-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GfcM/zV2SMP1NTLYL792CD8co4XTedSBJqxzmJZqukwDEPpgNcJ/ByQ5lmOBeW4K iTnXrd3rDwzjMoKJNENuuA== 0000046080-97-000006.txt : 19970520 0000046080-97-000006.hdr.sgml : 19970520 ACCESSION NUMBER: 0000046080-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HASBRO INC CENTRAL INDEX KEY: 0000046080 STANDARD INDUSTRIAL CLASSIFICATION: 3944 IRS NUMBER: 050155090 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06682 FILM NUMBER: 97601642 BUSINESS ADDRESS: STREET 1: 1027 NEWPORT AVE STREET 2: P O BOX 1059 CITY: PAWTUCKET STATE: RI ZIP: 02861 BUSINESS PHONE: 4014318697 FORMER COMPANY: FORMER CONFORMED NAME: HASBRO BRADLEY INC DATE OF NAME CHANGE: 19850814 FORMER COMPANY: FORMER CONFORMED NAME: HASBRO INDUSTRIES INC DATE OF NAME CHANGE: 19840917 FORMER COMPANY: FORMER CONFORMED NAME: HASSENFELD BROTHERS INC DATE OF NAME CHANGE: 19720615 10-Q 1 10-Q DOCUMENT SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended March 30, 1997 Commission file number 1-6682 HASBRO, INC. -------------------- (Name of Registrant) Rhode Island O5-0155090 - - ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 1027 Newport Avenue, Pawtucket, Rhode Island 02861 --------------------------------------------------- (Principal Executive Offices) (401) 431-8697 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 or No --- --- The number of shares of Common Stock, par value $.50 per share, outstanding as of April 25, 1997 was 128,079,854. HASBRO, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands of Dollars Except Share Data) (Unaudited) Mar. 30, Mar. 31, Dec. 29, Assets 1997 1996 1996 -------- -------- -------- Current assets Cash and cash equivalents $ 289,546 136,860 218,971 Accounts receivable, less allowance for doubtful accounts of $47,000, $49,800 and $46,600 517,022 528,632 807,149 Inventories: Finished products 214,342 266,020 209,903 Work in process 17,167 18,145 16,810 Raw materials 37,436 50,902 46,534 --------- --------- --------- Total inventories 268,945 335,067 273,247 Deferred income taxes 77,641 85,131 78,031 Prepaid expenses 102,754 90,830 109,191 --------- --------- --------- Total current assets 1,255,908 1,176,520 1,486,589 Property, plant and equipment, net 299,626 307,217 313,545 --------- --------- --------- Other assets Cost in excess of acquired net assets, less accumulated amortization of $118,986, $103,332 and $115,312 455,358 478,264 460,467 Other intangibles, less accumulated amortization of $107,850, $84,421 and $102,387 362,267 373,514 364,987 Other 76,729 68,345 75,921 --------- --------- --------- Total other assets 894,354 920,123 901,375 --------- --------- --------- Total assets $2,449,888 2,403,860 2,701,509 ========= ========= ========= HASBRO, INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued (Thousands of Dollars Except Share Data) (Unaudited) Mar. 30, Mar. 31, Dec. 29, Liabilities and Shareholders' Equity 1997 1996 1996 -------- -------- -------- Current liabilities Short-term borrowings $ 69,543 93,402 120,736 Trade payables 91,967 107,607 174,337 Accrued liabilities 315,913 315,601 399,896 Income taxes 120,428 111,270 135,849 --------- --------- --------- Total current liabilities 597,851 627,880 830,818 Long-term debt, excluding current installments 149,208 149,987 149,382 Deferred liabilities 68,937 72,409 69,263 --------- --------- --------- Total liabilities 815,996 850,276 1,049,463 --------- --------- --------- Shareholders' equity Preference stock of $2.50 par value. Authorized 5,000,000 shares; none issued - - - Common stock of $.50 par value. Authorized 300,000,000 shares; issued 132,168,378, 88,087,198 and 132,160,293 66,084 44,044 66,080 Additional paid-in capital 280,128 306,327 282,922 Retained earnings 1,378,803 1,215,639 1,362,791 Foreign currency translation 5,467 20,148 21,487 Treasury stock, at cost, 3,705,166, 1,019,161 and 3,297,628 shares (96,590) (32,574) (81,234) --------- --------- --------- Total shareholders' equity 1,633,892 1,553,584 1,652,046 --------- --------- --------- Total liabilities and shareholders' equity $2,449,888 2,403,860 2,701,509 ========= ========= ========= See accompanying condensed notes to consolidated financial statements. HASBRO, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Thousands of Dollars Except Share Data) (Unaudited) Quarter Ended -------------------- Mar. 30, Mar. 31, 1997 1996 -------- -------- Net revenues $555,784 538,685 Cost of sales 235,371 237,771 ------- ------- Gross profit 320,413 300,914 ------- ------- Expenses Amortization 10,032 9,799 Royalties, research and development 63,892 54,422 Advertising 71,302 70,276 Selling, distribution and administration 134,781 125,365 ------- ------- Total expenses 280,007 259,862 ------- ------- Operating profit 40,406 41,052 ------- ------- Nonoperating (income) expense Interest expense 4,430 4,906 Other (income), net (4,171) (2,963) ------- ------- Total nonoperating expense 259 1,943 ------- ------- Earnings before income taxes 40,147 39,109 Income taxes 14,453 14,744 ------- ------- Net earnings $ 25,694 24,365 ======= ======= Per common share Net earnings $ .20 .18 ======= ======= Cash dividends declared $ .08 .07 ======= ======= See accompanying condensed notes to consolidated financial statements. HASBRO, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Quarters