted share, compared to $396.6 million, or $3.12 per
diluted share, in 2017. Adjusted 2018 net earnings were $488.8 million,
or $3.85 per diluted share, excluding after-tax charges of $268.4
million, or $2.11 per diluted share. Adjusted 2017 net earnings were
$693.1 million, or $5.46 per diluted share, excluding a $296.5 million,
or $2.33 per diluted share, impact from U.S. tax reform.

The after-tax charges excluded from 2018 full-year adjusted net earnings
consist of:

  • $96.9 million, or $0.76 per diluted share, associated with fourth
    quarter 2018 non-cash impairment charges related to Backflip Studios
    goodwill and other intangible assets;
  • $77.9 million, or $0.61 per diluted share, of severance costs
    associated with previously announced organizational actions;
  • $52.8 million, or $0.42 per diluted share, associated with Toys"R"Us,
    primarily bad debt expense; and
  • $40.7 million, or $0.32 per diluted share, impact from U.S. tax reform
    based on remeasurement of current liabilities and additional
    regulations issued in 2018.

"2018 was a very disruptive year, driven by the bankruptcy and
liquidation of Toys"R"Us across most of the world and a rapidly shifting
consumer and retail landscape," said Brian Goldner, Hasbro's chairman
and chief executive officer. "During 2018, we diversified our retailer
base, meaningfully lowered retailer inventories and delivered innovative
new offerings to our global consumers. We were not, however, able to
recapture as much of the Toys"R"Us business during the holiday period as
we anticipated as the effect of its liquidated inventory in the market
was more impactful than we and industry experts expected. It is an
unprecedented yet finite event. In addition, as we discussed throughout
the year, our European shipments declined as the teams successfully
lowered retailer inventories amidst a declining toy and game market.

"Throughout 2018, we engaged in several major innovation initiatives and
initiated significant organizational changes to enable us to stabilize
our European business in 2019 and return Hasbro to profitable growth
this year," continued Goldner. "In 2019 we are entering the next
innovation cycle for NERF and we will deliver break frame innovation
across price points in the market this year. Hasbro's POWER RANGERS line
will hit the market in the second quarter, setting the stage for an all
new era for this iconic brand. We are positioned to advance our gaming
leadership, leveraging our investments, social relevance, innovative
game play and the industry's broadest games portfolio, including the
launch of our digital game Magic: The Gathering Arena. We will
deliver all new play experiences in support of a raft of compelling
entertainment properties, including Marvel Studios' Captain Marvel and
Avengers: Endgame,
Columbia Pictures' Spider-Man: Far From Home, Disney
Animation's Frozen 2 and Lucasfilm's Star Wars: Episode IX.
Finally, to successfully deliver these and numerous other initiatives,
we've re-imagined and re-designed our go-to-market strategy globally
supported by compelling, digital-first marketing programs for our
consumers and retailers."

"Despite the challenging year, Hasbro remains in a strong financial
position with the ability to continue investing to drive profitable
long-term growth and raise our quarterly dividend 8% in 2019," said
Deborah Thomas, Hasbro's chief financial officer. "Given the rapid
change in our business, our global teams are focused on identifying
incremental opportunities to deliver top and bottom line returns.
Investments to drive top line growth include the acquisition of
POWER RANGERS, storytelling such as Bumblebee and new growth
drivers including Magic: The Gathering Arena and the associated
MAGIC esports initiatives. We've also undertaken important operational
programs—investing in the geographic diversification of our
manufacturing locations and a new Midwest U.S. warehouse opening in
2019. In addition, the organizational actions we outlined are now
expected to deliver $50 to $55 million in net pre-tax savings in 2019."

Fourth Quarter 2018 Financial Results

Fourth quarter 2018 net revenues of $1.39 billion declined 13% compared
to $1.60 billion in 2017. Fourth quarter 2018 net revenues include an
unfavorable $35.1 million impact from foreign exchange.

As reported net earnings for the fourth quarter 2018 were $8.8 million,
or $0.07 per diluted share, compared to a net loss for the fourth
quarter 2017 of $5.3 million, or $0.04 per diluted share. Adjusted net
earnings for the fourth quarter 2018 were $169.6 million, or $1.33 per
diluted share, excluding net after-tax charges of $160.8 million, or
$1.26 per diluted share. Adjusted net earnings for the fourth quarter
2017 were $291.2 million, or $2.30 per diluted share, excluding $296.5
million or $2.35 per diluted share, from U.S. tax reform.

