EX-99 2 exhibit99.htm PRESS RELEASE DATED JULY 24, 2006 HASBRO, INC

EXHIBIT 99

For Immediate Release

Contact: Karen A. Warren (Investor Relations)                   

July 24, 2006

401-727-5401

 

Wayne S. Charness (News Media)

 

401-727-5983






Hasbro Reports Second Quarter Results


Highlights


·

Net revenues were $527.8 million, down 7.8%, compared to $572.4 million a year ago, results include an $84.8 million decline in STAR WARS;

·

Net earnings of $0.07 per diluted share which includes stock-based compensation expense, net of tax, of ($0.01) per share under SFAS 123R; this compares to prior year net earnings of $0.13 per diluted share, which would have been $0.11 per diluted share if the Company had recorded compensation expense of ($0.02) per share as disclosed under SFAS 123;

·

Strong performance from a number of Hasbro brands, including LITTLEST PET SHOP, MONOPOLY, PLAYSKOOL, MAGIC: THE GATHERING, TRANSFORMERS and NERF;

·

Repurchased approximately 10 million shares of common stock at a cost of $192.6 million.


Pawtucket, RI (July 24, 2006) -- Hasbro, Inc. (NYSE: HAS) today reported second quarter results.  Worldwide net revenues for the quarter were $527.8 million, compared to $572.4 million a year ago.  The Company reported net income of $27.1 million or $0.07 per diluted share, which includes stock-based compensation expense of $2.5 million or ($0.01) per diluted share, net of tax, due to the required implementation of SFAS 123R at the beginning of the year.  Net earnings prior to fiscal 2006 did not include stock-based compensation expense.  Including the stock-based compensation expense previously disclosed in Hasbro’s financial statement footnotes, the net earnings for the second quarter of fiscal 2005 would have been $26.0 million or $0.11 per diluted share.  In the second quarter of 2005 net earnings on a reported basis, which did not include the effect of stock-based compensation expense, were $29.5 million or $0.13 per diluted share.  Please refer to the tables attached to this press release for 2005 results that have been adjusted to include the effect of stock-based compensation expense.


“Given the anticipated decline in STAR WARS of $84.8 million, our top line results are better than we expected and the remaining business is performing well, up $40.2 million or 9.4% for the quarter and $102.8 million or 13.2% for the year, which bodes well for our full year results,” said Alfred J. Verrecchia, President and Chief Executive Officer.


North American segment revenues, which include all of the Company’s toys and games business in the United States, Canada, and Mexico, were $362.0 million for the quarter, compared to $388.0 million in 2005.  This $26.0 million decline reflects a $47.7 million decline in STAR WARS, which was partially offset by growth in PLAYSKOOL, MAGIC: THE GATHERING, LITTLEST PET SHOP, NERF, G.I. JOE, TRANSFORMERS and board games.  The North American segment reported an operating profit of $30.4 million, compared to $25.4 million last year, which has been adjusted to include the impact of stock-based compensation.  


International segment revenues for the quarter were $153.2 million, compared to $172.5 million in 2005, a decline of $19.3 million.  The results reflect strong performance from MONOPOLY, PLAY-DOH, LITTLEST PET SHOP, MAGIC: THE GATHERING and PLAYSKOOL which was offset by a $37.1 million decline in STAR WARS.  The International segment reported an operating loss of ($8.1) million for the quarter, compared with an operating profit of $1.2 million in 2005, as adjusted to include the impact of stock-based compensation.

 

“As part of our commitment to return cash to shareholders, during the quarter we repurchased approximately 10 million shares of common stock at a total cost of $192.6 million,” said David Hargreaves, Chief Financial Officer.  “Given our performance in the second quarter, I believe we remain on track to achieve our financial goals for the full year.”


The Company will web cast its second quarter earnings conference call at 9:00 a.m. Eastern Standard Time today. Investors and the media are invited to listen at http://www.hasbro.com (select "Corporate Info" from the home page, click on "Investor Information," and then click on the web cast microphone).


Hasbro is a worldwide leader in children's and family leisure time entertainment products and services, including the design, manufacture and marketing of games and toys ranging from traditional to high-tech.  Both internationally and in the U.S., its PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, TIGER, and WIZARDS OF THE COAST brands and products provide the highest quality and most recognizable play experiences in the world.

