Q3 2020
Earnings
OCTOBER 26, 2020
Safe Harbor
Certain statements in this presentation contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by the use of forward-looking words or phrases, include statements relating to: 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; our expectations concerning the upcoming holiday season and our future results; and our working capital and liquidity. Our actual actions or results may differ materially from those expected or anticipated in the forward-looking statements due to both known and unknown risks and uncertainties. Factors that might cause such a difference include, but are not limited to: our ability to successfully develop and execute plans to mitigate the negative impact of the coronavirus to our business;
- our ability to design, develop, produce, manufacture, source and ship products on a timely and cost-effective and profitable basis;
- rapidly changing consumer interests in the types of products and entertainment we offer;
- the challenge of developing and offering products and storytelling experiences that are sought after by children, families and audiences given increasing technology and entertainment offerings available;
- our ability to develop and distribute engaging storytelling across media to drive brand awareness;
- our dependence on third party relationships, including with third party manufacturers, licensors of brands, studios, content producers and entertainment distribution channels;
- our ability to successfully compete in the global play and entertainment industry, including with manufacturers, marketers, and sellers of toys and games, digital gaming products and digital media, as well as with film studios, television production companies and independent distributors and content producers;
- our ability to successfully evolve and transform our business and capabilities to address a changing global consumer landscape and retail environment, including changing inventories policies and practices of our customers;
- our ability to develop new and expanded areas of our business, such as through eOne, Wizards of the Coast, and our other entertainment, digital gaming and esports initiatives;
- risks associated with international operations, such as currency conversion, currency fluctuations, the imposition of tariffs, quotas, border adjustment taxes or other protectionist measures, and other challenges in the territories in which we operate;
- our ability to successfully implement actions to lessen the impact of potential and enacted tariffs imposed on our products, including any changes to our supply chain, inventory management, sales policies or pricing of our products;
- downturns in global and regional economic conditions impacting one or more of the markets in which we sell products, which can negatively impact our retail customers and consumers, result in lower employment levels, consumer disposable income, retailer inventories and spending, including lower spending on purchases of our products;
- other economic and public health conditions or regulatory changes in the markets in which we and our customers, suppliers and
manufacturers operate, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease, such as the | |
coronavirus, the occurrence of which could create work slowdowns, delays or shortages in production or shipment of products, | |
increases in costs or delays in revenue; | 2 |
Safe Harbor continued
- the success of our key partner brands, including the ability to secure, maintain and extend agreements with our key partners or the risk of delays, increased costs or difficulties associated with any of our or our partners' planned digital applications or media initiatives;
- fluctuations in our business due to seasonality;
- the concentration of our customers, potentially increasing the negative impact to our business of difficulties experienced by any of our customers or changes in their purchasing or selling patterns;
- the bankruptcy or other lack of success of one of our significant retailers, licensees and other business partners;
- risks relating to the use of third party manufacturers for the manufacturing of our products, including the concentration of manufacturing for many of our products in the People's Republic of China and our ability to successfully diversify sourcing of our products to reduce reliance on sources of supply in China;
- our ability to attract and retain talented employees;
- our ability to realize the benefits of cost-savings and efficiency and/or revenue efficiency enhancing initiatives including initiatives to integrate eOne into our business;
- our ability to protect our assets and intellectual property, including as a result of infringement, theft, misappropriation, cyber-attacks or other acts compromising the integrity of our assets or intellectual property;
- risks relating to the impairment and/or write-offs of acquired products and films and television programs we acquire and produce;
- risks relating to investments and acquisitions, such as our acquisition of eOne, which risks include: integration difficulties; inability to retain key personnel; diversion of management time and resources; failure to achieve anticipated benefits or synergies of acquisitions or investments; and risks relating to the additional indebtedness incurred in connection with a transaction;
- the risk of product recalls or product liability suits and costs associated with product safety regulations;
- changes in tax laws or regulations, or the interpretation and application of such laws and regulations, which may cause us to alter tax reserves or make other changes which significantly impact our reported financial results;
- the impact of litigation or arbitration decisions or settlement actions; and
- other risks and uncertainties as may be detailed from time to time in our public announcements and U.S. Securities and
Exchange Commission ("SEC") filings.
The statements contained herein are based on our current beliefs and expectations. We undertake no obligation to make any | |
revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances | |
occurring after the date of this presentation. | 3 |
Supplemental Financial Data
Use of Non-GAAP Financial Measures
The financial tables accompanying this presentation include non-GAAP financial measures as defined under SEC rules, specifically Adjusted operating profit, Adjusted net earnings and Adjusted earnings per diluted share, which exclude, where applicable, the 2020 impact of eOne acquisition and related costs, purchased intangible amortization, other severance costs and income tax expense associated with U.K tax reform. For 2019, Pro Forma Adjusted operating profit, Pro Forma Adjusted net earnings and Pro Forma Adjusted earnings per diluted share exclude the impact of charges associated with the settlement of the Company's U.S. pension plan, purchased intangible amortization and certain charges incurred by eOne related to prior restructuring programs and acquisition-related charges. Also included in the financial tables are the non-GAAP financial measures of EBITDA, Adjusted EBITDA and Pro Forma Adjusted EBITDA. EBITDA represents net earnings attributable to Hasbro, Inc. excluding interest expense, income taxes, depreciation and amortization. Adjusted EBITDA also excludes the impact of the charges/gains noted above. As required by SEC rules, we have provided reconciliations on the attached schedules of these measures to the most directly comparable GAAP measure. Management believes that Adjusted net earnings, Adjusted earnings per diluted share and Adjusted operating profit provides investors with an understanding of the underlying performance of our business absent unusual events. Management believes that EBITDA and Adjusted EBITDA are appropriate measures for evaluating the operating performance of our business because they reflect the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet and make strategic acquisitions. These non-GAAP measures should be considered in addition to, not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with GAAP as more fully discussed in our consolidated financial statements and filings with the SEC. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America.
4
Hasbro's Brand Blueprint
5
Creating the World's Best Play & Entertainment Experiences
HASBRO'S BRAND
BLUEPRINT:
A PROPRIETARY
ADVANTAGE
Unique Strategy fueled by
Unmatched Brand Portfolio and Industry-leadingcapabilities in Innovation, Content, Gaming, Digital and Licensing
DiversifiedStrongportfolio leveraging long-terminvestments made in Digital- First orientation, including ecomm and omni-channelretail, digital gaming and across Hasbro
FOCUSED ON FOUR ESSENTIAL AREAS IN NEAR TERM
Supply: Partner factories and
warehouses are currently open and operating. Production is caught up in most instances.
Demand: Consumer demand remained positive in the quarter; revenue gains led by Franchise Brands and Gaming; ecomm up 50% globally
Liquidity: Substantial liquidity and
access to cash
Community: Our global teams remain
focused on supporting our people, health & safety workplace protocols & supporting remote work arrangements.
STRONG FINANCIAL
POSITION
Q3 2020 Revenues: $1.78B
Net Earnings: $220.9M
Adjusted Net Earnings: $258.9M*
Adjusted EBITDA $428.2M* $1.1B in cash at quarter end $494.3M Q3 operating cash flow
$1.5B Revolving Credit Facility
available
*A reconciliation of Adjusted Net | |
Earnings can be found on slide 36; | |
adjusted EBITDA can be found on | 6 |
slide 37. |
Q3
2020
snapshot
REVENUE
$1.78B
OPERATING PROFIT
As Reported $336.6M As Adjusted $367.2M
NET EARNINGS
As Reported $220.9M As Adjusted $258.9M
EPS: NET EARNINGS
As Reported $1.61 per diluted share As Adjusted $1.88 per diluted share
*The As Adjusted figures are non-GAAP financial measures.