The after-tax charges and benefits excluded from 2018 fourth quarter
adjusted net earnings consist of:

  • $96.9 million, or $0.76 per diluted share, associated with fourth
    quarter 2018 non-cash impairment charges related to Backflip Studios
    goodwill and other intangible assets;
  • $62.2 million, or $0.49 per diluted share, of severance costs
    associated with previously announced organizational actions;
  • $10.2 million, or $0.08 per diluted share, associated with U.S. tax
    reform based on a remeasurement of the transition liability; and
  • A benefit of $8.5 million, or $0.07 per diluted share, from a higher
    than previously anticipated recovery of pre-bankruptcy receivables
    based on the Company's final settlement with Toys"R"Us.

Full-Year 2018 Major Segment Performance

                 
          Net Revenues ($ Millions)     Operating Profit ($ Millions)
        FY 2018     FY 2017     % Change     FY 2018     FY 2017     % Change
U.S. and Canada         $2,433.4     $2,690.5     -10%     $382.0     $509.9     -25%
International         $1,847.6     $2,233.6     -17%     $39.5     $228.7     -83%
Entertainment and Licensing         $298.5     $285.6     +5%     $17.3     $96.4     -82%
                   

Note: Full-year 2018 segment operating profit is as reported.
Adjusted segment operating profit excludes Non-GAAP adjustments. A
reconciliation is in the attached schedule "Reconciliation of As
Reported to Adjusted Operating Results." Non-GAAP adjustments
recorded in the Corporate and Eliminations segment include $89.3
million of pre-tax severance costs from organizational actions,
$31.3 million of pre-tax asset impairment costs and $7.0 million
of royalty expense associated with Toys"R"Us.

Full-year 2018 U.S. and Canada segment net revenues decreased 10% to
$2.43 billion as compared to $2.69 billion in 2017. The U.S. and Canada
segment reported operating profit was $382.0 million. Adjusted segment
operating profit, excluding pre-tax charges of $45.8 million associated
with Toys"R"Us, was $427.8 million. The segment's 2018 revenue and
operating profit were negatively impacted by the loss of Toys"R"Us
revenues as well as a higher mix of close out activity at retail in 2018.

Full-year International segment net revenues decreased 17% to $1.85
billion compared to $2.23 billion in 2017. Full-year 2018 International
segment revenues include an unfavorable $41.7 million impact of foreign
exchange. On a regional basis, Europe net revenues decreased 24%, Latin
America decreased 6% and Asia Pacific decreased 5%. Emerging markets net
revenues decreased 12% for the full year. International segment reported
operating profit was $39.5 million. On an adjusted basis, excluding
pre-tax charges of $7.6 million associated with Toys"R"Us, operating
profit was $47.1 million. Revenues and operating profits in the segment
were negatively impacted by efforts to clear excess retail inventory in
Europe, as well as the loss of Toys"R"Us revenues in many European and
Asia Pacific markets.

Entertainment and Licensing segment net revenues increased 5% to $298.5
million compared to $285.6 million in 2017, due to changes in revenue
recognition in 2018 and a multi-year digital streaming deal for Hasbro
television programming. Revenue accounting changes included the timing
of revenue recognition for minimum guarantee license contracts.
Excluding a pre-tax $86.3 million non-cash fourth quarter 2018 goodwill
impairment charge related to Backflip Studios, adjusted operating profit
was $103.6 million. The segment's underlying operating profit margin,
excluding impairment charges, increased to 34.7% versus 33.8% in 2017.

Fourth Quarter and Full-Year 2018 Brand
Portfolio Performance

           
          Net Revenues ($ Millions)
        Q4 2018     Q4 2017     % Change     FY 2018     FY 2017     % Change
Franchise Brands         $729.9     $796.3     -8%     $2,445.9     $2,690.4     -9%
Partner Brands         $272.9     $342.9     -20%     $987.3     $1,271.6     -22%
Hasbro Gaming*         $267.4     $343.3     -22%     $787.7     $893.0     -12%
Emerging Brands         $119.0     $113.7     +5%     $358.8     $354.8     +1%
                   

*Hasbro's total gaming category, including all gaming revenue,
most notably MAGIC: THE GATHERING and MONOPOLY, which are included
in Franchise Brands in the table above, totaled $479.0 million for
the fourth quarter 2018, down 12%, versus $546.4 million in the
fourth quarter 2017 and down 4% to $1,443.2 million for full-year
2018 versus $1,497.8 million for full-year 2017. Hasbro believes
its gaming portfolio is a competitive differentiator and views it
in its entirety.

