HASBRO, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

This Quarterly Report on Form 10-Q, including the following section entitled
Management's Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements expressing management's current
expectations, goals, objectives and similar matters. These forward-looking
statements may include statements concerning: the ability to achieve our
financial and business goals and objectives, including continued profitable
growth and successful integration of eOne; our efforts to ship sufficient
product to meet demand due to supply chain issues affecting businesses globally
which are expected to continue for the remainder of 2021 and possibly into 2022;
operation of our third-party manufacturing facilities; the impact of global
coronavirus outbreak on our business; the Company's product and entertainment
plans, including the timing of product and content releases; changes in the
methods of content distribution, including increased reliance on streaming
outlets; marketing and promotional efforts; anticipated expenses, including
compensation related expenses due to the passing of our former Chairman and CEO
and the appointment of a successor CEO; working capital and liquidity;
anticipated impact of acquisitions and dispositions; and anticipated impact of
changes in accounting standards. See Item 1A, in Part II of this report and Item
1A, in Part I of the Annual Report on Form 10-K for the year ended December 27,
2020 ("2020 Form 10-K"), for a discussion of factors which may cause the
Company's actual results or experience to differ materially from that
anticipated in these forward-looking statements. The Company undertakes no
obligation to revise the forward-looking statements in this report after the
date of the filing.
EXECUTIVE SUMMARY
Hasbro, Inc. ("Hasbro") is a global play and entertainment company committed to
Creating the World's Best Play and Entertainment Experiences. From toys, games
and consumer products to television, movies, digital gaming, and other
entertainment experiences, we connect to global audiences by bringing to life
great innovations, stories and brands across established and inventive
platforms. Our iconic brands include NERF, MAGIC: THE GATHERING, MY LITTLE PONY,
TRANSFORMERS, PLAY-DOH, MONOPOLY, BABY ALIVE, POWER RANGERS, PEPPA PIG and PJ
MASKS, as well as premier partner brands. Through our global independent
entertainment studio, Entertainment One ("eOne"), we are building our brands
globally through great storytelling and content on all screens, including
content based on our children's and family entertainment brands as well as
offering the production and distribution of a broad spectrum of live-action
scripted and unscripted entertainment content geared toward all audiences. At
Hasbro, we are committed to making the world a better place for all children,
fans and families. We believe that doing well includes doing good in the world
and for all our constituents. This is demonstrated in all we do, including
through our corporate social responsibility and philanthropy initiatives.
2021 Developments
Leadership Matters
On October 12, 2021, we announced the passing of our beloved leader and longtime
Chairman and Chief Executive Officer, Brian D. Goldner. Brian joined Hasbro in
2000 and was quickly recognized as a visionary in the industry. He was appointed
CEO in 2008 and became Chairman of the Board in 2015. He was instrumental in
transforming the Company into a global play and entertainment leader,
architecting a strategic Brand Blueprint to create the world's best play and
storytelling experiences. Through his unwavering focus, he expanded the Company
beyond toys and games into television, movies, digital gaming and beyond, to
ensure Hasbro's iconic brands reached every consumer.
Richard S. Stoddart, most recently the Lead Independent Director of the Board,
has been appointed by the Board to serve as Hasbro's interim CEO while the
Company executes its CEO succession plan. Mr. Stoddart has served as a member of
the Board since 2014 and is the former President and Chief Executive Officer of
global marketing execution firm InnerWorkings, Inc., serving in that role from
2017 until 2020 when InnerWorkings, Inc. was acquired. Prior to that, Mr.
Stoddart was the Chief Executive Officer of Leo Burnett Worldwide from February
2016 to 2017, the Chief Executive Officer of Leo Burnett North America from 2013
to 2016 and the President of Leo Burnett North America from 2005 to 2013. In
addition to the appointment of Mr. Stoddart, Tracy A. Leinbach, a member of the
Board since 2008, has been appointed to serve as Chair, the Lead Independent
Director role has been eliminated, and Edward M. Philip has been appointed to
serve as Chair of the Nominating, Governance and Social Responsibility
Committee.
Under Mr. Goldner's employment agreement, we expect to incur additional
compensation expense in the fourth quarter of 2021 due to the accelerated
vesting of certain equity awards then held by Mr. Goldner. A description of Mr.
Goldner's employment agreement can be found in the Company's proxy statement
filed with the SEC on April 1, 2021. In future periods, we may incur additional
compensation related expenses in connection with our succession plans and the
appointment of a permanent CEO.

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
Segment Realignment
In the first quarter of 2020, we completed our acquisition of eOne, our global
independent studio. Throughout 2020, we successfully integrated parts of our
business and began recognizing synergies as a combined company. Effective for
the first quarter of 2021, we realigned our reportable segment structure to
correspond with the evolution of our company, including the integration of eOne,
to reflect changes in our reporting structure and allocation of decision-making
responsibility and for assessing the Company's performance. Our new reportable
segments are: Consumer Products, Wizards of the Coast & Digital Gaming,
Entertainment and Corporate and Other.
•Consumer Products Our Consumer Products business engages in the sourcing,
marketing and sales of toy and game products around the world. Our Consumer
Products business also promotes our brands through the out-licensing of our
trademarks, characters and other brand and intellectual property rights to third
parties, through the sale of branded consumer products such as toys and apparel.
Additionally, through license agreements with third parties, we develop and sell
products based on popular third-party partner brands.
Our toy and game products are supported by cross-functional teams including
members of our global development and marketing groups. Our global development
teams develop, design and engineer new products alongside the redesign of
existing products, driven by our understanding of consumers and using
marketplace insights while leveraging opportunistic toy and game lines and
licenses. Our global marketing function establishes a cohesive brand direction
and assists our selling entities in establishing local marketing programs. This
strategy leverages efforts to increase consumer awareness of our brands through
the Company's entertainment experiences, including film and television
programming and digital gaming.
•Wizards of the Coast and Digital Gaming Our Wizards of the Coast and Digital
Gaming business engages in the promotion of our brands through the development
of trading card, role-playing and digital game experiences based on Hasbro and
Wizards of the Coast properties.
Wizards of the Coast offerings include popular games such as the collectable
card game MAGIC: THE GATHERING and the fantasy tabletop role-playing game
DUNGEONS & DRAGONS, as well as other digital games developed for mobile devices,
personal computers and video gaming consoles including MAGIC: THE GATHERING
ARENA. Additionally, we out-license certain of our brands to other third-party
digital game developers who transform Hasbro brand-based characters and other
intellectual properties, into digital gaming experiences.
•Entertainment Our Entertainment business engages in the development,
acquisition, production, financing, distribution and sale of world-class
entertainment content including film, scripted and unscripted television, family
programming, digital content and live entertainment.
Film and TV operations produce film and television content which is sold
worldwide to distributors, broadcasters, television networks and streaming
platforms. While maintaining ownership of the content rights, we sell content
for specific time periods to generate broadcast license fees from television
content and to collect minimum guarantees and overage participations from films.
The Entertainment business also actively acquires third-party film and
television content. In television, the Entertainment segment engages in the sale
of acquired third-party content internationally. For acquired films, the
Entertainment segment obtains territorial rights from independent producers to
distribute in those territories and acquires global rights which are sold
internationally. Feature length film and television programming based on our
owned and controlled brands provide both immersive storytelling and the ability
for our consumers to enjoy these properties in different formats, which also
drives product sales, results in increased licensing revenues, and expands
overall brand awareness.
•Corporate and Other Our Corporate and Other segment provides management and
administrative services to the Company's principal reporting segments described
above. The segment consists of unallocated corporate expenses and administrative
costs and activities not considered when evaluating segment performance such as
the Company's legal, human resources, finance, facilities and information
technology departments as well as certain assets benefiting more than one
segment. In addition, intersegment transactions are eliminated within the
Corporate and Other segment.
eOne Music Sale
On June 29, 2021, we completed the sale of our Entertainment One Music business
("eOne Music") for $397 million, including the sales price of $385 million and
$12 million of closing adjustments related to working capital and net debt
calculations. The final proceeds are subject to further adjustments upon
completion of closing working capital, which will be recognized in the fourth
quarter of 2021. Based on the value allocated to the music assets as part of the
eOne Acquisition, the Company recorded a pre-tax non-cash goodwill impairment
charge of $101.8 million included within Loss on Disposal of Business, as well
as

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
transaction expenses of $9.5 million ($7.3 million after-tax) within Selling,
Distribution and Administration costs, within the Consolidated Statements of
Operations during the first nine months of 2021. The impairment charge was
recorded within the Entertainment segment and the transaction costs were
recorded within the Corporate and Other segment. The financial results of eOne
Music were recorded within the Company's Entertainment segment through the date
of the closing of the sale. The assets and liabilities of eOne Music were
de-consolidated as of the closing date and there are no remaining carrying
amounts in the Company's Consolidated Balance Sheets as of September 26, 2021.
Coronavirus Pandemic
Throughout 2020 and continuing through the first nine months of 2021, the novel
coronavirus (COVID-19) pandemic has had a substantial adverse impact on our
business, as well as our employees, consumers, customers, partners, licensees,
suppliers and manufacturers, due in part to the preventative measures taken to
reduce the spread of the virus worldwide.
We experienced and in some cases, continue to experience:
•disruptions in supply of products, due to closures or reductions in operations
at third-party manufacturing facilities across several geographies including,
but not limited to, China, India, Vietnam the United States and Ireland, as well
as difficulties in shipping and distributing products due to ongoing port
capacity, shipping container and truck transportation shortages, resulting in
higher costs for both ocean and air freight and delays in the availability of
products, which can result in delayed sales and in some cases result in lost
sales. These and other disruptions are expected to continue through the
remainder of 2021 and possibly into 2022;
•adverse sales impact due to changes in consumer purchasing behavior and
availability of products to consumers, resulting from retail store closures,
limited reopening of retail stores and limitations on the capacity of ecommerce
channels to supply additional products;
•fluctuations in our performance based on the progress of different countries in
controlling the coronavirus and the maturity of e-commerce platforms in those
markets.
•limited production of live-action scripted and unscripted entertainment content
due to the hard stop and soft reopening of production studios;
•delays or postponements of entertainment productions and releases of
entertainment content both internally and by our partners;
•increases in entertainment production costs due to measures required to
minimize COVID-19 risks; and
•challenges of working remotely.
In response to these challenges, we developed and continue to develop and
execute plans to mitigate the negative impact of COVID-19 to the business. Our
responses included:
•utilizing our global supply chain and existing inventory to work to meet
demand, while managing freight cost increases across all markets, as our
manufacturing facilities returned to varying levels of operation;
•mitigating risk in global supply chain by expanding shipping capacity,
activating alternate ports in China and the U.S. and prioritizing supply based
on inventory and customer needs, including utilizing air freight if necessary;
•accelerating our business online and expanding omni-channel to get products to
customers and consumers;
•developing innovative ways to enable players to continue to play MAGIC: THE
GATHERING and DUNGEONS & DRAGONS games remotely;
•continuing to create new entertainment, including post-production work and the
development of animation productions remotely; and
•the gradual return of TV and film productions in late 2020. Currently, our
studios are back to operating at pre-pandemic production levels across all
businesses, with preventative measures and health and safety protocols in place.
We have maintained sufficient liquidity and access to capital resources. We also
continue to closely manage expenses to further preserve liquidity and we
continually monitor customer health and collectability of receivables. The
COVID-19 outbreak continues to be fluid and it is difficult to forecast the
impact it could have on our future operations. Please see Part I, Item 1A. Risk
Factors, in the Company's Form 10-K for the fiscal year ended December 27, 2020
for further information.
Brand Blueprint Strategy
Hasbro's strategic plan is centered around the Hasbro Brand Blueprint, a
framework for bringing compelling and expansive brand experiences to consumers
and audiences around the world. Our brands are story-led consumer franchises
brought to life