A reconciliation of non-GAAP financial measures can be found7 on slides 31-37
PARTNER BRAND | PARTNER BRAND | PARTNER BRAND | ||
2020 ANNOUNCEMENTS
& HIGHLIGHTS
8
Third Quarter & Nine Months Net Revenues Performance
$ Millions, unaudited
THIRD QUARTER NET REVENUES
$2,000 | $1,858 | -4% |
$1,777 | ||
$1,500 |
$1,000
$500
$-
20192020
Pro Forma
NINE MONTHS NET REVENUES
$5,000 | $4,273 | -12% |
$3,742 | ||
$4,000 |
$3,000
$2,000
$1,000
$-
20192020 Pro Forma
- Growth in toys, games and digital initiatives offset by a decline in entertainment
- Consumer demand remained strong in the third quarter 2020; Global POS up mid-single digits
- Revenue growth in the U.S. and Canada segment and European region; ecomm revenues up 50% globally
- eOne TV and Film revenues impacted by delivery delays due to timing of production returning
- FX had a negative $1M impact on revenues in the third quarter 2020; YTD 2020 negative impact is $28M
For comparability, the third quarter of 2019 includes the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma | 9 |
Results" for the Pro Forma and Non-GAAP adjustments on slides 34 and 35. |
Third Quarter & Nine Months Brand Portfolio Performance
Pro Forma | Nine | Pro Forma | % | |||
Q3 2020 | % CHANGE | Months | Nine Months | |||
(millions of dollars) | Q3 2019 | 2020 | 2019 | CHANGE | ||
FRANCHISE BRANDS | $808 | $780 | +4% | $1,581 | $1,750 | -10% |
PARTNER BRANDS | $409 | $427 | -4% | $730 | $812 | -10% |
HASBRO GAMING1 | $239 | $232 | +3% | $516 | $463 | +11% |
EMERGING BRANDS2 | $155 | $189 | -18% | $325 | $411 | -21% |
TV/FILM/ENTERTAINMENT3 | $166 | $231 | -28% | $590 | $836 | -29% |
TOTAL | $1,777 | $1,858 | -4% | $3,742 | $4,273 | -12% |
1Hasbro's total gaming category, including all gaming revenue, most notably MAGIC: THE GATHERING and MONOPOLY which are included in Franchise Brands in the table above, was $543M for Q3 2020, up 21% vs. $449M for Q3 2019. YTD 2020 Hasbro's total gaming was $1.2B, up 11% versus $1.1B YTD 2019. Hasbro believes its gaming portfolio is a competitive differentiator and views it in its entirety.
2 Emerging Brands portfolio includes the preschool brands, PEPPA PIG, PJ MASKS and RICKY ZOOM, acquired as part of the eOne acquisition. For comparability, the quarter and nine months ended September 29, 2019 includes the pro forma net revenues of $52M and $145M, respectively, for those brands.
3TV/Film/Entertainment represents eOne net revenues not allocated to the Emerging Brands portfolio.
3rd QUARTER 2020
• Consumer demand for Hasbro brands and stories remained strong through the third quarter 2020.
• Q3 2020 growth in
FRANCHISE BRANDS: MAGIC: THE GATHERING, MONOPOLY and PLAY- DOH.
• PARTNER BRANDS Growth in Lucasfilm's Star Wars offset by declines in Marvel and Frozen.
• Growth in HASBRO GAMING led by DUNGEONS AND DRAGONS as well as Classic Games.
• EMERGING BRANDS revenues declined on pro forma basis.
• TV/FILM/ENTERTAINMENT Late Q3 return to production in some locations delayed completion and delivery of productions; shifting timing of revenues to future periods.
10 10
Third Quarter & Nine Months Operating Profit
$ Millions, unaudited
THIRD QUARTER
$400 | $342 | $337 | $367 |
$313 | |||
$300 |
$200
$100
$-
2019 | 2019 Adj* | 2020 | 2020 Adj* |
Pro Forma |
NINE MONTHS
$750 | $659 | |
$600 | $553 | $565 |
$450
$315
$300
$150
$-
2019 | 2019 Adj* | 2020 | 2020 Adj* |
Pro Forma |
Operating Profit Margin Q3 2020
Operating Profit Margin Nine Months 2020
Favorable
- Product Mix
- Lower Program Amortization
- Lower Expenses
Unfavorable
- Lower Revenues
- Alignment of Accounting for certain eOne expenses versus 2019
Favorable | Unfavorable | ||
• | Product Mix | • | Lower Revenues |
• | Lower Expenses | • | Shipping |
- Lower Program Amortization
*The Adjusted figures are non-GAAP financial measures. See "Reconciliation of As Reported to Pro Forma Adjusted Operating Results" on slides 31-33. For comparability, the third quarter of 2019 | 11 |
includes the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma Results" for the Pro Forma and Non-GAAP adjustments on slides 34 and 35. |
U.S. & Canada Segment Net Revenues & Operating Profit
THIRD QUARTER
+9% | +36% | |||
$977 | ||||
$1,000 | $898 | $300 | $263 | |
unaudited | $750 | -9% | ||
$194 | ||||
$200 | ||||
Millions, | $500 | |||
$100 | ||||
$ | $250 | |||
$- | $- | |||
NET REVENUES | OPERATING PROFIT | |||
- Revenue growth in Franchise Brands, led by MAGIC: THE GATHERING, Emerging Brands and Hasbro Gaming
- In Partner Brands, Lucasfilm's Star Wars revenue increased
- Operating Profit and Operating Profit margin growth driven primarily by higher revenues and
favorable product mix as well as reduced inventory costs and cost savings initiatives
Pro Forma
2019
2020
12
U.S. & Canada Segment Net Revenues & Operating Profit
$ Millions, unaudited
$2,000
$1,500
$1,000
$500
$-
--
$1,767$1,765
NET REVENUES
NINE MONTHS
$400 $350 $300 $250 $200 $150 $100
$50 $-
+14%
$359 | Pro Forma |
2019 | |
$314 | 2020 |
-9%
OPERATING PROFIT
- Revenue growth in Hasbro Gaming, other categories down; MAGIC: THE GATHERING and Lucasfilm's Star Wars up
- Despite flat net revenues, Operating Profit and Operating Profit Margin grew from favorable product mix, including MAGIC: THE GATHERING, and lower expenses
13
International Segment Net Revenues & Operating Profit
$ Millions, unaudited
THIRD QUARTER
-8%
$100 | -5% | Pro Forma | ||||
$600 | $561 | 2019 | ||||
$517 | ||||||
$67 | $64 | 2020 | ||||
$500 | $75 | |||||
-9% | ||||||
$400 | ||||||
$300 | $50 | |||||
$200 | $25 | |||||
$100 | ||||||
$- | $- |
NET REVENUES | OPERATING PROFIT |
- Revenue declines primarily driven by Latin America; Revenue growth in European region
- Operating Profit declined on lower revenues, but Operating Profit Margin improved due to favorable mix, including growth in MAGIC: THE GATHERING, lower advertising spend and cost management
14
International Segment Net Revenues & Operating Profit
NINE MONTHS
$ Millions, unaudited
-17% | -76% | Pro Forma | |
$1,500 | $75 | 2019 | |
2020 | |||
$1,221 | -9%$51 | ||
$1,017 | $50 | ||
$1,000 | $- | ||
$500 | $25 | $12 | |
$- | $- |
NET REVENUES | OPERATING PROFIT |
- Revenue declines most meaningful in Latin America; Q3 2020 improvement in European region
- YTD 2020 International segment revenues negatively impacted by $25M due to foreign exchange
- Operating Profit declined as a result of lower revenues and efforts to clear inventory in
Latin America; partially offset by favorable product mix and lower expenses
15
International Segment Net Revenues
Nine | Nine | |||
Q3 2020 | Months | |||
Q3 2020 | 2020 | Months | ||
AS | AS | 2020 | ||
REPORTED | ABSENT FX | REPORTED | ABSENT FX | |
EUROPE | +7% | +4% | -2% | -2% |
LATIN AMERICA | -40% | -30% | -48% | -40% |
ASIA PACIFIC | -9% | -10% | -19% | -18% |
TOTAL | -8% | -7% | -17% | -15% |
INTERNATIONAL | ||||
Foreign Exchange had a negative $1M impact on International | |
segment revenues in the third quarter 2020 and a negative $25M | |
impact YTD 2020 | 16 |
Entertainment, Licensing & Digital Segment
Net Revenues & Operating Profit
THIRD QUARTER | ||||
-23% | ||||
$150 | $50 | +33% | ||
unaudited | $116 | -9% | ||
$89 | $33 | |||
$25 | ||||
Millions,$ | $75 | $25 | ||
$- | $- |
NET REVENUES | OPERATING PROFIT |
- EL&D revenues declined due to lower film revenue compared to 2019, which included Transformer's Bumblebee film revenue, partially offset by higher digital gaming revenues
- Operating profit and operating profit margin increased due to increased revenue from high profit digital licensing
and decreased advertising costs versus the 2019 initial launch of Magic: The Gathering Arena
Pro Forma
2019
2020
17
Entertainment, Licensing & Digital Segment
Net Revenues & Operating Profit
$ Millions, unaudited
$400
$300
$200
$100
$-
NINE MONTHS
-14%
$100
$304
$263$75
$50
$25
$-
As | |||
As | Adjusted | Pro Forma | |
+38% | 2019 | ||
Reported | 2020 | ||
+5% | |||
-9% | $87 | 2020 | |
Adj. |
$63 $66
NET REVENUES | OPERATING PROFIT |
- EL&D revenues declined due to lower film revenue compared to 2019, which included Transformer's Bumblebee film revenue, and closure of Backflip Studios late in 2019, partially offset by higher digital gaming revenues
- Adjusted Operating Profit increased due to lower program amortization, increased revenue from high-profit digital licensing and in part due to the closure of Backflip Studios
- YTD Adjusted Operating Profit excludes a $21M charge associated with a write down of certain assets resulting from the
transition to eOne entertainment strategy following the acquisition | 18 |
A reconciliation of adjusted segment operating profit can be found on slide 33
eOne Segment Net Revenues & Operating Profit (Loss)
