Hasbro Inc · 10-K405 · For 12/31/00 · EX-13

Filed On 3/30/01 6:30pm ET   ·   SEC File 1-06682   ·   Accession Number 46080-1-3

Annual Report -- [X] Reg. S-K Item 405   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     10-K Document                                         41    203K 
 2: EX-4        Exhibit 4 (C)                                        147±   631K 
 3: EX-4        Exhibit 4 (D)                                        162±   694K 
 4: EX-4        Exhibit 4 (F)                                          2±    13K 
 5: EX-10       Exhibit 10 (D)                                         2±    11K 
 6: EX-10       Exhibit 10 (Gg)                                       11±    55K 
 7: EX-10       Exhibit 10 (Hh)                                        7±    36K 
 8: EX-10       Exhibit 10 (Vv)                                        4±    23K 
 9: EX-10       Exhibit 10 (Ww)                                        7±    41K 
10: EX-11       Statement re: Computation of Earnings Per Share        1      7K 
11: EX-12       Statement re: Computation of Ratios                    1      7K 
12: EX-13       Annual or Quarterly Report to Security Holders        44±   205K 
13: EX-21       Subsidiaries of the Registrant                         1      9K 
14: EX-23       Consent of Experts or Counsel                          1      9K 

EX-13   ·   Annual or Quarterly Report to Security Holders
Exhibit Table of Contents

Sponsored Ads...

                                                            EXHIBIT 13
HASBRO, INC. AND SUBSIDIARIES   

Selected Information Contained in   
Annual Report to Shareholders   

for the Year Ended December 31, 2000    

MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS       
-------------------------------------------------------------------------       
The Company's common stock, par value $.50 per share (the "Common Stock"), is   
traded on the New York and London Stock Exchanges. Prior to June 23, 1999,      
the Common Stock was traded on the American and London Stock Exchanges. The     
following table sets forth the high and low sales prices as reported on the     
Composite Tape of the New York Stock Exchange and the American Stock            
Exchange, as applicable, and the cash dividends declared per share of Common    
Stock for the periods listed.                                                   

Sales Prices          
                ----------------            Cash Dividends
Period                     High         Low               Declared              
------                     ----         ---            --------------           
1999                                                                            
1st Quarter           $30 1/8      21 13/16             $.06            
2nd Quarter            37          27                    .06            
3rd Quarter            28 5/8      21 15/16              .06            
4th Quarter            24 1/4      16 7/8                .06            

2000                                                                            
1st Quarter           $19 1/8      13 3/4               $.06            
2nd Quarter            18 9/16     15                    .06            
3rd Quarter            17 13/16    10 3/16               .06            
4th Quarter            12 15/16     8 3/8                .03            

The approximate number of holders of record of the Company's Common Stock as    
of February 28, 2001 was 8,650.                                                 

Dividends                                                                   
---------                                                                   

Declaration of dividends is at the discretion of the Company's Board of         
Directors and will depend upon the earnings, financial condition of the         
Company and such other factors as the Board of Directors deems appropriate.     
Payment of dividends is further subject to restrictions contained in            
agreements relating to the Company's outstanding short-term and long-term       
debt. Under the most restrictive agreement, dividend payments are restricted    
to the greater of $.03 per share quarterly or 25% of prior fiscal year          
consolidated net income.                                                        

SELECTED FINANCIAL DATA                                                         
-----------------------                                                         
(Thousands of Dollars and Shares Except per share Data and Ratios)          

                 Fiscal Year
                  ------------------------------------------------
                  2000       1999       1998       1997       1996
                  ----       ----       ----       ----       ----
Statement of                                                                    
Earnings Data:                                                                

Net revenues       $3,787,215  4,232,263  3,304,454  3,188,559  3,002,370   
Net earnings (loss)$ (144,631)   188,953    206,365    134,986    199,912   

Per Common Share                                                                
Data:                                                                         

Earnings (loss)                                                             
Basic            $     (.82)       .97       1.04        .70       1.02 
Diluted          $     (.82)       .93       1.00        .68        .98 
Cash dividends                                                              
declared          $      .21        .24        .21        .21        .18  

Balance Sheet Data:                                                             

Total assets       $3,828,459  4,463,348  3,793,845  2,899,717  2,701,509   
Long-term debt     $1,167,838    420,654    407,180          -    149,382   

Ratio of Earnings to                                                            
Fixed Charges(1)          (.67)      4.10       6.70       5.66       7.51    

Weighted Average                                                                
Number of Common                                                              
Shares:                                                                       
Basic                 176,437    194,917    197,927    193,089    195,061   
Diluted               176,437    202,103    205,420    206,353    209,283   

(1)  For purposes of calculating the ratio of earnings to fixed charges,    
fixed charges include interest, amortization of debt expense and  
  one-third of rentals; earnings available for fixed charges represent
earnings before fixed charges and income taxes.  Earnings for 2000
were insufficient to cover fixed charges by $225,986.             

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND       
RESULTS OF OPERATIONS       

Summary                                                                         
-------                                                                         
A percentage analysis of results of operations follows:                         

                                          2000       1999       1998
                                          ----       ----       ----

Net revenues                                   100.0%     100.0%     100.0%     
Cost of sales                                   44.2       40.1       41.3      
                                         -----      -----      -----
Gross profit                                    55.8       59.9       58.7      
Amortization                                     4.2        4.1        2.2      
Royalties, research and development             16.8       16.8       12.9      
Advertising                                     12.0       10.8       13.3      
Selling, distribution and administration        22.7       19.0       19.8      
Restructuring charge and acquired in-process                                    
research and development                        1.7        1.5         .6     
Loss on sale of business units                   1.2          -          -      
Interest expense                                 3.0        1.6        1.1      
Other (income) expense, net                       .2        (.4)       (.4)     
                                         -----      -----      -----
Earnings (loss) before income taxes             (6.0)       6.5        9.2      
Income taxes                                    (2.2)       2.0        2.9      
                                         -----      -----      -----
Net earnings (loss)                             (3.8)%      4.5%       6.3%     
                                         =====      =====      =====

(Thousands of Dollars Except Share Data)                                        