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
through a wide array of consumer products, digital gaming and compelling content
offered across a multitude of platforms and media. Hasbro's purpose of making
the world a better place for all children, fans and families sits at the center
of the Hasbro Brand Blueprint and is a key driver of Hasbro brands and content.
The development and execution of our brands and content are informed by our
proprietary consumer insights, which help us understand the behavior of our
consumers, from a consumption of content and play standpoint. We have learned
that consumers will travel with a brand that they love across multiple forms and
formats, including our core historical strength of toys and games and licensed
consumer products, as well as digital gaming and story-led entertainment, such
as short-form content online and long-form content in television and film. As
the global consumer landscape, shopping behaviors and the retail and
entertainment environments continue to evolve, we continue to adapt and refine
our business strategy. This process includes reexamining the ways we organize
across the Hasbro Brand Blueprint, re-shaping our business into a more adaptive
and digitally-driven organization, expanding our ecommerce capabilities and
attracting and developing a high-performing and diverse workforce through human
capital investments.
Third quarter 2021 highlights:
•Third quarter net revenues were $1,970.0 million compared to $1,776.6 million
in the third quarter of 2020 and included a favorable foreign currency
translation of $13.1 million. Absent the favorable impact of foreign currency
exchange, third quarter net revenues increased 10%.
•Net revenues in the Entertainment segment increased 76% to $327.1 million;
Wizards of the Coast and Digital Gaming segment net revenues increased 32% to
$360.2 million; and Consumer Products segment net revenues declined 3% to
$1,282.7 million.
•TV/Film/Entertainment portfolio net revenues increased 58%; Hasbro Gaming net
revenues increased 18%; Emerging Brands net revenues increased 15%; Franchise
Brands net revenues increased 9%; and net revenues from Partner Brands decreased
10% in the third quarter of 2021.
•Operating profit was $367.9 million, or 19% of net revenue, in the third
quarter of 2021 compared to operating profit of $336.6 million, or 19% of net
revenue, in the third quarter of 2020.
•Third quarter 2021 operating profit was negatively impacted by $19.7 million
($16.3 million after-tax) of eOne acquired intangible asset amortization and
$2.0 million ($1.7 million after-tax) of expense associated with retention
awards granted in connection with the eOne acquisition.
•Third quarter 2020 operating profit was negatively impacted by $24.7 million
($19.7 million after-tax) of eOne acquired intangible asset amortization and
acquisition and related expenses of $5.9 million ($4.7 million after-tax).
•Net earnings attributable to Hasbro, Inc. of $253.2 million, or $1.83 per
diluted share, in the third quarter of 2021 compared to net earnings of $220.9
million, or $1.61 per diluted share, in the third quarter of 2020.
•Third quarter 2020 net earnings included incremental income tax expense of
$13.6 million, or $0.10 per diluted share, related to a change in the United
Kingdom ("UK") tax code.
First nine months 2021 highlights:
•Net revenues increased 18% to $4,407.0 million in first nine months of 2021
compared to $3,742.5 million in the first nine months of 2020. The increase in
net revenues included $66.5 million of favorable foreign currency translation.
Absent the impact of foreign currency exchange, net revenues increased 16%.
•Net revenues in the Wizards of the Coast and Digital Gaming segment increased
50% to $1,008.7 million; Entertainment segment net revenues increased 17% to
$772.5 million; and Consumer Products segment net revenues increased 9% to
$2,625.8 million.
•Net revenues from Franchise Brands increased 28%; Emerging Brands net revenues
increased 23%; TV/Film/Entertainment portfolio net revenues increased 11%;
Hasbro Gaming net revenues increased 9%; and Partner Brands net revenues
increased 5% during the first nine months of 2021.
•Operating profit was $591.8 million, or 13% of net revenues, in the first nine
months of 2021 compared to operating profit of $315.5 million, or 8% of net
revenues, in the first nine months of 2020.
•Operating profit in the first nine months of 2021 was negatively impacted by a
pre-tax non-cash impairment charge of $101.8 million and pre-tax cash
transaction expenses of $9.5 million ($7.3 million after-tax) associated with
the sale of eOne Music; $66.4 million ($55.0 million after-tax) of eOne acquired
intangible asset amortization; and $5.8 million ($5.0 million after-tax) of
expense associated with retention awards granted in connection with the eOne
acquisition.

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
•Operating profit in the first nine months of 2020 was negatively impacted by
acquisition and related expenses of $166.0 million ($140.7 million after-tax);
$72.3 million ($57.5 million after-tax) of eOne acquired intangible asset
amortization; and $11.5 million ($10.2 million after-tax) of restructuring
charges associated with cost savings initiatives.
•Net earnings attributable to Hasbro, Inc. were $346.5 million, or $2.51 per
diluted share, in the first nine months of 2021 compared to net earnings
attributable to Hasbro, Inc. of $117.3 million, or $0.85 per diluted share, in
the first nine months of 2020.
•In addition to the negative impacts to operating profit described above, net
earnings in the first nine months of 2021 were impacted by incremental income
tax expense of $39.4 million, $0.28 per diluted share, related to a change in
the UK tax code.
•In addition to the negative impacts to operating profit described above, net
earnings in the first nine months of 2020 were impacted by incremental income
tax expense of $13.6 million, or $0.10 per diluted share, related to a change in
the UK tax code.
The impact of changes in foreign currency exchange rates used to translate the
consolidated statements of operations is quantified by translating the current
period revenues at the prior period exchange rates and comparing this amount to
the prior period reported revenues. The Company believes that the presentation
of the impact of changes in exchange rates, which are beyond the Company's
control, is helpful to an investor's understanding of the performance of the
underlying business.
SUMMARY OF FINANCIAL PERFORMANCE
A summary of the results of operations is illustrated below for the quarters and
nine-month periods ended September 26, 2021 and September 27, 2020.
                                                     Quarter Ended                         Nine Months Ended
                                           September 26,       September 27,       September 26,       September 27,
                                               2021                2020                2021                2020
Net revenues                               $  1,970.0          $  1,776.6          $  4,407.0          $  3,742.5
Operating profit                                367.9               336.6               591.8               315.5
Earnings before income taxes                    323.4               299.2               494.0               183.5
Net earnings                                    254.9               220.0               350.5               119.2
Net earnings (loss) attributable to
noncontrolling interests                          1.7                (0.9)                4.0                 1.9
Net earnings attributable to Hasbro, Inc.       253.2               220.9               346.5               117.3
Diluted earnings per share                       1.83                1.61                2.51                0.85


RESULTS OF OPERATIONS - CONSOLIDATED
Third Quarter 2021
The quarters ended September 26, 2021 and September 27, 2020 were each 13-week
periods.
Consolidated net revenues for the third quarter of 2021 increased $193.4
million, or 11%, to $1,970.0 million compared to the third quarter of 2020,
including a favorable $13.1 million impact from foreign currency translation as
a result of strengthening currencies, primarily in the Company's Latin American
and Asia Pacific regions during the third quarter of 2021 compared to 2020.
Operating profit for the third quarter of 2021 was $367.9 million, or 19% of net
revenues, compared to operating profit of $336.6 million, or 19% of net
revenues, for the third quarter of 2020. The operating profit increase was
driven primarily by higher revenues and a favorable product mix, and to a lesser
extent, lower royalty expense and lower intangible asset amortization expense.
These favorable results were partially offset by higher freight costs due to
shipping cost increases and the use of air freight to manage supply chain
disruptions, as well as higher product cost amortization, higher development
costs and higher advertising costs. Operating profit during the third quarter of
2021 reflects $19.7 million ($16.3 million after-tax) of eOne acquired
intangible asset amortization and $2.0 million ($1.7 million after-tax) of
expense associated with retention awards granted in connection with the eOne
acquisition. Operating profit during the third quarter of 2020 reflects $24.7
million ($19.7 million after-tax) of expenses related to eOne acquired
intangible asset amortization and $5.9 million ($4.7 million after-tax) of
acquisition and related costs.