$ Millions, unaudited
THIRD QUARTER | |||
-32% | As Reported | ||
&As | |||
$300 | $283 | Adjusted | |
->100%+x | |||
$50 | $45 | ||
$193 | |||
$200 | |||
$16 | |||
$100 | $- | ||
$(1) | |||
$- | $(26) | ||
NET REVENUES | $(50) | OPERATING PROFIT (LOSS) | |
Pro Forma
2019
2019 Adj.
2020
2020 Adj.
- Revenues declined due to timing of live-action production restart in TV & Film due to COVID-19 related shutdowns; Family Brands revenues declined due to lower consumer products and lower advertising revenue from the YouTube platform
- Adjusted Operating Loss primarily related to lower revenue partially offset by lower program amortization, advertising and royalties
A reconciliation of adjusted segment operating profit can be found on slide 33. For comparability, the third quarter of 2019 includes the pro forma results for the eOne Segment. See | 19 |
"Reconciliation of 2019 As Reported to Pro Forma Results" for the Pro Forma and Non-GAAP adjustments on slide 34. |
eOne Segment Net Revenues & Operating Profit (Loss)
NINE MONTHS
-29%
Pro Forma
2019
$ Millions, unaudited
$981
$1,000 | ||
$800 | $697 | $250 |
$600 | $200 | |
$150 | ||
$400 | $100 | |
$200 | $50 | |
$- | $- | |
$(50) | ||
NET REVENUES | $(100) |
As
Adjusted
-57%
$198
$91 | $85 |
$(65)
OPERATING PROFIT (LOSS)
2019 Adj.
2020
2020 Adj.
- Revenues declined due to timing of live-action production restart in TV & Film due to COVID-19 related shutdowns; Family Brands revenues declined due to lower consumer products and lower advertising revenue from the YouTube platform
- Adjusted Operating Profit declined primarily related to the decrease in revenues and the decline in You Tube advertising revenues, partially offset by lower expenses
A reconciliation of adjusted segment operating profit can be found on slide 33. For comparability, the third quarter of 2019 includes the pro forma results for the eOne Segment. See | 20 |
"Reconciliation of 2019 As Reported to Pro Forma Results" for the Pro Forma and Non-GAAP adjustments on slide 35. |
Third Quarter & Nine Months Net Earnings
Diluted Shares:
unaudited
$300 | THIRD QUARTER | |
$217 | $239 | $221 |
$200 | ||
$1.74 | ||
PER | $1.61 PER | |
$1.57 PER | DILUTED | |
DILUTED | ||
DILUTED | SHARE |
$259
$1.88
PER
DILUTED SHARE
$500
$400
$300
$200
$250
NINE MONTHS
$419
$3.04
PER
DILUTED SHARE
Q3 2020
137.5M vs.
Q3 2019
127.2M
$339
$2.47 PER
DILUTED
SHARE
$ Millions,
$100 | SHARE | SHARE |
$-
2019 | 2019 Adj* | 2020 |
Pro Forma
2020 Adj*
$100
$-
$1.82 | $117 | |
PER | ||
DILUTED | ||
SHARE | $0.85 PER | |
DILUTED | ||
SHARE | ||
2019 | 2019 Adj* | 2020 |
Pro Forma
2020 Adj*
- Total Non-Operating Expense: Q3 2020 $37M; YTD 2020 $132M
- Q3 2019 Non-Operating Expense included a $25.5 million charge related to hedging part of the British Pound Sterling purchase price of eOne
• Q3 2020 Underlying Tax Rate: 19.8% versus 18.2% in Q3 2019 | 21 |
• Q3 2020 Underlying Tax Rate Includes $13.7M of incremental tax expense related to a change in the U.K. tax code | 21 |
Key Cash Flow & Balance Sheet Data
YEAR TO DATE ENDED | |||||||
$ Millions, unaudited | SEPT 27, 2020 | SEPT 29, 2019 | NOTES | ||||
Cash | $1,132 | $1,060 | Substantial cash on hand and access to cash through $1.5B | ||||
revolving credit facility | |||||||
Long-term Debt | $4,778 | $1,696 | Reflects eOne acquisition financing completed in 2019 | ||||
Depreciation | $94 | $101 | |||||
Amortization of Intangibles | $108 | $35 | Reflects eOne acquisition purchased intangibles | ||||
Program Spend, net | $295 | $44 | Increase due to content spend with eOne; 2020 expected | ||||
to be at the lower end of previously updated range of | |||||||
$450-550M | |||||||
Capital Expenditures | $92 | $91 | Expect to be slightly below full-year 2020 target of $145- | ||||
$155M | |||||||
Dividends Paid | $279 | $251 | $0.68 per share quarterly dividend paid in Q3 2020; Next | ||||
dividend payable November 16, 2020 | |||||||
Share Repurchase | $0 | $60 | Share repurchase suspended in 2019 as Company | ||||
prioritizes delevering | |||||||
Operating Cash Flow | $494 | $390 | Generating strong cash flow; TTM $758M | ||||
Accounts Receivable | $1,438 | $1,417 | DSO down 9 days on pro forma basis; Strong cash | ||||
collections | |||||||
Inventory | $540 | $589 | Down 7% absent FX | ||||
Goodwill | $3,644 | $485 | eOne acquisition goodwill | 22 | |||
Our commitment to CSR reflects our desire to help build a safer, more sustainable and inclusive company and world for all.