Results of Operations                                                           
---------------------                                                           
Net earnings (loss) for the three fiscal years ended December 31, 2000 were     
$(144,631), $188,953 and $206,365, respectively. Diluted earnings (loss) per    
share was $(.82) in 2000, $.93 in 1999 and $1.00 in 1998.  Net revenues and     
operating profit, excluding charges relating to the Company's consolidation     
programs, decreased from 1999 levels in the U.S. Toy and International          
segments.  In U.S. Toys, the decline in revenues resulted from a decline in     
sales of product related to STAR WARS: EPISODE 1: THE PHANTOM MENACE, POKEMON   
toys and TELETUBBIES preschool products, offset in part by the United States    
introduction of ACTION MAN.  Coupled with the decline in revenues, lower        
gross profit margins on product sold in 2000, and early 2000 higher             
administrative overhead and expenditures for items such as advertising          
resulted in an operating loss.  In the International segment, the decline in    
sales of STAR WARS product was largely offset by shipments of POKEMON toy and   
non-trading card game related products. The decline in revenues was due         
primarily to the unfavorable impact of currency.  Higher product costs on       
items sold in 2000 contributed to the decline in operating profit.  The         
Company's Other segments had an operating loss in 2000 compared to operating    
profit in 1999 due to reduced revenues from sales of seasonal outdoor play      
products, combined with decreased shipments of KOOSH and candy products.  In    
the Company's Games segment, revenues increased while operating profits,        
before consolidation program charges and loss on sale of business units,        
decreased. The increased revenues are due in large part to the full year        
inclusion of trading cards games from Wizards of the Coast, Inc. (Wizards),     
acquired in the fourth quarter of 1999, while decreased operating profits       
result from a significant decline in sales of FURBY and related lost profit.    
Included in the results of the Games segment are revenues and operating         
profits derived from sales of interactive software games, and costs             
associated with development of an online interactive game initiative,           
Games.com.  In December 2000, the Company announced it had entered into an      
agreement with Infogrames Entertainment S.A. (Infogrames) to sell the           
business units which make up Hasbro Interactive as well as Games.com.  This     
sale closed in January 2001. Net revenues from the business units held for      
sale, including revenues from affiliated companies, for the three fiscal        
years ended December 31, 2000 were $194,300, $237,200 and $197,000,             
respectively.  Operating losses of the business units to be sold, including     
consolidation program charges and discontinued development charge, were         
$(104,200) in 2000, $(124,300) in 1999 and $(2,100) in 1998.                    

Net revenues for 2000 were $3,787,215 compared to $4,232,263 and $3,304,454     
for 1999 and 1998, respectively. This 11% decrease in net revenues from 1999    
levels includes an approximate $129,800 worldwide unfavorable impact of         
foreign currency translation rates. Decreased revenues of 47% in the U.S. Toy   
segment resulted primarily from decreased sales of product relating to STAR     
WARS: EPISODE 1: THE PHANTOM MENACE.  It is expected that revenues and          
related expenses of entertainment based products are higher in the year of a    
theatrical release. STAR WARS: EPISODE 1: THE PHANTOM MENACE was released       
theatrically in the United States in May 1999, and throughout international     
markets thereafter. In the International segment, net revenues decreased 12%    
from 1999 levels, 10% of which is due to the unfavorable impact of currency     
noted above, and the remainder to a combination of reduced sales of STAR        
WARS, FURBY and ACTION MAN products, offset in part by increased sales of       
POKEMON toy related products.  Reduced revenues of these segments over the      
prior year were offset in part by increased revenues of the Games segment,      
which experienced an 11% growth in revenues over the prior year.  This          
increase was driven primarily by trading card game revenues from Wizards,       
which was acquired in the fourth quarter of 1999.  While the most significant   
contribution from trading card games came from sales of POKEMON card games,     
other staple products from Wizards, including MAGIC: THE GATHERING, accounted   
for 30% of the increase attributable to trading card games.  Partly             
offsetting this increase was an approximate 86% decrease in sales of FURBY      
and FURBY related product, and a 22% decrease in revenues from interactive      
software games.                                                                 

In comparing 1999 to 1998, the Games segment led revenue growth during the      
year, accounting for approximately 71% of the increase, followed by U.S. Toys   
and International, contributing 18% and 13% of revenue growth, respectively.    
Increased Games segment revenue was primarily driven by FURBY, which            
accounted for 24% of segment revenue in 1999 compared to 7% in 1998. Revenues   
from Wizards, acquired in the fourth quarter of 1999, accounted for 14% of      
Games segment revenues. Increased activity in hand-held electronic games        
utilizing Company and licensed brands, interactive CD-ROM games and             
traditional board games such as MONOPOLY and TRIVIAL PURSUIT also contributed   
to Games segment growth. U.S. Toy segment revenues were boosted by sales of     
STAR WARS product associated with the theatrical release of STAR WARS:          
EPISODE 1: THE PHANTOM MENACE. Revenues from this line accounted for 36% of     
segment revenues in 1999 compared to 13% in 1998. This, as well as the          
popular POKEMON line, traditional toy offerings such as EASY BAKE and LITE      
BRITE and the full year inclusion of the MICRO MACHINES line acquired with      
Galoob Toys, Inc. (Galoob) in the fourth quarter of 1998, also contributed to   
revenue growth over 1998 by the U.S. Toy segment. The International segment     
contribution to revenue growth was primarily driven by sales of STAR WARS,      
POKEMON, TELETUBBIES and FURBY and hand-held electronic products in certain     
markets, all partly offset by decreased volume in traditional board games and   
puzzles as well as the negative impact of foreign currency translation. The     
results of Other segments negatively affected revenue by approximately 3%,      
primarily due to decreased revenues of KOOSH and candy product.                 