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
Net earnings attributable to Hasbro, Inc. were $253.2 million for the third
quarter of 2021 compared to net earnings of $220.9 million for the third quarter
of 2020. Diluted earnings per share attributable to Hasbro, Inc. for the third
quarter of 2021 were $1.83, compared to diluted earnings per share of $1.61 in
the third quarter of 2020 and reflect the negative impact of $0.12 per diluted
share and $0.01 per diluted share from eOne acquired intangible asset
amortization and costs associated with retention awards, respectively. Diluted
earnings per share in 2020 reflect the negative impact of eOne acquired
intangible asset amortization of $0.14 per diluted share, incremental income tax
expense related to a change in the UK tax code of $0.10 per diluted share and
acquisition and related costs of $0.03 per diluted share.
The following table presents net revenues by brand and entertainment portfolio
for the quarters ended September 26, 2021 and September 27, 2020.
                                             Quarter Ended
                                                                           %
                         September 26, 2021      September 27, 2020      Change
Franchise Brands        $            882.0      $            807.5          9  %
Partner Brands                       366.7                   409.2        -10
Hasbro Gaming                        281.9                   239.2         18
Emerging Brands                      177.5                   155.0         15
TV/Film/Entertainment                261.9                   165.7         58
Total                   $          1,970.0      $          1,776.6         11  %


FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio increased 9% in
the third quarter of 2021 compared to the third quarter of 2020. The majority of
the increase in 2021 was driven by higher net revenues from MAGIC: THE GATHERING
products as a result of the Adventures in Forgotten Realms and Innistrad:
Midnight Hunt set releases during the third quarter, and higher net revenues
from MY LITTLE PONY due to the September 2021 release of the feature length
film, MY LITTLE PONY: A NEW GENERATION and the launch of the associated product
line. To a lesser extent, net revenues from TRANSFORMERS increased, supported by
the release of the final chapter of the TRANSFORMERS: WAR FOR CYBERTRON trilogy
in July 2021. These increases were partially offset by lower net revenues from
PLAY-DOH products during the third quarter of 2021.
PARTNER BRANDS: Net revenues from the Partner Brands portfolio decreased 10% in
the third quarter of 2021 compared to the third quarter of 2020. Within the
Partner Brands portfolio, there are a number of brands which are reliant on
related entertainment, including television and movie releases. As such, net
revenues by partner brand, fluctuate depending on entertainment popularity,
release dates and related product line offerings and success. Historically these
entertainment-based brands experience higher revenues during years in which new
content is released in theaters, for broadcast, and on streaming platforms.
During the third quarter of 2021, Partner Brands net revenue decreases were
primarily driven by declines in DISNEY FROZEN products, as a result of the
entertainment support in the prior year from the November 2019 theatrical
release of DISNEY'S FROZEN 2, and net revenue declines from STAR WARS products,
compared to a strong third quarter in 2020, in anticipation of the October 2020
release of the Disney+ streaming series STAR WARS: THE MANDALORIAN, season two,
as well as lower sales of products for TROLLS as a result of the entertainment
support in the prior year from the TROLLS WORLD TOUR film, released in April
2020. Partially offsetting these declines was growth in Hasbro products for
MARVEL and DISNEY PRINCESS and to a lesser extent, GHOSTBUSTERS products. The
Company's MARVEL products benefited from fan support, primarily in the U.S.,
across multiple properties including MARVEL LEGENDS and the launch of the
preschool product line supporting Spidey and His Amazing Friends, a children's
animated television series, as well as from the introduction of products
supported by the theatrical release of Shang-Chi and the Legend of the Ten Rings
in September 2021. The Company's DISNEY PRINCESS products were supported by
recent entertainment releases including RAYA and THE LAST DRAGON which premiered
in March 2021, and from the library of Disney Princess films available on
Disney+.
HASBRO GAMING: Net revenues in the Hasbro Gaming portfolio increased 18% in the
third quarter of 2021 compared to the third quarter of 2020. Higher net revenues
were driven by net revenue increases from DUNGEONS & DRAGONS products as well as
net revenue increases from classic games including LIFE and CONNECT 4 products.
Net revenues for Hasbro's total gaming category, including the Hasbro Gaming
portfolio as reported above and all other gaming revenue, most notably revenues
from MAGIC: THE GATHERING and MONOPOLY products, which are included in the
Franchise Brands portfolio, totaled $658.6 million for the third quarter of
2021, an increase of 21%, as compared to $543.1 million in the third quarter of
2020.

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
EMERGING BRANDS: Net revenues from the Emerging Brands portfolio increased 15%
during the third quarter of 2021 compared to the third quarter of 2020. Net
revenue increases were driven by the launch of the Company's first PEPPA PIG and
PJ MASKS product lines during the third quarter of 2021, and to a lesser extent,
higher net revenues from GI JOE products. These increases were partially offset
by lower net revenues from POWER RANGERS, POTATO HEAD and FURREAL FRIENDS
products during the third quarter of 2021.
TV/FILM/ENTERTAINMENT: During the third quarter of 2021, net revenues from the
TV/Film/Entertainment portfolio increased 58% compared to the third quarter of
2020 as the entertainment industry continues to recover from the impact of the
COVID-19 pandemic. Net revenue increases during the third quarter of 2021 were
driven by scripted television deliveries that include YELLOWJACKETS and THE
ROOKIE, as well as from certain other scripted and unscripted programs compared
to the third quarter of 2020 where deliveries were limited or delayed. In
addition, feature length film deliveries, including FINCH and COME FROM AWAY,
contributed to the TV/Film/Entertainment portfolio net revenue increase during
the third quarter of 2021.
First Nine Months 2021
The nine-month periods ended September 26, 2021 and September 27, 2020 were each
39-week periods.
For the first nine months of 2021, consolidated net revenues increased 18% to
$4,407.0 million including a favorable variance of $66.5 million as a result of
foreign currency translation due to strengthening currencies primarily across
the Company's European and to a lesser extent, Asia Pacific and Latin American
markets, when compared to the first nine months of 2020.
Operating profit for the first nine months of 2021 was $591.8 million, or 13% of
net revenues, compared to operating profit of $315.5 million, or 8% of net
revenues, for the first nine months of 2020. The increase in operating profit
was driven by higher revenues and favorable product mix, partially offset by
increased costs to drive the business including, higher program amortization
costs, product development costs, marketing and advertising costs and higher
freight costs due to shipping cost increases. Operating profit during the first
nine months of 2021 reflects a pre-tax non-cash impairment charge of $101.8
million included within Loss on Disposal of Business and transaction costs of
$9.5 million ($7.3 million after-tax) included within Selling, Distribution and
Administration, associated with the sale of eOne Music, as well as $66.4 million
($55.0 million after-tax) of expenses related to eOne acquired intangible asset
amortization and $5.8 million ($5.0 million after-tax) of expense for retention
awards granted in connection with the eOne acquisition. Operating profit during
the first nine months of 2020 was reflects acquisition and related costs of
$166.0 million ($140.7 million after-tax); $72.3 million ($57.5 million
after-tax) of expenses related to eOne acquired intangible asset amortization;
and restructuring charges associated with cost savings initiatives of $11.5
million ($10.2 million after-tax).
Net earnings attributable to Hasbro, Inc. were $346.5 million for the first nine
months of 2021 compared to net earnings of $117.3 million for the first nine
months of 2020. In addition to the negative impacts to operating profit
described above, net earnings in the first nine months of 2021 were impacted by
incremental income tax expense of $39.4 million related to a change in the UK
tax code. Diluted earnings per share attributable to Hasbro, Inc. were $2.51 in
the first nine months of 2021, compared to diluted earnings per share of $0.85
in the first nine months of 2020. Net earnings attributable to Hasbro, Inc. for
the first nine months of 2021 reflect the negative impact of a non-cash
impairment charge and transaction expenses, totaling $0.79 per diluted share,
associated with the sale of eOne Music, incremental income tax expense related
to a change in the UK tax code of $0.28 per diluted share, as well as the impact
of eOne acquired intangible asset amortization of $0.40 per diluted share and
costs associated with retention awards of $0.04 per diluted share. Net earnings
for the first nine months of 2020 reflect the negative impact of acquisition
related costs and eOne acquired intangible asset amortization of $1.02 per
diluted share and $0.42 per diluted share, respectively, as well as incremental
income tax expense related to a change in the UK tax code of $0.10 per diluted
share and restructuring charges associated with cost savings initiatives of
$0.07 per diluted share.
The following table presents net revenues by product category for the first nine
months of 2021 and 2020.
                                           Nine Months Ended
                                                                           %
                         September 26, 2021      September 27, 2020      Change
Franchise Brands        $          2,023.4      $          1,580.9         28  %
Partner Brands                       766.7                   729.8          5
Hasbro Gaming                        565.3                   516.3          9
Emerging Brands                      399.2                   325.1         23
TV/Film/Entertainment                652.4                   590.4         11
Total                   $          4,407.0      $          3,742.5         18  %

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio increased 28%
in the first nine months of 2021 compared to 2020. Higher net revenues from
MAGIC: THE GATHERING products, as a result of successful card set releases,
drove the majority of the increase during the first nine months of 2021. To a
lesser extent, higher net revenues from NERF products, most notably in the US,
higher net revenues from the MY LITTLE PONY brand, due to the release of MY
LITTLE PONY: A NEW GENERATION and the launch of the associated product line, and
higher net revenues from TRANSFORMERS and PLAY-DOH products contributed to the
increase during the first nine months of 2021.
PARTNER BRANDS: Net revenues from the Partner Brands portfolio increased 5%
during the first nine months of 2021 compared to 2020. Net revenue increases
from the Company's MARVEL, DISNEY PRINCESS and STAR WARS products drove growth
in the Partner Brands portfolio during the first nine months of 2021, and to a
lesser extent, GHOSTBUSTERS products contributed to net revenue growth. The
Company's MARVEL products benefited from fan support, primarily in the U.S., and
from the September 2021 theatrical release of SHANG-CHI AND THE LEGEND OF THE
TEN RINGS. The Company's DISNEY PRINCESS and STAR WARS products benefited from
entertainment releases including Disney's RAYA and THE LAST DRAGON which
premiered in March 2021, availability of the library of Disney Princess films on
Disney+, and from the Disney+ streaming series, STAR WARS: THE MANDALORIAN,
season two, released during the fourth quarter of 2020. These increases were
partially offset by net revenue declines from TROLLS and DISNEY FROZEN products
as a result of the entertainment support in the prior year from the TROLLS WORLD
TOUR film, released in April 2020 and the November 2019 theatrical release of
DISNEY'S FROZEN 2.
HASBRO GAMING: Net revenues in the Hasbro Gaming portfolio increased 9% in the
first nine months of 2021 compared to the first nine months of 2020 driven by
increased net revenues from DUNGEONS & DRAGONS, GUESS WHO and THE GAME OF LIFE
products, partially offset by net revenue decreases from JENGA and certain other
Hasbro Gaming products.
Net revenues for Hasbro's total gaming category, including the Hasbro Gaming
portfolio as reported above and all other gaming revenue, most notably from
MAGIC: THE GATHERING and MONOPOLY products, which are included in the Franchise
Brands portfolio, were $1,543.3 million, an increase of 28%, in the first nine
months of 2021 versus $1,202.6 million in the first nine months of 2020.
EMERGING BRANDS: Net revenues from the Emerging Brands portfolio grew 23% for
the first nine months of 2021 compared to the first nine months of 2020. Net
revenue increases were primarily driven by the Company's launch of its first
PEPPA PIG and PJ MASKS products during the third quarter of 2021, as well as
from GI JOE products, which benefited from the July 2021 theatrical release,
SNAKE EYES: G.I. JOE ORIGINS. These increases were partially offset by lower net
revenues from POWER RANGERS and LITTLEST PET SHOP products during the first nine
months of 2021.
TV/FILM/ENTERTAINMENT: During the first nine months of 2021, net revenues from
the TV/Film/Entertainment portfolio increased 11% compared to the first nine
months of 2020. In 2020, the shutdown of live action TV and film productions and
theatrical releases, beginning late in the first quarter of 2020 as a result of
the COVID-19 pandemic, had a significant impact on entertainment deliveries
during the second half of 2020 and first nine months of 2021. However, as of the
end of the third quarter 2021, the Company's production studios were operating
at pre-pandemic levels across all businesses.
The drivers of the net revenue increase during the first nine months of 2021
include higher scripted television production deliveries, most notably from
YELLOWJACKETS and THE ROOKIE series, and higher licensing, production and
transactional revenues from programming featuring the Company's brands. These
increases were partially offset by lower distribution revenues overall, due to
the gap in available entertainment deliveries in 2021, as a result of the
conditions described above.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
SEGMENT RESULTS
Third Quarter 2021
The following table presents net external revenues and operating profit data for
the Company's principal segments for the quarters ended September 26, 2021 and
September 27, 2020:
                                                                          Quarter Ended
                                                   September 26,        September 27,                %
                                                        2021                 2020                 Change
Net Revenues
Consumer Products segment                          $   1,282.7          $   1,317.8                      -3  %
Wizards of the Coast and Digital Gaming segment          360.2                273.4                      32  %
Entertainment segment *                                  327.1                185.4                      76  %

