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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Hasbro, Inc.    HAS

HASBRO, INC.

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

11/04/2020 | 02:19pm EST
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 impact of, and actions and
initiatives taken and planned to be taken to try and manage the negative impact
of, the global coronavirus outbreak on our business; the expected adequacy of
supply and operation of our manufacturing facilities; the ability to achieve our
financial and business goals and objectives; the Company's product and
entertainment plans, including anticipated entertainment production; anticipated
product and entertainment performance; anticipated expenses; and working capital
and liquidity. 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 29, 2019 ("2019 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
Completion of Acquisition
On December 30, 2019, Hasbro, Inc. ("Hasbro" or the "Company") completed the
acquisition of Entertainment One Ltd. ("eOne") for an aggregate purchase price
of approximately $4.6 billion, comprised of $3.8 billion of cash consideration
for shares outstanding and $0.8 billion related to the redemption of eOne's
outstanding senior secured notes and the payoff of eOne's revolving credit
facility. We financed the acquisition through a combination of debt and equity
financings, including (i) the issuance of senior unsecured notes in an aggregate
principal amount of $2.4 billion, (ii) the issuance of 10,592,106 shares of
common stock at a public offering price of $95.00 per share and (iii) $1.0
billion in term loans. eOne's results of operations and financial position are
included in the Company's consolidated financial statements and accompanying
condensed footnotes since the date of acquisition. The addition of eOne
accelerates the Company's brand blueprint strategy by expanding our brand
portfolio with eOne's global preschool brands, adding proven TV and film
expertise and executive leadership as well as by enhancing brand building
capabilities and our storytelling capabilities to strengthen Hasbro brands.
For more information on the eOne Acquisition see Note 3, "Business Combination"
to the Consolidated Financial Statements included in Part I, Item 1 of this Form
10-Q.
For purposes of identifying Hasbro activities that existed before the eOne
Acquisition, in some instances, Hasbro may be referred to herein as legacy
Hasbro. For purposes of identifying certain activities derived from eOne's
historical business, in some instances these activities may be referred to
herein as legacy eOne.
Hasbro, Inc. 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, live-action, music, and
virtual reality experiences, Hasbro connects to global audiences by bringing to
life great innovations, stories and brands and developing and delivering the
very best content across established and inventive platforms. Hasbro's iconic
brands include MAGIC: THE GATHERING, MY LITTLE PONY, NERF, TRANSFORMERS,
PLAY-DOH, MONOPOLY, BABY ALIVE, POWER RANGERS, and through the acquisition of
eOne, Hasbro expanded its portfolio with popular preschool brands including
PEPPA PIG, PJ MASKS and RICKY ZOOM. In addition, Hasbro leverages its portfolio
of premier partner brands. Through our global entertainment studio, we are
building our brands worldwide 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. Hasbro is committed to making the world a better place for all
children and all families through corporate social responsibility and
philanthropy.
Hasbro's strategic plan is centered around its brand blueprint. Under the brand
blueprint strategy, Hasbro re-imagines, re-invents and re-ignites its owned and
controlled brands and imagines, invents and ignites new brands, through product
innovation, immersive entertainment offerings, including television, film and
music, digital gaming and a broad range of consumer products. As the global
consumer landscape, shopping behaviors and the retail and entertainment
environments continue to evolve, the Company continues to transform and
reimagine its business strategy. This transformation includes reexamining the
ways Hasbro organizes across its brand blueprint and re-shaping the Company to
become a better equipped and adaptive, digitally-driven organization, including
the development of an omni-channel retail presence and adding new capabilities
through the on-boarding of new skill sets and talent.
Hasbro generates revenue and earns cash by developing, marketing and selling
products based on global brands in a broad variety of consumer goods categories,
in digital gaming applications and through distribution of television
programming and

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
other content based on the Company's properties, as well as through the
out-licensing of rights for third parties to use its properties in connection
with products, including digital media and games and other consumer products.
Hasbro also leverages its competencies to develop and market products based on
well-known licensed brands including, but not limited to, BEYBLADE, DISNEY
PRINCESS and DISNEY FROZEN, DISNEY'S DESCENDANTS, MARVEL, SESAME STREET, STAR
WARS, and DREAMWORKS' TROLLS. MARVEL, STAR WARS, DISNEY PRINCESS, DISNEY FROZEN
and DISNEY'S DESCENDANTS are owned by The Walt Disney Company. Additionally,
Hasbro's eOne business generates revenue and earnings from the production and
distribution of a broad spectrum of television and film entertainment that is
not based on our children's and family entertainment brands, as well as from
music production and distribution geared towards all audiences.
The Company's business is separated into four principal business segments: U.S.
and Canada, International, Entertainment, Licensing and Digital and, following
the eOne Acquisition, the eOne operating segment was added to the Company's
reporting structure. The U.S. and Canada segment markets and sells both toy and
game products primarily in the United States and Canada. The International
segment consists of the Company's European, Asia Pacific and Latin and South
American toy and game marketing and sales operations. The Company's
Entertainment, Licensing and Digital segment includes the Company's Wizards of
the Coast digital gaming business, consumer products licensing, owned and
licensed digital gaming, movie and television entertainment operations. The eOne
segment engages in the development, acquisition, production, financing,
distribution and sales of entertainment content and is comprised of all legacy
eOne operations. These diversified offerings span film, television and music
production and sales, family programming, merchandising and licensing, and
digital content. Over time, the Company plans to transition towards reflecting
all of its entertainment operations in the eOne segment.  The Company also
expects to shift the consumer product and digital licensing business and toy and
game sales related to the eOne preschool brands, to legacy Hasbro segments,
including related toy and game operations into the Company's geographic
commercial segments in late 2021 and 2022.
Coronavirus Outbreak
In the first quarter of 2020, the outbreak of the coronavirus disease (COVID-19)
was recognized as a pandemic by the World Health Organization. The adverse
impact on our business of the global outbreak of COVID-19 currently being
experienced in markets in which Hasbro, our employees, consumers, customers,
partners, licensees, suppliers and manufacturers operate, has been significant
and is reflected in our revenues, profitability and business operations overall.
As a result of the preventative actions taken worldwide, such as restrictions on
travel and business operations, temporary closures or limited reopenings of
non-essential businesses, shelter-in-place and stay-at-home orders, reductions
in consumers going to retail stores and buying products, and other voluntary and
government imposed restrictions, the outbreak has had a negative impact on
economic conditions in all of our markets. These preventative actions although
necessary, have led to market uncertainty and some economic disruption.
We have experienced disruptions in supply of products and production of
entertainment content, negative impact on sales due to changes in consumer
purchasing behavior and availability of products to consumers, including; due to
retail store closures, limited reopenings of retail stores and limitations on
the capacity of e-comm channels to supply additional products; delays or
postponements of entertainment productions and releases of entertainment content
both internally and by our partners; and challenges of working remotely. While
we have developed and continue to develop plans to help mitigate the negative
impact of COVID-19 to our business, the efforts will not prevent our business
from being adversely affected, and the longer the outbreak continues, or if the
virus continues to reemerge or surge in areas in which we do business, the more
negative the impact on our business, revenues and earnings, and the more limited
our ability will be to try and make up for delayed or lost product development,
production and sales in future periods.
During the first nine months of 2020, the Company's supply chain experienced
lower than planned production levels in certain of its third-party manufacturing
facilities across several geographies including, but not limited to, China,
India and the United States, due to the impact of COVID-19. After operating at
lower than planned production levels during the first quarter due to COVID-19,
facilities in China began to reopen during the second quarter and have since
returned to planned operating capacity and production output for this time of
year. Outside of China, manufacturing operated at varying levels during the
first nine months of 2020 depending on local government action, the prevalence
of COVID-19 infection, and overall safety considerations. In response, the
Company utilized its global supply chain and existing inventory to work to meet
demand, which has remained strong. Headed into the fourth quarter of 2020, the
Company continues to make up for lost production in areas of the business where
demand has been strongest, such as gaming, and believes it is well positioned
for holiday demand, as nearly all of Hasbro's partner factories and warehouses
are currently open and operating. However, if manufacturing facilities are
impacted by a resurgence in COVID-19, we may experience further disruptions in
the Company's supply chain in the near term.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
During the first nine months of 2020, as more of our consumers remained at home,
we creatively found ways to accelerate our business online, expand omni-channel
and skip the shopping cart to get our products into cars and homes. For example,
we launched Bring Home the Fun, a global initiative created to further the
Company's purpose to make the world a better place for children and their
families. The initiative provides parents and caregivers resources to help kids
remain occupied and engaged during extended time at home and indoors. Another
example is the initiative our Wizards of the Coast team undertook to enable
players to play MAGIC: THE GATHERING games while in-person play events are not
happening.
Markets with more developed e-comm and omni-channel business operations
performed better during the first nine months of 2020, than those markets that
rely more heavily on physical stores for reaching consumers. Markets in Latin
America, which have less advanced e-comm business and where retail store
closures remain high, have been and are expected to continue to be challenged
during the remainder of 2020. The negative impact to future periods from store
closures or limited reopenings remains unknown.
Beginning late in the first quarter and continuing throughout the first nine
months of 2020, production and delivery of live-action television and film
projects for Hasbro's eOne TV and Film business have been delayed, negatively
impacting the level and timing of revenues. For several months following the
initial COVID-19 outbreak, live-action productions were shut down; however, the
industry has been working to resume live-action production operations. As of the
end of the third quarter, live-action productions have restarted in the United
Kingdom and Canada and in certain other European countries. In the U.S., the
expectation is for live-action productions to resume during the fourth quarter
of 2020, subject to the negative impact on such resumption that could result
from further COVID-19 outbreaks. The eOne team continues to develop new projects
and work on animation production, which is being done remotely. The team expects
a delay in certain finished episodes and film projects as compared to initial
expectations. Additionally, several film release dates have moved into 2021 and
in some instances, releases are going straight to video on demand/electronic
sell-through windows impacting the timing and level of anticipated revenues. As
more people remain at home, content viewership remains high, which we believe
bodes well for long-term brand engagement and the Company expects a robust 2021
entertainment slate for eOne productions and from our Partner Brands.
We believe we have sufficient liquidity and capital resources available at this
time, including approximately $1.1 billion of cash on hand and $1.5 billion
available under our revolving credit facility. We are in compliance with our
covenants under our revolving credit facility and, while we do not currently
foresee a need to borrow under the facility, we believe we would be able to
access the facility for the foreseeable future. Our top three customers during
the first nine months of 2020 were Walmart, Amazon and Target. During this time
of uncertainty, however, we are managing our expenses to further preserve our
liquidity and while our collections in the third quarter were strong, we
continue to closely monitor our customers' health and collectability of
receivables, with some customers having difficulty making payments or requesting
extended payment terms at a time when retailers are experiencing challenges such
as store closures and in some cases, bankruptcy filings.
The health and safety of Hasbro employees, stakeholders and communities is a top
priority. In China, Hasbro's offices reopened in late March when the COVID-19
outbreak there improved, following shutdowns earlier in the first quarter.
Hasbro's global offices, outside of China, were closed in March due to the
COVID-19 outbreak and began re-opening on a limited, as needed basis as we
continue to actively work on plans to safely bring workers back to our offices.
The majority of our workforce has been able to work remotely in an effective
manner since the closure and the timing of re-opening offices will be based on
need as well as local governmental, health and safety guidelines and COVID-19
conditions.