The Company's gross profit margin decreased to 55.8% in 2000 from 59.9% in      
1999 and 58.7% in 1998. The decrease in margin primarily reflects product       
mix, with lower revenues generated from FURBY and entertainment based           
properties, such as STAR WARS related products, which carry higher gross        
margins.  Partially offsetting this decrease is the higher gross margin         
associated with trading card games from Wizards.  Moderating this higher        
anticipated gross margin in 2000 was the impact of obsolescence costs           
associated with overproduction of certain trading card games, primarily         
POKEMON related. The increase in margin in 1999 from 1998 principally           
reflects the increased revenues in the Games segment, where many product        
lines carry a higher gross margin.                                              

Amortization expense of $157,763 includes amortization of both property         
rights and cost in excess of net assets acquired. This compares with $173,533   
in 1999 and $72,208 in 1998.  Impairment charges of $25,046 were recognized     
in 2000 resulting from discontinued product line offerings arising from the     
Company's decision to focus on developing its core brands. In 1999, as part     
of its consolidation program, the Company recognized $38,449 in impairment      
charges arising from decisions to discontinue or significantly reduce product   
line offerings. The remaining increases in all years were attributable to the   
acquisitions made during the period.                                            

Expenditures for royalties, research and development decreased 11% to           
$635,366 from $711,790 in 1999, which had increased from $424,673 in 1998.      
Included in these amounts are expenditures for research and development of      
$208,485 in 2000, $254,599 in 1999 and $184,962 in 1998. As percentages of      
net revenues, research and development was 5.5% in 2000, down from 6.0% in      
1999 and 5.6% in 1998. In 1999, contractual development commitments             
recognized for discontinued product lines in connection with the 1999           
consolidation program amounted to $10,992. The decrease in 2000 reflects        
reduced spending on development of interactive software game titles, the        
primary reason for the increase in 1999 over 1998, and reduced product          
development in the U.S. Toy group as the Company focuses its efforts on         
developing its core brands. Revenues derived from entertainment based           
properties, such as STAR WARS and POKEMON, and resultant royalties, while       
continuous over the life of a contract, are generally higher in amount in the   
year a theatrical release takes place. It is anticipated that operating         
profit will also generally be higher in these years. The degree to which        
revenues, royalties and operating profits fluctuate is dependent not only on    
theatrical release dates, but video release dates as well. Excluding charges    
of $42,270 in 2000 and $15,300 in 1999 relating to royalty commitments on       
discontinued product lines and product lines with significantly reduced         
expectations recognized in connection with the Company's consolidation          
programs, royalty expenditures decreased by approximately $57,000 and .2% as    
a percent of net revenues from 1999. Excluding consolidation program charges,   
the increase in 1999 over 1998 reflects the increased percentage of 1999        
revenues obtained from licensed product carrying higher royalty rates,          
primarily STAR WARS.                                                            

Advertising expense increased to 12.0% of net revenues, compared to 10.8% of    
net revenues in 1999 and the 1998 level of 13.3%. Included in 2000 expense is   
$3,155 related to contractual commitments on discontinued product lines         
arising from the Company's 2000 consolidation program. This charge, combined    
with expenditures committed to early in the year, contributed to the            
increased percentage of lower 2000 net revenue. The percentage decrease in      
1999 from 1998 levels primarily reflects the mix of more entertainment based    
properties, such as STAR WARS and POKEMON, marketed throughout our segments,    
which tend to carry a lower advertising to revenue ratio. Increased 1999        
revenues in the Games segment from FURBY and trading card games also            
contributed to the decrease from 1998, as these lines do not carry as great     
of an advertising spend ratio as other products.                                

Selling, distribution and administration costs increased in both dollars and    
as a percentage of net revenues in 2000 from 1999 levels. The increase          
results from marketing, selling and administrative costs in the Games segment   
associated with Wizards. Costs associated with tournament sponsorship and       
retail operations of Wizards result in higher selling, distribution and         
administrative costs than historically found in the Games segment.  The         
increase in the Games segment was offset in part by lower administrative        
costs in the remainder of the Games segment and in the US Toy segment           
relating to a significant decrease or elimination of performance based bonus    
accruals existing in 1999. Comparing 1999 to 1998, selling, distribution and    
administration costs increased in dollars but decreased as a percentage of      
net revenues to $799,919, or 19.0% of revenues, from $655,938, or 19.9% in      
1998. Of the increase in dollars, approximately 25% of the increase reflects    
the Games segment's 1999 acquisition of Wizards and approximately 31% of the    
increase reflects higher performance based bonus accruals. The remainder of     
the increase in dollars primarily reflects costs associated with the higher     
level of activity in 1999. The decreased percentage reflects higher 1999        
revenues as well as the Company's commitment to control these costs, and the    
benefit received from the 1997 global integration and profit enhancement        
program.                                                                        

The Company recognized $63,951 of restructuring expense in 2000. This amount    
reflects charges under the 2000 restructuring plan of $70,079 and adjustments   
to the 1999 plan of $(6,128). The pretax impact of consolidation program        
charges and adjustments for the fiscal year ended December 31, 2000 was         
$146,142.                                                                       

On October 12, 2000, the Company announced a plan approved by its Board of      
Directors (Board) to consolidate its U.S. Toy group in Rhode Island,            
significantly reduce overhead through reductions in product development,        
sales and marketing, and administrative functions across the Company and to     
increase its focus on development of the Company's core brands.  The impact     
of this plan was recorded in the fourth quarter as follows:                     

Restructuring charge                                        $  70,079         
                                                    --------

Other operating expenses:                                                     
Cost of sales                                                   6,625         
Amortization                                                   25,046         
Royalties, research and development                            42,270         
Advertising                                                     3,155         
Selling, distribution and administration                        5,095         
                                                    --------
                                                      82,191
                                                    --------
Total 2000 consolidation program cost                        $ 152,270          
                                                    ========

The significant components of the 2000 plan include the closing of offices in   
Cincinnati, Ohio, the Napa, California office and warehouse and a small         
office in San Francisco, California, thereby essentially consolidating the      
U.S. Toy group in Rhode Island. These actions were substantially completed at   
December 31, 2000.  Additionally, the plan includes the reduction of            
overhead, particularly in marketing and sales, product development and          
administration.  This includes a curtailment of expansion of the retail         
business of Wizards, the further consolidation of certain international         
operating offices into regional centers and consolidation and streamlining of   
the Company's marketing activities. The Company is also increasing its focus    
on developing and marketing its core brands and reducing its reliance on        
licenses. This focus has resulted in product lines which will be discontinued   
or for which the Company has significantly reduced expectations.                