Certain statements contained in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include expectations concerning the Company’s ability to achieve its financial goals and may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend," "look forward," "may," "planned," "potential," "should," "will" and "would." Such forward-looking statements are inherently subject to known and unknown risks and uncertainties. The Company's actual actions or results may differ materially from those expected or anticipated in the forward-looking statements. Specific factors that might cause such a difference include, but are not limited to: the Company's ability to manufacture, source and ship new and continuing products on a timely basis and the acceptance of those products by customers and consumers at prices that will be sufficient to profitably recover development, manufacturing, marketing, royalty and other costs of products; economic and public health conditions in the various markets in which the Company and its customers and suppliers operate throughout the world, including factors which impact the retail market or consumer demand, the Company's ability to manufacture and deliver products, higher fuel and other commodity prices, higher transportation costs and potential transportation delays, currency fluctuations and government regulation; the concentration of the Company's customers; the inventory policies of retailers, including the concentration of the Company's revenues in the second half and fourth quarter of the year, together with increased reliance by retailers on quick response inventory management techniques, which increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve tight and compressed shipping schedules; work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product; the bankruptcy or other lack of success of one of the Company's significant retailers which could negatively impact the Company's revenues or bad debt exposure; the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees in a competitive environment; market conditions, third party actions or approvals and the impact of competition that could delay or increase the cost of implementation of the Company's consolidation programs or alter the Company's actions and reduce actual results; the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization; and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances occurring after the date of this release.

This presentation includes a non-GAAP financial measure as defined under rules of the Securities and Exchange Commission (“SEC”), specifically EBITDA. As required by SEC rules, we have provided reconciliation on the attached schedule of this measure to the most directly comparable GAAP measure. EBITDA (earnings before interest, taxes, depreciation and amortization) represents net earnings excluding, interest expense, income taxes, depreciation and amortization. Management believes that EBITDA is one of the appropriate measures for evaluating the operating performance of the Company because it reflects the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet, and make strategic acquisitions. However, this measure should be considered in addition to, not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with GAAP as more fully discussed in the Company's financial statements and filings with the SEC. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. This presentation also discusses 2005 segment operating profit (loss) adjusted for the impact of stock-based compensation as disclosed under SFAS 123.  Management believes that presentation of adjusted 2005 segment operating profit (loss) is appropriate in order to provide a comparison to 2006 segment operating results on a consistent basis.

"

# # #

(Tables Attached)








HASBRO, INC.

       

CONSOLIDATED CONDENSED BALANCE SHEETS

   
           
           
           
           
           

(Thousands of Dollars)

    

July 2,

2006

 

June 26, 2005

 

ASSETS

     

-----------

 

-----------

Cash and Cash Equivalents

   

 $   417,087

 

 $   642,831

Short-term Investments

   

72,625

 

-

Accounts Receivable, Net

   

290,480

 

348,200

Inventories

   

258,500

 

262,471

Other Current Assets

   

     229,662

 

      208,921

    

----------------

 

----------------

Total Current Assets

   

   1,268,354

 

   1,462,423

Property, Plant and Equipment, Net

   

164,057

 

171,762

Other Assets

   

   1,302,954

 

   1,363,529

    

----------------

 

----------------

Total Assets

   

 $2,735,365

 

 $2,997,714

    

=========

 

=========

           
           
 

LIABILITIES AND SHAREHOLDERS' EQUITY

    

Short-term Borrowings

  

 $    10,017

 

 $    13,177

Current Portion of Long-term Debt

  

-

 

355,005

Payables and Accrued Liabilities

  

      629,736

 

      624,674

   

----------------

 

---------------

Total Current Liabilities

  

639,753

 

992,856

Long-term Debt

  

494,359

 

247,554

Deferred Liabilities

  

143,732

 

150,810

   

----------------

 

---------------

Total Liabilities

  

1,277,844

 

1,391,220

Total Shareholders' Equity

  

1,457,521

 

1,606,494

   

----------------

 

---------------

Total Liabilities and Shareholders' Equity

  

 $2,735,365

 

 $2,997,714

   

=========

 

=========









HASBRO, INC.

         

CONSOLIDATED STATEMENTS OF OPERATIONS

     
             
      

Quarter Ended

 

Six Months Ended

             

(Thousands of Dollars and Shares Except Per Share Data)

July 2,

2006

 

June 26, 2005

 

July 2,

2006

 

June 26, 2005

 

-----------

 

-----------

 

-----------

 

-----------

Net Revenues

  

$   527,764

 

$   572,388

 

$995,945

 

$1,027,332 

Cost of Sales

  

210,369

 

224,766

 

396,461

 

390,741 

    

--------------

 

---------------

 

--------------

 

-------------- 

Gross Profit

   

317,395

 

347,622

 

599,484

 

636,591 

Amortization

   

19,140

 

26,930

 

37,392

 

51,685 

Royalties

   

30,200

 

50,795

 

56,190

 

91,667 

Research and Product Development

39,606

 

36,514

 

77,770

 

67,555 

Advertising

   

60,466

 

64,974

 

115,320

 

119,164 

Selling, Distribution and Administration

147,384

 

141,289

 

294,339

 

277,860 

    

--------------

 

---------------

 

--------------

 