The coronavirus outbreak continues to be fluid and uncertain, making it
difficult to forecast the impact it could have on our future operations. Please
see Part II, Item 1A, Risk Factors, for further information.
The Company's 2020 results presented in this Form 10-Q include eOne's results of
operations and financial position beginning on December 30, 2019, the date of
acquisition. The Company's 2019 results are presented as reported and do not
include 2019 eOne results.
Third quarter 2020 highlights:
•Third quarter net revenues of $1,776.6 million increased 13% compared to
$1,575.2 million in the third quarter of 2019. The increase in net revenues
included an unfavorable foreign currency translation of $3.4 million
attributable to the Company's legacy Hasbro business.
•Net revenues in the U.S. and Canada segment increased 9% to $977.1 million;
International segment net revenues decreased 8% to $517.0 million, including an
unfavorable foreign currency translation impact of $3.3 million; Entertainment,
Licensing and Digital segment net revenues decreased 23% to $89.0 million; and
eOne segment net revenues were $193.5 million.
•Net revenues from Emerging Brands increased 14%; Franchise Brands net revenues
increased 4%; Hasbro Gaming net revenues increased 3%; and net revenues from
Partner Brands decreased 4%; TV, Film and

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
Entertainment portfolio net revenues were $165.7 million and represented 9% of
total net revenues in the third quarter of 2020.
•Operating profit was $336.6 million, or 19% of net revenue, in the third
quarter of 2020 compared to operating profit of $297.2 million, or 18.9% of net
revenue, in the third quarter of 2019.
•Third quarter 2020 operating profit was negatively impacted by acquisition and
related expenses of $5.9 million ($4.7 million after-tax) and $24.7 million
($19.6 million after-tax) of eOne acquired intangible asset amortization.
•Net earnings attributable to Hasbro, Inc. of $220.9 million, or $1.61 per
diluted share, in the third quarter of 2020 compared to net earnings of $212.9
million, or $1.67 per diluted share, in the third quarter of 2019.
•Third quarter 2020 net earnings included incremental income tax expense of
$13.7 million, or $0.10 per diluted share, related to a change in the United
Kingdom ("UK") tax code.
•Third quarter 2019 net earnings included an unrealized foreign currency loss of
$25.5 million ($20.9 million after-tax), or $0.16 per diluted share, related to
hedging the British Pound sterling purchase price of eOne.
First nine months 2020 highlights:
•Net revenues increased 14% to $3,742.5 million in first nine months of 2020
compared to $3,292.2 million in the first nine months of 2019. The increase in
net revenues included $25.7 million of unfavorable foreign currency translation
attributable to the Company's legacy Hasbro business.
•Net revenues in the U.S. and Canada segment remained flat at $1,765.5 million;
International segment net revenues decreased 17% to $1,017.2 million;
Entertainment, Licensing and Digital segment net revenues decreased 14% to
$262.9 million; while eOne segment net revenues were $696.9 million in the first
nine months of 2020. International segment net revenues were unfavorably
impacted by $25.1 million in foreign currency translation.
•Net revenues from Emerging Brands increased 22%; Hasbro Gaming net revenues
increased 11%; Partner Brands and Franchise Brands net revenues each decreased
10%; and TV, Film and Entertainment portfolio net revenues were $590.4 million
representing 16% of total net revenues in the first nine months of 2020.
•Operating profit was $315.5 million, or 8% of net revenues, in the first nine
months of 2020 compared to operating profit of $461.7 million, or 14.0% of net
revenues, in the first nine months of 2019.
•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 $11.6 million ($10.1 million after-tax) of restructuring
charges associated with cost savings initiatives.
•Net earnings attributable to Hasbro, Inc. was $117.3 million, or $0.85 per
diluted share, in the first nine months of 2020 compared to net earnings
attributable to Hasbro, Inc. of $253.1 million, or $1.99 per diluted share, in
the first nine months of 2019.
•Net earnings in the first nine months of 2020 included incremental income tax
expense of $13.7 million, or $0.10 per diluted share, related to a change in the
UK tax code.
•Net earnings for the first nine months of 2019 included non-cash charges of
$110.8 million ($85.9 million after-tax), or $0.68 per diluted share, related to
the Company's settlement of its U.S. defined benefit pension plan liability, as
well as an unrealized foreign currency loss of $25.5 million ($20.9 million
after-tax), or 0.16 per diluted share, related to a partial hedge of the British
Pound purchase price of Entertainment One.
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. Since the Company's 2019 results are
presented as reported and do not include 2019 eOne results, references to the
impact of foreign currency exchange on 2020 results exclude the impact to
revenues attributable to the Company's eOne business. 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.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
Amounts Returned to Shareholders
The Company has a long history of returning cash to its shareholders through
quarterly dividends and share repurchases. Hasbro maintained its quarterly
dividend rate of $0.68 per share for the dividend paid in August 2020 and has
maintained this rate for the dividend payment planned for November 2020. In
addition to the dividend, the Company historically has returned cash through its
share repurchase program. As part of this initiative, since 2005, the Company's
Board of Directors (the "Board") adopted nine share repurchase authorizations
with a cumulative authorized repurchase amount of $4,325.0 million. The ninth
authorization was approved in May 2018 for $500 million. As of September 27,
2020, the Company had $366.6 million remaining under these 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.
SUMMARY OF FINANCIAL PERFORMANCE
A summary of the results of operations is illustrated below for the quarter and
nine month periods ended September 27, 2020 and September 29, 2019.
                                                     Quarter Ended                         Nine Months Ended
                                           September 27,       September 29,       September 27,       September 29,
                                               2020                2019                2020                2019
Net revenues                               $  1,776.6$  1,575.2$  3,742.5$  3,292.2
Operating profit                                336.6               297.2               315.5               461.7
Earnings before income taxes                    299.2               259.7               183.6               295.4
Income tax expense                               79.2                46.8                64.3                42.3
Net earnings                                    220.0               212.9               119.3               253.1
Net (loss) earnings attributable to
noncontrolling interests                         (0.9)                  -                 1.9                   -
Net earnings attributable to Hasbro, Inc.       220.9               212.9               117.3               253.1
Diluted earnings per share                       1.61                1.67                0.85                1.99


RESULTS OF OPERATIONS - CONSOLIDATED
Third Quarter of 2020
The quarters ended September 27, 2020 and September 29, 2019 were each 13-week
periods.
Consolidated net revenues for the third quarter of 2020 increased $201.4
million, or 13%, compared to the third quarter of 2019 and reflect the inclusion
of eOne revenues of $193.5 million which represent 11% of consolidated net
revenues for the quarter. Third quarter 2020 net revenues include a $3.4 million
unfavorable impact from foreign currency translation as a result of weakening
currencies, primarily in the Company's Latin American markets, partially offset
by favorable foreign currency translation from European markets in the third
quarter of 2020 compared to 2019.
Operating profit for the third quarter of 2020 was $336.6 million, or 19% of net
revenues, compared to operating profit of $297.2 million, or 19% of net
revenues, for the third quarter of 2019. Operating profit during the third
quarter of 2020 reflects the consolidation of eOne results of operations and was
negatively impacted by acquisition and related costs of $5.9 million ($4.7
million after-tax) and $24.7 million ($19.6 million after-tax) of expenses
related to eOne acquired intangible asset amortization.
Net earnings attributable to Hasbro, Inc. were $220.9 million for the third
quarter of 2020 compared to net earnings of $212.9 million for the third quarter
of 2019.  Diluted earnings per share attributable to Hasbro, Inc. for the third
quarter of 2020 was $1.61, compared to diluted earnings per share of $1.67 in
the third quarter of 2019 and reflects 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. Third quarter 2019 net
earnings included an unrealized foreign currency loss of $0.16 per diluted
share, related to hedging the British Pound sterling purchase price of eOne.
As a result of the 2020 acquisition of eOne, the Company's brand architecture
reflects the addition of the TV, Film and Entertainment brand portfolio which
consists of legacy eOne film and TV revenues. Revenues related to eOne brands,
including PEPPA PIG, PJ MASKS and RICKY ZOOM, are reported in the Emerging
Brands portfolio.

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

The following table presents net revenues by brand and entertainment portfolio for the quarters ended September 27, 2020 and September 29, 2019.

                                                    Quarter Ended
                                                                                  %
                               September 27, 2020       September 29, 2019      Change
Franchise Brands              $             807.6             779.7                4  %
Partner Brands                              409.2             427.0               -4  %
Hasbro Gaming                               239.2             232.3                3  %
Emerging Brands                             155.0             136.2               14  %
TV, Film and Entertainment                  165.7                 -              100  %
Total                         $           1,776.6           1,575.2               13  %


FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio increased 4% in
the third quarter of 2020 compared to the third quarter of 2019. Net revenue
increases from MAGIC: THE GATHERING and MONOPOLY products, drove the majority of
the increase in the third quarter of 2020, and were partially offset by net
revenue declines from TRANSFORMERS, NERF and MY LITTLE PONY products. During the
third quarter of 2020, MAGIC: THE GATHERING products benefited from a favorable
card set release cadence while 2019 net revenues from TRANSFORMERS products were
supported by the theatrical release of TRANSFORMERS: BUMBLEBEE.
PARTNER BRANDS: Net revenues from the Partner Brands portfolio decreased 4% in
the third quarter of 2020 compared to the third quarter of 2019.  Partner Brands
net revenues are reliant on related entertainment, including television and
movie releases. During the third quarter of 2020, the Company's Partner Brands
portfolio was supported by the highly anticipated Disney+ streaming series, STAR
WARS: THE MANDALORIAN, season two, expected to be released during the fourth
quarter of 2020 and TROLLS WORLD TOUR, which was released in the premium
video-on-demand format in April. During the third quarter of 2019, the Company's
Partner Brands portfolio was supported by MARVEL'S April 2019 theatrical
release, AVENGERS: END GAME and product sales in anticipation of the November
2019 theatrical release of DISNEY'S FROZEN 2. Due to the uncertainty surrounding
the ongoing COVID-19 pandemic, heading into the fourth quarter of 2020, a
significant number of movie theaters have remained closed worldwide. As a
result, certain theatrical releases in support of the Company's Partner Brand
products, including BLACK WIDOW from DISNEY'S MARVEL franchise and GHOSTBUSTERS:
AFTERLIFE, previously planned as 2020 releases, have been postponed and are
expected to be in theaters during the first half of 2021, subject to COVID-19
impacts at that time.
HASBRO GAMING: Net revenues in the Hasbro Gaming portfolio increased 3% in the
third quarter of 2020 compared to the third quarter of 2019. Higher net revenues
from DUNGEONS & DRAGONS products and higher net revenues from classic games
including, JENGA and CLUE products were partially offset by lower net revenues
from DON'T STEP IN IT and certain other Hasbro Gaming products in the third
quarter of 2020.
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 $543.1 million for the third quarter of
2020, an increase of 21%, as compared to $449.4 million in the third quarter of
2019. The increase relates primarily to the timing of MAGIC: THE GATHERING
product releases during the third quarter of 2020 compared to the same period in
2019.
EMERGING BRANDS: Net revenues from the Emerging Brands portfolio increased 14%
during the third quarter of 2020 compared to the third quarter of 2019.
Contributing to the net revenue increases were the inclusion of brands acquired
through the eOne Acquisition including PEPPA PIG and PJ MASKS and the addition
of net revenues from GI JOE products, due to the Company's product-line relaunch
in 2020, as well as net revenue increases from PLAYSKOOL products during the
third quarter of 2020. These increases were partially offset by declines in
POWER RANGERS and LITTLEST PET SHOP products during the third quarter of 2020.
TV, FILM and ENTERTAINMENT: The TV, Film and Entertainment portfolio includes
eOne revenues not allocated to the Emerging Brands portfolio. Operations
contributing to the TV, Film and Entertainment portfolio focus on high quality,
premium film, television and music production and content rights around the
world and selling this content globally.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
During the third quarter of 2020, net revenues from the TV, Film and
Entertainment portfolio were approximately 9% of total Company net revenues. The
drivers of net revenues from the TV, Film and Entertainment portfolio included
television production and distribution net revenues from the fifth season of
FEAR THE WALKING DEAD, airing on the AMC television network, and film
distribution revenues from the Amblin Partners film 1917, released in December
2019, as well as broadcast and licensing net revenues from key scripted
deliveries including season two of THE ROOKIE, a television drama series
currently airing on ABC. In addition to these offerings, TV, Film and
Entertainment net revenues benefited from the Company's lineup of unscripted
television programming including the American reality series, NAKED AND AFRAID
airing on the Discovery Channel and from its library of subscription video on
demand ("SVOD") content.
First Nine Months of 2020
The nine month periods ended September 27, 2020 and September 29, 2019 were each
39-week periods.
For the first nine months of 2020, consolidated net revenues increased 14%
compared to the first nine months of 2019 and reflect the inclusion of eOne
revenues of $696.9 million which represents 19% of consolidated net revenues for
the period. The net revenue increase in the first nine months of 2020 included
an unfavorable variance of $25.7 million as a result of foreign currency
translation due to weaker currencies across the Company's Latin American and to
a lesser extent, Asia Pacific markets, when compared to the first nine months of
2019.
Operating profit for the first nine months of 2020 was $315.5 million, or 8.4%
of net revenues, compared to an operating profit of $461.7 million, or 14.0% of
net revenues, for the first nine months of 2019. Operating profit during the
first nine months of 2020 reflects the consolidation of eOne results of
operations and was negatively impacted by 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 $11.6
million ($10.1 million after-tax).
Net earnings attributable to Hasbro, Inc. were $117.3 million for the first nine
months of 2020 compared to net earnings of $253.1 million for the first nine
months of 2019. Diluted earnings per share attributable to Hasbro, Inc. were
$0.85 in the first nine months of 2020, compared to diluted earnings per share
of $1.99 in the first nine months of 2019. Net earnings attributable to Hasbro,
Inc. 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. Net earnings for the first nine months
of 2019 included a non-cash, net of tax charge of $85.9 million, or $0.68 per
diluted share, related to the settlement of the Company's U.S. defined benefit
pension plan liability and a $20.9 million loss, net of tax, or $0.16 per
diluted share related to unrealized losses on foreign exchange forward contracts
and option contracts purchased to hedge the foreign exposure associated with the
purchase price of eOne.
The following table presents net revenues by product category for the first nine
months of 2020 and 2019.
                                                  Nine Months Ended
                                                                                  %
                               September 27, 2020       September 29, 2019      Change
Franchise Brands              $           1,580.9           1,749.9              -10  %
Partner Brands                              729.8             812.5              -10  %
Hasbro Gaming                               516.3             463.3               11  %
Emerging Brands                             325.1             266.5               22  %
TV, Film and Entertainment                  590.4                 -              100  %
Total                         $           3,742.5           3,292.2               14  %



FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio decreased 10%
in the first nine months of 2020 compared to 2019. Declines in net revenues from
TRANSFORMERS and NERF products drove the overall decline in Franchise Brands net
revenues, while, to a lesser extent, MY LITTLE PONY and PLAY-DOH products also
contributed to segment net revenue declines. Much of the segment net revenue
decline was due to reduced customer ordering, supply chain delays and other
disruptions to the business as a result of the impact of the COVID-19 pandemic.
Additionally, TRANSFORMERS products benefited from the December 2018 theatrical
release of TRANSFORMERS: BUMBLEBEE in 2019, driving lower revenues in 2020
compared to 2019. These declines were partially offset by net revenue increases
from MAGIC: THE GATHERING products during the first nine months of 2020, due to
a favorable card set release cadence.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
PARTNER BRANDS: Net revenues from the Partner Brands portfolio decreased 10%
during the first nine months of 2020 compared to 2019. Partner Brands net
revenues are reliant on related entertainment, including television and movie
releases.
During the first nine months of 2020, certain scheduled theatrical releases were
delayed or postponed due to the closure or limited reopening of theaters as a
result of the impact of COVID-19, which negatively impacted sales of the
Company's Partner Brands products. During the first nine months of 2020, the
Company's Partner Brands portfolio was supported by fourth quarter 2019
theatrical releases DISNEY'S FROZEN 2 in November and STAR WARS: THE RISE OF
SKYWALKER in December, as well as through various distribution channels
including home entertainment and streaming video. The Company's 2020 Partner
Brand entertainment releases include TROLLS WORLD TOUR, which was released in
the premium video-on-demand format in April and the highly anticipated Disney+
streaming series, STAR WARS: THE MANDALORIAN, season two, expected to be
released during the fourth quarter of 2020. During the first nine months of
2019, the Company's Partner Brands portfolio was supported by theatrical
releases from MARVEL'S AVENGERS: END GAME in April and DISNEY'S ALADDIN in May.
During the first nine months of 2020, net revenue declines from MARVEL and
BEYBLADE products were partially offset by net revenue increases from STAR WARS
and DREAMWORKS' TROLLS products. The majority of Partner Brand net revenue
declines were attributable to MARVEL products which are dependent on
entertainment releases as described above. Due to the impact of the COVID-19
pandemic on the entertainment industry during 2020, including the postponement
of certain theatrical releases such as BLACK WIDOW, previously planned as a 2020
MARVEL release, the Company's MARVEL products associated with related
entertainment experienced a decline during the nine months ended 2020 as
compared to the first nine months of 2019 which benefited from a successful
entertainment slate including theatrical release, AVENGERS: END GAME in April
2019. Net revenue increases from STAR WARS and DREAMWORKS' TROLLS products
during the first nine months of 2020 were attributable to the entertainment
release support described above.
HASBRO GAMING: Net revenues in the Hasbro Gaming portfolio increased 11% in the
first nine months of 2020 compared to the first nine months of 2019 led by
increased net revenues from DUNGEONS & DRAGONS and JENGA products and to a
lesser extent, from certain other Hasbro Gaming brands.
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 $1,202.6 million, an increase of 11%, in the first nine
months of 2020 versus $1,086.2 million in the first nine months of 2019.
EMERGING BRANDS: Net revenues from the Emerging Brands portfolio grew 22% for
the first nine months of 2020 compared to the first nine months of
2019. Contributing to the net revenue increases in the first nine months of 2020
were the inclusion of brands acquired through the eOne Acquisition including
PEPPA PIG and PJ MASKS and the addition of net revenues from GI JOE products in
2020, due to the Company's product-line relaunch. These net revenue increases
were partially offset by net revenue declines from LITTLEST PET SHOP and FURREAL
FRIENDS products.

TV, FILM and ENTERTAINMENT: Net revenues from the TV, Film and Entertainment
portfolio were approximately 16% of total Company net revenues and included
theatrical contributions from the Amblin Partners film 1917, released in
December 2019, television production and distribution net revenues from the
fifth season of FEAR THE WALKING DEAD, airing on the AMC television network and
broadcast and licensing net revenues from key scripted deliveries including
season two of THE ROOKIE, a television drama series currently airing on ABC. In
addition to these offerings, net revenues included the Company's lineup of
unscripted television programming and its library of SVOD content.
SEGMENT RESULTS
The Company's net revenues and operating profits are primarily derived from its
four principal business segments: the U.S. and Canada segment, the International
segment, the Entertainment, Licensing and Digital segment and, as a result of
the 2020 eOne Acquisition, the eOne operating segment. The eOne segment was
added to the Company's reporting structure in the first quarter of 2020 and is
comprised of the legacy eOne business. The results of these operations are
discussed in detail below.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
Third Quarter of 2020
The following table presents net external revenues and operating profit data for
the Company's principal segments for the quarters ended September 27, 2020 and
September 29, 2019:
                                                                            Quarter Ended
                                                     September 27,         September 29,                %
                                                         2020                  2019                  Change
Net Revenues
U.S. and Canada segment                             $      977.1$      898.3                       9  %
International segment                                      517.0                 561.1                      -8  %
Entertainment, Licensing and Digital segment                89.0                 115.8                     -23  %
eOne segment                                               193.5                     -                     100  %

Operating Profit (Loss)
U.S. and Canada segment                             $      263.0$      193.7                      36  %
International segment                                       63.9                  67.2                      -5  %
Entertainment, Licensing and Digital segment                32.8                  24.6                      33  %
eOne segment                                               (25.9)                    -                    -100  %