Together, the components of this plan anticipate the redundancy of              
approximately 850 employees, including 125 in manufacturing and sourcing        
activities and 725 worldwide in research and product development, marketing,    
sales and administration. Employee redundancies by area are as follows:         

                      Opening                 Balance at
                           Balance    Activity   December 31, 2000
                     -------    -------        -------
Manufacturing activities            125        (98)            27           
Research, product development, sales                                        
marketing and administration       725       (403)           322          
                     -------    -------        -------
                         850       (501)           349
                     =======    =======        =======

Total charges under the 2000 plan represent cash charges of $89,400,            
comprised of approximately $31,800 for severance benefits which will be         
disbursed over the employee's entitlement period, $5,100 in related charges     
paid in 2000 to relocate certain U.S. Toy group employees to Rhode Island,      
$21,400 for lease costs to be expended over the contractual lease term of the   
closed facilities and approximately $31,100 of contractual commitments on       
exited product lines and certain other licensed product lines with reduced      
expectations due to the Company's enhanced focus on its core brands.  The       
product lines being exited were not, either individually or in the aggregate,   
material to the Company's revenues or operating results.  Total non-cash        
charges were $62,900 of which charges of $16,900 were for fixed asset write-    
offs relating primarily to Corporate and the U.S. Toy segment. The remaining    
approximate $46,000 relates to asset write-offs and a write-down of assets      
impaired due to the Company's enhanced focus on its core brands. This           
includes impairment of intangible assets arising from the decision to           
discontinue product line offerings. Non-cash charges relating to asset write-   
offs have been credited to the respective line items on the balance sheet.      
The components of the plan included in the restructuring charge in the          
statement of operations are severance costs of $31,800, lease costs of          
$21,400 and fixed asset write-offs of $16,900.  Included in accrued             
liabilities at December 31, 2000 is $53,200 relating to amounts due to          
terminated employees over their severance entitlement period and costs          
associated with lease costs. The Company anticipates pretax savings under the   
restructuring plan of $49,000 in 2001 and $53,000 in 2002.  The restructuring   
plan is expected to be completed in fiscal 2001.  Third party actions and the   
impact of competition could delay or increase the cost of implementation of     
the Company's consolidation program or alter the Company's actions and reduce   
actual results.                                                                 

In December 1999, the Company commenced a program to consolidate                
manufacturing and sourcing activities and product lines, as well as             
streamline and further regionalize marketing, sales and research and            
development activities worldwide. Costs associated with this program in 1999    
amounted to $141,575, and were recorded $64,232 in restructuring, $8,740 in     
cost of sales, $38,449 in amortization, $26,292 in royalties, research and      
development and $3,862 in advertising.  Adjustments to the 1999 restructuring   
plan of $(6,128) were recorded in 2000.                                         

The significant components of the 1999 restructuring plan included the          
closing of factories in Mexico and in the United Kingdom, reducing capacity     
at the remaining three factories, shifting production to third party            
manufacturers in the Far East and further consolidation and regionalization     
of the International marketing and sales structure. Actions under the plan      
commenced in December 1999 and were completed in fiscal 2000. There were no     
material changes to the plan, however adjustments were recognized in 2000       
reflecting the reversal of excess restructuring accruals due to lower than      
previously estimated costs to achieve the overall objectives of the plan,       
primarily in the consolidation and regionalization of the International         
marketing and sales structure. The 1999 restructuring charge of $64,232         
represented approximately $38,700 of cash charges for severance benefits for    
termination of approximately 2,200 employees, which will be disbursed over      
the employee's entitlement period, $14,300 of cash charges for lease and        
facility closing costs to be expended over the contractual lease terms and      
closing process and non-cash charges of $11,200 for fixed asset write-offs,     
arising primarily in the manufacturing area. Of the cash amount,                
approximately $4,700 was paid prior to December 26, 1999 for severance          
benefits relating to approximately 200 employees terminated prior to that       
date. Non-cash charges relating to fixed asset write-offs were credited to      
the respective line items on the balance sheet.  Details of                     

activity in the restructuring plan for fiscal 2000 follow:                      

                        Balance at                        Balance at
                          Dec. 26,                          Dec. 31,
                           1999    Adjustments  Activity      2000
                           -------  -----------  --------     ------
Severance                      $  34,000      (4,800)   (25,200)     4,000      
Lease and facility                                                              
closing costs                  14,300      (1,300)    (9,100)     3,900   
                           -------     -------    -------     ------
                         $  48,300      (6,100)   (34,300)     7,900
                           =======     =======    =======     ======
Employee redundancies by area:                                                  
Manufacturing and sourcing                                                  
activities                      1,700          -      (1,700)         -   
Research, product development, sales                                        
marketing and administration      300        (40)       (260)         -   
                           -------     -------    -------     ------
                             2,000        (40)     (1,960)         -
                           =======     =======    =======     ======

The remaining severance liability represents cash charges for severance         
benefits for employees made redundant which will be disbursed over the          
employee's entitlement period. The balance in lease and facility closing        
costs will be expended over the contractual lease term.  The Company            
generated pre-tax savings of approximately $15,900 from this plan in 2000.      

The components of the 1999 program included in other operating expenses         
represented costs associated with exiting certain product lines and             
reevaluating other product lines which resulted in reduced expectations. The    
product lines being exited were not, either individually or in the aggregate,   
material to the Company's revenues or operating results. Approximately          
$12,000 represents cash charges that will be incurred on contractual royalty,   
product development and advertising commitments associated with the             
discontinued product lines. Non-cash charges of approximately $65,000 relate    
to asset write-offs and write-downs of underutilized assets. This includes      
impairment of intangible assets arising from the decision to discontinue or     
significantly reduce product line offerings. The resulting sum of               
undiscounted future cash flows of these assets was not sufficient to cover      
the carrying amount of the assets, and as such, they were written down to       
their fair market value. Items relating to property rights and licenses,        
goodwill, inventory, prepaid and other current assets have been credited to     
the respective asset in the balance sheet.                                      

As noted above, in December 2000, the Company entered into an agreement to      
sell certain business units comprising Hasbro Interactive, as well as its       
internet portal, Games.com, to Infogrames for Infogrames securities and cash.   
The sale of the business units closed in January 2001.  Net assets of the       
business units to be sold have been written down to estimated fair value as     
of December 31, 2000, resulting in the recognition of a pretax loss of          
$43,965.  In addition, the Company entered into an agreement with Infogrames,   
whereby Infogrames will develop interactive games based on the Company's        
properties.  The Company will receive annual royalties including a minimum      
guarantee from Infogrames based on sales generated from the licensing           
agreement.                                                                      

During the third quarter of 1998, the Company incurred a one-time charge to     
write-off the $20,000 appraised value of acquired in-process research and       
development of MicroProse, Inc., which was acquired for a total purchase        
price of approximately $70,000 on September 14, 1998.                           