Operating Profit (Loss)
Consumer Products segment                          $     210.4          $     226.2                      -7  %
Wizards of the Coast and Digital Gaming segment          159.4                141.6                      13  %
Entertainment segment *                                   22.4                (28.3)                    > 100%


* Entertainment segment net revenues and operating profit (loss), for the
quarter ended September 27, 2020 include $28.7 million and $1.0 million,
respectively, from eOne Music.
Consumer Products Segment
The Consumer Products segment net revenues declined 3% to $1,282.7 million for
the third quarter of 2021 compared to $1,317.8 million for the third quarter of
2020, due in part to declines in shipments as a result of supply chain
disruption in the U.S. and Europe and included the impact of a favorable $6.8
million currency translation. Drivers of the net revenue decrease include lower
sales of DISNEY FROZEN and STAR WARS products as well as lower sales of PLAY-DOH
and TROLLS products during the third quarter. These sales declines were
partially offset by higher sales of PJ MASKS and PEPPA PIG products, following
the launch of the Company's own product lines for these brands during the third
quarter of 2021, higher sales of the Company's products for MARVEL and DISNEY
PRINCESS, and higher sales within Hasbro Gaming products. Net revenues declined
across North America, Europe and the Asia Pacific regions while in Latin
American markets, where the favorable impact of foreign currency exchange was
more significant compared to other regions, net revenue remained relatively flat
absent the positive impact from foreign currency exchange of $3.4 million.
Consumer Products segment operating profit for the third quarter of 2021 was
$210.4 million or 16% of segment net revenues, compared to segment operating
profit of $226.2 million or 17% of segment net revenues, for the third quarter
of 2020. The operating profit decrease in the third quarter of 2021 was driven
by lower segment net revenues as described above, higher product costs and
distribution costs as a result of global supply chain disruptions, including
higher ocean freight rates and increases in air freight costs. These negative
impacts were partially offset by price increases, lower intangible asset
amortization costs and lower royalty expenses due to lower sales of Partner
Brands products during the third quarter of 2021.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
The following table presents the Consumer Products segment net revenues by major
geographic region for the quarters ended September 26, 2021 and September 27,
2020.
                                 Quarter Ended
                   September 26, 2021      September 27, 2020
North America     $            805.0      $            830.1
Europe                         304.2                   316.8
Asia Pacific                    75.5                    78.2
Latin America                   98.0                    92.7
Net Revenues      $          1,282.7      $          1,317.8



Wizards of the Coast and Digital Gaming Segment
Wizards of the Coast and Digital Gaming segment net revenues increased 32% in
the third quarter of 2021 to $360.2 million from $273.4 million in the third
quarter of 2020 and included the impact of a favorable $2.0 million foreign
currency translation.
The net revenue increase in the Wizards of the Coast and Digital Gaming segment
during the third quarter of 2021 was attributable to net revenue increases from
Wizards of the Coast table-top and digital gaming products, most notably, MAGIC:
THE GATHERING, driven by the Adventures in Forgotten Realms and Innistrad:
Midnight Hunt set releases, as well as higher sales from Magic: The Gathering
Arena mobile and net revenue contributions from Dungeons & Dragons: Dark
Alliance, launched during the first half of 2021.
Wizards of the Coast and Digital Gaming segment operating profit was $159.4
million, or 44% of segment net revenues for the third quarter of 2021, compared
to operating profit of $141.6 million, or 52% of segment net revenues, for the
third quarter of 2020. The operating profit increase during the third quarter of
2021 was the result of increased sales and product launches described above,
partially offset by higher development costs, advertising costs and
administrative costs, including depreciation expense, primarily related to costs
to support the Company's digital gaming initiatives.
Entertainment Segment
Entertainment segment net revenues increased 76% to $327.1 million for the third
quarter of 2021, compared to $185.4 million for the third quarter of 2020 and
included the impact of a favorable $4.2 million foreign currency translation.
The net revenue increase during the third quarter was driven by higher
deliveries of scripted television and film programming following the return of
live-action entertainment production in late 2020 and throughout 2021. Also
contributing to the increase were higher net revenues from streaming content
deals related to programming featuring the Company's brands, as well as revenue
recognized due to the delivery of MY LITTLE PONY: A NEW GENERATION, the feature
length film released on the steaming service, Netflix in September and released
theatrically on a limited basis. These increases were partially offset by the
sale of the eOne Music business in the third quarter of 2021 and lower film
distribution revenues in 2021, as a result of the limited production of
live-action feature length films in 2020.
Entertainment segment operating profit was $22.4 million, or 7% of segment net
revenues for the third quarter of 2021 compared to operating losses of $28.3
million, or 15% of segment net revenues for the third quarter of 2020.
The operating profit increase during the third quarter of 2021 was driven by the
net revenue increase described above and lower administrative costs, partially
offset by higher program cost amortization, advertising costs and royalty
expenses. The operating results for the third quarter of 2021 and 2020 included
$19.7 million and $24.7 million, respectively, of incremental intangible
amortization costs related to the intangible assets acquired in the eOne
Acquisition.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)

The following table presents Entertainment segment net revenues by category for the quarters ended September 26, 2021 and September 27, 2020.

                                    Quarter Ended
                     September 26, 2021       September 27, 2020
Film and TV         $             255.4      $             141.6
Family Brands                      60.5                     14.2
Music and Other *                  11.2                     29.6
Net revenues        $             327.1      $             185.4


*Music and Other category net revenues for the quarter ended September 27, 2020
includes $28.7 million related to eOne Music.
Corporate and Other Segment
The Corporate and Other segment operating losses were $24.3 million for the
third quarter of 2021 compared to operating losses of $2.9 million for the third
quarter of 2020. Operating losses in 2021 were driven by higher administrative
expenses due primarily to higher compensation expense including retention costs
of $1.9 million related to the eOne acquisition and higher advertising and
promotional costs. Operating losses in 2020 included acquisition and integration
costs of $4.6 million and certain restructuring and related costs of $1.3
million associated with the acquisition of eOne.
First Nine Months 2021
The following table presents net revenues and operating profit (loss) for the
Company's principal segments for each of the nine-month periods ended
September 26, 2021 and September 27, 2020.
                                                                        Nine Months Ended
                                                   September 26,        September 27,                %
                                                        2021                 2020                 Change
Net Revenues
Consumer Products segment                          $   2,625.8          $   2,409.8                       9  %
Wizards of the Coast and Digital Gaming segment        1,008.7                670.7                      50  %
Entertainment segment                                    772.5                662.0                      17  %

Operating Profit (Loss)
Consumer Products segment                          $     260.5          $     171.2                      52  %
Wizards of the Coast and Digital Gaming segment          462.3                311.5                      48  %
Entertainment segment                                    (74.3)              (106.1)                     30  %


* Entertainment segment net revenues for nine-month periods ended September 26,
2021 and September 27, 2020 include $65.2 million and $86.6 million,
respectively, from eOne Music.
Consumer Products Segment
The Consumer Products segment net revenues increased 9% to $2,625.8 million for
the first nine months of 2021 compared to $2,409.8 million for the first nine
months of 2020 and included the impact of a favorable $34.9 million currency
translation. The drivers of the net revenue increase include higher sales of
NERF and TRANSFORMERS products as well as higher sales of the Company's Partner
Brands for MARVEL and DISNEY PRINCESS. To a lesser extent were higher sales of
PJ MASKS and PEPPA PIG products, following the launch of the Company's own
product lines for these brands during the third quarter of 2021. Partially
offsetting these increases were lower sales of certain Partner Brands, notably,
the Company's products for DISNEY FROZEN and TROLLS. Revenue grew across all
geographic regions, most notably in the U.S. and Europe, and to a lesser extent,
in the Company's Latin American and Asia Pacific markets.
Consumer Products segment operating profit for the first nine months of 2021 was
$260.5 million or 10% of segment net revenues, compared to segment operating
profit of $171.2 million or 7% of segment net revenues, for the first nine
months of 2020. The operating profit increase in the first nine months of 2021
was driven by higher segment net revenues as described above, partially offset
by higher royalty expenses from higher sales of the Company's Partner Brand
products, higher advertising costs as a result of the overall sales increases
within the segment as well as higher rates for ocean freight and increases in
air freight costs during the first nine months of 2021.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)

The following table presents the Consumer Products segment net revenues by major geographic region for the nine-month periods ended September 26, 2021 and September 27, 2020.