U.S. and Canada Segment
The U.S. and Canada segment net revenues increased 9% for the third quarter of
2020 compared to the third quarter of 2019. Net revenue increases from the
Company's Franchise Brands and Emerging Brands portfolio and to a lesser extent,
the Hasbro Gaming portfolio, were partially offset by lower net revenues from
the Partner Brands portfolio during the third quarter of 2020.
Net revenue increases in the Company's Franchise Brands portfolio were driven by
MAGIC: THE GATHERING products which benefited from a favorable card set release
cadence in 2020, and to a lesser extent, PLAY-DOH and MONOPOLY products. In the
Partner Brands portfolio, entertainment releases including the highly
anticipated Disney+ streaming series, STAR WARS: THE MANDALORIAN, season two,
expected in the fourth quarter 2020 and TROLLS WORLD TOUR, released in the
premium video-on-demand format in April, resulted in higher net revenues from
STAR WARS and DREAMWORKS' TROLLS products. These increases were more than offset
by net revenue decreases from DISNEY FROZEN and MARVEL products, which were not
supported by entertainment releases during the third quarter of 2020. In
addition, net revenues from MARVEL products were negatively impacted during the
third quarter of 2020 due to delays in theatrical releases as a result of the
impact of COVID-19. In the Hasbro Gaming portfolio, higher net revenues were
delivered across many of the Company's games brands, most notably from JENGA and
DUNGEON & DRAGONS products. In the Emerging Brands portfolio, higher net
revenues from PLAYSKOOL products and net revenues from the 2020 relaunch of the
Company's GI JOE product line drove growth.
U.S. and Canada segment operating profit for the third quarter of 2020 was
$263.0 million or 27% of segment net revenues, compared to segment operating
profit of $193.7 million or 22% of segment net revenues, for the third quarter
of 2019. The operating profit increase in the third quarter of 2020 was driven
by higher segment net revenues as described above and favorable brand mix,
partially offset by increased administrative and product development expenses
associated with the Company's Wizards of the Coast business, as well as higher
freight costs from increased domestic shipments and higher direct-to-customer
shipments which carry elevated fulfillment costs.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
International Segment
International segment net revenues declined 8% in the third quarter of 2020 to
$517.0 million from $561.1 million in the third quarter of 2019 and included the
impact of an unfavorable $3.3 million currency translation. The following table
presents net revenues by geographic region for the Company's International
segment for the quarters ended September 27, 2020 and September 29, 2019.
                                       Quarter Ended
                                                                     %
                   September 27, 2020      September 29, 2019      Change
Europe            $            343.2             319.3                7  %
Latin America                   91.6             152.0              -40  %
Asia Pacific                    82.2              89.9               -9  %
Net revenues      $            517.0             561.1               -8  %


The decline in International segment net revenues during the third quarter of
2020 was attributable to ongoing disruptions to the business related to the
COVID-19 pandemic, most notably in the Latin American and Asia Pacific regions,
where large numbers of retail stores remain closed. The Latin American region
was also unfavorably impacted by $14.6 million in foreign exchange translation,
partially offset by a favorable foreign currency translation impact of $9.9
million and $1.4 million in the Company's European and Asia Pacific regions,
respectively. International segment net revenues declined in the Company's
Franchise Brands, Emerging Brands and Partner Brands portfolios while net
revenues from the Hasbro Gaming portfolio increased during the third quarter of
2020 compared to the third quarter of 2019.  In the Franchise Brands portfolio,
International segment net revenue declines were noted in NERF and TRANSFORMERS
products and to a lesser extent, from BABY ALIVE and MY LITTLE PONY products.
These decreases were partially offset by net revenue increases from MAGIC: THE
GATHERING products, due to the timing of card set releases and strong brand
engagement during the third quarter of 2020. In the Partner Brands portfolio,
the drivers of the decreases include BEYBLADE products as well as MARVEL
products, which were negatively impacted during the third quarter of 2020 due to
delays in theatrical releases as a result of the impact of COVID-19. These
decreases were partially offset by net revenue increases from STAR WARS and to a
lesser extent, DREAMWORKS' TROLLS products which were supported by entertainment
releases including STAR WARS: THE MANDALORIAN, season two, expected during the
fourth quarter 2020 and TROLLS WORLD TOUR, which was released in the premium
video-on-demand format in April from DREAMWORKS. In the Hasbro Gaming portfolio,
higher net revenues from CLUE, JENGA and OPERATION products were partially
offset by lower net revenues from certain other Hasbro Gaming products,
including PIE FACE. In the Emerging Brands portfolio, net revenues declined from
POWER RANGERS, LITTLEST PET SHOP and PLAYSKOOL products in the third quarter of
2020.
International segment operating profit was $63.9 million, or 12% of segment net
revenues for the third quarter of 2020, compared to operating profit of $67.2
million, or 12% of segment net revenues, for the third quarter of 2019.
International segment operating profit declines during the third quarter of 2020
were the result of lower sales described above, most notably in the Company's
Latin American region, partially offset by a favorable product mix and lower
advertising and marketing costs.
Entertainment, Licensing and Digital Segment
Entertainment, Licensing and Digital segment net revenues declined 23% to $89.0
million for the third quarter of 2020, compared to $115.8 million for the third
quarter of 2019. Net revenue declines were primarily driven by lower film
revenues in 2020 compared to 2019, related to the TRANSFORMERS: BUMBLEBEE film
and, lower revenues during the third quarter of 2020 due to the closure of the
Backflip business in the fourth quarter of 2019. These declines were partially
offset by higher licensed digital gaming revenue and increased revenues related
to MAGIC: THE GATHERING ARENA.
Entertainment, Licensing and Digital segment operating profit increased to $32.8
million, or 37% of segment net revenues for the third quarter of 2020, from
$24.6 million, or 21.2% of segment net revenues for the third quarter of 2019.
The increase in Entertainment, Licensing and Digital segment operating profit
was driven primarily by favorable mix from growth in licensed digital gaming,
reduction of expenses due to the closure of the Backflip business and lower
advertising costs associated with MAGIC: THE GATHERING ARENA.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
eOne Segment
During the third quarter of 2020, eOne segment net revenues were $193.5 million.
The following table presents eOne segment net revenues by channel for the
quarter ended September 27, 2020.
                                                Three Months Ended
                                                September 27, 2020
                 eOne Segment Net Revenues
                      Film and TV              $             138.5
                      Family Brands                           26.3
                      Music and Other                         28.7
                 Segment Total                 $             193.5


The COVID-19 outbreak continued to impact the Company's eOne segment during the
third quarter of 2020. Specifically, certain scheduled productions have been
delayed due to the shutdown of production work and the closure or limited
reopening of studios. Additionally, certain theatrical releases have been
delayed due to the closure or limited reopening of theaters, and in some cases,
global film releases have moved from theaters to alternative media platforms
such as streaming services.
During the third quarter of 2020, drivers of eOne segment net revenues included:
(i) broadcast and licensing revenues associated with internationally recognized
brands, PEPPA PIG and PJ MASKS: (ii) broadcast and licensing contributions from
key scripted deliveries including the fifth season of FEAR THE WALKING DEAD and
season two of THE ROOKIE; (iii) film distribution revenues from the Amblin
Partners film 1917, released in December 2019; and (iv) the Company's strong
lineup of unscripted television programming as well as demand for the Company's
vast SVOD library. In addition to these entertainment driven revenues, the
Company's music business benefited from both streaming and publishing revenues
during the third quarter of 2020.
eOne segment operating losses were $25.9 million, or 13.4% of segment net
revenues for the third quarter of 2020. This loss was driven by $24.7 million of
incremental intangible amortization costs related to the intangible assets
acquired in the eOne Acquisition.
Global Operations
The Global Operations segment operating profit of $5.7 million for the third
quarter of 2020 compared to an operating profit of $11.1 million for the third
quarter of 2019.
Corporate and Eliminations
Operating losses in Corporate and Eliminations totaled $2.9 million for the
third quarter of 2020 compared to operating profit of $0.6 million for the third
quarter of 2019. Operating losses in the third quarter of 2020 were driven
primarily by acquisition and integration costs of $4.6 million and certain
restructuring and related costs of $1.3 million associated with the acquisition
of eOne.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
First Nine Months of 2020
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 27, 2020 and September 29, 2019.
                                                                         Nine Months Ended
                                                    September 27,        September 29,                %
                                                         2020                 2019                 Change
Net Revenues
U.S. and Canada segment                             $   1,765.5$   1,766.6                       -  %
International segment                                   1,017.2              1,221.2                     -17  %
Entertainment, Licensing and Digital segment              262.9                304.3                     -14  %
eOne segment                                              696.9                    -                     100  %

Operating Profit (Loss)
U.S. and Canada segment                             $     359.0$     313.8                      14  %
International segment                                      12.3                 51.4                     -76  %
Entertainment, Licensing and Digital segment               65.8                 62.6                       5  %
eOne segment                                              (65.0)                   -                    -100  %


U.S. and Canada Segment
The U.S. and Canada segment net revenues remained flat for the nine months ended
September 27, 2020 compared to the same period in 2019, which reflects recovery
in the third quarter from negative impacts realized in the first half of 2020,
driven in part by disruptions to the Company's business operations as a result
of COVID-19. In the first nine months of 2020, higher net revenues in the Hasbro
Gaming portfolio were wholly offset by lower net revenues in the Franchise
Brands, Partner Brands and Emerging Brands portfolios.
In the Franchise Brands portfolio, net revenues declined from NERF, PLAY-DOH and
TRANSFORMERS products, due in part to disruptions to the business, as a result
of the impact of the COVID-19 pandemic. These declines were partially offset by
higher net revenues from MAGIC: THE GATHERING products which benefited from a
favorable card set release cadence and strong brand engagement in 2020. In the
Partner Brands portfolio, the decrease was driven by lower net revenues from
MARVEL and DISNEY FROZEN products which did not have the benefit of 2020
entertainment releases. These decreases were partially offset by net revenue
increases from STAR WARS and TROLLS products as a result of entertainment
support from the anticipated Disney+ streaming series, STAR WARS: THE
MANDALORIAN, season two, expected to be released during the fourth quarter 2020
and TROLLS WORLD TOUR, which was released in the premium video-on-demand format
in April. In the Hasbro Gaming portfolio, higher net revenues were delivered
across multiple brands, most notably DUNGEONS & DRAGONS and JENGA products. In
the Emerging Brands portfolio, net revenue declines from FURREAL FRIENDS and
POWER RANGERS products, were partially offset by net revenues contributions from
the 2020 relaunch of the Company's GI JOE product line and higher net revenues
from PLAYSKOOL products during the first nine months of 2020.
U.S. and Canada segment operating profit for the nine months ended September 27,
2020 increased to $359.0 million, or 20% of segment net revenues, compared to
$313.8 million, or 18% of segment net revenues, for the nine months ended
September 29, 2019. The increase in operating profit in the first nine months of
2020 was driven by higher net revenues from MAGIC: THE GATHERING products, lower
marketing and advertising costs and reduced administrative costs as a result of
cost-savings initiatives, partially offset by higher freight costs as a result
of higher domestic shipments and increased direct-to-customer shipments which
carry higher fulfillment costs.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
International Segment
International segment net revenues decreased 17% to $1,017.2 million for the
nine months ended September 27, 2020 from $1,221.2 million for the nine months
ended September 29, 2019 and included an unfavorable $25.1 million impact from
foreign currency exchange. The following table presents net revenues by
geographic region for the Company's International segment for the nine month
periods ended September 27, 2020 and September 29, 2019.
                                                 Nine Months Ended
                                                                                 %
                              September 27, 2020       September 29, 2019      Change
           Europe            $             663.1             673.7               -2  %
           Latin America                   158.0             305.1              -48  %
           Asia Pacific                    196.1             242.4              -19  %
           Net revenues      $           1,017.2           1,221.2              -17  %