Interest expense was $114,421 in 2000, compared to $69,340 in 1999 and          
$36,111 during 1998. The increase largely reflects the costs associated with    
funding the Company's recent acquisitions and the Company's stock repurchase    
program. Under the terms of the Company's amended and restated credit           
facility agreements, coupled with the increased amount of long-term debt of     
the Company, Hasbro expects interest expense to increase in 2001.               

Other expense of $7,288 in 2000 compares with income of $15,616 in 1999 and     
$14,707 in 1998.  Expense in 2000 relates primarily to the write down of        
investments held for sale which have experienced a non-temporary decline in     
value, coupled with a higher level of transactional losses resulting from an    
unfavorable movement in foreign currency.                                       

Income tax benefit on the pre-tax loss was 36.0% in 2000. This compares with    
income tax expense of 31.0% in 1999 and 32.0% in 1998. This year's higher       
rate reflects the tax benefit of operating losses in jurisdictions with         
higher statutory tax rates.                                                     

Liquidity and Capital Resources                                                 
-------------------------------                                                 
Cash and cash equivalents were $127,115 at December 31, 2000 compared to        
$280,159 and $177,748 at December 26, 1999 and December 27, 1998,               
respectively.                                                                   

Hasbro generated approximately $163,000 of net cash from its operating          
activities in 2000, compared with approximately $392,000 in 1999 and $127,000   
in 1998.  The 58% decrease in cash provided by operating activities from 1999   
is due primarily to the approximate $145,000 net loss incurred in 2000.         
Coupled with cash utilized to reduce accounts payable and accrued               
liabilities, the decrease was partially offset by a 37% decrease in accounts    
receivable. The decrease in accounts receivable results from a 27% decrease     
in revenues for the fourth quarter of 2000 and a greater proportion of cash     
collected on sales during the year.  Inventories decreased as a result of       
both lower production in anticipation of reduced shipments in the first         
quarter of 2001 and the write-down of excess inventory, particularly trading    
card games, in the fourth quarter.  Conversely, prepaid expenses and other      
current assets increased in large part as a result of inclusion of assets       
held for sale in regards to the Company's sale of Hasbro Interactive and        
Games.com to Infogrames.                                                        

Hasbro generated approximately $392,000 of net cash from its operating          
activities in 1999, compared with approximately $127,000 in 1998. The           
significant change between the 1999 and 1998 amounts results from a             
combination of factors. Included in the 1999 amount was $38,361 utilized by     
changes in operating assets and liabilities, compared with $267,231 utilized    
in 1998. Full year accounts receivable for 1999 increased at a rate             
significantly below that of the increase in fourth quarter revenues.            
Reflecting the acquisition of Wizards made during the fourth quarter and        
growth in inventory levels in the International segment for 2000 product        
introduction, 1999 inventories increased over prior year levels. Prepaid and    
other current assets also increased from the prior year, in part due to the     
acquisition of Wizards and the increased spending on product development.       
Reflecting amounts payable in 2000 for the Wizards acquisition, the remaining   
unpaid amounts from the 1999 consolidation program and increased bonus          
accruals in high performing segments, accounts payable and accrued              
liabilities increased by 35% over prior year levels. Royalty advances made in   
connection with the STAR WARS license that apply to future years have been      
included in long-term assets.  During 1998, $267,231 was utilized by changes    
in operating assets and liabilities. With the $170,723 increase in fourth       
quarter revenues from the comparable period of 1997, most of which, under       
Hasbro's normal trading terms, became due after the end of the Company's        
fiscal year, accounts receivable increased. Inventories also increased, in      
part reflecting acquisitions made during the year, as did prepaid expenses      
and other current assets, largely reflecting higher advance royalty payments.   
Partially offsetting these utilizations of funds was a small increase in        
accounts payable and other accrued liabilities.                                 

Cash flows from investing activities were a net utilization of $180,710,        
$429,092 and $792,700 in 2000, 1999 and 1998, respectively.  During 2000, the   
Company expended approximately $125,000 on additions to its property, plant     
and equipment while during 1999 and 1998 it expended approximately $107,000     
and $142,000, respectively.  Of these amounts, 33% in 2000, 53% in 1999 and     
38% in 1998 were for purchases of tools, dies and molds related to the          
Company's products.  Under the terms of the Company's amended and restated      
credit facilities, the Company is restricted in the amount it can expend on     
additions to property, plant and equipment.  The 1998 additions also include    
the expenditures associated with the consolidation of its Spanish               
manufacturing and marketing operations into one facility.  During the three     
years, depreciation and amortization of plant and equipment was $106,458,       
$103,791 and $96,991, respectively.                                             

During 2000, the Company made several small acquisitions for approximately      
$58,000 in total, net of cash acquired, none of which were considered           
individually significant.  An additional post closing adjustment payment made   
and contingent payments accrued in 2000 with relation to the September 1999     
acquisition of Wizards totaled approximately $79,800, bringing the total        
acquisition cost to date to $492,574. On September 30, 1999, the Company        
acquired the outstanding shares of Wizards, for an initial purchase price of    
$325,000, subject to additional payments based upon the closing balance sheet   
and future payments contingent upon achieving certain operating objectives.     
The Company also made other smaller acquisitions and investments in 1999,       
none of which were significant.  Hasbro made three major acquisitions during    
1998, having an aggregate purchase price of $669,737.  On April 1, 1998, it     
acquired substantially all of the business and operating assets of Tiger        
Electronics, Inc. and certain affiliates.  On September 14, 1998, it acquired   
the outstanding shares of MicroProse Inc. through a cash tender offer of        
$6.00 for each outstanding share.  On October 30, 1998, it acquired the         
outstanding shares of Galoob through a cash tender offer of $12.00 for each     
outstanding share.  Other investing activities in 2000 largely reflects a       
reduction in intangible and other long-term assets of Hasbro Interactive and    
Games.com, which were sold to Infogrames.  Under the terms of the Company's     
amended and restated credit facilities, the Company is restricted in the        
amount it can expend on future acquisitions.                                    