Full-year 2018 Franchise Brand net revenues decreased 9% to $2.45
billion. Revenue gains in MONOPOLY and MAGIC: THE GATHERING was more
than offset by declines in all other Franchise Brands. Franchise Brand
revenues grew in the Entertainment and Licensing segment; but declined
in the U.S. and Canada and International segments.

Partner Brand net revenues decreased 22% to $987.3 million. Revenue
growth in BEYBLADE and MARVEL was more than offset by declines in STAR
WARS, DISNEY PRINCESS, FROZEN and TROLLS. Partner Brand revenues
decreased in the U.S. and Canada and International segments.

Hasbro Gaming net revenues declined 12% to $787.7 million. DUNGEONS and
DRAGONS, DON'T STEP IN IT, CONNECT 4 and JENGA revenues grew, but were
more than offset by declines in PIE FACE, SPEAK OUT and other gaming
properties. Hasbro Gaming revenues declined in all three major operating
segments. Hasbro's total gaming category revenues decreased 4% to $1.44
billion, including growth in MONOPOLY and MAGIC: THE GATHERING.

Emerging Brands net revenues increased 1% to $358.8 million, driven by
the introduction of new collectible lines including LOST KITTIES and
YELLIES and the contribution of POWER RANGERS licensing revenues. These
revenue gains were partially offset by declines in other brands
including FURREAL FRIENDS and PLAYSKOOL. Emerging Brand net revenues
grew in the International and Entertainment and Licensing segments.

Dividend and Share Repurchase

The Company paid $309.3 million in cash dividends to shareholders during
2018. Hasbro's Board of Directors has declared a quarterly cash dividend
of $0.68 per common share. This represents an increase of $0.05 per
share, or 8%, from the previous quarterly dividend of $0.63 per common
share. The dividend will be payable on May 15, 2019 to shareholders of
record at the close of business on May 1, 2019.

For the full-year 2018, Hasbro repurchased 2.66 million shares of common
stock at a total cost of $250.1 million and an average price of $94.15
per share. At year end, $428.0 million remained available in the current
share repurchase authorization.

Asset Impairments

During the fourth quarter of 2018, the Company took a number of actions
to react to a rapidly changing mobile gaming industry that resulted in a
modification to the Company's long-term plan for its Backflip business.
These modifications included organizational actions and related
personnel changes, the extension of launch dates for games currently in
or planned for development and the addition of partners for the
development of future game releases. The modifications resulted in
changes to the long-term projections for the Backflip business which led
the Company to conclude the goodwill associated with the Backflip
reporting unit was impaired. The Company recorded a pre-tax non-cash
impairment charge of $86.3 million for the year ended December 30, 2018.

The Company also concluded that certain intangible assets were also
impaired during the fourth quarter 2018. The impairments were primarily
the result of changes to revenue projections that became apparent after
the recent holiday period. This resulted in recording a pre-tax non-cash
impairment charge of $31.3 million in the year ended December 30, 2018.

Conference Call Webcast

Hasbro will webcast its fourth quarter and full-year 2018 earnings
conference call at 8:30 a.m. Eastern Time today. To listen to the live
webcast and access the accompanying presentation slides, please go to https://investor.hasbro.com.
The replay of the call will be available on Hasbro's web site
approximately 2 hours following completion of the call.

About Hasbro
Hasbro (NASDAQ: HAS) is a global play and entertainment company committed to Creating
the World's Best Play Experiences. From toys and games to television,
movies, digital gaming and consumer products, Hasbro offers a variety of
ways for audiences to experience its iconic brands, including NERF, MY
LITTLE PONY, TRANSFORMERS, PLAY-DOH, MONOPOLY, BABY ALIVE and MAGIC: THE
GATHERING, as well as premier partner brands. Through its entertainment
labels, Allspark Pictures and Allspark Animation, the Company is
building its brands globally through great storytelling and content on
all screens. Hasbro is committed to making the world a better place for
children and their families through corporate social responsibility and
philanthropy. Hasbro ranked No. 5 on the 2018 100 Best Corporate
Citizens list by CR Magazine, and has been named one of the
World's Most Ethical Companies® by Ethisphere Institute for the
past seven years. Learn more at www.hasbro.com,
and follow us on Twitter (@Hasbro)
and Instagram (@Hasbro).

© 2019 Hasbro, Inc. All Rights Reserved.