Foreign currency translation negatively impacted the Latin American and Asia
Pacific regions by $25.0 million and $2.6 million respectively, partially offset
by a favorable foreign currency translation impact of $2.5 million in Europe
during the first nine months of 2020. International segment net revenues
declined from Franchise Brands, Partner Brands, and Emerging Brands while the
Hasbro Gaming portfolio remained flat during the first nine months of 2020
compared to 2019.  The declines in Franchise Brands were the result of lower net
revenues from NERF products, followed by net revenue declines from TRANSFORMERS
and PLAY-DOH products and to a lesser extent, MY LITTLE PONY products. These
declines were partially offset by net revenue increases from MAGIC: THE
GATHERING products. The overall net revenue declines were in part, due to
disruptions to the business, and to consumer purchasing patterns, as a result of
the COVID-19 pandemic, most notably in the Company's Latin American region and,
to a lesser extent, certain areas within its Asia Pacific region. During the
first nine months of 2020, MAGIC: THE GATHERING products benefited from a
favorable card set release cadence and increased demand compared to 2019. In the
Partner Brands portfolio, the decrease was primarily driven by lower net
revenues from MARVEL products which did not have the benefit of 2020
entertainment releases, as well as lower net revenues from the Company's
BEYBLADE products. These decreases were partially offset by higher net revenues
from DREAMWORKS' TROLLS and STAR WARS products, which were supported by 2020
entertainment, as well as higher net revenues from DISNEY FROZEN products. In
the Hasbro Gaming portfolio, net revenue increases from CLUE, JENGA and DUNGEONS
& DRAGONS products, were offset by lower net revenues from PIE FACE and certain
other Hasbro Gaming products. In the Emerging Brands portfolio, the net revenue
declines were driven by LITTLEST PET SHOP and PLAYSKOOL products during the
first nine months of 2020.
International segment operating profit was $12.3 million, or 1% of segment net
revenues, for the first nine months of 2020, compared to operating profit of
$51.4 million, or 4% of segment net revenues, for the first nine months of 2019.
The decrease in International segment operating profit for the first nine months
of 2020 was the result of lower net revenues as discussed above, partially
offset by reduced advertising, sales and marketing costs, as well as lower
administrative expenses due to the implementation of cost savings initiatives.
Entertainment, Licensing and Digital Segment
Entertainment, Licensing and Digital segment net revenues for the nine months
ended September 27, 2020 decreased 14% to $262.9 million from $304.3 million for
the nine months ended September 29, 2019. The net revenue declines during the
first nine months of 2020 were primarily driven by lower film revenues in 2020
due to revenue recognized in 2019 related to the TRANSFORMER: BUMBLEBEE film
combined with lower net revenues associated with the closure of the Backflip
business in the fourth quarter of 2019, and to a lesser extent, lower consumer
product licensing revenues during the first nine months of 2020. These declines
were partially offset by an increase in digital gaming for the nine months ended
September 27, 2020.
Entertainment, Licensing and Digital segment operating profit was $65.8 million,
or 25.0% of net revenues, for the nine months ended September 27, 2020 up from
$62.6 million, or 21% of segment net revenues, for the nine months ended
September 29, 2019. The increase in operating profit in the Entertainment,
Licensing and Digital segment was driven by lower program costs and amortization
costs, reduced operating expenses associated with the closure of the Backflip
business in the fourth quarter of 2019, favorable mix from growth in licensed
digital gaming, as well as lower digital gaming advertising and development
costs during the first nine months of 2020. Partially offsetting these favorable
impacts to operating profit were lower net revenues as well as asset impairment
charges of $20.8 million in production assets driven by the change in
entertainment strategy as a result of the eOne Acquisition during the first
quarter of 2020.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
eOne Segment
During the first nine months of 2020, eOne segment net revenues were $696.9
million. The following table presents eOne segment net revenues by channel for
the nine months ended September 27, 2020.
                                                Nine Months Ended
                                                September 27, 2020
                 eOne Segment Net Revenues
                      Film and TV              $            504.1
                      Family Brands                         106.1
                      Music and Other                        86.7
                 Segment Total                 $            696.9


The impact of the COVID-19 outbreak on the eOne segment during the first nine
months of 2020 was felt most significantly during the second and third quarters
of the year. Specifically, scheduled productions were and continue to be delayed
or postponed due to the shutdown of live-action production work and the closure
or limited reopening of studios. In addition, theatrical releases have been
delayed due to the closure or limited reopening of theaters, and in some cases,
global film releases were moved from theaters to alternative media platforms
such as streaming services.
In the first nine months of 2020, drivers of the eOne segment net revenues
included: (i) broadcast and licensing revenues associated with internationally
recognized brands, PEPPA PIG and PJ MASKS; (ii) theatrical and film distribution
contributions from the Amblin Partners film 1917, released in December 2019;
(iii) broadcast and licensing contributions from key scripted deliveries
including the fifth season of FEAR THE WALKING DEAD and season two of THE
ROOKIE; and (iv) the Company's strong lineup of unscripted television
programming as well as the Company's SVOD library. In addition to these
entertainment driven revenues, the Company's music business benefited from both
strong streaming and publishing revenues during the first nine months of 2020.
eOne segment operating losses were $65.0 million, or -9.3% of segment net
revenues for the first nine months of 2020. This loss was driven by $77.7
million of acquisition and integration costs, including $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. Also
contributing to the loss is $72.3 million of incremental intangible amortization
costs related to the intangible assets acquired in the eOne Acquisition.
Global Operations
The Global Operations segment operating profit of $4.4 million for the first
nine months of 2020 compares to an operating profit of $6.3 million for the
first nine months of 2019.
Corporate and Eliminations
Operating losses in Corporate and Eliminations for the first nine months of 2020
were $61.1 million, compared to operating profit of $27.6 million for the first
nine months of 2019. The Corporate and Eliminations operating loss in the first
nine months of 2020 was 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, comprised of severance and
retention costs, as well as impairment charges for certain definite-lived
intangible assets driven by the change in strategy for the combined company's
entertainment assets. In addition to the charges associated with the eOne
Acquisition, the Company incurred $11.6 million of severance charges associated
with cost-savings initiatives within the Company's commercial and Film and TV
businesses.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
OPERATING COSTS AND EXPENSES
Third Quarter 2020
Overall, the Company's costs and expenses in the third quarter of 2020 increased
compared to the third quarter of 2019 driven by the inclusion of eOne's
operations in the Company's consolidated financial statements. Costs and
expenses stated as percentages of net revenues, are illustrated below for the
quarters ended September 27, 2020 and September 29, 2019.
                                                            Quarter Ended
                                              September 27, 2020      September 29, 2019
Cost of sales                                             34.3  %                 39.8  %
Program cost amortization                                  4.8                     1.8
Royalties                                                 10.0                     8.1
Product development                                        3.5                     4.3
Advertising                                                7.7                     8.9
Amortization of intangibles                                2.0                     0.8
Selling, distribution and administration                  18.3                    17.5
Acquisition and related costs                              0.3                     0.0


Cost of sales for the third quarter of 2020 was $610.1 million, or 34.3% of net
revenues, compared to $627.1 million, or 39.8% of net revenues, for the third
quarter of 2019.  The decrease of cost of sales as a percentage of net revenues
is primarily related to the inclusion of net revenues from eOne, which
experiences lower costs of sales sold as a percentage of net sales. To a lesser
extent, the cost of sales decrease as a percentage of net revenues was driven by
the impact of $3.6 million of foreign exchange and positive brand mix driven by
the increase in net sales of MAGIC: THE GATHERING combined with improved
inventory costing closeout rates and lower in-freight costs in the third quarter
of 2020 due to expedited shipping during the third quarter of 2019.
Program cost amortization increased to $85.4 million, or 4.8% of net revenues,
for the third quarter of 2020 from $28.0 million, or 1.8% of net revenues, for
the third quarter of 2019. 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 this expense both in dollars and as
a percentage of net revenues is related to the addition of eOne's business,
which experiences higher program cost amortization as a percentage of net sales.
Program cost amortization attributable to eOne was 4.3% of net revenues for the
third quarter of 2020. This increase was partially offset by lower program cost
amortization in 2020 related to the BUMBLEBEE theatrical release which the
Company began to amortize during the third quarter of 2019.
Royalty expense for the third quarter of 2020 increased to $176.9 million, or
10.0% of net revenues, compared to $128.0 million, or 8.1% of net revenues, for
the third quarter of 2019.  The increase in royalty expense in dollars and as a
percentage of net revenues was driven by the inclusion of royalty expense
related to eOne operations and was 2.3% of net revenues in the third quarter.
This increase was partially offset by lower sales of Partner Brand products in
the third quarter of 2020 as compared to the third quarter of 2019.
Product development expense for the third quarter of 2020 was $62.7 million, or
3.5% of net revenues, compared to $67.4 million, or 4.3% of net revenues, for
the third quarter of 2019. The decrease in dollars was primarily related to
lower spending as a result of global cost savings initiatives combined with
savings related to the closure of the Backflip business in the fourth quarter of
2019, partially offset by increased investments in MAGIC: THE GATHERING digital
and tabletop gaming.
Advertising expense for the third quarter of 2020 was $137.4 million, or 7.7% of
net revenues, compared to $140.3 million, or 8.9% of net revenues, for the third
quarter of 2019. The advertising expense decrease in dollars and as a percent of
net revenues was driven by lower advertising levels across substantially all of
the Company's regions, most notably in Latin America, reflecting the current
environment due to COVID-19 impacts. The savings in the third quarter, in
dollars, of 2020 were partially offset by the inclusion of the eOne operations
during 2020.
Amortization of intangible assets increased to $36.2 million, or 2.0% of net
revenues, for the third quarter of 2020, compared to $11.8 million, or 0.8% of
net revenues, for the third quarter of 2019. The increase in dollars and as a
percentage of net revenues is primarily related to the acquisition of eOne,
which contributed intangible asset amortization of $24.7 million, or 1.4% of net
revenues, in the third quarter of 2020.
For the third quarter of 2020, the Company's selling, distribution and
administration expenses increased to $325.4 million, or 18.3% of net revenues,
from $275.4 million, or 17.5% of net revenues, for the third quarter of 2019.
The increase in selling,

