Segment Reporting

12 Months Ended

Dec. 29, 2019

Segment and Geographic Information

Hasbro is a global play and entertainment company with a broad portfolio of brands and entertainment properties spanning toys, games, licensed products ranging from traditional to high-tech and digital, and film and television entertainment. For the periods presented in these consolidated financial statements, the Company’s segments are (i) U.S. and Canada, (ii) International, (iii) Entertainment, Licensing and Digital, and (iv) Global Operations.

The U.S. and Canada segment includes the marketing and selling of action figures, arts and crafts and creative play products, electronic toys and related electronic interactive products, fashion and other dolls, infant products, play sets, preschool toys, plush products, sports action blasters and accessories, vehicles and toy-related specialty products, as well as traditional board games, and trading card and role-playing games primarily within the United States and Canada. Within the International segment, the Company markets and sells both toy and game products in markets outside of the U.S. and Canada, primarily in the European, Asia Pacific, and Latin and South American regions. The Company’s Entertainment, Licensing and Digital segment includes the Company’s consumer products licensing, digital gaming, movie and television entertainment operations. The Global Operations segment is responsible for sourcing finished products for the Company’s U.S. and Canada and International segments.

During the first quarter of 2019, the Company realigned its financial reporting segments to include all digital gaming businesses within the re-named Entertainment, Licensing and Digital reporting segment. As a result of the realignment, 2018 and 2017 results for the U.S. and Canada and the former Entertainment and Licensing segments have been restated to reflect those changes.

Segment performance is measured at the operating profit level. Included in Corporate and eliminations are certain corporate expenses, including the elimination of intersegment transactions and certain assets benefiting more than one segment. Intersegment sales and transfers are reflected in management reports at amounts approximating cost. Certain shared costs, including global development and marketing expenses and corporate administration, are allocated to segments based upon expenses and foreign exchange rates fixed at the beginning of the year, with adjustments to actual expenses and foreign exchange rates included in Corporate and eliminations. The accounting policies of the segments are the same as those referenced in note 1.

Results shown for fiscal years 2019, 2018 and 2017 are not necessarily those which would be achieved if each segment was an unaffiliated business enterprise.

Information by segment and a reconciliation to reported amounts are as follows:



	Revenues from External Customers		Affiliate Revenue		Operating Profit (Loss)		Depreciation and Amortization	Capital Additions	Total Assets
2019
U.S. and Canada	$	2,449,280	11,016		415,436		8,696	6,280	3,244,950
International	1,836,360		273		107,304		6,166	4,290	2,482,170
Entertainment, Licensing and Digital	434,467		11,466		99,686		8,342	25,718	695,898
Global Operations(a)	120		1,388,623		(7,237	)	81,532	73,708	3,334,190
Corporate and eliminations(b)	—		(1,411,378	)	36,861		76,051	23,640	(901,580	)
Consolidated Total	$	4,720,227	—		652,050		180,787	133,636	8,855,628
2018
U.S. and Canada	$	2,375,653	10,242		370,197		11,119	5,255	2,899,986
International	1,847,585		290		39,470		6,530	4,652	2,229,053
Entertainment, Licensing and Digital	356,299		15,796		29,127		4,627	26,631	620,425
Global Operations(a)	109		1,439,292		(8,415	)	84,759	82,912	3,197,847
Corporate and eliminations(b)	—		(1,465,620	)	(99,327	)	60,923	20,976	(3,684,323	)
Consolidated Total	$	4,579,646	—		331,052		167,958	140,426	5,262,988
2017
U.S. and Canada	$	2,650,682	8,157		523,915		19,457	5,849	2,746,834
International	2,233,579		382		228,669		9,527	4,669	2,499,985
Entertainment, Licensing and Digital	325,424		21,889		82,427		5,526	7,637	628,743
Global Operations(a)	97		1,644,650		4,014		92,595	89,619	2,819,768
Corporate and eliminations(b)	—		(1,675,078	)	(28,666	)	44,731	27,103	(3,405,347	)
Consolidated Total	$	5,209,782	—		810,359		171,836	134,877	5,289,983


(a)	The Global Operations segment derives substantially all of its revenues, and thus its operating results, from intersegment activities.

(b)

Certain long-term assets, including property, plant and equipment, goodwill and other intangibles, which benefit multiple operating segments, are included in Corporate and eliminations. Allocations of certain expenses related to these assets to the individual operating segments are done at the beginning of the year based on budgeted amounts. Any differences between actual and budgeted amounts are reflected in Corporate and eliminations. Furthermore, Corporate and eliminations includes elimination of inter-company income statement transactions. Corporate and eliminations also includes the elimination of inter-company balance sheet amounts.