Product Safety | Environmental | Human Rights & | Diversity & |
Sustainability | Ethical Sourcing | Inclusion | |
100 Most Sustainable
Companies
2020
23
Our Mission
Create the World's
Best Play &
Entertainment
Experiences
Our Values
Community
Engaging, Purposeful and Giving
Creativity
Curious, Playful and Inventive
Inclusion
Diverse, Empowered and United
Integrity
Responsible, Ethical and Trustworthy
Passion
Driven, Focused and Courageous
24
Supplemental Financial Information
25
Condensed Consolidated Balance Sheets
(Thousands of Dollars) | |||||||
September 27, | September 29, | ||||||
ASSETS | 2020 | 2019 | |||||
Cash and Cash Equivalents | $ | 1,132,405 | $ | 1,060,432 | |||
Accounts Receivable, Net | 1,438,360 | 1,416,879 | |||||
Inventories | 540,039 | 589,132 | |||||
Prepaid Expenses and Other Current Assets | 648,158 | 346,687 | |||||
Total Current Assets | 3,758,962 | 3,413,130 | |||||
Property, Plant and Equipment, Net | 477,154 | 371,881 | |||||
Goodwill | 3,644,118 | 485,042 | |||||
Other Intangible Assets, Net | 1,546,810 | 658,350 | |||||
Other Assets | 1,276,133 | 626,221 | |||||
Total Assets | $ | 10,703,177 | $ | 5,554,624 | |||
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY | |||||||
Short-term Borrowings | $ | 10,032 | $ | 7,903 | |||
Current Portion of Long-term Debt | 369,269 | - | |||||
Accounts Payable and Accrued Liabilities | 1,936,248 | 1,458,832 | |||||
Total Current Liabilities | 2,315,549 | 1,466,735 | |||||
Long-term Debt | 4,777,807 | 1,696,204 | |||||
Other Liabilities | 778,514 | 550,778 | |||||
Total Liabilities | 7,871,870 | 3,713,717 | |||||
Redeemable Noncontrolling Interests | 22,876 | - | |||||
Total Shareholders' Equity | 2,808,431 | 1,840,907 | |||||
Total Liabilities, Noncontrolling Interests and Shareholders' Equity | $ | 10,703,177 | $ | 5,554,624 | 26 | 26 |
Consolidated Statements of Operations
((Thousands of Dollars and Shares, Except Per Share Data) )
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 27, | % Net | September 29, | % Net | September 27, | % Net | September 29, | % Net | |||||||||||||||||||||||||
2020 | Revenues | 2019 | Revenues | 2020 | Revenues | 2019 | Revenues | |||||||||||||||||||||||||
Net Revenues | $ | 1,776,623 | 100.0% | $ | 1,575,173 | 100.0% | $ | 3,742,472 | 100.0% | $ | 3,292,220 | 100.0% | ||||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||||||||||
Cost of Sales | 610,105 | 34.3% | 627,119 | 39.8% | 1,126,044 | 30.1% | 1,230,800 | 37.4% | ||||||||||||||||||||||||
Program Cost Amortization | 85,424 | 4.8% | 28,028 | 1.8% | 268,245 | 7.2% | 58,105 | 1.8% | ||||||||||||||||||||||||
Royalties | 176,938 | 10.0% | 128,008 | 8.1% | 387,097 | 10.3% | 258,957 | 7.9% | ||||||||||||||||||||||||
Product Development | 62,709 | 3.5% | 67,354 | 4.3% | 174,863 | 4.7% | 189,246 | 5.7% | ||||||||||||||||||||||||
Advertising | 137,408 | 7.7% | 140,256 | 8.9% | 311,415 | 8.3% | 309,659 | 9.4% | ||||||||||||||||||||||||
Amortization of Intangibles | 36,172 | 2.0% | 11,814 | 0.8% | 107,685 | 2.9% | 35,445 | 1.1% | ||||||||||||||||||||||||
Selling, Distribution and Administration | 325,360 | 18.3% | 275,384 | 17.5% | 885,680 | 23.7% | 748,338 | 22.7% | ||||||||||||||||||||||||
Acquisition and Related Costs | 5,949 | 0.3% | - | 0.0% | 165,993 | 4.4% | - | 0.0% | ||||||||||||||||||||||||
Operating Profit | 336,558 | 18.9% | 297,210 | 18.9% | 315,450 | 8.4% | 461,670 | 14.0% | ||||||||||||||||||||||||
Interest Expense | 49,400 | 2.8% | 22,764 | 1.4% | 153,702 | 4.1% | 67,096 | 2.0% | ||||||||||||||||||||||||
Other (Income) Expense, Net | (12,040) | -0.7% | 14,700 | 0.9% | (21,840) | -0.6% | 99,125 | 3.0% | ||||||||||||||||||||||||
Earnings before Income Taxes | 299,198 | 16.8% | 259,746 | 16.5% | 183,588 | 4.9% | 295,449 | 9.0% | ||||||||||||||||||||||||
Income Tax Expense | 79,215 | 4.5% | 46,797 | 3.0% | 64,313 | 1.7% | 42,340 | 1.3% | ||||||||||||||||||||||||
Net Earnings | 219,983 | 12.4% | 212,949 | 13.5% | 119,275 | 3.2% | 253,109 | 7.7% | ||||||||||||||||||||||||
Net (Loss) Earnings Attributable to Noncontrolling Interests | (915) | -0.1% | - | 0.0% | 1,929 | 0.1% | - | 0.0% | ||||||||||||||||||||||||
Net Earnings Attributable to Hasbro, Inc. | $ | 220,898 | 12.4% | $ | 212,949 | 13.5% | $ | 117,346 | 3.1% | $ | 253,109 | 7.7% | ||||||||||||||||||||
Per Common Share | ||||||||||||||||||||||||||||||||
Net Earnings | ||||||||||||||||||||||||||||||||
Basic | $ | 1.61 | $ | 1.68 | $ | 0.86 | $ | 2.00 | ||||||||||||||||||||||||
Diluted | $ | 1.61 | $ | 1.67 | $ | 0.85 | $ | 1.99 | ||||||||||||||||||||||||
Cash Dividends Declared | $ | 0.68 | $ | 0.68 | $ | 2.04 | $ | 2.04 | ||||||||||||||||||||||||
Weighted Average Number of Shares | ||||||||||||||||||||||||||||||||
Basic | 137,258 | 126,453 | 137,214 | 126,356 | ||||||||||||||||||||||||||||
Diluted | 137,490 | 127,204 | 137,465 | 126,956 |
27 27
Condensed Consolidated Cash Flows
(Thousands of Dollars) | Nine Months Ended | ||||||
September 27, | September 29, | ||||||
Cash Flows from Operating Activities: | 2020 | 2019 | |||||
Net Earnings | $ | 119,275 | $ | 253,109 | |||
Non-Cash Pension Charge | - | 110,777 | |||||
Other Non-Cash Adjustments | 561,826 | 204,726 | |||||
Changes in Operating Assets and Liabilities | (186,791) | (179,044) | |||||
Net Cash Provided by Operating Activities | 494,310 | 389,568 | |||||
Cash Flows from Investing Activities: | |||||||
Additions to Property, Plant and Equipment | (92,059) | (90,800) | |||||
Acquisition, Net of Cash Acquired | (4,403,929) | - | |||||
Other | 24,297 | 4,340 | |||||
Net Cash Utilized by Investing Activities | (4,471,691) | (86,460) | |||||
Cash Flows from Financing Activities: | |||||||
Proceeds from Long-term Debt | 1,036,037 | - | |||||
Repayments of Long-term Debt | (147,324) | - | |||||
Net Repayments of Short-term Borrowings | (319) | (1,425) | |||||
Purchases of Common Stock | - | (60,137) | |||||
Stock-Based Compensation Transactions | 1,830 | 29,737 | |||||
Dividends Paid | (279,423) | (250,760) | |||||
Employee Taxes Paid for Shares Withheld | (5,935) | (13,061) | |||||
Redemption of Equity Instruments | (47,399) | - | |||||
Deferred Acquisition Payments | - | (100,000) | |||||
Debt Issuance Costs | - | (21,534) | |||||
Other | (6,949) | - | |||||
Net Cash Provided (Utilized) by Financing Activities | 550,518 | (417,180) | |||||
Effect of Exchange Rate Changes on Cash | (21,101) | (7,867) | |||||
Cash and Cash Equivalents at Beginning of Year | 4,580,369 | 1,182,371 | |||||
Cash and Cash Equivalents at End of Period | $ | 1,132,405 | $ | 1,060,432 | 28 | 28 | |
SUPPLEMENTAL FINANCIAL DATA
PRO FORMA SEGMENT RESULTS (Unaudited)
(Thousands of Dollars)
Quarter Ended | Nine Months Ended | |||||||||
September 27, | Pro Forma | % | September 27, | Pro Forma | % | |||||
September 29, | September 29, | |||||||||
2020 | 2019 | Change | 2020 | 2019 | Change |
Segment Results
U.S. and Canada Segment: | ||||||||||||
External Net Revenues | $ | 977,115 | $ | 898,269 | 9% | $ | 1,765,482 | $ | 1,766,649 | 0% | ||
Operating Profit | 262,977 | 193,686 | 36% | 359,028 | 313,795 | 14% | ||||||
Operating Margin | 26.9% | 21.6% | 20.3% | 17.8% | ||||||||
International Segment(1): | ||||||||||||
External Net Revenues | 517,007 | 561,137 | -8% | 1,017,222 | 1,221,224 | -17% | ||||||
Operating Profit | 63,924 | 67,238 | -5% | 12,333 | 51,410 | -76% | ||||||
Operating Margin | 12.4% | 12.0% | 1.2% | 4.2% | ||||||||
Entertainment, Licensing and Digital Segment: | ||||||||||||
External Net Revenues | 89,027 | 115,766 | -23% | 262,879 | 304,266 | -14% | ||||||
Operating Profit | 32,791 | 24,594 | 33% | 65,758 | 62,550 | 5% | ||||||
Operating Margin | 36.8% | 21.2% | 25.0% | 20.6% | ||||||||
eOne Segment (2): | ||||||||||||
External Net Revenues | 193,474 | 283,310 | -32% | 696,889 | 980,613 | -29% | ||||||
Operating (Loss) Profit | (25,914) | 15,812 | >-100% | (64,962) | 91,367 | >-100% | ||||||
Operating Margin | -13.4% | 5.6% | -9.3% | 9.3% |
- International Segment Net Revenues by Major Geographic Region
Europe | $ | 343,179 | $ | 319,277 | 7% | $ | 663,100 | $ | 673,728 | -2% | ||
Latin America | 91,619 | 151,987 | -40% | 158,028 | 305,106 | -48% | ||||||
Asia Pacific | 82,209 | 89,873 | -9% | 196,094 | 242,390 | -19% | ||||||
Total | $ | 517,007 | $ | 561,137 | $ | 1,017,222 | $ | 1,221,224 |
- eOne Segment Net Revenues by Category
Film and TV | $ | 138,514 | $ | 199,949 | -31% | $ | 504,059 | $ | 747,830 | -33% | |||
Family Brands | 26,252 | 53,828 | -51% | 106,069 | 151,668 | -30% | |||||||
Music and Other | 28,708 | 29,533 | -3% | 86,761 | 81,115 | 7% | |||||||
Total | $ | 193,474 | $ | 283,310 | $ | 696,889 | $ | 980,613 |
29 29
SUPPLEMENTAL FINANCIAL DATA
PRO FORMA SEGMENT RESULTS (Unaudited)
(Thousands of Dollars)
For comparability, the quarter and nine months ended September 29, 2019 include the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma Results" for the pro forma adjustments.