Certain statements in this release contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995. These statements include expectations concerning the Company's
potential performance in the future and the Company's ability to achieve
its financial and business goals, such as stabilizing the European
business in 2019 and returning the overall business to growth this year,
and may be identified by the use of forward-looking words or phrases.
The Company's actual actions or results may differ materially from those
expected or anticipated in the forward-looking statements due to both
known and unknown risks and uncertainties. Specific factors that might
cause such a difference include, but are not limited to: (i) the
Company's ability to design, develop, produce, manufacture, source and
ship products on a timely and cost-effective basis, as well as interest
in and purchase of those products by retail customers and consumers in
quantities and at prices that will be sufficient to recover the
Company's costs and earn a profit; (ii) downturns in economic conditions
impacting one or more of the markets in which the Company sells
products, including, without limitation, changes in exchange rates or
other macroeconomic conditions currently impacting customers and
consumers for the Company's products in the United Kingdom, Brazil, and
Russia, which can negatively impact the Company's retail customers and
consumers, and which can result in lower employment levels, lower
consumer disposable income, lower retailer inventories and lower
spending, including lower spending on purchases of the Company's
products; (iii) other factors which can lower discretionary consumer
spending, such as higher costs for fuel and food, drops in the value of
homes or other consumer assets, and high levels of consumer debt; (iv)
consumer interest in entertainment properties, such as motion pictures,
for which the Company is developing and marketing products, and the
ability to drive sales of products associated with such entertainment
properties; (v) the Company's ability to successfully evolve and
transform its business to address a changing global consumer landscape
and retail environment, one in which online shopping and digital first
marketing are critical, traditional retailers face challenges from
disintermediation and our success depends on developing additional
retail channels and paths to our consumers, and difficulties or delays
the Company may experience in successfully implementing and developing
new capabilities and making the changes to its business that are
required to be successful under these changing marketplace conditions;
(vi) our ability to successfully develop and grow new areas of our
business, such as Magic: The Gathering Arena and esports initiatives
from our Wizards of the Coast business; (vii) other economic and public
health conditions or regulatory changes in the markets in which the
Company and its customers and suppliers operate which could create
delays or increase the Company's costs, such as higher commodity prices,
labor costs or transportation costs, or outbreaks of disease; (viii)
currency fluctuations, including movements in foreign exchange rates,
which can lower the Company's net revenues and earnings, and
significantly impact the Company's costs; (ix) the concentration of the
Company's customers, potentially increasing the negative impact to the
Company of difficulties experienced by any of the Company's customers or
changes in their purchasing or selling patterns; (x) the ability of the
Company to successfully develop, produce and distribute motion pictures
under its relationship with Paramount Pictures Corporation, and consumer
interest in those motion pictures and related merchandise; (xi) consumer
interest in programming created by Hasbro Studios, and other factors
impacting the financial performance of Hasbro Studios and the Discovery
Family Channel; (xii) existing retail inventories, which can depress
purchases of new products by retailers and/or other aspects of the
inventory policies of the Company's retail customers, including
retailers' potential decisions to lower their inventories, even if it
results in lost sales, as well as the concentration of the Company's
revenues in the second half and fourth quarter of the year, which
coupled with reliance by retailers on quick response inventory
management techniques increases the risk of underproduction of popular
items, overproduction of less popular items and failure to achieve
compressed shipping schedules; (xiii) delays, increased costs or
difficulties associated with any of our or our partners' planned digital
applications or media initiatives; (xiv) work disruptions, which may
impact the Company's ability to manufacture or deliver product in a
timely and cost-effective manner; (xv) the bankruptcy or other lack of
success of one of the Company's significant retailers, such as the
bankruptcy of Toys"R"Us in the United States and Canada in the fourth
quarter of 2017 and the subsequent liquidation of the Toys"R"Us business
in the United States, as well as the economic difficulty of Toys"R"Us in
other markets, or the bankruptcy or lack of success of a smaller retail
customer of the Company, such as Sears Holdings Corporation, any of
which could negatively impact the Company's revenues or bad debt
exposure and create challenges to the Company and its financial
performance as the Company attempts to recapture this lost business
through other customers or channels and faces suppressed sales of new
products caused by the liquidation of existing retail inventories into
the market; (xvi) ability to realize the benefits of cost-savings and
efficiency enhancing initiatives; (xvii) the impact of competition on
revenues, margins and other aspects of the Company's business, including
the ability to offer Company products which consumers choose to buy
instead of competitive products, the ability to secure, maintain and
renew popular licenses and the ability to attract and retain talented
employees; (xviii) concentration of manufacturing for many of the
Company's products in the People's Republic of China and the associated
impact to the Company of social, economic or public health conditions
and other factors affecting China, the movement of products into and out
of China, the cost of producing products in China and exporting them to
other countries, including without limitation, the potential application
of tariffs to some or all of the products the Company purchases from
vendors in China, and imports into the United States, which would
significantly increase the price of the Company's products and
substantially harm sales if applied to any significant amount of the
Company's products; (xix) the ability of the Company to successfully
diversify sourcing of its products to reduce reliance on sources of
supply in China; (xx) the application of tariffs to some or all of the
Company's products being imported into other markets, which would
significantly increase the price of the Company's products and
substantially harm sales if applied to any significant amount of the
Company's products; (xxi) the risk of product recalls or product
liability suits and costs associated with product safety regulations;
(xxii) the impact of other market conditions, third party actions or
approvals and competition which could reduce demand for the Company's
products or delay or increase the cost of implementation of the
Company's programs or alter the Company's actions and reduce actual
results; (xxiii) changes in tax laws or regulations, or the
interpretation and application of such laws and regulations, such as
what may occur as the U.S. Tax Cuts and Jobs Act is interpreted and
applied, which may cause the Company to alter tax reserves or make other
changes which significantly impact its reported financial results; (xiv)
the impact of litigation or arbitration decisions or settlement actions;
and (xv) other risks and uncertainties as may be detailed from time to
time in the Company's public announcements and Securities and Exchange
Commission ("SEC") filings. The Company undertakes no obligation to make
any revisions to the forward-looking statements contained in this
release or to update them to reflect events or circumstances occurring
after the date of this release.