The Company commits to inventory production, advertising and marketing          
expenditures prior to the peak third and fourth quarter retail selling          
season.  In addition, accounts receivable, which increase with customer         
purchases, are also closer to this selling season and are generally not due     
for payment until the fourth quarter or early in the first quarter of the       
subsequent year.  This timing difference between expenses paid and revenues     
collected makes it necessary for the Company to borrow significant amounts      
during the year. During 2000, the Company borrowed through the issuance of      
commercial paper and against short-term lines of credit to fund its seasonal    
working capital requirements in excess of funds available from operations and   
the issuance of long-term debt. In February 2001, the Company entered into      
amended and restated secured revolving and line of credit facility agreements   
with its existing lenders.  These committed lines include long-term and         
short-term secured credit agreements of $325,000 each. The facilities are       
secured by substantially all domestic accounts receivable and inventory, as     
well as certain investments and intangible assets of the Company.  The          
Company is not required to maintain compensating balances under the             
agreements.  The agreements contain certain restrictive covenants setting       
forth minimum cash flow and coverage requirements, and a number of other        
limitations, including with respect to capital expenditures, investments,       
acquisitions, share repurchases and dividend payments.  During 2001, the        
Company expects to fund its seasonal working capital needs through operations   
and these lines of credit and believes that the funds available to it are       
adequate to meet its needs. Amounts available for borrowing under the           
committed revolving and line of credit facilities are $325,000 (long-term)      
and $325,000 (short-term) and vary by quarter, with availability at its         
lowest point of $300,000 in the first quarter of 2001.  Of this amount          
available, $213,000 is unused at March 4, 2001. Amounts available and unused    
under uncommitted lines at March 4, 2001 were $143,000.                         

During 2000, net financing activities utilized approximately $128,000 of        
funds of the Company, primarily as a result of the completion on March 27 of    
a "Modified Dutch Auction" tender offer, pursuant to which the Company          
accepted for payment 18,085,578 shares of common stock, representing            
approximately 9.5% of outstanding shares, at a purchase price of $17.25 per     
share.  The aggregate purchase, including fees and expenses associated with     
the tender offer, was approximately $313,000.  Offsetting this utilization      
was net borrowing activities in 2000 which included the issuance of $550,000    
of 7.95% notes due March 15, 2003 and $200,000 of 8.50% notes due March 15,     
2006.  During 1999, net financing activities provided approximately $145,000    
of funds to the Company, primarily through the use of short-term borrowings.    
Net financing activities during 1998 provided approximately $490,000,           
principally through the issuance of $100,000 of 5.60% notes due November 1,     
2005, $150,000 of 6.15% notes due July 15, 2008 and $150,000 of 6.6%            
debentures due July 15, 2028.                                                   

On December 9, 1997, the Board cancelled all prior share repurchase             
authorizations and authorized the purchase of up to an additional $500,000 of   
the Company's common stock.  On December 6, 1999, the Board authorized an       
additional common stock repurchase program up to $500,000. As a result of the   
"Modified Dutch Auction" tender offer, the repurchase authorization of 1997     
has been completed while $204,500 remains under the 1999 authorization.  The    
shares acquired under these programs are being used for corporate purposes      
including issuance upon the exercise of stock options and warrants.  Under      
terms of the current bank agreements, the Company is limited in its             
repurchase of its shares in the future to $5,000 per year.  During 1999, the    
Company also invested approximately $240,000 to repurchase its common stock     
in the open market. This compares with approximately $180,000 repurchased in    
the open market in 1998.                                                        

At December 31, 2000, under the most restrictive bank credit agreement          
covenant, dividend payments are restricted to the greater of $.03 per share     
quarterly or 25% of prior fiscal year consolidated net income.                  

Financial Risk Management                                                       
-------------------------                                                       
The Company is exposed to market risks attributable to fluctuations in          
foreign currency exchange rates primarily as a result of sourcing products in   
four currencies while marketing those products in more than thirty              
currencies. Results of operations will be affected primarily by changes in      
the value of the U.S. dollar, Hong Kong dollar, British pound, Euro, Canadian   
dollar and Mexican peso versus other currencies, principally in Europe and      
the United States.                                                              

To manage this exposure, as of December 31, 2000, the Company has hedged a      
portion of its estimated fiscal 2001 foreign currency transactions using a      
combination of forward foreign exchange contracts and purchased foreign         
currency options. The Company estimates that a hypothetical immediate 10%       
unfavorable movement in the currencies involved could result in an              
approximate $13.7 million decrease in the fair value of these instruments.      
The Company is also exposed to foreign currency risk with respect to its net    
cash and cash equivalents or short-term borrowing positions in other than the   
U.S. dollar. The Company believes, however, that the risk on this net           
exposure would 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. The Company does not speculate   
in and other than set forth above, the Company does not hedge foreign           
currencies.                                                                     

At December 31, 2000, the Company had fixed rate long-term debt of              
$1,167,838. Interest rate changes affect the fair value of this fixed rate      
debt but do not impact earnings or cash flows. The Company estimates that a     
hypothetical one percentage point decrease or increase in interest rates        
would increase or decrease the fair value of this debt by approximately         
$31,000 or $29,000, respectively.                                               

In June 1998, the Financial Accounting Standards Board (FASB) issued            
Statement of Financial Accounting Standards No. 133, Accounting for             
Derivative Instruments and Hedging Activities (SFAS 133).  SFAS 133 was         
amended during 1999, requiring the Company to adopt SFAS 133 effective          
January 1, 2001.  SFAS 133 will require that the Company record all             
derivatives, such as foreign exchange contracts, in the balance sheet at fair   
value.  Changes in derivative fair values will either be recognized in          
earnings as an offset to the changes in the fair value of the related hedged    
assets, liabilities and firm commitments or, for forecasted transactions,       
deferred and recorded as a component of other shareholders' equity until the    
hedged transactions occur and are recognized in earnings.  The ineffective      
portion of a hedging derivative's change in fair value will be immediately      
recognized in earnings.                                                         

The one-time effect of adopting SFAS 133 on the Company's assets,               
liabilities, other comprehensive income and net income will be less than        
$1,000 for the fiscal quarter ending April 1, 2001.                             

The Economy and Inflation                                                       
-------------------------                                                       
The Company continued to experience difficult economic environments in some     
parts of the world during 2000. The principal market for the Company's          
products is the retail sector where certain customers have experienced          
economic difficulty. The Company closely monitors the creditworthiness of its   
customers and adjusts credit policies and limits as it deems appropriate.       