-------------- 

Operating Profit

 

20,599

 

27,120

 

18,473

 

28,660 

Interest Expense

 

6,812

 

7,649

 

13,938

 

15,380 

Other (Income) Expense, Net

 

(18,715

)

(13,219

)

(22,514

)

(16,185)

    

--------------

 

---------------

 

--------------

 

-------------- 

Earnings Before Income Taxes

32,502

 

32,690

 

27,049

 

29,465 

Income Taxes

  

5,414

 

3,236

 

4,860

 

3,724 

    

--------------

 

---------------

 

--------------

 

-------------- 

Net Earnings

  

$     27,088

 

$     29,454

 

$     22,189

 

$     25,741 

      

========

 

========

 

========

 

======== 

             

Per Common Share

         
 

Net Earnings

        
  

Basic

   

$         0.16

 

$         0.17

 

$         0.13

 

$         0.14 

      

========

 

========

 

========

 

======== 

  

Diluted

   

$         0.07

 

$         0.13

 

$         0.06

 

$         0.13 

      

========

 

========

 

========

 

======== 

             
 

Cash Dividends Declared

 

$         0.12

 

$         0.09

 

$         0.24

 

$         0.18 

      

========

 

========

 

========

 

======== 

             

Weighted Average Number of Shares

       
 

Basic

   

169,648

 

178,463

 

173,475

 

178,113 

     

========

 

========

 

========

 

======== 

 

Diluted

   

177,376

 

197,630

 

181,046

 

185,710 

      

========

 

========

 

========

 

======== 






HASBRO, INC.

           

Supplemental Financial Data

          

Major Segment Results and EBITDA

        


(Thousands of Dollars)

           
            
 

Quarter Ended

 

Six Months Ended

 

July 2, 2006

 

June 26, 2005

 

% Change

 

July 2, 2006

 

June 26, 2005

 

% Change

 

-----------

 

-----------

 

-----------

 

-----------

 

-----------

 

----------

Major Segment Results

           

(2005 Operating Profit (Loss) Adjusted (1))

          

North American Segment

           

  External Net Revenues

$ 361,956 

 

$ 387,959

 

-7 %

 

$ 672,260 

 

$ 676,635 

 

-1 %

  Operating Profit

30,402 

 

25,374

 

20 %

 

35,172 

 

30,011 

 

17 %

               

International Segment

           

  External Net Revenues

153,244 

 

172,534 

 

-11 %

 

298,735 

 

325,622 

 

-8 %

  Operating Profit (Loss)

(8,093)

 

1,239 

 

-753 %

 

(16,416)

 

(6,634)

 

-147 %

            


Reconciliation of EBITDA

           
            

Net Earnings

$  27,088

 

$  29,454

   

$   22,189

 

$   25,741

  

Interest Expense

6,812

 

7,649

   

13,938

 

15,380

  

Income Taxes

5,414

 

3,236

   

4,860

 

3,724

  

Depreciation

18,341

 

18,587

   

31,936

 

31,948

  

Amortization

19,140

 

26,930

   

37,392

 

51,685

  
 

------------

 

------------

   

------------

 

------------

  

     EBITDA

$  76,795

 

$  85,856

   

$ 110,315

 

$ 128,478

  
 

=======

 

=======

   

=======

 

=======

  


(1) 2005 segment operating profit (loss) has been adjusted to include the amount of stock-based compensation as disclosed under SFAS 123. Because 2006 operating profit (loss) includes stock-based compensation expense, management believes that presentation of adjusted 2005 segment operating profit (loss) is appropriate in order to provide a comparison to 2006 segment operating results. See the attached Supplemental Financial Data schedule for a reconciliation of reported segment operating profit (loss) to the segment operating profit (loss) adjusted for stock-based compensation under SFAS 123.




HASBRO, INC.

         

Supplemental Financial Data

     

(Thousands of Dollars and Shares, except Per Share Data)

       
         

Net Earnings Per Share

  

2006

 

2005

             

Quarter

Basic

 

Diluted

 

Basic

 

Diluted

----------

-----------

 

-----------

 

-----------

 

-----------

        

Net earnings

$    27,088

 

$    27,088

 

$    29,454

 

$    29,454 

Effect of dilutive securities:

       

  Change in fair value of liabilities

       

   potentially settleable in common stock

-

 

(15,270

)

-

 

(5,730)

  Interest expense on contingent convertible

      

   debentures due 2021

-

 

-

 

-

 

1,066 

 

--------------

 

--------------

 

--------------

 

-------------- 

 

$    27,088

 

$    11,818

 

$    29,454

 

$    24,790 

 

========

 

========

 

========

 

======== 

        

Average shares outstanding

169,648

 

169,648

 

178,463

 

178,463 

Effect of dilutive securities:

       