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
distribution and administration expenses in dollars was driven primarily by the
inclusion and consolidation of eOne's operations during 2020. In addition, the
increase in selling, distribution and administration expenses reflects higher
freight expenses as a result of increased shipments. These increases were
partially offset by the impact of cost savings initiatives in the third quarter
of 2020 as compared to the third quarter of 2019. Selling, distribution and
administration expenses attributable to eOne were 3.3% of net revenues during
the third quarter of 2020.
During the three months ended September 27, 2020, the Company incurred $5.9
million of acquisition and related costs in connection with the eOne
Acquisition. These expenses were comprised of $4.6 million of acquisition and
integration costs, and $1.3 million of severance and retention costs.
First Nine Months of 2020
The Company's costs and expenses, stated as percentages of net revenues, are
illustrated below for the nine month periods ended September 27, 2020 and
September 29, 2019.
                                                          Nine Months Ended
                                              September 27, 2020      September 29, 2019
Cost of sales                                             30.1  %                 37.4  %
Program cost amortization                                  7.2                     1.8
Royalties                                                 10.3                     7.9
Product development                                        4.7                     5.7
Advertising                                                8.3                     9.4
Amortization of intangibles                                2.9                     1.1
Selling, distribution and administration                  23.7                    22.7
Acquisition and related costs                              4.4                       -


Cost of sales for the nine months ended September 27, 2020 decreased to
$1,126.0, million or 30.1% of net revenues, from $1,230.8 million, or 37.4% of
net revenues for the nine months ended September 29, 2019. The decrease as a
percentage of net revenues is primarily related to the acquisition of eOne,
which experiences lower cost of sales as a percentage of net sales as well as
the impact of $13.8 million of foreign exchange. The cost of sales decrease in
dollars during the first nine months of 2020 was driven by positive brand mix
due to an increase in net sales of MAGIC: THE GATHERING, and improved inventory
costing, partially offset by lower sales of Partner Brand products.
Program cost amortization increased in the first nine months of 2020 to $268.2
million, or 7.2% of net revenues, from $58.1 million, or 1.8% of net revenues,
in the first nine months of 2019. Programming 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 percentage of
net revenues, is primarily related to the addition of eOne's business, which
experiences higher program cost amortization as a percentage of net sales.
Program cost amortization attributable to eOne was 6.5% of net revenues during
the first nine months of 2020.
Royalty expense for the nine months ended September 27, 2020 was $387.1 million,
or 10.3% of net revenues, compared to $259.0 million, or 7.9% of net revenues,
for the nine months ended September 29, 2019. The increase in royalty expense in
dollars, and as a percentage of net revenues, was driven by the inclusion of
eOne operations during the first nine months of 2020 and was 3.5% of net
revenues, partially offset by lower sales of Partner Brand product during the
first nine months of 2020 as compared to the first nine months of 2019.
Product development expense for the nine months ended September 27, 2020
decreased to $174.9 million, or 4.7% of net revenues, from $189.2 million, or
5.7% of net revenues, for the nine months ended September 29, 2019. The decrease
as a percentage of net revenues was primarily related to eOne, which experiences
lower product development expense as a percentage of net sales. The decrease in
dollars during the first nine months of 2020 was driven by lower spending as a
result of global cost savings initiatives combined with the impact of the
closure of the Company's Backflip business during the fourth quarter of 2019.
These decreases were partially offset by increased investments in digital
gaming, primarily related to the Company's Wizards of the Coast business.
Advertising expense for the nine months ended September 27, 2020 was $311.4
million, or 8.3% of net revenues, compared to $309.7 million, or 9.4% of net
revenues, for the nine months ended September 29, 2019. The advertising expense
increase in dollars was driven by the acquisition of eOne, partially offset by
lower advertising costs related to the Company's digital gaming initiatives and
reduced advertising levels globally, reflecting the current environment due to
the impact of COVID-19.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
Amortization of intangible assets was $107.7 million, or 2.9% of net revenues,
for the nine months ended September 27, 2020 compared to $35.4 million, or 1.1%
of net revenues, in the first nine months of 2019. The increase in dollars and
as a percentage of net revenues is primarily related to the acquisition of eOne,
which contributed intangible asset amortization of $72.3 million, or 1.9% of net
revenues, in the first nine months of 2020.
For the nine months ended September 27, 2020, the Company's selling,
distribution and administration expenses increased to $885.7 million, or 23.7%
of net revenues, from $748.3 million, or 22.7% of net revenues, for the nine
months ended September 29, 2019. The increase in selling, distribution and
administration expenses was driven primarily by the inclusion and consolidation
of eOne's operations during the first nine months of 2020, combined with $11.6
million of severance charges associated with cost-savings initiatives within the
Company's commercial and Film and TV businesses. This increase was partially
offset by lower marketing, sales and warehousing expenses across the regions
during the first nine months. Selling, distribution and administration expenses
attributable to eOne were 4.2% of net revenues during the first nine months of
2020.
During the first nine months 2020, the Company incurred $166.0 million of
acquisition and related costs in connection with the eOne Acquisition. These
expenses were comprised of $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 2020 totaled
$49.4 million and $153.7 million, respectively, compared to $22.8 million and
$67.1 million in the third quarter and first nine months of 2019, respectively.
In connection with the financing of the eOne Acquisition, the Company issued an
aggregate of $2.4 billion of senior unsecured debt securities during November
2019 and in the first quarter of 2020, on the date of the closing, borrowed $1.0
billion in term loans provided by a term loan agreement. The increase in
interest expense for the third quarter and first nine months of 2020 reflects
interest related to these notes and other borrowings associated with the eOne
Acquisition, partially offset by lower average short-term borrowings during the
first nine months of 2020.
Interest income was $0.7 million and $6.4 million for the third quarter and
first nine months of 2020, respectively, compared to $5.5 million and $19.2
million in the third quarter and first nine months of 2019, respectively. Lower
average interest rates in 2020 compared to 2019 contributed to the decrease.
Other income, net was $11.3 million and $15.4 million for the third quarter and
first nine months of 2020, respectively, compared to other expense, net of $20.2
million and $118.3 million in the third quarter and first nine months of 2019,
respectively. The increase for the third quarter was driven by lower foreign
currency losses in 2020 compared to 2019, which included a $25.5 million charge
related to unrealized losses on foreign exchange forward and option contracts
entered into by the Company to limit exposure to foreign currency fluctuations
associated with the proposed eOne Acquisition price. Also contributing to the
third quarter 2020 increase is a $6.1 million gain related to the sale of the
Dragonvale software and brand. The increase for the nine month period was driven
by lower pension expense in 2020 due to the $110.8 million non-cash pension
charge as a result of the settlement of the Company's U.S. pension plan
liability during the second quarter of 2019 combined with the previously
discussed lower foreign currency losses in 2020 and gain on the sale of the
Dragonvale software and brand.
INCOME TAXES
Income tax expense totaled $79.2 million on pre-tax earnings of $299.2 million
in the third quarter of 2020 compared to income tax expense of $46.8 million on
pre-tax earnings of $259.7 million in the third quarter of 2019. For the
nine-month period, income tax expense totaled $64.3 million on pre-tax earnings
of $183.6 million in 2020 compared to income tax expense of $42.3 million on
pre-tax earnings of $295.4 million in 2019. The quarter and nine month periods
in both 2020 and 2019, as well as the full year 2019, were impacted by discrete
tax events including the accrual of potential interest and penalties on
uncertain tax positions. During the first nine months of 2020, favorable
discrete tax adjustments were a net benefit of $5.3 million compared to a net
benefit of $31.7 million in the first nine months of 2019. The favorable
discrete tax adjustments for the first nine months of 2020 primarily relate to
the costs related to the acquisition of eOne offset by the revaluation of UK tax
attributes as a result of the United Kingdom's enactment during the quarter of
the Finance Act of 2020 which maintains the corporate income tax rate at 19% and
an increase of uncertain tax positions based on changes in management judgement.
The favorable discrete tax adjustments for the first nine months of 2019
primarily related to the settlement of the U.S. defined benefit pension plan
liability, excess tax benefits on share-based payments and the expiration of
statutes of limitations for uncertain tax

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
positions. Absent discrete items, the adjusted tax rates for the first nine
months of 2020 and 2019 were 19.9% and 18.2%, respectively. The increase in the
adjusted tax rate of 19.9% for the first nine months of 2020 is primarily due to
the mix of jurisdictions where the Company earned its profits and the impact of
the eOne Acquisition.