The following table represents consolidated International segment net revenues by major geographic region for the three fiscal years ended December 29, 2019.



	2019		2018	2017
Europe	$	1,043,217	1,046,901	1,381,949
Latin America	435,740		454,066	485,088
Asia Pacific	357,403		346,618	366,542
Net revenues	$	1,836,360	1,847,585	2,233,579

The following table presents consolidated net revenues by brand portfolio for the three fiscal years ended December 30, 2018.



	2019		2018	2017
Franchise Brands	$	2,411,847	2,445,902	2,690,394
Partner Brands	1,220,982		987,283	1,271,597
Hasbro Gaming	709,750		787,692	893,019
Emerging Brands	377,648		358,769	354,772
Net revenues	$	4,720,227	4,579,646	5,209,782

For the year ended December 31, 2017, net revenues of $122,432 were reclassified from Emerging Brands to Franchise Brands to conform to the presentation for the years ended December 29, 2019 and December 30, 2018.

Hasbro’s total gaming category, including all gaming net revenues, most notably MAGIC: THE GATHERING and MONOPOLY, totaled $1,528,283, $1,443,164 and $1,497,795 for the years ended December 29, 2019, December 30, 2018 and December 31, 2017, respectively.

Information as to Hasbro’s operations in different geographical areas is presented below on the basis the Company uses to manage its business. Net revenues are categorized based on location of the customer, while long-lived assets (property, plant and equipment, goodwill and other intangibles) are categorized based on their location.



	2019		2018	2017
Net revenues
United States	$	2,653,337	2,497,331	2,732,034
International	2,066,890		2,082,315	2,477,748
	4,720,227		4,579,646	5,209,782
Long-lived assets
United States	1,299,317		1,287,444	894,597
International	223,820		148,753	155,558
	$	1,523,137	1,436,197	1,050,155

Principal international markets include Europe, Canada, Mexico and Latin America, Australia, China and Hong Kong. Long-lived assets include property, plant and equipment, goodwill and other intangibles.

Other Information

Hasbro markets its products primarily to customers in the retail sector. Although the Company closely monitors the creditworthiness of its customers, adjusting credit policies and limits as deemed appropriate, a substantial portion of its customers’ ability to discharge amounts owed is generally dependent upon the overall retail economic environment.

In 2019 the Company’s largest customers were Wal-Mart Stores, Inc., Target Corporation, and Amazon.com. Sales to these customers amounted to 18%, 9% and 8%, respectively of consolidated net revenues in 2019. In 2018 the Company’s largest customers were Wal-Mart Stores, Inc. and Target Corporation. Sales to these customers amounted to 20% and 9%, respectively of consolidated net revenues during 2018. In 2017 the Company’s largest customers were Wal-Mart Stores, Inc., Toys“R”Us, Inc. and Target Corporation. Sales to these customers amounted to 19%, 9% and 9%, of consolidated net revenues during 2017. These sales were primarily within the U.S. and Canada segment.

Hasbro purchases certain components used in its manufacturing process and certain finished products from manufacturers in the Far East. The Company’s reliance on external sources of manufacturing can be shifted, over a period of time, to alternative sources of supply for products it sells, should such changes be necessary. However, if the Company were prevented from obtaining products from a substantial number of its current Far East suppliers due to political, labor or other factors beyond its control, the Company’s operations would be disrupted, potentially for a significant period of time, while alternative sources of product were secured. The imposition of trade sanctions, tariffs, border adjustment taxes or other measures by the United States or the European Union against a class of products imported by Hasbro from, or the loss of “normal trade relations” status with, China, or other countries where we manufacture products, or other factors which increase the cost of manufacturing in China, or other countries where we manufacture products, such as higher labor costs or an appreciation in the Chinese Yuan, could significantly disrupt our operations and/or significantly increase the cost of the products which are manufactured and imported into other markets.

The Company has agreements which allow it to develop and market products based on properties owned by third parties including its license with Marvel Entertainment, LLC and Marvel Characters B.V. (together “Marvel”) and its license with Lucas Licensing Ltd. and Lucasfilm Ltd. (together “Lucas”). These licenses have multi-year terms and provide the Company with the right to market and sell designated classes of products based on Marvel’s portfolio of brands, including SPIDER-MAN and THE AVENGERS, and Lucas’s STAR WARS brand. The Company also has a license to market products with The Walt Disney Company for DISNEY PRINCESS and DISNEY FROZEN lines. Hasbro’s net revenues from these licenses can be significant in any given year based on the level of third party entertainment. In addition to DISNEY PRINCESS and DISNEY FROZEN, both Marvel and Lucas are owned by The Walt Disney Company.