Net Revenues by Brand Portfolio
Franchise Brands | $ | 807,555 | $ | 779,659 | 4% | $ | 1,580,878 | $ | 1,749,948 | -10% | ||
Partner Brands | 409,214 | 427,029 | -4% | 729,772 | 812,466 | -10% | ||||||
Hasbro Gaming (3) | 239,222 | 232,287 | 3% | 516,337 | 463,272 | 11% | ||||||
Emerging Brands (4) | 154,965 | 188,589 | -18% | 325,101 | 411,371 | -21% | ||||||
TV/Film/Entertainment (5) | 165,667 | 230,919 | -28% | 590,384 | 835,776 | -29% | ||||||
Total | $ | 1,776,623 | $ | 1,858,483 | $ | 3,742,472 | $ | 4,272,833 | ||||
- Hasbro's total gaming category, including all gaming revenue, most notably MAGIC: THE GATHERING and MONOPOLY, totaled $543,107 and $1,202,604 for the quarter and nine months ended September 27, 2020, respectively, up 21% and 11%, respectively, from revenues of $449,393 and $1,086,151 for the quarter and nine months ended September 29, 2019, respectively.
- Emerging Brands includes the preschool brands, PEPPA PIG, PJ MASKS and RICKY ZOOM, acquired as part of the eOne Acquisition. For comparability, the quarter and nine months ended September 29, 2019 includes the pro forma net revenues for those brands, which amounted to $52,391 and $144,837, respectively.
- TV/Film/Entertainment includes all other brands not detailed in (4) above acquired as part of the eOne Acquisition. For comparability, the quarter and nine months ended September 29, 2019 includes the pro forma net revenues of $230,919 and $835,776, respectively.
30 30
SUPPLEMENTAL FINANCIAL DATA RECONCILIATION OF AS REPORTED TO PRO FORMA ADJUSTED OPERATING RESULTS (Unaudited)
(Thousands of Dollars)
For comparability, the quarter and nine months ended September 29, 2019 include the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma Results" for the pro forma and non-GAAP adjustments.
Quarter Ended | |||||||||||||
September 27, 2020 | Pro Forma | ||||||||||||
September 29, 2019 | |||||||||||||
Pre-tax | Post-tax | Pre-tax | Post-tax | ||||||||||
Acquisition and Related Costs (1) | Adjustments | Adjustments | Adjustments | Adjustments | |||||||||
$ | 5,949 | $ | 4,726 | $ | - | $ | - | ||||||
Acquired Intangible Amortization (2) | 24,716 | 19,637 | 24,597 | 19,063 | |||||||||
Pro Forma eOne Adjustments | - | - | 4,558 | 3,532 | |||||||||
Total | $ | 30,665 | $ | 24,363 | $ | 29,155 | $ | 22,595 | |||||
Nine Months Ended | |||||||||||||
Pro Forma | |||||||||||||
September 27, 2020 | September 29, 2019 | ||||||||||||
Pre-tax | Post-tax | Pre-tax | Post-tax | ||||||||||
Adjustments | Adjustments | Adjustments | Adjustments | ||||||||||
Acquisition and Related Costs (1) | $ | 165,993 | $ | 140,691 | $ | - | $ | - | |||||
Acquired Intangible Amortization (2) | 72,336 | 57,471 | 73,791 | 57,188 | |||||||||
Severance (3) | 11,554 | 10,125 | - | - | |||||||||
Pro Forma eOne Adjustments | - | - | 32,599 | 25,264 | |||||||||
Total | $ | 249,883 | $ | 208,287 | $ | 106,390 | $ | 82,452 |
- In association with the Company's acquisition of eOne, the Company incurred related expenses of $5,949 and $165,993, respectively, in the quarter and nine months ended September 27, 2020, comprised of the following:
- Acquisition and integration costs of $4,599 and $104,283 for the quarter and nine months ended September 27, 2020, respectively, including expense associated with the acceleration of eOne stock-based compensation and advisor fees settled at the closing of the acquisition, as well as integration costs; and
- Restructuring and related costs of $1,350 and $61,710 for the quarter and nine months ended September 27, 2020, respectively, including severance and retention costs, as well as impairment charges in the first quarter of 2020 for certain definite-lived intangible and production assets.
- The Company incurred incremental intangible amortization costs related to the intangible assets acquired in the eOne Acquisition.
- In the second quarter of 2020, the Company incurred $11,554 of severance charges, associated with cost-savings initiatives within the Company's commercial and Film
and TV businesses. These charges were included in Corporate and Eliminations. | 31 | 31 |
SUPPLEMENTAL FINANCIAL DATA RECONCILIATION OF AS REPORTED TO PRO FORMA ADJUSTED OPERATING RESULTS Q3 2020
(Thousands of Dollars) | (Unaudited) |
For comparability, the quarter and nine months ended September 29, 2019 include the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma Results" for the pro forma and non-GAAP adjustments.
Reconciliation of Operating Profit (Loss) Results
Quarter Ended September 27, 2020 | Pro Forma | |||||||||||||||||||
Quarter Ended September 29, 2019 | ||||||||||||||||||||
Non-GAAP | Non-GAAP | |||||||||||||||||||
Adjusted Company Results | As Reported | Adjustments | Adjusted | As Reported | Adjustments | Adjusted | % Change | |||||||||||||
External Net Revenues | $ | 1,776,623 | $ | - | $ | 1,776,623 | $ | 1,858,483 | $ | - | $ | 1,858,483 | -4% | |||||||
Operating Profit | 336,558 | 30,665 | 367,223 | 313,022 | 29,155 | 342,177 | 7% | |||||||||||||
Operating Margin | 18.9% | 1.7% | 20.7% | 16.8% | 1.6% | 18.4% | ||||||||||||||
Adjusted Segment Results | ||||||||||||||||||||
U.S. and Canada Segment: | ||||||||||||||||||||
External Net Revenues | $ | 977,115 | $ | - | $ | 977,115 | $ | 898,269 | $ | - | $ | 898,269 | 9% | |||||||
Operating Profit | 262,977 | - | 262,977 | 193,686 | - | 193,686 | 36% | |||||||||||||
Operating Margin | 26.9% | - | 26.9% | 21.6% | - | 21.6% | ||||||||||||||
International Segment: | ||||||||||||||||||||
External Net Revenues | 517,007 | - | 517,007 | 561,137 | - | 561,137 | -8% | |||||||||||||
Operating Profit | 63,924 | - | 63,924 | 67,238 | - | 67,238 | -5% | |||||||||||||
Operating Margin | 12.4% | - | 12.4% | 12.0% | - | 12.0% | ||||||||||||||
Entertainment, Licensing and Digital Segment: | ||||||||||||||||||||
External Net Revenues | 89,027 | - | 89,027 | 115,766 | - | 115,766 | -23% | |||||||||||||
Operating Profit | 32,791 | - | 32,791 | 24,594 | - | 24,594 | 33% | |||||||||||||
Operating Margin | 36.8% | - | 36.8% | 21.2% | - | 21.2% | ||||||||||||||
eOne Segment: | ||||||||||||||||||||
External Net Revenues | 193,474 | - | 193,474 | 283,310 | - | 283,310 | -32% | |||||||||||||
Operating (Loss) Profit | (25,914) | 24,716 | (1,198) | 15,812 | 29,155 | 44,967 | >-100% | |||||||||||||
Operating Margin | -13.4% | 12.8% | -0.6% | 5.6% | 10.3% | 15.9% |
Corporate and Eliminations:
The Corporate and Eliminations segment included non-GAAP adjustments of $5,949 for the quarter ended September 27, 2020, consisting of eOne acquisition and related costs.