The effect of inflation on the Company's operations during 2000 was not         
significant and the Company will continue its policy of monitoring costs and    
adjusting prices accordingly.                                                   

Euro Conversion                                                                 
---------------                                                                 
Certain member countries of the European Union established fixed conversion     
rates between their existing currencies and the European Economic Monetary      
Union common currency, or Euro. While the Euro was introduced on January 1,     
1999, member countries will continue to use their existing currencies through   
January 1, 2002, with the transition period for full conversion to the Euro     
ending June 30, 2002. Transition to the Euro creates certain issues for the     
Company with respect to upgrading information technology systems for 2002       
full use requirements, reassessing currency risk, product pricing, amending     
business and financial contracts as well as processing tax and accounting       
records. The Company has and will continue to address these transition issues   
and does not expect the Euro to have a material effect on the results of        
operations or financial condition of the Company.                               

Other Information                                                               
-----------------                                                               
The Company's revenue pattern continues to show the second half of the year     
more significant to its overall business. The trend of retailers over the       
past few years has been to make a higher percentage of their purchases within   
or close to the fourth quarter holiday consumer selling season, which           
includes Christmas.                                                             

The Company is not aware of any material amounts of potential exposure          
relating to environmental matters and does not believe its compliance costs     
or liabilities to be material to its operating results or financial position.   

In May 2000, the Emerging Issues Task Force reached a consensus on issue No.    
00-14, Accounting for Coupons, Rebates, and Discounts (Issue 00-14).  Issue     
00-14 requires that all expenses relating to sales incentives such as           
coupons, rebates and discounts be reported as a reduction of sales.  Issue      
00-14 will be effective for the Company not later than the second quarter of    
2001.  The Company currently estimates the impact of adopting Issue 00-14 on    
net revenues and selling, distribution and administration expense would not     
have a material effect on the Company's financial condition.                    

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                     
-------------------------------------------                                     
See attached pages.                                                             

INDEPENDENT AUDITORS' REPORT    

The Board of Directors and Shareholders                                         
Hasbro, Inc.:                                                                   

We have audited the accompanying consolidated balance sheets of 
Hasbro, Inc. and subsidiaries as of December 31, 2000 and December 26, 1999     
and the related consolidated statements of operations, shareholders' equity     
and cash flows for each of the fiscal years in the three-year period ended      
December 31, 2000. These consolidated financial statements are the              
responsibility of the Company's management. Our responsibility is to express    
an opinion on these consolidated financial statements based on our audits.      

We conducted our audits in accordance with auditing standards   
generally accepted in the United States of America. Those standards require     
that we plan and perform the audit to obtain reasonable assurance about         
whether the financial statements are free of material misstatement. An audit    
includes examining, on a test basis, evidence supporting the amounts and        
disclosures in the financial statements. An audit also includes assessing the   
accounting principles used and significant estimates made by management, as     
well as evaluating the overall financial statement presentation. We believe     
that our audits provide a reasonable basis for our opinion.                     

 In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of       
Hasbro, Inc. and subsidiaries as of December 31, 2000 and December 26, 1999     
and the results of their operations and their cash flows for each of the        
fiscal years in the three-year period ended December 31, 2000 in conformity     
with accounting principles generally accepted in the United States of           
America.                                                                        

/s/ KPMG LLP                                                                    

Providence, Rhode Island                                                        

February 7, 2001                                                                

 HASBRO, INC. AND SUBSIDIARIES

 Consolidated Balance Sheets
 December 31, 2000 and December 26, 1999

(Thousands of Dollars Except Share Data)

                  Assets                         2000       1999
                  ------                         ----       ----

Current assets                                                                  
Cash and cash equivalents                          $  127,115    280,159    
Accounts receivable, less allowance for                                     
doubtful accounts of $55,000 in 2000                                      
and $65,000 in 1999                                  685,975  1,084,118   
Inventories                                           335,493    408,571    
Prepaid expenses and other current assets             431,630    358,804    
                                                ---------  ---------
Total current assets                              1,580,213  2,131,652  

Property, plant and equipment, net                      296,729    318,825      
                                                ---------  ---------
Other assets                                                                    
Cost in excess of acquired net assets, less                                 
accumulated amortization of $225,770 in 2000                              
and $193,947 in 1999                                 803,189    806,092   
Other intangibles, less accumulated amortization                            
of $347,149 in 2000 and $300,632 in 1999             902,893    949,789   
Other                                                 245,435    256,990    
                                                ---------  ---------
Total other assets                                1,951,517  2,012,871  
                                                ---------  ---------

Total assets                                     $3,828,459  4,463,348  
                                                =========  =========

 HASBRO, INC. AND SUBSIDIARIES

  Consolidated Balance Sheets, Continued
 December 31, 2000 and December 26, 1999

  (Thousands of Dollars Except Share Data)

Liabilities and Shareholders' Equity                2000       1999   
------------------------------------                ----       ----   

Current liabilities                                                             
Short-term borrowings                              $  228,085    714,669    
Accounts payable                                      191,749    284,772    
Accrued liabilities                                   789,128    983,280    
Income taxes                                           30,850     88,606    
                                                ---------  ---------
Total current liabilities                         1,239,812  2,071,327  

Long-term debt                                        1,167,838    420,654      
Deferred liabilities                                     93,403     92,392      
                                                ---------  ---------
Total liabilities                                 2,501,053  2,584,373  
                                                ---------  ---------
Shareholders' equity                                                            
Preference stock of $2.50 par value.                                        
Authorized 5,000,000 shares; none issued                   -          -   
Common stock of $.50 par value.  Authorized                                 
600,000,000 shares; issued 209,694,630 shares                             
in 2000 and 1999                                     104,847    104,847   
Additional paid-in capital                            464,084    468,329    
Deferred compensation                                  (6,889)         -    
Retained earnings                                   1,583,394  1,764,110    
Accumulated other comprehensive earnings              (44,718)   (32,982)   
Treasury stock, at cost, 37,253,164 shares in                               
2000 and 16,710,620 shares in 1999                  (773,312)  (425,329)  
                                                ---------  ---------
Total shareholders' equity                        1,327,406  1,878,975  
                                                ---------  ---------

Total liabilities and shareholders' equity       $3,828,459  4,463,348  
                                                =========  =========

See accompanying notes to consolidated financial statements.                    