                               Nine Months Ended
                   September 26, 2021      September 27, 2020
North America     $          1,559.1      $          1,434.9
Europe                         669.2                   615.4
Asia Pacific                   208.7                   197.1
Latin America                  188.8                   162.4
Net Revenues      $          2,625.8      $          2,409.8


Wizards of the Coast and Digital Gaming Segment
Wizards of the Coast and Digital Gaming segment net revenues increased 50% in
the first nine months of 2021 to $1,008.7 million from $670.7 million in the
first nine months of 2020 and included the impact of a favorable $13.6 million
foreign currency translation.
The net revenue increase in the Wizards of the Coast and Digital Gaming segment
during the first nine months of 2021 was attributable to net revenue increases
from Wizards of the Coast table-top and digital gaming products, most notably,
MAGIC THE GATHERING, driven by the number of strong performing card set
releases, and from DUNGEONS & DRAGONS table-top games. In addition to these
increases were higher digital gaming sales from Magic: The Gathering Arena and
net revenue contributions associated with the launch of Dungeons & Dragons: Dark
Alliance during the second quarter 2021. In addition to the net revenue
increases from the Company's Wizards of the Coast business, the segment
benefited from growth in certain of the Company's licensed digital games.
Wizards of the Coast and Digital Gaming segment operating profit was $462.3
million, or 46% of segment net revenues for the first nine months of 2021,
compared to operating profit of $311.5 million, or 46% of segment net revenues
for the first nine months of 2020. The operating profit increase during the
first nine months of 2021 was the result of increased sales volumes as described
above, partially offset by higher product development costs and administrative
expenses, including depreciation expense, and higher advertising costs,
primarily related to support of the Company's digital gaming initiatives and
tabletop set releases throughout 2021.
Entertainment Segment
Entertainment segment net revenues for the nine months ended September 26, 2021
increased 17% to $772.5 million from $662.0 million for the nine months ended
September 27, 2020 and included the impact of a favorable $18.0 million foreign
currency translation. The segment net revenue increase was primarily driven by
higher deliveries of scripted programming following the return of live-action
entertainment production in late 2020 and throughout 2021. Also contributing to
the increase were higher net revenues from streaming content deals related to
programming featuring the Company's brands, as well as revenue recognized due to
the delivery of MY LITTLE PONY: A NEW GENERATION. These increases were partially
offset by the sale of the eOne Music business during the third quarter of 2021
and lower film distribution revenues in 2021.
The Entertainment segment operating losses were $74.3 million, or 10% of net
revenues, for the nine months ended September 26, 2021, compared to operating
losses of $106.1 million, or 16% of segment net revenues, for the nine months
ended September 27, 2020. The 2021 results were negatively impacted by a
non-cash impairment charge of $101.8 million associated with the sale of eOne
Music and $66.4 million of incremental intangible amortization costs related to
the intangible assets acquired in the eOne Acquisition. The 2020 results were
impacted by $77.7 million of acquisition and integration costs consisting of
$47.4 million of expense associated with the acceleration of eOne stock-based
compensation and $24.5 million of advisor fees settled at the closing of the
acquisition, as well as $72.4 million of incremental intangible amortization
costs related to the intangible assets acquired in the eOne Acquisition and
$20.8 million in impairment charges for certain production assets.
The improvement in Entertainment segment operating results during the first nine
months of 2021 was driven by increased net revenues described above and lower
advertising expenses due to declined theatrical activity, partially offset by
higher program cost amortization due to the delivery of certain television
programming that carries higher costs.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)

The following table presents Entertainment segment net revenues by category for the nine-month periods ended September 26, 2021 and September 27, 2020.

                                  Nine Months Ended
                     September 26, 2021       September 27, 2020
Film and TV         $             586.1      $             514.5
Family Brands                     105.4                     58.9
Music and Other *                  81.0                     88.6
Net revenues        $             772.5      $             662.0


*Music and Other category net revenues for nine-month periods ended September
26, 2021 and September 27, 2020 include $65.2 million and $86.6 million,
respectively, from eOne Music.
Corporate and Other Segment
Operating losses in the Corporate and Other Segment for the first nine months of
2021 were $56.7 million, compared to operating losses of $61.1 million for the
first nine months of 2020. Operating losses in 2021 were driven by higher
administrative expenses and advertising costs. Administrative expenses include
$9.5 million of transaction costs associated with the sale of eOne Music and
higher compensation expense, including retention costs of $5.8 million in
relation to the eOne acquisition. Operating losses in the first nine months of
2020 were driven primarily by charges related to the eOne Acquisition; including
acquisition and integration costs of $26.6 million and restructuring and related
costs of $40.8 million. In addition to the charges associated with the eOne
Acquisition, the Company incurred $11.6 million of severance charges associated
with cost-savings initiatives.
OPERATING COSTS AND EXPENSES
Third Quarter 2021
The Company's costs and expenses, stated as percentages of net revenues, are
illustrated below for the quarters ended September 26, 2021 and September 27,
2020.
                                                            Quarter Ended
                                              September 26, 2021      September 27, 2020
Cost of sales                                             30.9  %                 34.3  %
Program cost amortization                                  9.5  %                  4.8  %
Royalties                                                  8.7  %                 10.0  %
Product development                                        4.1  %                  3.5  %
Advertising                                                8.3  %                  7.7  %
Amortization of intangibles                                1.4  %                  2.0  %
Selling, distribution and administration                  18.4  %                 18.3  %
Acquisition and related costs                                -  %                  0.3  %


Cost of sales for the third quarter of 2021 was $609.5 million, or 30.9% of net
revenues, compared to $610.1 million, or 34.3% of net revenues, for the third
quarter of 2020. Cost of sales was consistent in dollars due to higher sales
volumes and, to a lesser extent, from the impact of $3.3 million of foreign
currency exchange, offset by higher freight costs. The cost of sales decrease as
a percent of net revenues was driven by product mix, primarily from higher sales
of Wizards of the Coast table-top games and higher entertainment revenues.
Program cost amortization increased to $187.9 million, or 9.5% of net revenues,
for the third quarter of 2021 from $85.4 million, or 4.8% of net revenues, for
the third quarter of 2020. Program costs are capitalized as incurred and
amortized using the individual-film-forecast method which matches costs to the
related recognized revenue. The increase in dollars and as a percent of net
revenues during the third quarter of 2021 was driven by higher programming
revenues, primarily from scripted television deliveries and amortization of film
production expenses associated with the MY LITTLE PONY: A NEW GENERATION
production asset, compared to the third quarter of 2020.
Royalty expense for the third quarter of 2021 decreased to $171.8 million, or
8.7% of net revenues, compared to $176.9 million, or 10.0% of net revenues, for
the third quarter of 2020. Fluctuations in royalty expense are generally related
to the volume of

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
content releases and deliveries and entertainment-driven products sold. The
decrease in royalty expense in dollars was driven by the impact of the sale of
eOne Music combined with lower sales of Partner Brand products in the third
quarter of 2021 as compared to the third quarter of 2020. The decrease in
royalty expense as a percent of net revenues during the third quarter of 2021
was the result of a higher percentage of product sales that do not carry
significant royalty expenses.
Product development expense for the third quarter of 2021 was $80.1 million, or
4.1% of net revenues, compared to $62.7 million, or 3.5% of net revenues, for
the third quarter of 2020. The increase was primarily related to increased
investments in the development of Wizards of the Coast tabletop and digital
gaming initiatives.
Advertising expense for the third quarter of 2021 was $163.3 million, or 8.3% of
net revenues, compared to $137.4 million, or 7.7% of net revenues, for the third
quarter of 2020. Advertising spend is generally impacted by revenue mix and the
number and type of entertainment releases. The advertising expense increase
during the third quarter of 2021 was driven by costs associated with promotion
of the feature length film, MY LITTLE PONY: A NEW GENERATION as well as
promotional spend in support of Wizards of the Coast third quarter set releases,
including Adventures in Forgotten Realms and Innistrad: Midnight Hunt.
Amortization of intangible assets decreased to $27.7 million, or 1.4% of net
revenues, for the third quarter of 2021, compared to $36.2 million, or 2.0% of
net revenues, for the third quarter of 2020. The decrease is related to the
discontinuation of amortization related to the eOne Music intangible assets due
to the sale of the business in the third quarter of 2021, as well as certain
licensed property rights which became fully amortized in the fourth quarter of
2020.
For the third quarter of 2021, the Company's selling, distribution and
administration expenses increased to $361.8 million, or 18.4% of net revenues,
from $325.4 million, or 18.3% of net revenues, for the third quarter of 2020.
The increase in selling, distribution and administration expenses reflects
higher freight and warehousing costs due to higher rates for ocean freight and
increases in air freight costs, as well as higher compensation expense and
higher depreciation expense associated with capitalized games in the Wizards of
the Coast business. These increases were partially offset by lower
administrative costs as a result of the eOne Music sale.
During the third quarter of 2020, the Company incurred $5.9 million of
acquisition and related costs in connection with the eOne Acquisition. These
expenses comprised of $4.6 million of acquisition and integration costs, and
$1.3 million of severance and retention costs.
First Nine Months of 2021
The Company's costs and expenses, stated as percentages of net revenues, are
illustrated below for the nine month periods ended September 26, 2021 and
September 27, 2020.
                                                          Nine Months Ended
                                              September 26, 2021      September 27, 2020
Cost of sales                                             28.2  %                 30.1  %
Program cost amortization                                  9.0  %                  7.2  %
Royalties                                                  8.9  %                 10.3  %
Product development                                        5.2  %                  4.7  %
Advertising                                                8.1  %                  8.3  %
Amortization of intangibles                                2.0  %                  2.9  %
Selling, distribution and administration                  22.8  %                 23.7  %
Loss on disposal of a business                             2.3  %                    -  %
Acquisition and related costs                                -  %           