32 32
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF AS REPORTED TO PRO FORMA ADJUSTED OPERATING RESULTS YTD 2020 (Unaudited)
(Thousands of Dollars)
For comparability, the quarter and nine months ended September 29, 2019 include the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma Results" for the pro forma and non-GAAP adjustments.
Nine Months Ended September 29, 2020 | Pro Forma | ||||||||||||||||||
Nine Months Ended September 27, 2019 | |||||||||||||||||||
As Reported | Non-GAAP | Adjusted | As Reported | Non-GAAP | Adjusted | % Change | |||||||||||||
Adjusted Company Results | Adjustments | Adjustments | |||||||||||||||||
External Net Revenues | $ | 3,742,472 | $ | - | $ | 3,742,472 | $ | 4,272,833 | $ | - | $ | 4,272,833 | -12% | ||||||
Operating Profit | 315,450 | 249,883 | 565,333 | 553,037 | 106,390 | 659,427 | -14% | ||||||||||||
Operating Margin | 8.4% | 6.7% | 15.1% | 12.9% | 2.5% | 15.4% | |||||||||||||
Adjusted Segment Results | |||||||||||||||||||
U.S. and Canada Segment: | |||||||||||||||||||
External Net Revenues | $ | 1,765,482 | $ | - | $ | 1,765,482 | $ | 1,766,649 | $ | - | $ | 1,766,649 | 0% | ||||||
Operating Profit | 359,028 | - | 359,028 | 313,795 | - | 313,795 | 14% | ||||||||||||
Operating Margin | 20.3% | - | 20.3% | 17.8% | - | 17.8% | |||||||||||||
International Segment: | |||||||||||||||||||
External Net Revenues | 1,017,222 | - | 1,017,222 | 1,221,224 | - | 1,221,224 | -17% | ||||||||||||
Operating Profit | 12,333 | - | 12,333 | 51,410 | - | 51,410 | -76% | ||||||||||||
Operating Margin | 1.2% | - | 1.2% | 4.2% | - | 4.2% | |||||||||||||
Entertainment, Licensing and Digital Segment: | |||||||||||||||||||
External Net Revenues | 262,879 | - | 262,879 | 304,266 | - | 304,266 | -14% | ||||||||||||
Operating Profit | 65,758 | 20,831 | 86,589 | 62,550 | - | 62,550 | 38% | ||||||||||||
Operating Margin | 25.0% | 7.9% | 32.9% | 20.6% | - | 20.6% | |||||||||||||
eOne Segment: | |||||||||||||||||||
External Net Revenues | 696,889 | - | 696,889 | 980,613 | - | 980,613 | -29% | ||||||||||||
Operating (Loss) Profit | (64,962) | 150,065 | 85,103 | 91,367 | 106,390 | 197,757 | -57% | ||||||||||||
Operating Margin | -9.3% | 21.5% | 12.2% | 9.3% | 10.8% | 20.2% |
Corporate and Eliminations:
The Corporate and Eliminations segment included non-GAAP adjustments of $78,987 for the nine months ended September 27, 2020, consisting of eOne acquisition and related costs and other severance expenses.
33 33
SUPPLEMENTAL FINANCIAL DATA RECONCILIATION OF 2019 AS REPORTED TO PRO FORMA RESULTS (Unaudited)
(Thousands of Dollars)
Pro forma results were prepared by combining the results of Hasbro and eOne for the quarter ended September 29, 2019, after giving effect to the eOne Acquisition as if it had been consummated on December 31, 2018.
These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on December 31, 2018, nor are they intended to be a projection of future results. The pro forma financial information is presented for illustrative purposes only and does not reflect the costs of any integration activities or cost savings or synergies that may be achieved as a result of the acquisition.
Quarter Ended September 29, 2019 | |||||||||||||||||||||||
Hasbro | eOne | Pro Forma | Pro Forma | ||||||||||||||||||||
(under U.S. | |||||||||||||||||||||||
As Reported | GAAP) | Adjustments (1) | Combined | ||||||||||||||||||||
Net Revenues | $ | 1,575,173 | $ | 283,310 | $ | - | $ | 1,858,483 | |||||||||||||||
Operating Profit | $ | 297,210 | $ | 22,294 | $ | (6,482) | $ | 313,022 | |||||||||||||||
Non-GAAP Adjustments | - | 22,673 | 6,482 | 29,155 | |||||||||||||||||||
Adjusted Operating Profit * | $ | 297,210 | $ | 44,967 | $ | - | $ | 342,177 | |||||||||||||||
* Reconciliation to Pro Forma Adjusted results is as follows: | |||||||||||||||||||||||
Net Earnings | $ | 212,949 | $ | 2,958 | $ | 629 | $ | 216,536 | |||||||||||||||
Interest Expense | 22,764 | 10,302 | 19,105 | 52,171 | |||||||||||||||||||
Other Expense (Income), Net | 14,700 | 2,687 | (25,533) | (8,146) | |||||||||||||||||||
Income Tax Expense | 46,797 | 4,025 | (683) | 50,139 | |||||||||||||||||||
Net Earnings Attributable to Noncontrolling Interests | - | 2,322 | - | 2,322 | |||||||||||||||||||
Operating Profit | 297,210 | 22,294 | (6,482) | 313,022 | |||||||||||||||||||
Non-GAAP Adjustments | |||||||||||||||||||||||
eOne: | |||||||||||||||||||||||
Restructuring and Related Charges | - | 3,234 | - | 3,234 | |||||||||||||||||||
Acquisition Costs - eOne Deals | - | 1,324 | - | 1,324 | |||||||||||||||||||
Hasbro Transaction Costs | - | 3,244 | (3,244) | - | |||||||||||||||||||
Acquired Intangible Amortization | - | 14,871 | 9,726 | 24,597 | |||||||||||||||||||
- | 22,673 | 6,482 | 29,155 | ||||||||||||||||||||
Adjusted Operating Profit | |||||||||||||||||||||||
$ | 44,967 | $ | - | $ | 342,177 | ||||||||||||||||||
$ | 297,210 |
- The pro forma results include certain pro forma adjustments to net earnings that were directly attributable to the acquisition, as if the acquisition had occurred on December 31, 2018, including the following:
- deal costs of $3,244 incurred by eOne related to the eOne acquisition, included in Selling, Distribution and Administration;
- additional amortization expense of $9,726 that would have been recognized as a result of the allocation of purchase consideration to definite-lived intangible assets subject to amortization;
- estimated differences in interest expense of $19,105 as a result of incurring new debt and extinguishing historical eOne debt;
- reduction in Other Expense of $25,533 related to the mark to market of foreign exchange forward and option contracts, which the Company entered into in order to hedge a portion of the British pound sterling purchase price for the eOne acquisition; and
- the income tax effect of the pro forma adjustments in the amount of $683, calculated using a blended statutory income tax rate of 22.5% for the eOne
adjustments and 21% for the Hasbro interest adjustments. | 34 |
SUPPLEMENTAL FINANCIAL DATA RECONCILIATION OF 2019 AS REPORTED TO PRO FORMA RESULTS (Unaudited)
(Thousands of Dollars)
Pro forma results were prepared by combining the results of Hasbro and eOne for the nine months ended September 29, 2019, after giving effect to the eOne Acquisition as if it had been consummated on December 31, 2018.
These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on December 31, 2018, nor are they intended to be a projection of future results. The pro forma financial information is presented for illustrative purposes only and does not reflect the costs of any integration activities or cost savings or synergies that may be achieved as a result of the acquisition.