The UK enacted the Finance Act of 2020 upon receiving royal assent on July 22,
2020. Effective April 1, 2020, the new law maintains the corporate income tax
rate at 19% instead of the planned reduction to 17% that was previously enacted
in the Finance Act of 2016. Changes in tax laws and rates impact recorded
deferred tax assets and liabilities and our effective tax rate. The primary
impact resulted from the revaluation of Hasbro's UK tax attributes, which
resulted in an increased tax provision of $13.7 million in the third quarter of
2020.
OTHER INFORMATION
Brexit Referendum
On June 23, 2016, the UK voted in a referendum to leave the European Union
("EU"), commonly referred to as Brexit. The UK government triggered the formal
two-year period to negotiate the terms of the UK's exit on March 29, 2017. These
events resulted in an immediate weakening of British pound sterling against the
US dollar, and increased volatility in the foreign currency markets which
continued into 2020. These fluctuations initially affected Hasbro's financial
results, although the impact was partially mitigated by the Company's hedging
strategy. On January 31, 2020, the UK formally withdrew from the EU, entering a
transitional period which is currently expected to end on December 31, 2020.
During this transitional period, EU law will continue to apply in the UK while
providing time for the UK and EU to negotiate the details of their future
relationship. Financial, trade and legal implications of the UK leaving the EU
remain uncertain. The Company continues to closely monitor the negotiations and
the impact to foreign currency markets, taking appropriate actions to support
the Company's long-term strategy and to mitigate risks in its operational and
financial activities. However, the Company cannot predict the direction of
Brexit-related developments nor the impact of those developments on our European
operations and the economies of the markets in which they operate.
Business Seasonality and Shipments
Historically, the revenue pattern of Hasbro's legacy 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.
The Company's business is characterized by customer order patterns which vary
from year to year largely because of differences each year 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 the Company sells products, and changes in overall
economic conditions. As a result, comparisons of the Company's unshipped orders
on any date with those at the same date in a prior year are not necessarily
indicative of the Company's expected sales for the year. Moreover, quick
response inventory management practices result in fewer orders being placed
significantly in advance of shipment and more orders being placed for immediate
delivery. Although the Company may receive orders from customers in advance, it
is a 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 unshipped orders, at any given date, are indicative of future
sales. Additionally, the impact of the COVID-19 outbreak to the Company's
business seasonality and shipments was significant during the first nine months
of 2020. After operating at lower than planned production levels during most of
the first quarter due to COVID-19, the Company's third-party manufacturing
facilities in China are currently operating at planned capacity for this time of
year. Manufacturing and warehouse partners outside of China operated at close to
normal levels during much of the first quarter. Beginning in mid-March and
continuing into the second quarter, these locations were operating at varying
levels of productivity depending on local government and safety considerations
however, as of the end of the third quarter, the majority of the Company's
third-party manufacturing facilities were up and running. The COVID-19 situation
continues to be fluid, but we currently expect all manufacturing facilities to
remain operational through the end of 2020, unless a resurgence of COVID-19
cases were to cause further manufacturing shutdowns or restrictions.
Additionally, the Company experienced significant growth in its ecommerce
business during 2020, as more consumers have turned to online shopping as a
result of the COVID-19 outbreak, which provides the Company with less lead-time
to ship product as compared to product being shipped to brick and mortar
retailers. We believe we are currently well positioned to meet our expected
shipping schedule demands however, if manufacturing facilities are impacted by a
resurgence in COVID-19, we may not be able to make up for the disruption in
supply in the near term.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
Accounting Pronouncement Updates
In June 2016, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update No. 2016-13 (ASU 2016-13) Financial Instruments -
Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. The amendments in this update provide financial statement users
with more decision-useful information about the expected credit losses on
financial instruments and other commitments to extend credit held by a reporting
entity at each reporting date. The standard update replaces the incurred loss
impairment methodology with a methodology that reflects expected credit losses
and requires consideration of a broader range of reasonable and supportable
information to inform credit loss estimates. For public companies, this standard
is effective for annual reporting periods beginning after December 15, 2019, and
early adoption was permitted. The Company adopted the standard in the first
quarter of 2020 and the adoption of the standard did not have a material impact
on its consolidated financial statements.
In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (ASU
2018-13), Fair Value Measurement (Topic 820): Disclosure Framework - Changes to
the Disclosure Requirements for Fair Value Measurement. The amendments in this
update modify the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement, specifically related to disclosures surrounding
Level 3 asset balances, fair value measurement methods, related gains and losses
and fair value hierarchy transfers. For public companies, this standard is
effective for annual reporting periods beginning after December 15, 2019, and
early adoption was permitted. The Company adopted the standard in the first
quarter of 2020 and the adoption of the standard did not have a material impact
on its consolidated financial statements.
In March 2019, the FASB issued Accounting Standards Update No. 2019-02 (ASU
2019-02) Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and
Entertainment-Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350):
Improvements to Accounting for Costs of Films and License Agreements for Program
Materials. The amendments in this update align cost capitalization of episodic
television series production costs with that of film production cost
capitalization. In addition, this update addresses impairment testing procedures
with regard to film groups, when a film or license agreement is expected to be
monetized with other films and/or license agreements.  The intention of this
update is to align accounting treatment with changes in production and
distribution models within the entertainment industry and to provide increased
transparency of information provided to users of financial statements about
produced and licensed content.  For public companies, this standard is effective
for annual reporting periods beginning after December 15, 2019, and early
adoption was permitted. The Company adopted the standard in the first quarter of
2020 and the adoption of the standard did not have a material impact on its
consolidated financial statements.
Recently Issued Accounting Pronouncements
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 standard relates to financial statement disclosure only and
will not have an impact on the Company's consolidated statement of financial
position, statement of operations or statement of cash flows.
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 generally accepted
accounting principles ("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 is currently evaluating this option as it relates
to its contracts that reference LIBOR, as well as the impact of the standard to
the Company's 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 2020 and 2019 the Company has primarily
funded its operations and liquidity needs through cash flows from operations,
and when needed, used borrowings under its available lines of credit. In 2020,
the Company's eOne operating segment has used production financing to fund
certain of its television and film productions which are arranged on an
individual production basis by special purpose production subsidiaries.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
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 that the Company is not able
to issue commercial paper, the Company intends to utilize its available lines of
credit. With the acquisition of eOne, the Company funds certain of its
television and film productions using production financing facilities which are
secured by the assets and future revenues of the individual production
subsidiaries. Under these facilities, the cash generated by the production may
be restricted until the production financing is paid. The Company believes that
the funds available to it, including cash expected to be generated from
operations and funds available through its available lines of credit and
commercial paper program are adequate to meet its working capital needs over the
next twelve months. However, unexpected events or circumstances such as material
operating losses or increased capital or other expenditures or inability to
otherwise access the commercial paper market, 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 management believes the risk of
nonperformance by the counterparties to the Company's 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.
During November of 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%. The
interest rate payable on each series of the Notes will be subject to adjustment
from time to time if either Moody's or S&P (or a substitute rating agency
therefor) downgrades (or downgrades and subsequently upgrades) the credit rating
assigned to the Notes. Underwriting discount and fees of $20.0 million were
deducted from the gross proceeds of the Notes. These costs are being amortized
over the life of the Notes, which range from three to ten years. Prior to
October 19, 2024 (in the case of the 2024 Notes), September 19, 2026 (in the
case of the 2026 Notes), August 19, 2029 (in the case of the 2029 Notes) and at
any time (in the case of the 2022 Notes), the Company may redeem the Notes at
its option at the greater of the principal amount of the Notes or the present
value of the remaining scheduled payments discounted using the effective
interest rate on applicable U.S.Treasury bills at the time of repurchase, plus
(1) 15 basis points (in the case of the 2022 Notes); (2) 25 basis points (in the
case of the 2024 Notes); (3) 30 basis points (in the case of the 2026 Notes);
and (4) 35 basis points (in the case of the 2029 Notes).  In addition, on and
after (1) October 19, 2024 for the 2024 Notes; (2) September 19, 2026 for the
2026 Notes; and (3) August 19, 2029 for the 2029 Notes, such series of Notes
will be redeemable, in whole at any time or in part from time to time, at the
Company's option at a redemption price equal to 100% of the principal amount of
the Notes to be redeemed plus accrued and unpaid interest.
Of the Company's long-term borrowings, the $300.0 million of 3.15% Notes mature
in 2021. All of the Company's other long-term borrowings have contractual
maturities that occur subsequent to 2021 with the exception of certain of the
Company's production financing facilities.
In November of 2019, the Company completed an underwritten public offering of
10,592,106 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 $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.
As of September 27, 2020, the Company's cash and cash equivalents totaled
$1,132.4 million, of which $71.2 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. Tax Cuts and Jobs Act (the "Tax Act") provided significant changes to
the U.S. tax system including the elimination of the ability to defer U.S.
income tax on unrepatriated earnings by imposing a one-time mandatory deemed
repatriation tax on undistributed foreign earnings. As of September 27, 2020,
the Company has a total liability of $174.5 million related to this tax, $18.4
million is reflected in current liabilities while the remaining long-term
payable related to the Tax Act of $156.1 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 27, 2020 is denominated in the U.S. dollar.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
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 as well. 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 27,
                                                       2020              September 29, 2019                % Change
Cash and cash equivalents (including restricted
cash of $71.2 and $0)                             $   1,132.4                  1,060.4                               7  %
Accounts receivable, net                              1,438.4                  1,416.9                               2  %
Inventories                                             540.0                    589.1                              -8  %
Prepaid expenses and other current assets               648.2                    346.7                              87  %
Other assets                                          1,276.1                    626.2                             104  %
Accounts payable and accrued liabilities              1,936.2                  1,458.8                              33  %
Other liabilities                                       778.5                    550.8                              41  %


Accounts receivable increased to $1,438.4 million at September 27, 2020,
compared to $1,416.9 million at September 29, 2019. Absent the unfavorable
foreign currency impact of $21.5 million, accounts receivable increased 3%, or
$43.1 million. The increase in accounts receivable during the first nine months
of 2020 was driven primarily by the inclusion of eOne balances of $177.9
million. Absent eOne, accounts receivable balances decreased across the
Company's Latin American, U.S. and Canada and European regions due to improved
collections during the nine months ended September 27, 2020 compared to the same
period in 2019. Days sales outstanding decreased from 82 days at September 29,
2019 to 74 days at September 27, 2020 primarily due to the mix of sales,
improved collections and higher shipments earlier in the quarter.
Inventories decreased to $540.0 million as of September 27, 2020 compared to
$589.1 million at September 29, 2019. Absent the unfavorable foreign currency
impact of $8.2 million, inventories decreased 7% reflecting lower levels in the
U.S. and Canada and Asia Pacific markets primarily due to improved inventory
management, offset by higher inventories in Latin America due to higher than
normal inventory levels remaining from the fourth quarter of 2019 and lower
sales and lower shipments in the first nine months of 2020 due to the impact of
COVID-19.
Prepaid expenses and other current assets increased to $648.2 million at
September 27, 2020 from $346.7 million at September 29, 2019. The increase was
due to higher accrued royalty and licensing income, primarily attributable to
accrued revenue balances of $228.6 million associated with eOne's properties and
content, higher accrued tax credits related to film and television production
costs, the majority of which are attributable to eOne productions, higher
prepaid royalty amounts due to payments made in the first quarter of 2020 for
the extension of the Company's Marvel and Lucas agreements and higher prepaid
tax balances as a result of lower earnings relative to estimated tax payments.
These increases were partially offset by lower unrealized gains on foreign
exchange contracts, deferred financing cost balances recorded at September 29,
2019 to secure funding for the purchase of eOne and lower short-term investment
balances at September 27, 2020 compared to September 29, 2019.
Other assets increased to approximately $1,276.1 million at September 27, 2020
from $626.2 million at September 29, 2019. The increase was primarily due to
eOne's investments in acquired content and production for music, film and
television content of $619.5 million. Also contributing to the increase are
higher long-term accrued income balances primarily driven by eOne and higher
deferred tax balances. These increases were partially offset by lower
capitalized television production costs in the legacy Hasbro business.
Accounts payable and accrued liabilities increased to $1,936.2 million at
September 27, 2020 from $1,458.8 million at September 29, 2019. The increase was
primarily attributable to eOne accrued participation and deferred revenue
balances. In addition, increases included higher accrued royalty balances as
well as higher accrued interest as a result of higher debt levels in 2020 from
the issuance of notes in November 2019 and January 2020. These increases were
partially offset by lower accounts payable balances and lower severance accruals
as payments made in relation to the Company's 2018 restructuring actions more
than offset the increase from the restructuring actions taken in the second
quarter of 2020 as a result of the integration of eOne.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
Other liabilities increased to $778.5 million at September 27, 2020 from $550.8
million at September 29, 2019. The increase was primarily driven by deferred tax
liabilities recorded as a result of the eOne Acquisition, higher long-term lease
liability balances resulting from the eOne Acquisition and higher reserves for
uncertain tax positions. In addition, the balance at September 27, 2020 includes
long-term deferred revenue balances of eOne and higher long-term international
pension balances due to 2019 year-end actuarial valuations. These increases were
offset by a lower transition tax liability balance reflecting the
reclassification of the 2021 installment payment.
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 27,
2020 and September 29, 2019.
                                    September 27, 2020       September 29, 

2019

Net cash provided by (used in)
Operating activities             $             494.3      $             389.6
Investing activities                        (4,471.7)                   (86.5)
Financing activities                           550.5                   (417.2)