Ended March 30, 1997 and March 31, 1996 (Thousands of Dollars) (Unaudited) 1997 1996 ---- ---- Cash flows from operating activities Net earnings $ 25,694 24,365 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization of plant and equipment 20,600 18,678 Other amortization 10,032 9,799 Deferred income taxes (1,553) 1,991 Change in operating assets and liabilities (other than cash and cash equivalents): Decrease in accounts receivable 271,373 258,408 Increase in inventories (2,616) (18,196) Decrease (increase) in prepaid expenses 4,757 (18,678) Decrease in trade payables and accrued liabilities (164,747) (215,994) Other 930 1,658 ------- ------- Net cash provided by operating activities 164,470 62,031 ------- ------- Cash flows from investing activities Additions to property, plant and equipment (12,536) (13,811) Investments and acquisitions, net of cash acquired (2,719) (21,296) Other (1,577) (7,228) ------- ------- Net cash utilized by investing activities (16,832) (42,335) ------- ------- Cash flows from financing activities Proceeds from borrowings with original maturities of more than three months - 5,778 Repayments of borrowings with original maturities of more than three months (2,499) (21,905) Net repayments of other short-term borrowings (42,596) (8,851) Purchase of common stock (32,511) (14,969) Stock option transactions 14,191 4,380 Dividends paid (8,561) (6,977) ------- ------- Net cash utilized by financing activities (71,976) (42,544) ------- ------- Effect of exchange rate changes on cash (5,087) (1,322) ------- ------- Increase (decrease) in cash and cash equivalents 70,575 (24,170) Cash and cash equivalents at beginning of year 218,971 161,030 ------- ------- Cash and cash equivalents at end of period $289,546 136,860 ======= ======= Supplemental information Cash paid during the period for: Interest $ 1,697 2,206 Income taxes $ 29,617 10,890 See accompanying condensed notes to consolidated financial statements. HASBRO, INC. AND SUBSIDIARIES Condensed Notes to Consolidated Financial Statements (Thousands of Dollars) (Unaudited) (1) In the opinion of management and subject to year-end audit, the accompanying unaudited interim financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of March 30, 1997 and March 31, 1996, and the results of operations and cash flows for the periods then ended. The results of operations for the quarter ended March 30, 1997, are not necessarily indicative of results to be expected for the full year. (2) Per share data have been adjusted to reflect the three-for-two stock split paid March 21, 1997. (3) Earnings per common share are based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during each period. Common stock equivalents include stock options and warrants for the period prior to their exercise. Under the treasury stock method, the unexercised options and warrants are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common stock at the average market price during the period. For each of the reported periods the difference between primary and fully diluted earnings per share was not significant. HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Thousands of dollars) NET REVENUES - - ------------ Net revenues for the first quarter of 1997 were $555,784, compared with the $538,685 reported for the same period of 1996. Increased revenue from products associated with the theatrical re-release of the Star Wars trilogy, was a major factor in this growth. Also contributing to increased volumes in the United States were the Company's line of Super Soaker water toys and the Hasbro Interactive range of CD-ROM classic games. Internationally, the Company experienced growth, both in local currency and U.S. dollars, in Canada, Mexico, Latin America and Australia, while in Europe, moderate local currency gains were more than offset by the approximate $8 million impact of the strengthened dollar. GROSS PROFIT - - ------------ The Company's gross profit margin, expressed as a percentage of net revenues, increased almost two percentage points to 57.7% from the 1996 level of 55.9%. The mix of products sold, coupled with reduced manufacturing overheads, is primarily responsible for the 1997 improvement. EXPENSES - - -------- Royalties, research and development expenses for the quarter increased in both amount and as a percentage of revenues from 1996 levels. The royalty component increased in both, reflecting the increased revenues and the change in mix of products sold. Research and development remained constant as a percentage of revenues while increasing slightly in amount to $31,057 for the quarter, compared to $30,119 in 1996. The current quarter advertising decreased as a percentage of net revenues to 12.8% from 13.0% a year ago, while increasing marginally in amount. The decrease in percentage is the result of several factors including the lower portion of the Company's revenues coming from the international marketing units which generally have higher advertising to sales ratios than do the United States groups and lower advertising costs with respect to the United States toy products. The Company's selling, distribution and administration expenses increased from their 1996 levels, both in amount and as a percentage of net revenues. Absent the impact of the previously