The financial tables accompanying this press release include non-GAAP
financial measures as defined under SEC rules, specifically Adjusted net
earnings and Adjusted earnings per diluted share, excluding the impact
of charges associated with the Toys"R"Us liquidation; goodwill and
intangible asset impairments; severance costs and U.S. tax reform, as
well as Adjusted operating profit absent the impact of the charges
associated with the Toys"R"Us liquidation, goodwill and intangible asset
impairments and severance costs. Also included in the financial tables
are the non-GAAP financial measures of EBITDA and Adjusted EBITDA.
EBITDA represents net earnings attributable to Hasbro, Inc. excluding
interest expense, income taxes, depreciation and amortization. Adjusted
EBITDA also excludes the impact of charges associated with the Toys"R"Us
liquidation, goodwill and intangible asset impairments and severance
costs in the fourth quarter and full-year 2018. As required by SEC
rules, we have provided reconciliations on the attached schedules of
these measures to the most directly comparable GAAP measure. Management
believes that Adjusted net earnings, Adjusted earnings per diluted share
and Adjusted operating profit absent the impact of charges associated
with the Toys"R"Us liquidation, goodwill and intangible asset
impairments and severance costs in the fourth quarter and full-year 2018
provides investors with an understanding of the underlying performance
of the Company's business absent these unusual events. Management
believes that EBITDA and Adjusted EBITDA are appropriate measures for
evaluating the operating performance of the Company because they reflect
the resources available for strategic opportunities including, among
others, to invest in the business, strengthen the balance sheet and make
strategic acquisitions. These non-GAAP measures should be considered in
addition to, not as a substitute for, or superior to, net earnings or
other measures of financial performance prepared in accordance with GAAP
as more fully discussed in the Company's financial statements and
filings with the SEC. As used herein, "GAAP" refers to accounting
principles generally accepted in the United States of America.

HAS-E

 
HASBRO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
           
(Thousands of Dollars)

December 30,
2018

December 31,
2017

ASSETS
Cash and Cash Equivalents $ 1,182,371 $ 1,581,234
Accounts Receivable, Net 1,188,052 1,405,399
Inventories 443,383 433,293
Other Current Assets   268,698   214,000
Total Current Assets 3,082,504 3,633,926
Property, Plant and Equipment, Net 256,473 259,710
Other Assets   1,924,011   1,396,347
Total Assets $ 5,262,988 $ 5,289,983
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term Borrowings $ 9,740 $ 154,957
Payables and Accrued Liabilities   1,264,584   1,096,740
Total Current Liabilities 1,274,324 1,251,697
Long-term Debt 1,695,092 1,693,609
Other Liabilities   539,086   514,720
Total Liabilities 3,508,502 3,460,026
Total Shareholders' Equity   1,754,486   1,829,957
Total Liabilities and Shareholders' Equity $ 5,262,988 $ 5,289,983
 