Nine Months Ended September 29, 2019 | |||||||||||
Hasbro | eOne | Pro Forma | Pro Forma | ||||||||
(under U.S. | |||||||||||
As Reported | GAAP) | Adjustments (2) | Combined | ||||||||
Net Revenues | $ | 3,292,220 | $ | 980,613 | $ | - | $ | 4,272,833 | |||
Operating Profit | $ | 461,670 | $ | 118,901 | $ | (27,534) | $ | 553,037 | |||
Non-GAAP Adjustments | - | 78,856 | 27,534 | 106,390 | |||||||
Adjusted Operating Profit * | $ | 461,670 | $ | 197,757 | $ | - | $ | 659,427 | |||
* Reconciliation to Pro Forma Adjusted results is as follows: | |||||||||||
Net Earnings | $ | 253,109 | $ | 28,132 | $ | (30,798) | $ | 250,443 | |||
Interest Expense | 67,096 | 35,073 | 57,316 | 159,485 | |||||||
Other Expense, Net | 99,125 | 28,479 | (45,345) | 82,259 | |||||||
Income Tax Expense | 42,340 | 22,303 | (8,707) | 55,936 | |||||||
Net Earnings Attributable to Noncontrolling Interests | - | 4,914 | - | 4,914 | |||||||
Operating Profit | 461,670 | 118,901 | (27,534) | 553,037 | |||||||
Non-GAAP Adjustments | |||||||||||
eOne: | |||||||||||
Restructuring and Related Charges | - | 21,882 | - | 21,882 | |||||||
Acquisition Costs - eOne Deals | - | 10,717 | - | 10,717 | |||||||
Hasbro Transaction Costs | - | 3,244 | (3,244) | - | |||||||
Acquired Intangible Amortization | - | 43,013 | 30,778 | 73,791 | |||||||
- | 78,856 | 27,534 | 106,390 | ||||||||
Adjusted Operating Profit | |||||||||||
$ | 197,757 | $ | - | $ | 659,427 | ||||||
$ | 461,670 |
- The pro forma results include certain pro forma adjustments to net earnings that were directly attributable to the acquisition, as if the acquisition had occurred on December 31, 2018, including the following:
•deal costs of $3,244 incurred by eOne related to the eOne acquisition, included in Selling, Distribution and Administration;
•additional amortization expense of $30,778 that would have been recognized as a result of the allocation of purchase consideration to definite-lived intangible assets subject to amortization;
•estimated differences in interest expense of $57,316 as a result of incurring new debt and extinguishing historical eOne debt; •total reduction in Other Expense of $45,345, consisting of:
-$19,812 related to premiums paid by eOne in connection with the early redemption of its senior secured notes and the related write-off of unamortized deferred finance charges associated with | ||
the senior secured notes, and | ||
-$25,533 related to the mark to market of foreign exchange forward and option contracts, which the Company entered into in order to hedge a portion of the British pound sterling purchase price | ||
for the eOne acquisition; and | ||
•the income tax effect of the pro forma adjustments in the amount of $8,707, calculated using a blended statutory income tax rate of 22.5% for the eOne adjustments and 21% for the Hasbro interest | 35 | |
adjustments. |
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)
Thousands of Dollars & Shares, Except Per Share Data
For comparability, the quarter and nine months ended September 29, 2019 includes the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma Results" for the pro forma and non-GAAP adjustments.
Reconciliation of Net Earnings and Earnings per Share
Quarter Ended | |||||||||||||||||||||||||||||||||||
Diluted | Pro Forma | Pro Forma Diluted Per | |||||||||||||||||||||||||||||||||
(all adjustments reported after-tax) | Setpember 27, 2020 | Per Share Amount | September 29, 2019 | Share Amount (1) | |||||||||||||||||||||||||||||||
Net Earnings Attributable to Hasbro, Inc. | $ | 220,898 | $ | 1.61 | $ | 216,536 | $ | 1.57 | |||||||||||||||||||||||||||
Acquisition and Related Costs | 4,726 | 0.03 | - | - | |||||||||||||||||||||||||||||||
Acquired Intangible Amortization | 19,637 | 0.14 | 19,063 | 0.14 | |||||||||||||||||||||||||||||||
UK Tax Reform (2) | 13,680 | 0.10 | - | - | |||||||||||||||||||||||||||||||
Pro Forma eOne Adjustments | - | - | 3,532 | 0.03 | |||||||||||||||||||||||||||||||
Net Earnings Attributable to Hasbro, Inc., as Adjusted | $ | 258,941 | $ | 1.88 | $ | 239,131 | $ | 1.74 | |||||||||||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||||||||||||||
Diluted | Pro Forma | Pro Forma Diluted Per | |||||||||||||||||||||||||||||||||
(all adjustments reported after-tax) | Setpember 27, 2020 | Per Share Amount | September 29, 2019 | Share Amount (1) | |||||||||||||||||||||||||||||||
Net Earnings Attributable to Hasbro, Inc. | $ | 117,346 | $ | 0.85 | $ | 250,443 | $ | 1.82 | |||||||||||||||||||||||||||
Acquisition and Related Costs | 140,691 | 1.02 | - | - | |||||||||||||||||||||||||||||||
Acquired Intangible Amortization | 57,471 | 0.42 | 57,188 | 0.42 | |||||||||||||||||||||||||||||||
Severance | 10,125 | 0.07 | - | - | |||||||||||||||||||||||||||||||
UK Tax Reform (2) | 13,680 | 0.10 | - | - | |||||||||||||||||||||||||||||||
Pro Forma eOne Adjustments | - | - | 25,264 | 0.18 | |||||||||||||||||||||||||||||||
Pension (3) | - | - | 85,852 | 0.62 | |||||||||||||||||||||||||||||||
Net Earnings Attributable to Hasbro, Inc., as Adjusted | $ | 339,313 | $ | 2.47 | $ | 418,747 | $ | 3.04 |
- 2019 Pro Forma Diluted Per Share Amount is calculated using weighted average shares outstanding of 137,586 for the quarter and nine months ended September 29, 2019, which includes the pro forma impact of issuing shares associated with the financing of the eOne Acquisition.
- In the third quarter of 2020, the Company recorded income tax expense of $13,680 as a result of the revaluation of Hasbro's UK tax attributes in accordance with the Finance Act of 2020 enacted by the United Kingdom on July 22, 2020. Effective back to 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 UK Finance Act of 2016.
(3) In the second quarter of 2019, the Company recognized a non-cash charge of $110,777 ($85,852 after-tax) related to the settlement of its U.S. defined benefit pension plan. | 36 |
SUPPLEMENTAL FINANCIAL DATA
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)
Thousands of Dollars & Shares, Except Per Share Data
For comparability, the quarter and nine months ended September 29, 2019 includes the pro forma results for the eOne Segment. See "Reconciliation of 2019 As Reported to Pro Forma Results" for the pro forma and non-GAAP adjustments.