Net cash provided by operating activities in the first nine months of 2020 was
$494.3 million compared to $389.6 million in the first nine months of 2019. The
$104.7 million increase in net cash provided by operating activities was
primarily attributable to higher collections of accounts receivable balances
during the first nine months of 2020 and higher earnings excluding non-cash
charges. These increases were partially offset by higher film and television
production spend as a result of the inclusion of eOne operations during the
first nine months of 2020 as well as royalty advances paid in the first quarter
of 2020 related to the extension of the Company's Marvel and Lucas license
agreements that were due to expire in 2020.
Net cash utilized in investing activities was $4,471.7 million in the first nine
months of 2020 compared to $86.5 million in the first nine months of 2019.  The
increase in 2020 reflects $4.4 billion of cash utilized to acquire eOne, net of
cash acquired. As discussed in the Executive Summary, the cash used for the
purchase of eOne consisted of the net proceeds from the issuance of an aggregate
principal amount of $2.4 billion in senior secured notes in November 2019, net
proceeds $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 $92.1 million in the first nine
months of 2020 compared to $90.8 million in the first nine months of 2019.
Net cash provided by financing activities was $550.5 million in the first nine
months of 2020 compared to net cash utilized of $417.2 million in the first nine
months of 2019. The increase in cash provided by financing activities was
primarily driven by the proceeds from the drawdown 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.
During the first nine months of 2019, the Company paid $100.0 million to Saban
Properties related to the 2018 POWER RANGERS acquisition which consisted of a
$75.0 million deferred purchase price payment and $25.0 million released from
escrow. Cash payments related to the purchases of the Company's common stock
were $60.1 million in the first nine months of 2019. There were no repurchases
of the Company's common stock in the first nine months of 2020 as the Company
suspended the program while it prioritizes deleveraging. Dividends paid in the
first nine months of 2020 totaled $279.4 million compared to $250.8 million in
the first nine months of 2019 primarily reflecting the additional shares issued
in the fourth quarter of 2019.
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 $1,000.0 million. 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 rates vary based on
market conditions and the ratings assigned to the notes by the credit rating
agencies at the time

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
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 27, 2020, 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 $1,500.0
million. 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 and for the quarter ended September 27,
2020. The Company had no borrowings outstanding under its committed revolving
credit facility as of September 27, 2020. However, letters of credit outstanding
under this facility as of September 27, 2020 were approximately $2.7 million.
Amounts available and unused under the committed line, at September 27, 2020
were approximately $1,497.3 million, inclusive of borrowings under the Company's
commercial paper program. The Company also has other uncommitted lines from
various banks, of which approximately $23.2 million was utilized at
September 27, 2020. Of the amount utilized under, or supported by, the
uncommitted lines, approximately $10.0 million and $13.2 million represent
outstanding short-term borrowings and letters of credit, 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. Loans under the Term Loan
Facilities bear interest, at the Company's option, at either the Eurocurrency
Rate or the Base Rate, in each case plus a per annum applicable rate that
fluctuates (1) in the case of the Three-Year Tranche, between 87.5 basis points
and 175.0 basis points, in the case of loans priced at the Eurocurrency Rate,
and between 0.0 basis points and 75.0 basis points, in the case of loans priced
at the Base Rate, and (2) in the case of the Five-Year Tranche, between 100.0
basis points and 187.5 basis points, in the case of loans priced at the
Eurocurrency Rate, and between 0.0 basis points and 87.5 basis points, in the
case of loans priced at the Base Rate, in each case, based upon the non-credit
enhanced, senior unsecured long-term debt ratings of the Company by Fitch
Ratings Inc., Moody's Investor Service, Inc. and S&P Global Rankings, subject to
certain provisions taking into account potential differences in ratings issued
to the relevant rating agencies or a lack of ratings issued by such ratings
agencies. Loans under the Five-Year Tranche require principal amortization
payments, payable in equal quarterly installments of 5.0% per annum of the
original principal amount thereof for each of the first two years after funding,
increasing to 10.0% per annum of the original principal amount thereof for each
subsequent year. The Term Loan Agreement contains affirmative and negative
covenants typical of this type of facility, including: (i) restrictions on the
Company's and its domestic subsidiaries' ability to allow liens on their assets,
(ii) restrictions on the incurrence of indebtedness, (iii) restrictions on the
Company's and certain of its subsidiaries' ability to engage in certain mergers,
(iv) the requirement that the Company maintain a Consolidated Interest Coverage
Ratio of no less than 3.00:1.00 as of the end of any fiscal quarter and (v) the
requirement that the Company maintain a Consolidated Total Leverage Ratio of no
more than, depending on the gross proceeds of equity securities issued after the
effective date of the eOne Acquisition, 5.65:1.00 or 5.40:1.00 for each of the
first, second and third fiscal quarters ended after the funding of the Term Loan
Facilities, with periodic step downs to 3.50:1.00 for the fiscal quarter ending
December 31, 2023 and thereafter.
The Company has principal amounts of long-term debt at September 27, 2020 of
$5.2 billion, due at varying times from 2021 through 2044. As described above,
the Company issued an aggregate of $2.4 billion of senior unsecured long-term
debt securities in November 2019 and borrowed $1.0 billion under its term loan
facilities on December 30, 2019 in connection with the financing of the eOne
Acquisition. Of the total principal amount of long-term debt, $369.3 million is
current at September 27, 2020 of which $300.0 million is related to the 3.15%
2021 Notes and $30.0 million is related to principal amortization of the 5-year
term loans due December 2024. Additionally, the Company has outstanding
production financing facilities at September 27, 2020 of $121.4 million of which
$82.2 million is included in long-term debt and $39.2 million is reported as the
current portion of long-term debt within the Company's consolidated financial
statements, included in Item 1 of this Form10-Q.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
The Company also had letters of credit and other similar instruments of
approximately $15.9 million and purchase commitments of approximately $605.9
million outstanding at September 27, 2020.
Through the eOne Acquisition, the Company assumed eOne's existing future
obligations for film and television content, future minimum contractual royalty
payment obligations and operating lease commitments. Future payments required
under these obligations, expressed in millions of dollars as of September 27,
2020, are as follows:
                               Remainder 2020             2021              2022              2023              2024             Thereafter            Total
Future film and television
obligations                  $          24.7               52.4               1.9                 -                -                   -             $  79.0

First-look commitments                   6.3               20.7               8.4                 -                -                   -                35.4
Operating lease commitments             23.6               36.0              11.2              10.1              8.8                22.8               112.5
                             $          54.6              109.1              21.5              10.1              8.8                22.8             $ 226.9


Other contractual obligations and commercial commitments, as detailed in the
Company's 2019 Form 10-K, did not materially change outside of commitments
assumed as part of the eOne Acquisition and 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
2019 Form 10-K does not include certain tax liabilities related to uncertain tax
positions. See Note 3, "Business Combinations" to our consolidated financial
statements, which is included in Part I of this Form 10-Q for contractual
commitments assumed through the eOne Acquisition.
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
recoverability of goodwill, intangible assets, income taxes and the valuation of
the Company's equity method investment in Discovery Family Channel. These
critical accounting policies are the same as those detailed in the 2019 Form
10-K with the exception of the use of estimates for business combinations in
relation to the Company's 2020 acquisition of eOne, which is detailed below.
Business Combinations. The Company accounts for business combination under FASB
Accounting Standards Codification Topic 805, Business Combinations ("Topic
805"). Identifiable assets acquired, liabilities assumed and any noncontrolling
interests in the acquiree are recognized and measured as of the acquisition date
at fair value. Goodwill is recognized to the extent by which the aggregate of
the acquisition-date fair value of the consideration transferred and any
noncontrolling interests in the acquiree exceed the recognized basis of the
identifiable assets acquired, net of assumed liabilities. Determining the fair
value of assets acquired, liabilities assumed and noncontrolling interests
requires management's judgment and often involves the use of significant
estimates and assumptions, including assumptions with respect to future cash
flows, discount rates and asset lives among other items.
The Company's evaluation of the facts and circumstances available as of December
30, 2019, to assign fair values to assets acquired and liabilities assumed,
including income tax related amounts are ongoing. As further analysis of assets
including program rights, investment in films and television content, intangible
assets, as well as deferred revenue, noncontrolling interests, tax and certain
other liabilities is completed, additional information on the assets acquired
and liabilities assumed may become available. A change in the information
related to the net assets acquired may change the amount of the purchase price
assigned to goodwill, and as a result, the preliminary fair values disclosed are
subject to adjustment as additional information is obtained and valuations are
completed. Provisional adjustments, if any, will be recognized during the
reporting period in which the adjustments are determined. We expect to finalize
the purchase price allocation as soon as practicable, but no later than one year
from the acquisition date. For more information on the eOne Acquisition see Note
3, "Business Combinations" to the Consolidated Financial Statements included in
Part I, Item 1 of this Form 10-Q.

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
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, Hong Kong 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 2020 through 2022 using foreign
exchange forward contracts. In addition, during the third quarter of 2019 the
Company hedged a portion of its exposure to fluctuations in the British pound
sterling in relation to the eOne Acquisition purchase price and other
transaction related costs using a series of both foreign exchange forward and
option contracts. These contracts did not qualify for hedge accounting and as
such, were marked to market through the Company's Consolidated Statement of
Operations. For tax purposes these contracts qualified as nontaxable integrated
tax hedges. These contracts matured on December 30, 2019 (the closing date of
the transaction) and net gains or losses recognized on these contracts in the
first nine months of 2020 were immaterial.
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.  Other than as set
forth above, the Company does not hedge foreign currency exposures.
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 27, 2020, these
contracts had net unrealized gains of $15.3 million, of which $11.7 million of
unrealized gains are recorded in prepaid expenses and other current assets, $4.0
million of unrealized gains are recorded in other assets, $0.3 million of
unrealized losses are recorded in accrued liabilities and $0.1 million of
unrealized losses are recorded in other liabilities. Included in accumulated
other comprehensive loss at September 27, 2020 are deferred gains, net of tax,
of $11.5 million, related to these derivatives.
At September 27, 2020, the Company had principal amounts of fixed rate long-term
debt of $5.2 billion. Of this long-term debt, $600 million represents the
aggregate issuance of long-term debt in May 2014 which consists of $300 million
of 3.15% Notes Due 2021 and $300 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 27, 2020 are deferred losses, net of tax,
of $16.9 million related to these derivatives.
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

--------------------------------------------------------------------------------
              Condensed Notes to Consolidated Financial Statements
            (Thousands of Dollars and Shares Except Per Share Data)
the supervision and with the participation of the Company's management,
including the Company's 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 27, 2020. Based on the evaluation of
these disclosure controls and procedures, the 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
Except for the acquisition of eOne described below, 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 27, 2020 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
On December 30, 2019, the Company completed the acquisition of eOne. We are
currently integrating eOne into our operations and internal control processes
and, pursuant to the Securities and Exchange Commission's guidance that an
assessment of a recently acquired business may be omitted from the scope of an
assessment in the year of acquisition, the scope of our assessment of the
effectiveness of our internal controls over financial reporting at December 27,
2020 will not include eOne.

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

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