4.4 %

Cost of sales for the nine months ended September 26, 2021 increased to $1,244.4
million, or 28.2% of net revenues, from $1,126.0 million, or 30.1% of net
revenues for the nine months ended September 27, 2020. The cost of sales
increase in dollars was primarily due to higher sales volumes and higher
inventory costs as a result of increased freight costs and, to a lesser extent,
from the impact of $16.7 million of foreign currency exchange. As a percent of
net revenues, the cost of sales decrease was the result of a favorable product
mix due to higher sales of Wizards of the Coast table-top games and higher
entertainment revenues compared to the first nine months of 2020.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
Program cost amortization increased in the first nine months of 2021 to $396.1
million, or 9.0% of net revenues, from $268.2 million, or 7.2% of net revenues,
in the first nine months of 2020. Programming costs are capitalized as incurred
and amortized using the individual-film-forecast method which matches costs to
the related recognized revenue. The increase during the first nine months of
2021 was the result of higher television programming revenues, primarily from
deliveries that carry higher programming costs, as well as amortization of film
production expenses associated with the MY LITTLE PONY: A NEW GENERATION
production asset.
Royalty expense for the nine months ended September 26, 2021 was $392.2 million,
or 8.9% of net revenues, compared to $387.1 million, or 10.3% of net revenues,
for the nine months ended September 27, 2020. Fluctuations in royalty expense
are generally related to the volume of content releases and deliveries and
entertainment-driven products sold. The increase in royalty expense during the
first nine months of 2021 was driven primarily by higher sales of Partner Brand
products as compared to the first nine months of 2020. The decrease in royalty
expense as a percentage of net revenues was due to product mix, most notably,
higher sales of Wizards of the Coast products, Franchise Brands and higher sales
of certain of the Company's Emerging Brands during the first nine months of
2021.
Product development expense for the nine months ended September 26, 2021
increased to $229.1 million, or 5.2% of net revenues, from $174.9 million, or
4.7% of net revenues, for the nine months ended September 27, 2020. The increase
was primarily related to investments in the Wizards of the Coast and Digital
Gaming segment, for both tabletop and digital gaming initiatives, such as for
the development MAGIC: THE GATHERING table-top set releases and for the
development of digital games such as MAGIC SPELLSLINGERS and Dungeons & Dragons:
Dark Alliance, as well as certain other mobile gaming projects.
Advertising expense for the nine months ended September 26, 2021 was $356.6
million, or 8.1% of net revenues, compared to $311.4 million, or 8.3% of net
revenues, for the nine months ended September 27, 2020. The advertising expense
increase reflects growth in revenues during the first nine months of 2021
compared to the first nine months of 2020 and higher advertising costs in
support of the feature length film MY LITTLE PONY:A NEW GENERATION, and for the
Company's digital initiatives, most notably, Magic: The Gathering Arena and
Dungeons & Dragons: Dark Alliance. These increases were partially offset by
reduced promotional spend in the Entertainment segment due to fewer theatrical
releases during the first nine months of 2021 compared to 2020.
Amortization of intangible assets was $90.3 million, or 2.0% of net revenues,
for the nine months ended September 26, 2021 compared to $107.7 million, or 2.9%
of net revenues, in the first nine months of 2020. The decrease is primarily
related to certain licensed property rights which became fully amortized in the
fourth quarter of 2020 combined with the discontinuation of amortization related
to the eOne Music intangible assets in the second quarter of 2021, upon being
classified as held for sale assets and subsequently sold in the third quarter of
2021.
For the nine months ended September 26, 2021, the Company's selling,
distribution and administration expenses increased to $1,004.7 million, or 22.8%
of net revenues, from $885.7 million, or 23.7% of net revenues, for the nine
months ended September 27, 2020. The increase in selling, distribution and
administration expenses reflects higher marketing and sales costs consistent
with the increase in net revenues, higher compensation expense and increased
freight and warehousing costs primarily due to ongoing global supply chain
disruptions. These increases were partially offset by lower expense for credit
losses during the first nine months of 2021.
The loss on disposal of business of $101.8 million, or 2.3% of net revenues,
represents a non-cash impairment charge associated with the disposition of eOne
Music.
During the first nine months of 2020, the Company incurred $166.0 million of
acquisition and related costs in connection with the eOne Acquisition. These
expenses comprised $104.3 million of acquisition and integration costs,
primarily related to $47.4 million of expense associated with the acceleration
of eOne stock-based compensation and $38.2 million of advisor fees,
substantially all of which were settled at the closing of the acquisition. Also
included in the acquisition and related costs were $61.7 million of
restructuring and related costs including severance and retention costs of $20.8
million, as well as $40.9 million in impairment charges for certain
definite-lived intangible and production assets. The impairment charges of $40.9
million were driven by the change in strategy for the combined company's
entertainment assets.
NON-OPERATING (INCOME) EXPENSE
Interest expense for the third quarter and first nine months of 2021 totaled
$43.3 million and $137.3 million, respectively, compared to $49.4 million and
$153.7 million in the third quarter and first nine months of 2020, respectively.
The decrease in interest expense for the third quarter and first nine months of
2021 primarily reflects long-term debt repayments made during 2021 related to
borrowings utilized for the eOne acquisition, and lower interest rates. These
decreases were partially offset by higher production financing borrowings during
the third quarter and first nine months of 2021.

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
Interest income was $1.8 million and $4.2 million for the third quarter and
first nine months of 2021, respectively, compared to $0.7 million and $6.3
million in the third quarter and first nine months of 2020, respectively. Lower
average interest rates in 2021 compared to 2020 contributed to the decrease for
the nine-month period.
Other expense (income), net was $3.0 million and $(35.3) million for the third
quarter and first nine months of 2021, respectively, compared to other (income),
net of $(11.3) million and $(15.4) million in the third quarter and first nine
months of 2020, respectively. The expense in the third quarter of 2021 included
$9.1 million of debt extinguishment costs in connection with the early repayment
of the Company's $300.0 million of 2.6% notes due 2022, repaid during the third
quarter of 2021. The increase in other income for the first nine months of 2021
was driven by a legal settlement resulting in a $26.7 million gain realized in
2021, partially offset by the $9.1 million of debt extinguishment costs.
INCOME TAXES
Income tax expense totaled $68.5 million on pre-tax earnings of $323.4 million
in the third quarter of 2021 compared to income tax expense of $79.2 million on
pre-tax earnings of $299.2 million in the third quarter of 2020. For the first
nine months of 2021, the income tax expense totaled $143.5 million on pre-tax
earnings of $494.0 million compared to an income tax expense of $64.3 million on
pre-tax earnings of $183.5 million in the first nine months of 2020. Both
periods were impacted by discrete tax events including the accrual of potential
interest and penalties on uncertain tax positions. During the first nine months
of 2021, unfavorable discrete tax adjustments were a net expense of $8.8 million
compared to a net discrete tax benefit of $5.3 million in the first nine months
of 2020. The unfavorable discrete tax adjustments for the first nine months of
2021 are primarily associated with (i) the revaluation of net deferred tax
liabilities as a result of the United Kingdom's ("UK") enactment of Finance Act
2021 during the second quarter, which increases the UK corporate income tax rate
from 19% to 25% as of April 1, 2023; (ii) a one-time tax charge related to an
ongoing tax audit; (iii) a release of a valuation allowance on net operating
losses that offsets income received from a one-time legal settlement; and (iv)
certain tax benefits including the reversal of uncertain tax positions and
operational tax planning. In addition, included in first nine months of 2021 is
a goodwill impairment charge on the sale of the Music business, recorded in the
second quarter of 2021 for which there is no corresponding tax benefit. The
favorable discrete tax adjustments for the first nine months of 2020 primarily
relate to (i) a tax benefit resulting from the eOne acquisition and related
costs incurred; (ii) a tax expense related to the revaluation of net deferred
tax liabilities as a result of the UK's enactment during the third quarter of
Finance Act 2020 which maintained the corporate income tax rate at 19%; and
(iii) a tax expense related to an increase of uncertain tax positions.
Absent discrete items, the tax rate for the first nine months of 2021 and 2020
were 23.3% and 19.9% respectively. The increase in the base rate of 23.3% for
the first nine months of 2021 is primarily due to the mix of jurisdictions where
the Company earned its profits.
Changes in income tax laws could materially impact our recorded deferred tax
assets and liabilities and our effective tax rate. We monitor such rules and
adjust our deferred tax assets and liabilities in the quarter in which such laws
become enacted. Accordingly, we recorded the impact of the UK's Finance Act 2021
upon receiving royal assent on June 10, 2021. The primary impact from this
legislation resulted in the revaluation of deferred net tax liabilities from
eOne, increasing the tax provision by $39.4 million in the first nine months of
2021.
OTHER INFORMATION
Business Seasonality and Shipments
Historically, the revenue pattern of Hasbro's consumer products business has
shown the second half of the year to be more significant to its overall business
than the first half. The Company expects that this concentration will continue,
particularly as more of its business has shifted to larger customers with order
patterns concentrated in the second half of the year around the holiday season.
The concentration of sales in the second half of the year 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.
Overall, the Company's consumer products customer order patterns vary from year
to year largely due to fluctuations in the degree of consumer acceptance of
product lines, product availability, marketing strategies and inventory policies
of retailers, the dates of theatrical releases of major motion pictures for
which we offer products, and changes in economic conditions. Despite the
historical pattern showing a disproportionate volume of net revenues being
earned during the third and fourth quarters leading up to the retail industry's
holiday selling season, including Christmas, comparisons of unshipped orders on
any date, with those of the same date in the prior year, are not necessarily
indicative of our sales for that year. Moreover, quick response, or
just-in-time, inventory management practices result in a significant proportion
of orders being placed for immediate delivery. Although the Company may receive
orders from customers in advance, it is general industry practice that these
orders are subject to amendment or cancellation by customers prior to shipment
and, as such, the Company does not believe that these

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
unshipped orders, at any given date, are necessarily indicative of future sales.
We expect retailers will continue to follow this strategy.
Accounting Pronouncement Updates
In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU
2018-14) Compensation - Retirement Benefits - Defined Benefit Plans - General
(Subtopic 715-20)- Disclosure Framework - Changes to the Disclosure Requirements
for Defined Benefit Plans. The amendments in this update modify the disclosure
requirements for employers that sponsor defined benefit pension or other
postretirement plans. For public companies, this standard is effective for
annual reporting periods beginning after December 15, 2020, and early adoption
is permitted. The Company adopted the standard in the first quarter of 2021 and
the adoption of the standard did not have a material impact on its consolidated
financial statements.
In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (ASU
2019-12), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.
The amendments in this update remove certain exceptions for performing
intra-period tax allocations, recognizing deferred taxes for investments, and
calculating income taxes in interim periods. The guidance also simplifies the
accounting for franchise taxes, transactions that result in a step-up in the tax
basis of goodwill, and the effect of enacted changes in tax laws or rates in
interim periods. ASU 2019-12 is effective for fiscal years beginning after
December 15, 2020 and early adoption is permitted. The Company adopted the
standard in the first quarter of 2021 and the adoption of the standard did not
have a material impact on its consolidated financial statements.
Recently Issued Accounting Pronouncements
In March of 2020, the FASB issued Accounting Standards Update No. 2020-04 (ASU
2020-04) Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting. The amendments in this update
provide optional expedients and exceptions for applying U.S. GAAP to contracts,
hedging relationships, and other transactions, for a limited period of time, to
ease the potential burden of recognizing the effects of reference rate reform on
financial reporting. The amendments in this update apply to contracts, hedging
relationships and other transactions that reference the London Inter-Bank
Offered Rate ("LIBOR") or another reference rate expected to be discontinued due
to the global transition away from LIBOR and certain other interbank offered
rates. An entity may elect to apply the amendments provided by this update
beginning March 12, 2020 through December 31, 2022. The Company does not
currently expect the change from LIBOR to an alternate rate to have a material
impact on its consolidated financial statements, and the Company is continuing
to evaluate the standard's potential impact to its consolidated financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated a significant amount of cash from
operations. In the first nine months of 2021 and 2020, the Company primarily
funded its operations and liquidity needs through cash on hand and cash flows
from operations. In addition, the Company's Entertainment operating segment used
production financing to fund certain of its television and film productions
which are typically arranged on an individual production basis by special
purpose production subsidiaries.
The Company expects to continue to fund its working capital needs primarily
through available cash and cash flows from operations as well as production
financing facilities and, when needed, by issuing commercial paper or borrowing
under its revolving credit agreement. In the event the Company is not able to
issue commercial paper, the Company intends to utilize its available lines of
credit. The Company believes that the funds available to it, including cash
expected to be generated from operations and funds available through its
commercial paper program or its available lines of credit and production
financing are adequate to meet its working capital needs for the remainder of
2021. The Company may also issue debt or equity securities from time to time, to
provide additional sources of liquidity when pursuing opportunities to enhance
our long-term competitive position, while maintaining a strong balance sheet.
However, unexpected events or circumstances such as material operating losses or
increased capital or other expenditures may reduce or eliminate the availability
of external financial resources. In addition, significant disruptions to credit
markets may also reduce or eliminate the availability of external financial
resources. Although the Company believes the risk of nonperformance by the
counterparties to its financial facilities is not significant, in times of
severe economic downturn in the credit markets, it is possible that one or more
sources of external financing may be unable or unwilling to provide funding to
the Company.
As of September 26, 2021, the Company's cash and cash equivalents totaled
$1,181.2 million, of which $94.9 million is restricted under the Company's
production financing facilities.
Prior to 2017, deferred income taxes had not been provided on the majority of
undistributed earnings of international subsidiaries as such earnings were
considered indefinitely reinvested by the Company. The Tax Cuts and Jobs Act of
2017 provided significant changes to the U.S. tax system including the
elimination of the ability to defer U.S. income tax on