 
HASBRO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                   
Quarter Ended Year Ended
(Thousands of Dollars and Shares Except Per Share Data)

December 30,
2018

% Net
Revenues

December 31,
2017

% Net
Revenues

December 30,
2018

% Net
Revenues

December 31,
2017

% Net
Revenues

Net Revenues $ 1,389,161 100.0 % $ 1,596,111 100.0 % $ 4,579,646 100.0 % $ 5,209,782 100.0 %
Costs and Expenses:
Cost of Sales 601,588 43.3 % 628,722 39.4 % 1,850,678 40.4 % 2,033,693 39.0 %
Royalties 110,698 8.0 % 122,734 7.7 % 351,660 7.7 % 405,488 7.8 %
Product Development 63,115 4.5 % 76,255 4.8 % 246,165 5.4 % 269,020 5.2 %
Advertising 149,921 10.8 % 159,577 10.0 % 439,922 9.6 % 501,813 9.6 %
Amortization of Intangibles 8,830 0.6 % 6,564 0.4 % 28,703 0.6 % 28,818 0.6 %
Program Production Cost Amortization 10,487 0.8 % 19,646 1.2 % 43,906 1.0 % 35,798 0.7 %
Selling, Distribution and Administration   433,975   31.2 %   311,525   19.5 %   1,287,560   28.1 %   1,124,793   21.6 %
Operating Profit 10,547 0.8 % 271,088 17.0 % 331,052 7.2 % 810,359 15.6 %
Interest Expense 22,435 1.6 % 24,516 1.5 % 90,826 2.0 % 98,268 1.9 %
Other Income, Net   (6,760 ) -0.5 %   (32,014 ) -2.0 %   (30,176 ) -0.7 %   (74,059 ) -1.4 %
(Loss) Earnings before Income Taxes (5,128 ) -0.4 % 278,586 17.5 % 270,402 5.9 % 786,150 15.1 %
Income Tax (Benefit) Expense   (13,894 ) -1.0 %   283,884   17.8 %   49,968   1.1 %   389,543   7.5 %
Net Earnings (Loss) $ 8,766   0.6 % $ (5,298 ) -0.3 % $ 220,434   4.8 % $ 396,607   7.6 %
 
Per Common Share
Net Earnings (Loss)
Basic $ 0.07   $ (0.04 ) $ 1.75   $ 3.17  
Diluted $ 0.07   $ (0.04 ) $ 1.74   $ 3.12  
 
Cash Dividends Declared $ 0.63   $ 0.57   $ 2.52   $ 2.28  
 
Weighted Average Number of Shares
Basic   126,582     124,528     126,132     125,039  
Diluted   127,237     124,528     126,890     127,031  
 
 

HASBRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS

(Unaudited)

 

(Thousands of Dollars)

           
Year Ended

December 30,
2018

December 31,
2017

Cash Flows from Operating Activities:
Net Earnings $ 220,434 $ 396,607
Non-Cash Adjustments 327,339 331,770
Changes in Operating Assets and Liabilities   98,224     (3,999 )
Net Cash Provided by Operating Activities   645,997     724,378  
 
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment (140,426 ) (134,877 )
Investments and Acquisitions, Net of Cash Acquired (155,451 ) -
Other   9,400     3,396  
Net Cash Utilized by Investing Activities   (286,477 )   (131,481 )
 
Cash Flows from Financing Activities:
Proceeds from Borrowings with Maturity Greater Than 3 Months - 493,878
Repayments of Borrowings with Maturity Greater Than 3 Months - (350,000 )
Net Repayments of Short-term Borrowings (142,357 ) (18,419 )
Purchases of Common Stock (250,054 ) (151,311 )
Stock-Based Compensation Transactions 29,999 29,431
Dividends Paid (309,258 ) (276,973 )
Employee Taxes Paid for Shares Withheld (58,344 ) (31,994 )
Other   (7,087 )   (6,785 )
Net Cash Utilized by Financing Activities   (737,101 )   (312,173 )
 
Effect of Exchange Rate Changes on Cash (21,282 ) 18,225
 
Cash and Cash Equivalents at Beginning of Year   1,581,234     1,282,285  
 
Cash and Cash Equivalents at End of Year $ 1,182,371   $ 1,581,234  
 
       
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
(Unaudited)
 