Reconciliation of EBITDA
Quarter Ended | Quarter Ended September 29, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hasbro | eOne | Pro Forma | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Earnings Attributable to Hasbro, Inc. | September 27, 2020 | As Reported | (under U.S. GAAP) | Adjustments (4) | Combined | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 220,898 | $ | 212,949 | $ | 2,958 | $ | 629 | $ | 216,536 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Expense | 49,400 | 22,764 | 10,302 | 19,105 | 52,171 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Expense | 79,215 | 46,797 | 4,025 | (683) | 50,139 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net (Loss) Earnings Attributable to Noncontrolling Interests | (915) | - | 2,322 | - | 2,322 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation | 37,513 | 38,608 | 2,667 | - | 41,275 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of Intangibles | 36,172 | 11,814 | 14,871 | 9,726 | 36,411 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBITDA | $ | 422,283 | $ | 332,932 | $ | 37,145 | $ | 28,777 | $ | 398,854 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP Adjustments | 5,949 | 25,533 | 7,802 | (28,777) | 4,558 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 428,232 | $ | 358,465 | $ | 44,947 | $ | - | $ | 403,412 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended | Nine Months Ended September 29, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hasbro | eOne | Pro Forma | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
September 27, 2020 | As Reported | (under U.S. GAAP) | Adjustments (5) | Combined | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Earnings Attributable to Hasbro, Inc. | $ | 117,346 | $ | 253,109 | $ | 28,132 | $ | (30,798) | $ | 250,443 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Expense | 153,702 | 67,096 | 35,073 | 57,316 | 159,485 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Expense | 64,313 | 42,340 | 22,303 | (8,707) | 55,936 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Earnings Attributable to Noncontrolling Interests | 1,929 | - | 4,914 | - | 4,914 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation | 94,100 | 101,016 | 5,770 | - | 106,786 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of Intangibles | 107,685 | 35,445 | 43,013 | 30,778 | 109,236 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBITDA | $ | 539,075 | $ | 499,006 | $ | 139,205 | $ | 48,589 | $ | 686,800 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP Adjustments | 177,547 | 136,310 | 55,655 | (48,589) | 143,376 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 716,622 | $ | 635,316 | $ | 194,860 | $ | - | $ | 830,176 | |||||||||||||||||||||||||||||||||||||||||||||||||||
(4) Pro Forma Adjustments for the quarter ended September 29, 2019 includes the mark to market of acquisition-related foreign exchange forward and option contracts of $25,533 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and deal costs of $3,244, which are excluded from pro forma results, and also shown as Non-GAAP Adjustments within Hasbro and eOne. The net impact to Pro Forma Adjusted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBITDA is zero. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(5) Pro Forma Adjustments for the nine months ended September 29, 2019 include debt refinancing costs of $19,812, the mark to market of acquisition-related foreign exchange | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
forward and option contracts of $25,533, and deal costs of $3,244, which are excluded from pro forma results, and also shown as a Non-GAAP Adjustment within Hasbro and | 37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
eOne. The net impact to Pro Forma Adjusted EBITDA is zero. |
SUPPLEMENTAL FINANCIAL DATA
eOne - FY2019 RESULTS OF OPERATIONS (AS REPORTED UNDER US GAAP) (Unaudited) (Thousands of Dollars)
Quarter Ended | Year Ended | ||||||||||||||
Net Revenues (1) | March 2019 | June 2019 | September 2019 | December 2019 | December 2019 | ||||||||||
$ | 466,212 | $ | 231,091 | $ | 283,310 | $ | 235,160 | $ | 1,215,773 | ||||||
Costs and Expenses: | |||||||||||||||
Cost of Sales | 14,141 | 17,053 | 11,497 | 24,878 | 67,569 | ||||||||||
Program Cost Amortization | 160,857 | 64,527 | 92,662 | 90,414 | 408,460 | ||||||||||
Royalties | 81,147 | 55,865 | 49,533 | 39,659 | 226,204 | ||||||||||
Advertising | 21,173 | 32,870 | 30,593 | 37,241 | 121,877 | ||||||||||
Amortization of Intangibles | 12,117 | 16,025 | 14,871 | 16,552 | 59,565 | ||||||||||
Selling, Distribution and Administration | 61,130 | 63,791 | 61,860 | 92,996 | 279,777 | ||||||||||
Operating Profit (Loss) | 115,647 | (19,040) | 22,294 | (66,580) | 52,321 | ||||||||||
Interest Expense | 12,563 | 12,208 | 10,302 | 10,772 | 45,845 | ||||||||||
Other Expense (Income), Net | 4,556 | 21,236 | 2,687 | (759) | 27,720 | ||||||||||
Earnings (Loss) before Income Taxes | 98,528 | (52,484) | 9,305 | (76,593) | (21,244) | ||||||||||
Income Tax Expense (Benefit) | 21,632 | (3,354) | 4,025 | (26,815) | (4,512) | ||||||||||
Net Earnings (Loss) | 76,896 | (49,130) | 5,280 | (49,778) | (16,732) | ||||||||||
Net Earnings Attributable to Noncontrolling Interests | 2,190 | 402 | 2,322 | 488 | 5,402 | ||||||||||
Net Earnings (Loss) Attributable to eOne | $ | 74,706 | $ | (49,532) | $ | 2,958 | $ | (50,266) | $ | (22,134) |
The eOne financial results above include certain charges that would have been excluded to calculate Adjusted results, as historically reported by eOne. Those charges are outlined below for each quarter in fiscal year 2019.
- eOne Net Revenues by category are as follows:
Quarter Ended | Year Ended | ||||||||||||||||||||
March 2019 | June 2019 | September 2019 | December 2019 | December 2019 | |||||||||||||||||
Film and TV | $ | 387,611 | $ | 160,270 | $ | 199,949 | $ | 140,581 | $ | 888,411 | |||||||||||
Family Brands | 56,612 | 41,228 | 53,828 | 58,677 | 210,345 | ||||||||||||||||
Music and Other | 21,989 | 29,593 | 29,533 | 35,902 | 117,017 | ||||||||||||||||
Total | $ | 466,212 | $ | 231,091 | $ | 283,310 | $ | 235,160 | $ | 1,215,773 |
38 38
SUPPLEMENTAL FINANCIAL DATA
eOne - FY2019 RESULTS OF OPERATIONS (AS REPORTED UNDER US GAAP) (Unaudited)
(Thousands of Dollars)
39 39
SUPPLEMENTAL FINANCIAL DATA
FY2019 PRO FORMA AND AS REPORTED NET REVENUES BY BRAND PORTFOLIO (Unaudited)
(Thousands of Dollars)
The following unaudited quarterly pro forma brand portfolio net revenue information presents the combination of the historical quarterly brand portfolio revenue of Hasbro and eOne for FY2019 and is intended to provide information about how the eOne acquisition might have affected the Company's historical quarterly revenue. Hasbro's standalone, as reported quarterly brand portfolio net revenue for FY2019 is also presented below. The pro forma net revenue information is not necessarily indicative of what the combined company's revenue actually would have been had the acquisition been completed as of the dates indicated, nor does it purport to project the future revenue of the combined company.
Q1 | % of | Q2 | % of | Q3 | % of | Q4 | % of | Full Year | % of | |||||||||||||||||||
Total | Total | Total | Total | Total | ||||||||||||||||||||||||
Franchise Brands | $ | 393,574 | 33% | $ | 576,715 | 47% | $ | 779,659 | 42% | $ | 661,899 | 40% | $ | 2,411,847 | 41% | |||||||||||||
Partner Brands | 171,989 | 14% | 213,448 | 18% | 427,029 | 23% | 408,516 | 24% | 1,220,982 | 20% | ||||||||||||||||||
Hasbro Gaming | 107,565 | 9% | 123,420 | 10% | 232,287 | 13% | 246,478 | 15% | 709,750 | 12% | ||||||||||||||||||
Emerging Brands (1) | 116,135 | 10% | 106,647 | 9% | 188,589 | 10% | 167,376 | 10% | 578,747 | 10% | ||||||||||||||||||
TV/Film/Entertainment (2) | 409,459 | 34% | 195,398 | 16% | 230,919 | 12% | 178,898 | 11% | 1,014,674 | 17% | ||||||||||||||||||
Total | $ | 1,198,722 | $ | 1,215,628 | $ | 1,858,483 | $ | 1,663,167 | $ | 5,936,000 | ||||||||||||||||||
- Emerging Brands includes the preschool brands, PEPPA PIG, PJ MASKS and RICKY ZOOM, acquired as part of the eOne acquisition.
- TV/Film/Entertainment includes all other brands not detailed in (1) above acquired as part of the eOne acquisition.
As Reported 2019 | |||||||||||||||||||||||||||||
Q1 | % of | Q2 | % of | Q3 | % of | Q4 | % of | Full Year | % of | ||||||||||||||||||||
Franchise Brands | Total | Total | Total | Total | Total | ||||||||||||||||||||||||
$ | 393,574 | 54% | $ | 576,715 | 59% | $ | 779,659 | 49% | $ | 661,899 | 46% | $ | 2,411,847 | 51% | |||||||||||||||
Partner Brands | 171,989 | 23% | 213,448 | 22% | 427,029 | 27% | 408,516 | 29% | 1,220,982 | 26% | |||||||||||||||||||
Hasbro Gaming | 107,565 | 15% | 123,420 | 12% | 232,287 | 15% | 246,478 | 17% | 709,750 | 15% | |||||||||||||||||||
Emerging Brands | 59,382 | 8% | 70,954 | 7% | 136,198 | 9% | 111,114 | 8% | 377,648 | 8% | |||||||||||||||||||
TV/Film/Entertainment | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||
Total | $ | 732,510 | $ | 984,537 | $ | 1,575,173 | $ | 1,428,007 | $ | 4,720,227 | 40 | 40 | |||||||||||||||||
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Disclaimer
Hasbro Inc. published this content on 26 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 October 2020 13:49:06 UTC