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
unrepatriated earnings by imposing a one-time mandatory deemed repatriation tax
on undistributed foreign earnings. As of September 26, 2021, the Company has a
total liability of $156.1 million related to this tax, $18.4 million is
reflected in current liabilities while the remaining long-term payable related
to the Tax Cuts and Jobs Act of 2017 of $137.7 million is presented within other
liabilities, non-current on the Consolidated Balance Sheets. As permitted by the
Tax Act, the Company will pay the transition tax in annual interest-free
installments through 2025. As a result, the related earnings in foreign
jurisdictions are available with greater investment flexibility. The majority of
the Company's cash and cash equivalents held outside of the United States as of
September 26, 2021 is denominated in the U.S. dollar.
Because of the seasonality in the Company's cash flow, management believes that
on an interim basis, rather than discussing only 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, due to the seasonality of its business, 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.
The table below outlines key financial information (in millions of dollars)
pertaining to our consolidated balance sheets including the period-over-period
changes.
                                                    September 26,       September 27,
                                                        2021                2020                 % Change
Cash and cash equivalents (including restricted
cash of $94.9 and $71.2)                            $  1,181.2          $  1,132.4                         4  %
Accounts receivable, net                               1,476.6             1,438.4                         3  %
Inventories                                              544.1               540.0                         1  %
Prepaid expenses and other current assets                528.5               648.2                       -18  %
Other assets                                           1,428.4             1,276.1                        12  %
Accounts payable and accrued liabilities               2,261.9             1,936.3                        17  %
Other liabilities                                        722.5               778.5                        -7  %


Accounts receivable increased 3% to $1,476.6 million at September 26, 2021,
compared to $1,438.4 million at September 27, 2020. The increase in accounts
receivable was driven primarily by higher sales during the first nine months of
2021, partially offset by improved collections, most notably in the Company's
Latin American and Asia Pacific markets. Days sales outstanding decreased from
74 days at September 27, 2020 to 68 days at September 26, 2021 primarily due to
the increase in revenues and mix of sales during the first nine months of 2021
as well as from improved collections described above.
Inventories increased slightly to $544.1 million as of September 26, 2021,
compared to $540.0 million at September 27, 2020 reflecting higher levels,
primarily in the U.S, offset by lower levels in the Company's Asia Pacific and
Latin American markets.
Prepaid expenses and other current assets decreased to $528.5 million at
September 26, 2021 from $648.2 million at September 27, 2020. The decrease was
driven by lower accrued income and prepaid expense balances due to the sale of
eOne Music as well as lower prepaid royalty balances in relation to the
Company's Marvel and Lucasfilm royalty agreements, lower prepaid tax balances,
lower short-term investment balances as a result of the Company's global cash
management strategy and lower unrealized gains on foreign exchange contracts.
Other assets increased to approximately $1,428.4 million at September 26, 2021
from $1,276.1 million at September 27, 2020. The increase was driven by higher
capitalized film and television content and production balances due to increased
investments in productions and acquired content and higher non-current
receivable balances within the Entertainment segment, partially offset by
certain content and production assets sold in connection with the sale of eOne
Music during the third quarter of 2021.
Accounts payable and accrued liabilities increased to $2,261.9 million at
September 26, 2021 from $1,936.3 million at September 27, 2020 driven by higher
account payable balances, higher accrued expenses for investments in content and
productions, higher incentive compensation accruals, higher accrued advertising,
and higher accrued tax balances due to higher earnings during the first nine
months of 2021. These increases were partially offset by lower accrued
participations and residuals, lower accrued marketing costs in connection with
the release of MY LITTLE PONY: A NEW GENERATION and lower balances of certain
accounts payable and accrued liabilities associated with the sale of eOne Music.
Other liabilities decreased to $722.5 million at September 26, 2021 from $778.5
million at September 27, 2020. The decrease was driven by lower long-term lease
liability balances and a lower transition tax liability balance reflecting the
reclassification of the 2021 installment payment, and lower tax reserves
partially offset by higher deferred compensation reserves.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
Cash Flow
The following table summarizes the changes in the Consolidated Statement of Cash
Flows, expressed in millions of dollars, for the quarters ended September 26,
2021 and September 27, 2020.
                                       September 26, 2021       September 27, 2020
Net cash provided by (used in):
  Operating activities              $             685.6      $             494.3
  Investing activities                            277.5                 (4,471.7)
  Financing activities                         (1,223.5)                   550.5


Net cash provided by operating activities in the first nine months of 2021 was
$685.6 million compared to $494.3 million in the first nine months of 2020. The
$191.3 million increase in net cash provided by operating activities was
primarily attributable to higher earnings in 2021 and favorable changes in
accounts payable terms, partially offset by higher film and television
production spend as a result of increased production activities during the first
nine months of 2021.
Net cash provided by investing activities was $277.5 million in the first nine
months of 2021 compared to net cash utilized for investing activities of
$4,471.7 million in the first nine months of 2020. Investing activities in 2021
include $379.2 million of proceeds, net of cash sold, from the sale of eOne
Music. Investing activities in 2020 included $4.4 billion of cash utilized to
acquire eOne, net of cash acquired funded by the net proceeds from the issuance
of an aggregate principal amount of $2.4 billion in senior secured notes in
November 2019, net proceeds of $975.2 million from of the issuance of
approximately 10.6 million shares of common stock in November 2019 and $1.0
billion in term loans drawn in the first quarter of 2020. Additions to property,
plant and equipment were $98.1 million in the first nine months of 2021 compared
to $92.1 million in the first nine months of 2020.
Net cash utilized in financing activities was $1,223.5 million in the first nine
months of 2021 compared to net cash provided by financing activities of $550.5
million in the first nine months of 2020.
Financing activities in the first nine months of 2021 include:
•early repayment of $300.0 million aggregate principal of 2.60% Notes due 2022
and related debt extinguishment costs of $9.1 million during the third quarter;
•repayment of $300.0 million aggregate principal amount of 3.15% Notes due 2021,
during the first quarter;
•payments totaling $372.5 million related to the $1.0 billion in term loans
described below consisting of $300.0 million for the remaining principal balance
of the Three-Year Tranche loans and $50.0 million principal and quarterly
principal amortization payments totaling $22.5 million toward the Five-Year
Tranche loan; and
•drawdowns of $127.6 million and repayments of $89.6 million related to
production financing loans.
In the first nine months of 2020, cash provided by financing activities was
driven by the proceeds of the Company's $1.0 billion in term loans. Also, in the
first nine months of 2020, the Company had drawdowns of $38.9 million and
repayments of $124.8 million related to eOne production financing loans and paid
$47.4 million associated with the redemption of eOne stock awards that were
accelerated as a result of the acquisition. In addition, the Company made
quarterly principal payments totaling $22.5 million related to the $1.0 billion
in term loans described above.
Dividends paid in the first nine months of 2021 totaled $280.7 million,
consistent with dividends paid in the first nine months of 2020 of $279.4
million. There were no repurchases of the Company's common stock in the first
nine months of 2021 as the Company suspended its share repurchase program while
it prioritizes deleveraging.
Sources and Uses of Cash
The Company has an agreement with a group of banks which provides for a
commercial paper program (the "Program"). Under the Program, at the request of
the Company and subject to market conditions, the banks may either purchase from
the Company, or arrange for the sale by the Company, of unsecured commercial
paper notes. The Company may issue notes from time to time up to an aggregate
principal amount outstanding at any given time of $1.0 billion. The maturities
of the notes may vary but may not exceed 397 days. The notes are sold under
customary terms in the commercial paper market and are issued at a discount to
par, or alternatively, sold at par and bear varying interest rates based on a
fixed or floating rate basis. The interest