announced closure of a manufacturing facility in the U.K., however, they remained essentially flat when expressed as a percentage of net revenues. The increased dollar amount reflects increased shipping costs as well as the impact of new operations in Chile, Peru and Argentina. HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued (Thousands of dollars) NONOPERATING (INCOME) EXPENSE - - ----------------------------- Net nonoperating expense decreased to $259 in the first quarter of 1997 from $1,943 a year ago. This was primarily the result of lower net interest expense, as both short-term borrowing and investment levels were favorable compared to 1996, reflecting the cash generated from operations during the most recent twelve months. Additionally, interest rates on short-term investments were favorable as compared to 1996. INCOME TAXES - - ------------ Income tax expense as a percentage of pretax earnings in the first quarter of 1997 decreased to 36.0% from 37.7% in the first quarter of 1996. This decrease reflects changes in Hasbro's operations begun in prior years, as well as the impact of certain strategies implemented during 1996. These changes and strategies realized a tax benefit for certain international operating losses and helped further reduce state income taxes. OTHER INFORMATION - - ----------------- During the past several years the Company has experienced a shift in its revenue pattern wherein the second half of the year has grown in significance to its overall business and within that half the fourth quarter has become more prominent. The Company expects that this trend will continue. This concentration increases the risk of (a) underproduction of popular items, (b) overproduction of less popular items and (c) failure to achieve tight and compressed shipping schedules. The business of the Company is characterized by customer order patterns which vary from year to year largely because of differences in the degree of consumer acceptance of a product line, product availability, marketing strategies and inventory levels of retailers and differences in overall economic conditions. Also, quick response inventory management practices now being used results in fewer orders being placed in advance of shipment and more orders, when placed, for immediate delivery. As a result, comparisons of unshipped orders on any date in a given year with those at the same date in a prior year are not necessarily indicative of sales for the entire year. In addition, it is a general industry practice that orders are subject to amendment or cancellation by customers prior to shipment. At the end of its fiscal April (April 27, 1997 and April 28, 1996) the Company's unshipped orders were approximately $410,000 and $380,000, respectively. HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued (Thousands of dollars) LIQUIDITY AND CAPITAL RESOURCES - - ------------------------------- Because of the seasonality of the Company's business coupled with certain customer incentives, mainly in the form of extended payment terms, the interim cash flow statements are not representative of that which may be expected for the full year. As a result of these extended payment terms, the majority of the Company's cash collections occur late in the fourth quarter and early in the first quarter of the subsequent year. As receivables are collected late in the fourth quarter and through the first quarter of the subsequent year, cash flow from operations becomes positive and is used to repay a significant portion of the short-term borrowings. As a result, management believes that on an interim basis, rather than discussing its cash flows, a better understanding of its liquidity and capital resources can be obtained through a discussion of the various balance sheet categories. Also, as several of the major categories, including cash and cash equivalents, accounts receivable, inventories and short-term borrowings, fluctuate significantly from quarter to quarter, again due to the seasonality of its business and the extended payment terms offered, management believes that a comparison to the comparable period in the prior year is generally more meaningful than a comparison to the prior year-end. Cash and cash equivalents at March 30, 1997, were approximately double their 1996 level. The Company attempts to keep its cash and cash equivalents at the lowest level possible whenever it has short-term borrowings, although at times the cash available and the borrowing requirement may be in different countries and currencies which may make it impractical to substitute one for the other. Despite first quarter revenue growth of $17,000, receivables were approximately $10,000 less than at the same time a year ago. This reflects the favorable impact of increased sales in markets with shorter sales terms. Inventories decraesed significantly from the prior year, primarily in the U.S., reflecting the Company's continuing efforts to better manage its inventories while still being able to supply customers on a timely basis. Other assets, as a group, decreased from their 1996 levels, reflecting twelve additional months of amortization expense, partially offset by the Company's acquisitions of product rights and licenses during the most recent twelve months. Short-term borrowings, at $69,543 were