  Liabilities potentially settleable in

       

   common stock

-

 

6,036

 

-

 

5,412 

  Contingent convertible debentures due 2021

-

 

-

 

-

 

11,574 

  Options and warrants

-

 

1,692

 

-

 

2,181 

 

--------------

 

--------------

 

--------------

 

-------------- 

Equivalent shares

169,648

 

177,376

 

178,463

 

197,630 

 

========

 

========

 

========

 

======== 

        

Net earnings per share

$        0.16

 

$        0.07

 

$        0.17

 

$        0.13 

 

========

 

========

 

========

 

======== 

Six Months

       

---------------

       

Net earnings

$    22,189

 

$    22,189

 

$    25,741

 

$    25,741 

Effect of dilutive securities:

       

  Change in fair value of liabilities

       

   potentially settleable in common stock

-

 

(11,940

)

-

 

(760)

 

--------------

 

--------------

 

--------------

 

-------------- 

 

$    22,189

 

$    10,249

 

$    25,741

 

$    24,981 

 

========

 

========

 

========

 

======== 

        

Average shares outstanding

173,475

 

173,475

 

178,113

 

178,113 

Effect of dilutive securities:

       

  Liabilities potentially settleable in

       

   common stock

-

 

5,656

 

-

 

5,358 

  Options and warrants

-

 

1,915

 

-

 

2,239 

 

--------------

 

--------------

 

--------------

 

-------------- 

Equivalent shares

173,475

 

181,046

 

178,113

 

185,710 

 

========

 

========

 

========

 

======== 

        

Net earnings per share

$        0.13

 

$        0.06

 

$        0.14

 

$        0.13 

 

========

 

========

 

========

 

======== 

        





HASBRO, INC.

    

Supplemental Financial Data

    

(Thousands of Dollars, Except Per Share Data)

    

2005 Net Earnings Including the Effect of Stock-Based

   Compensation Expense under SFAS 123

 

Quarter Ended

 

Six Months Ended

 
 

June 26,2005

 

June 26,2005

 
 

----------------

 

----------------

 

Net Earnings, as Reported (1)

$    29,454 

 

$   25,741 

 
     

   Stock-based Compensation Expense

(5,242)

 

(10,816)

 

   Tax benefit

1,762 

 

3,880 

 
 

------------- 

 

------------- 

 

     Stock-based Compensation Expense, Net of Tax

(3,480)

 

(6,936)

 
 

------------- 

 

------------- 

 

Net Earnings, Including the Effect of Stock-based

    

   Compensation Expense (2)

$    25,974 

 

$   18,805 

 
 

======= 

 

======= 

 
     

Diluted Net Earnings Per Share, as Reported (1)

$       0.13 

 

$       0.13 

 

Stock-based Compensation, Net of Tax, Per Share (2)

(0.02)

 

(0.03)

 
 

------------- 

 

------------- 

 

Diluted Net Earnings Per Share, Including the

    

  Effect of Stock-based Compensation (2)

$       0.11 

 

$       0.10 

 
 

======= 

 

======= 

 
     

2005 Major Segment Results

Quarter Ended

 

Six Months Ended

 
 

June 26,2005

 

June 26,2005

 
 

----------------

 

----------------

 

North American Segment

    

External Net Revenues (3)

$ 387,959 

 

$ 676,635 

 
 

======= 

 

======= 

 
     

Operating Profit (3)

$    28,880 

 

$   37,246 

 

Stock-based Compensation Expense

(3,506)

 

(7,235)

 
 

------------- 

 

------------- 

 

Adjusted Operating Profit (4)

$    25,374 

 

$   30,011 

 
 

======= 

 

======= 

 
     

International Segment

    

External Net Revenues (3)

$ 172,534 

 

$ 325,622 

 
 

======= 

 

======= 

 
     

Operating Profit (Loss) (3)

$     2,220 

 

$   (4,611)

 

Stock-based Compensation Expense

(981)

 

(2,023)

 
 

------------ 

 

------------ 

 

Adjusted Operating Profit (Loss) (4)

$     1,239 

 

$   (6,634)

 
 

======= 

 

======= 

 

(1) Net earnings and diluted net earnings per share prior to fiscal 2006 did not include stock-based compensation expense under SFAS 123R.  

(2) Stock-based compensation expense and stock-based compensation expense per share prior to fiscal 2006 is calculated based on the amounts as previously disclosed in Hasbro's 2005 quarterly and annual financial statement footnotes.

(3) Effective the beginning of fiscal 2006, Hasbro has restructured its business and as a result its operating segments.  External net revenues and operating profit reflects the 2005 results, as reported, reclassified into our new operating segment presentation.

(4) 2005 segment operating profit (loss) has been adjusted to reflect 2005 stock-based compensation as disclosed under SFAS 123.