(Thousands of Dollars) Quarter Ended     Year Ended

December 30,
2018

   

December 31,
2017

   

%
Change

December 30,
2018

   

December 31,
2017

   

%
Change

Major Segment Results

U.S. and Canada Segment:

External Net Revenues $ 685,605 $ 750,690 -9 % $ 2,433,412 $ 2,690,527 -10 %
Operating Profit 102,649 146,353 -30 % 382,013 509,942 -25 %
Operating Margin 15.0 % 19.5 % 15.7 % 19.0 %
 

International Segment:

External Net Revenues 618,492 722,505 -14 % 1,847,585 2,233,579 -17 %
Operating Profit 29,111 79,234 -63 % 39,470 228,669 -83 %
Operating Margin 4.7 % 11.0 % 2.1 % 10.2 %
 

Entertainment and Licensing Segment:

External Net Revenues 85,064 122,916 -31 % 298,540 285,579 5 %
Operating Profit (48,880 ) 56,820 -186 % 17,311 96,400 -82 %
Operating Margin -57.5 % 46.2 % 5.8 % 33.8 %
 

International Segment Net Revenues by
Major Geographic Region

Europe $ 360,411 $ 460,482 -22 % $ 1,046,901 $ 1,381,949 -24 %
Latin America 146,001 146,017 0 % 454,066 485,088 -6 %
Asia Pacific   112,080     116,006   -3 %   346,618     366,542   -5 %
Total $ 618,492   $ 722,505   $ 1,847,585   $ 2,233,579  
 

Net Revenues by Brand Portfolio (1)

Franchise Brands $ 729,916 $ 796,254 -8 % $ 2,445,902 $ 2,690,394 -9 %
Partner Brands 272,859 342,873 -20 % 987,283 1,271,597 -22 %
Hasbro Gaming 267,358 343,283 -22 % 787,692 893,019 -12 %
Emerging Brands   119,028     113,701   5 %   358,769     354,772   1 %
Total Net Revenues $ 1,389,161   $ 1,596,111   $ 4,579,646   $ 5,209,782  
 

Hasbro's total gaming category, including all gaming revenue, most
notably MAGIC: THE GATHERING and MONOPOLY, totaled $479,005 and
$1,443,164 for the quarter and year ended December 30, 2018,
respectively, down 12% and 4%, respectively, from revenues of
$546,397 and $1,497,794 for the quarter and year ended December
31, 2017, respectively.

 

(1) For the quarter and year ended December 31, 2017, revenues of
$32,036 and $122,432, respectively, were reclassified from
Emerging Brands to Franchise Brands to conform to the presentation
for the quarter and year ended December 30, 2018.

 
 
HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION
OF AS REPORTED TO ADJUSTED OPERATING RESULTS

(Unaudited)
   
(Thousands of Dollars)
 

Non-GAAP Adjustments Impacting Operating
Profit

       

Quarter Ended
December 30, 2018

   

Year Ended
December 30, 2018

Pre-tax
adjustments

   

Post-tax
adjustments

Pre-tax
adjustments

Post-tax
adjustments

Incremental costs impact of Toys"R"Us (1) $ (10,068 ) $ (8,543 ) $ 60,360 $ 52,829
Severance (2) 72,000 62,249 89,349 77,948
Asset Impairments (3)   117,556     96,928     117,556   96,928
$

179,488

  $ 150,634   $ 267,265 $ 227,705
 
(1) In the first quarter of 2018, Toys"R"Us announced a
liquidation of its U.S. operations, as well as other retail impacts
around the globe. As a result, the Company recognized incremental
bad debt expense on outstanding Toys"R"Us receivables, royalty
expense, inventory obsolescence as well as other related costs. In
the fourth quarter of 2018, the Company made adjustments to the
charges previously recorded based on its final settlement with
Toys"R"Us.
 
(2) In the first quarter of 2018, the Company incurred
$17.3 million of severance charges, primarily outside the U.S.,
related to actions associated with a new go-to-market strategy
designed to be more omni-channel and e-commerce focused.
Additionally, in the fourth quarter of 2018, the Company recorded an
additional $72.0 million of severance charges. All 2018 severance
charges constitute the "2018 Restructuring Program." These charges
were included in Corporate and Eliminations.
 
(3) In the fourth quarter of 2018, the Company conducted
its annual impairment test. The results of such test resulted in a
write-off of goodwill from its Backflip business of $86.3 million,
as well as impairments of certain definite-lived intangible assets
totaling $31.3 million.
 