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
rates vary based on market conditions and the ratings assigned to the notes by
the credit rating agencies at the time of issuance. Subject to market
conditions, the Company intends to utilize the Program as its primary short-term
borrowing facility and does not intend to sell unsecured commercial paper notes
in excess of the available amount under the revolving credit agreement discussed
below. If, for any reason, the Company is unable to access the commercial paper
market, the Company intends to use the revolving credit agreement to meet the
Company's short-term liquidity needs. At September 26, 2021, the Company had no
outstanding borrowings related to the Program.
The Company has a second amended and restated revolving credit agreement with
Bank of America, N.A., as administrative agent, swing line lender and a letter
of credit issuer and lender and certain other financial institutions, as lenders
thereto (the "Amended Revolving Credit Agreement"), which provides the Company
with commitments having a maximum aggregate principal amount of $1.5 billion.
The Amended Revolving Credit Agreement also provides for a potential additional
incremental commitment increase of up to $500.0 million subject to agreement of
the lenders. The Amended Revolving Credit Agreement contains certain financial
covenants setting forth leverage and coverage requirements, and certain other
limitations typical of an investment grade facility, including with respect to
liens, mergers and incurrence of indebtedness. The Amended Revolving Credit
Agreement extends through September 20, 2024. The Company was in compliance with
all covenants as of September 26, 2021. The Company had no borrowings
outstanding under its committed revolving credit facility as of September 26,
2021. However, letters of credit outstanding under this facility as of
September 26, 2021 were approximately $3.1 million. Amounts available and unused
under the committed line, at September 26, 2021 were approximately $1.5 billion,
inclusive of borrowings under the Company's commercial paper program. The
Company also has other uncommitted lines from various banks, of which
approximately $11.1 million was utilized at September 26, 2021. Of the amount
utilized under, or supported by, the uncommitted lines, approximately $10.1
million and $1.0 million represent letters of credit and outstanding short-term
borrowings, respectively.
In September of 2019, the Company entered into a $1.0 billion Term Loan
Agreement (the "Term Loan Agreement") with Bank of America N.A. ("Bank of
America"), as administrative agent, and certain financial institutions as
lenders, pursuant to which such lenders committed to provide, contingent upon
the completion of the eOne Acquisition and certain other customary conditions to
funding, (1) a three-year senior unsecured term loan facility in an aggregate
principal amount of $400.0 million (the "Three-Year Tranche") and (2) a
five-year senior unsecured term loan facility in an aggregate principal amount
of $600.0 million (the "Five-Year Tranche" and together with the Three-Year
Tranche, the "Term Loan Facilities"). On December 30, 2019, the Company
completed the acquisition of eOne and on that date, borrowed the full amount of
$1.0 billion under the Term Loan Facilities. Of the Three-Year Tranche $400
million principal balance, the Company repaid $100 million during the fourth
quarter 2020 and the remaining $300 million balance during the first nine months
of 2021. Of the Five-Year Tranche $600.0 million principal balance, the Company
repaid $22.5 million and $72.5 million during 2020 and 2021, respectively. The
Company is subject to certain financial covenants contained in this agreement
and as of September 26, 2021, the Company was in compliance with these
covenants. The terms of the Term Loan Facilities are described in Note 8 to the
consolidated financial statements included in Part I of this Form 10-Q.
During November 2019, in conjunction with the Company's acquisition of eOne, the
Company issued an aggregate of $2.4 billion of senior unsecured debt securities
(collectively, the "Notes") consisting of the following tranches: $300 million
of notes due 2022 (the "2022 Notes") that bear interest at a fixed rate of
2.60%; $500 million of notes due 2024 (the "2024 Notes") that bear interest at a
fixed rate of 3.00%; $675 million of notes due 2026 (the "2026 Notes") that bear
interest at a fixed rate of 3.55%; and $900 million of notes due 2029 (the "2029
Notes") that bear interest at a fixed rate of 3.90%. During the third quarter of
2021 the Company repaid in full, its 2022 Notes in the aggregate principal
amount of $300.0 million, including early redemption premiums and accrued
interest of $10.8 million. The terms of the Notes are described in Note 8 to the
consolidated financial statements in Part I of this Form 10-Q.
The Company has principal amounts of long-term debt as of September 26, 2021 of
$4.0 billion, due at varying times from 2024 through 2044. Of the total
principal amount of long-term debt, $187.6 million is current at September 26,
2021 of which $30.0 million is related to principal amortization of the 5-year
term loans due December 2024. In addition to the early repayment of the 2022
Notes described above, during the first quarter of 2021, the Company repaid in
full, its 3.15% Notes in the aggregate principal amount of $300.0 million due in
May 2021, including accrued interest. Additionally, the Company has outstanding
production financing facilities at September 26, 2021 of $204.7 million of which
$47.0 million is included in long-term debt and $157.7 million is reported as
the current portion of long-term debt within the Company's consolidated
financial statements, included in Part I of this Form 10-Q. All of the Company's
other long-term borrowings have contractual maturities that occur subsequent to
the third quarter of 2024, with the exception of certain of the Company's
production financing facilities discussed above.
In November of 2019, the Company completed an underwritten public offering of
10.6 million shares of common stock, par value $0.50 per share, at a public
offering price of $95.00 per share. Net proceeds from this public offering were
approximately

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
$975.2 million, after deducting underwriting discounts and commissions and
offering expenses of approximately $31.1 million. The net proceeds were used to
finance, in part, the acquisition of eOne and to pay related costs and expenses.
The Company also had letters of credit and other similar instruments of
approximately $13.4 million and purchase commitments of approximately $412.3
million outstanding at September 26, 2021.
Other contractual obligations and commercial commitments, as detailed in the
Company's 2020 Form 10-K, did not materially change outside of certain payments
made in the normal course of business and as otherwise set forth in this report.
The table of contractual obligations and commercial commitments, as detailed in
the Company's 2020 Form 10-K does not include certain tax liabilities related to
uncertain tax positions and certain unsatisfied performance obligations
primarily related to in-production television content to be delivered in the
future, under existing agreements.
The Company has a long history of returning cash to its shareholders through
quarterly dividends and share repurchases. In 2021 Hasbro maintained its
quarterly dividend rate of $0.68 per share for the dividend payments made in
February, May and August and has declared a fourth cash dividend of $0.68 per
share scheduled for November 2021. In addition to the dividend, the Company
periodically returns cash to shareholders through its share repurchase program.
As part of this initiative, since 2005, the Company's Board of Directors (the
"Board") adopted numerous share repurchase authorizations with a cumulative
authorized repurchase amount of $4.3 billion. The most recent authorization was
approved in May 2018 for $500 million. Since 2005, Hasbro has repurchased 108.6
million shares at a total cost of $4.0 billion and an average price of $36.44
per share. At September 26, 2021, the Company had $366.6 million remaining under
these share repurchase authorizations. Share repurchases are subject to market
conditions, the availability of funds and other uses of funds. As a result of
the financing activities related to the eOne Acquisition, the Company has
suspended its current share repurchase program while it prioritizes
deleveraging.
The Company believes that cash from operations, and, if necessary, its committed
line of credit and other borrowing facilities, will allow the Company to meet
its obligations over the next twelve months.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
The Company prepares its consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America. As
such, management is required to make certain estimates, judgments and
assumptions that it believes are reasonable based on the information
available. These estimates and assumptions affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses for the periods presented. The significant accounting
policies which management believes are the most critical to aid in fully
understanding and evaluating the Company's reported financial results include
film and television production costs, recoverability of goodwill and intangible
assets, income taxes and business combinations. Additionally, the Company
identified the valuation of the Company's equity method investment in Discovery
Family Channel as a significant accounting estimate. These critical accounting
policies are the same as those detailed in the 2020 Form 10-K.
FINANCIAL RISK MANAGEMENT
The Company is exposed to market risks attributable to fluctuations in foreign
currency exchange rates, primarily as the result of sourcing products priced in
U.S. dollars, Hong Kong dollars and Euros while marketing those products in more
than twenty currencies. Results of operations may be affected primarily by
changes in the value of the U.S. dollar, Euro, British pound sterling, Canadian
dollar, Brazilian real, Russian ruble and Mexican peso and, to a lesser extent,
other currencies in Latin American and Asia Pacific countries.
To manage this exposure, the Company has hedged a portion of its forecasted
foreign currency transactions for fiscal years 2021, 2022 and 2023 using foreign
exchange forward contracts. The Company is also exposed to foreign currency risk
with respect to its net cash and cash equivalents or short-term borrowing
positions in currencies other than the U.S. dollar. The Company believes,
however, that the on-going risk on the net exposure should not be material to
its financial condition. In addition, the Company's revenues and costs have
been, and will likely continue to be, affected by changes in foreign currency
rates. A significant change in foreign exchange rates can materially impact the
Company's revenues and earnings due to translation of foreign-denominated
revenues and expenses. The Company does not hedge against translation impacts of
foreign exchange. From time to time, affiliates of the Company may make or
receive intercompany loans in currencies other than their functional currency.
The Company manages this exposure at the time the loan is made by using foreign
exchange contracts.

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)
The Company reflects all forward and option contracts at their fair value as an
asset or liability on the consolidated balance sheets. The Company does not
speculate in foreign currency exchange contracts. At September 26, 2021, these
contracts had net unrealized gains of $8.1 million, of which $7.9 million of
unrealized gains are recorded in prepaid expenses and other current assets, $1.9
million of unrealized gains are recorded in other assets and $1.7 million of
unrealized losses are recorded in accrued liabilities. Included in accumulated
other comprehensive loss at September 26, 2021 are deferred gains, net of tax,
of $3.2 million, related to these derivatives.
At September 26, 2021, the Company had principal amounts of long-term debt of
$4.0 billion. In May 2014, the Company issued an aggregate amount of $600.0
million of long-term debt consisting of $300.0 million of 3.15% Notes, which
were repaid in full during the first quarter of 2021, and $300.0 million of
5.10% Notes due 2044. Prior to the debt issuance, the Company entered into
forward-starting interest rate swap agreements with a total notional value of
$500 million to hedge the anticipated underlying U.S. Treasury interest rate.
These interest rate swaps were matched with this debt issuance and were
designated and effective as hedges of the change in future interest payments. At
the date of debt issuance, the Company terminated these interest rate swap
agreements and their fair value at the date of issuance was recorded in
accumulated other comprehensive loss and is being amortized through the
consolidated statements of operations using an effective interest rate method
over the life of the related debt. Included in accumulated other comprehensive
loss at September 26, 2021 are deferred losses, net of tax, of $15.7 million,
all of which relates to the remaining $300.0 million of 5.10% Notes due 2044.
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is included in Part I, Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is incorporated herein by reference.
Item 4.  Controls and Procedures.
Evaluation of disclosure controls and procedures
The Company maintains disclosure controls and procedures, as defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), that are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and that such
information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. The Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's interim Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures as of
September 26, 2021. Based on the evaluation of these disclosure controls and
procedures, the interim Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were effective.
Changes in internal control over financial reporting
There were no changes in the Company's internal control over financial
reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act,
during the quarter ended September 26, 2021 that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting. In the first quarter of fiscal 2020, we completed the
acquisition of eOne as described in Note 3 to the consolidated financial
statements in Part I of this Form 10-Q. We are currently integrating eOne into
our internal control over financial reporting processes. This integration will
be completed in 2021.

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              Condensed Notes to Consolidated Financial Statements
             (Millions of Dollars and Shares Except Per Share Data)

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