approximately $24,000, or 25% less than last year, again reflecting funds generated from operations within the most recent twelve months available to reduce such borrowings. At March 30, 1997, the Company had committed unsecured lines of credit totaling approximately $550,000 available to it. It also had available uncommitted lines approximating $750,000. The Company believes that these amounts are adequate for its needs. Of these available lines, approximately $90,000 was in use at March 30, 1997. HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued (Thousands of dollars) RECENT INFORMATION - - ------------------ On May 2, 1997, the Company completed its previously announced acquisition of the assets of Cap Toys and OddzOn Products from Russ Berrie and Company, Inc. In the fourth quarter of 1997, the Company will adopt Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128) and Statement of Financial Accounting Standards No. 129, Disclosure of Information about Capital Structure (SFAS 129). SFAS 128 establishes new computation, presentation and disclosure requirements for earnings per share, however, the Company does not expect that its adoption will have any material impact on its earnings per share. SFAS 129 formalizes disclosure requirements related to an entity's capital structure and, as such, will not have any impact on the Company's financial condition or its results of operation. PART II. Other Information Item 1. Legal Proceedings. On April 22, 1997, the United States Environmental Protection Agency (EPA) and Hasbro, Inc. entered into a negotiated Consent Agreement to resolve a dispute concerning Hasbro's compliance with the Federal Insecticide, Fungicide and Rodenticide Act in connection with its labeling of certain Playskool toys containing an antibacterial additive known as Microban(R). In the Consent Agreement, Hasbro agreed to pay an administrative penalty of one hundred and twenty thousand dollars ($120,000) to the United States Treasury. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 11 Computation of Earnings Per Common Share - Quarters Ended March 30, 1997 and March 31, 1996. 12 Computation of Ratio of Earnings to Fixed Charges - Quarter Ended March 30, 1997. 27 Financial Data Schedule. (b) Reports on Form 8-K A Current Report on Form 8-K dated April 21, 1997 was filed by the Company and included the Press Release dated April 21, 1997 announcing the Company's results for the current quarter. Consolidated Statements of Earnings (without notes) for the quarters ended March 30, 1997 and March 31, 1996 and Consolidated Condensed Balance Sheets (without notes) as of said dates were also filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HASBRO, INC. ------------ (Registrant) Date: May 13, 1997 By: /s/ John T. O'Neill --------------------- John T. O'Neill Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) HASBRO, INC. AND SUBSIDIARIES Quarterly Report on Form 10-Q For the Period Ended March 30, 1997 Exhibit Index Exhibit No. Exhibits - - ------- -------- 11 Statement re computation of per share earnings - quarter 12 Statement re computation of ratios 27 Financial Data Schedule EX-11 2 EXHIBIT 11 EXHIBIT 11 HASBRO, INC. AND SUBSIDIARIES Computation of Earnings Per Common Share Quarters Ended March 30, 1997 and March 31, 1996 (Thousands of Dollars and Shares Except Per Share Data) 1997 1996(a) ----------------- ----------------- Fully Fully Primary Diluted Primary Diluted ------- ------- ------- ------- Net earnings $ 25,694 25,694 24,365 24,365 Interest and amortization on 6% convertible notes, net of taxes - 1,437 - 1,441 ------- ------- ------- ------- Net earnings applicable to common shares $ 25,694 27,131 24,365 25,806 ======= ======= ======= ======= Weighted average number of shares outstanding:(b) Outstanding at beginning of period 128,863 128,863 131,017 131,017 Actual exercise of stock options 327 327 112 112 Assumed exercise of stock options and warrants 2,476 2,554 1,288 1,579 Actual conversion of 6% convertible notes 5 5 - - Assumed conversion of 6% convertible notes - 7,635 - 7,671 Purchase of common stock (597) (597) (256) (256) ------- ------- ------- ------- Total 131,074 138,787 132,161 140,123 ======= ======= ======= ======= Per common share: Net earnings $ .20 .20 .18 .18 ======= ======= ======= ======= (a) Adjusted to reflect the three-for-two stock split paid March 21, 1997. (b) Computation to arrive at the average number is a weighted average computation. EX-12 3 EXHIBIT 12 EXHIBIT 12 HASBRO, INC. AND SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges Quarter Ended March 30, 1997 (Thousands of Dollars) Earnings available for fixed charges: Net earnings $ 25,694 Add: Fixed charges 8,134 Income taxes 14,453 ------- Total $ 48,281 ======= Fixed Charges: Interest on long-term debt $ 2,304 Other interest charges 2,126 Amortization of debt expense 85 Rental expense representative of interest factor 3,619 ------- Total $ 8,134 ======= Ratio of earnings to fixed charges 5.94 ======= EX-27 4 EXHIBIT 27
5 1,000 3-MOS DEC-28-1997 MAR-30-1997 289,546 0 564,022 47,000 268,945 1,255,908 554,807 255,181 2,449,888 597,851 149,208 0 0 66,084 1,567,808 2,449,888 555,784 555,784 235,371 235,371 145,226 1,451 4,430 40,147 14,453 25,694 0 0 0 25,694 .20 0
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