 

Reconciliation of Operating Profit Results

        Quarter Ended December 30, 2018     Year Ended December 30, 2018

As Reported

   

Non-GAAP
Adjustments

    Adjusted As Reported    

Non-GAAP
Adjustments

    Adjusted

Adjusted Company Results

External Net Revenues $ 1,389,161 $ - $ 1,389,161 $ 4,579,646 $ - $ 4,579,646
Operating Profit 10,547 179,488 190,035 331,052 267,265 598,317
Operating Margin 0.8 % 12.9 % 13.7 % 7.2 % 5.8 % 13.1 %
 

Adjusted Segment Results

U.S. and Canada Segment:

External Net Revenues $ 685,605 $ - $ 685,605 $ 2,433,412 $ - $ 2,433,412
Operating Profit 102,649 (6,518 ) 96,131 382,013 45,759 427,772
Operating Margin 15.0 % -1.0 % 14.0 % 15.7 % 1.9 % 17.6 %
 

International Segment:

External Net Revenues 618,492 - 618,492 1,847,585 - 1,847,585
Operating Profit 29,111 (3,550 ) 25,561 39,470 7,601 47,071
Operating Margin 4.7 % -0.6 % 4.1 % 2.1 % 0.4 % 2.5 %
 

Entertainment and Licensing Segment:

External Net Revenues 85,064 - 85,064 298,540 - 298,540
Operating Profit (48,880 ) 86,253 37,373 17,311 86,253 103,564
Operating Margin -57.5 % 101.4 % 43.9 % 5.8 % 28.9 % 34.7 %

Corporate and Eliminations:

The Corporate and Eliminations segment included non-GAAP adjustments
of $103.3 million for the quarter ended December 30, 2018 and $127.7
million for the year ended December 30, 2018, consisting of $72.0
million in Q4 2018 and $89.3 million in FY 2018 of severance; $31.3
million for both Q4 2018 and FY 2018 of asset impairments; and $7.0
million of royalty expense related to Toys"R"Us losses in FY 2018.
 
 

HASBRO, INC.
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES

(Unaudited)

                   
(Thousands of Dollars)
 

Reconciliation of Net Earnings and
Earnings per Share

 
Quarter Ended
(all adjustments reported after-tax)

December 30,
2018

Diluted Per Share
Amount

December 31,
2017

Diluted Per Share
Amount

Net Earnings (Loss), as Reported $ 8,766 $ 0.07 $ (5,298 ) $ (0.04 )
Incremental costs impact of Toys"R"Us (8,543 ) (0.07 ) - -
Severance 62,249 0.49 - -
Impact of Tax Reform (1) 10,196 0.08 296,512 2.35
Asset Impairments   96,928     0.76     -     -  
Net Earnings, as Adjusted $ 169,596   $ 1.33   $ 291,214   $ 2.30  
 
Year Ended
(all adjustments reported after-tax)

December 30,
2018

Diluted Per Share
Amount

December 31,
2017

Diluted Per Share
Amount

Net Earnings, as Reported $ 220,434 $ 1.74 $ 396,607 $ 3.12
Incremental costs impact of Toys"R"Us 52,829 0.42 - -
Severance 77,948 0.61 - -
Impact of Tax Reform (1) 40,650 0.32 296,512 2.33
Asset Impairments   96,928     0.76     -     -  
Net Earnings, as Adjusted $ 488,789   $ 3.85   $ 693,119   $ 5.46  
 
(1) The Company made adjustments to provisional U.S. Tax
Reform amounts recorded in the fourth quarter of 2017 based on
additional regulations issued in 2018.
 

Reconciliation of EBITDA

Quarter Ended Year Ended

December 30,
2018

December 31,
2017

December 30,
2018

December 31,
2017

Net Earnings (Loss) $ 8,766 $ (5,298 ) $ 220,434 $ 396,607
Interest Expense 22,435 24,516 90,826 98,268
Income Taxes (including Tax Reform) (13,894 ) 283,884 49,968 389,543
Depreciation 34,340 35,165 139,255 143,018
Amortization of Intangibles   8,830     6,564     28,703     28,818  
EBITDA $ 60,477   $ 344,831   $ 529,186   $ 1,056,254  
Non-GAAP Adjustments   179,488    

(19,911

)

  267,265    

(19,911

)

Adjusted EBITDA $ 239,965   $ 324,920   $ 796,451   $ 1,036,343  

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