 HASBRO, INC. AND SUBSIDIARIES

   Consolidated Statements of Operations
Fiscal Years Ended in December

(Thousands of Dollars Except Share Data)

                                      2000       1999       1998
                                      ----       ----       ----

Net revenues                              $3,787,215  4,232,263  3,304,454      
Cost of sales                              1,673,973  1,698,242  1,366,061      
                                     ---------  ---------  ---------
Gross profit                         2,113,242  2,534,021  1,938,393
                                     ---------  ---------  ---------
Expenses                                                                        
Amortization                               157,763    173,533     72,208    
Royalties, research and development        635,366    711,790    424,673    
Advertising                                452,978    456,978    440,692    
Selling, distribution and administration   863,496    799,919    655,938    
Restructuring charge                        63,951     64,232          -    
Loss on sale of business units              43,965          -          -    
Acquired in-process research and                                            
development                                     -          -     20,000   
                                     ---------  ---------  ---------
Total expenses                         2,217,519  2,206,452  1,613,511  
                                     ---------  ---------  ---------
Operating profit (loss)               (104,277)   327,569    324,882
                                     ---------  ---------  ---------
Nonoperating (income) expense                                                   
Interest expense                           114,421     69,340     36,111    
Other (income) expense, net                  7,288    (15,616)   (14,707)   
                                     ---------  ---------  ---------
Total nonoperating expense               121,709     53,724     21,404  
                                     ---------  ---------  ---------
Earnings (loss) before income taxes   (225,986)   273,845    303,478
Income taxes                                 (81,355)    84,892     97,113      
                                     ---------  ---------  ---------
Net earnings (loss)                 $ (144,631)   188,953    206,365
                                     =========  =========  =========

Per common share                                                                
Net earnings (loss)                                                         
Basic                                  $     (.82)       .97       1.04   
                                     =========  =========  =========
Diluted                                $     (.82)       .93       1.00   
                                     =========  =========  =========
Cash dividends declared                 $      .21        .24        .21    
                                     =========  =========  =========

See accompanying notes to consolidated financial statements.                    

 HASBRO, INC. AND SUBSIDIARIES

 Consolidated Statements of Cash Flows
  Fiscal Years Ended in December

  (Thousands of Dollars)

                                      2000       1999       1998
                                      ----       ----       ----

Cash flows from operating activities                                            
Net earnings (loss)                      $(144,631)   188,953    206,365    
Adjustments to reconcile net earnings                                       
(loss) to net cash provided by                                            
operating activities:                                                     
Depreciation and amortization of plant                                  
and equipment                           106,458    103,791     96,991 
Other amortization                       157,763    173,533     72,208  
Deferred income taxes                    (67,690)   (38,675)     1,679  
Compensation earned under restricted                                    
stock programs                            2,754          -          - 
Loss on sale of business units            43,965          -          -  
Acquired in-process research and                                        
development                                   -          -     20,000 
Change in operating assets and liabilities                                  
(other than cash and cash equivalents):                                   
Decrease (increase) in accounts                                       
receivable                              395,682    (11,248)  (126,842)
Decrease (increase) in inventories       69,657    (44,212)   (44,606)
Increase in prepaid expenses                                          
and other current assets                (84,006)   (26,527)  (113,451)
(Decrease) increase in accounts payable                                 
and other current liabilities         (292,313)   193,626     17,668
Long-term advances and other            (25,083)  (147,729)    (3,425)
                                       -------    -------    -------
Net cash provided by operating                                      
 activities                            162,556    391,512    126,587
                                       -------    -------    -------

Cash flows from investing activities                                            
Additions to property, plant and                                            
equipment                                (125,055)  (107,468)  (141,950)  
Investments and acquisitions, net of                                        
cash acquired                            (138,518)  (352,417)  (667,736)  
Other                                       82,863     30,793     16,986    
                                       -------    -------    -------
Net cash utilized by investing                                      
  activities                           (180,710)  (429,092)  (792,700)
                                       -------    -------    -------

 HASBRO, INC. AND SUBSIDIARIES

  Consolidated Statements of Cash Flows, Continued
  Fiscal Years Ended in December

  (Thousands of Dollars)

                                      2000       1999       1998
                                      ----       ----       ----

Cash flows from financing activities                                            
Proceeds from borrowings with original                                      
maturities of more than three months      912,979    460,333    407,377   
Repayments of borrowings with original                                      
maturities of more than three months     (291,779)  (308,128)   (24,925)  
Net (repayments) proceeds of other                                          
short-term borrowings                    (341,522)   226,103    271,895   
Purchase of common stock                  (367,548)  (237,532)  (178,917)   
Stock option and warrant transactions        2,523     50,358     58,493    
Dividends paid                             (42,494)   (45,526)   (42,277)   
                                       -------    -------    -------
Net cash (utilized) provided by                                     
 financing activities                 (127,841)   145,608    491,646
                                       -------    -------    -------

Effect of exchange rate changes on cash       (7,049)    (5,617)    (9,570)     
                                       -------    -------    -------
(Decrease) increase in cash                                           
  and cash equivalents                 (153,044)   102,411   (184,037)
Cash and cash equivalents at beginning                                          
of year                                     280,159    177,748    361,785     
                                       -------    -------    -------
Cash and cash equivalents at end                                    
 of year                              $127,115    280,159    177,748
                                       =======    =======    =======

Supplemental information                                                        
Cash paid during the year for                                               
Interest                                $ 91,180     64,861     25,135  
                                       =======    =======    =======
Income taxes                            $ 95,975    108,342    128,436  
                                       =======    =======    =======

See accompanying notes to consolidated financial statements.                    

                                                        [Enlarge/Download Table]
                                            HASBRO, INC. AND SUBSIDIARIES                                               

                                   Consolidated Statements of Shareholders' Equity                                      

                                               (Thousands of Dollars)                                                   

                                                                                   Accumulated                          
                                              Additional                              Other                   Total     
                                    Common     Paid-in     Deferred     Retained  Comprehensive  Treasury  Shareholders'
                                     Stock     Capital   Compensation   Earnings     Earnings      Stock      Equity    
                                  ---------   ---------    ---------    ---------   ---------   ---------   ---------   

                                                                                                                        
 Balance, December 28, 1997      $  104,849     454,498            -    1,457,495      (3,903)   (174,822)  1,838,117   
   Net earnings                           -           -            -      206,365           -           -     206,365   
   Other comprehensive earnings           -           -            -            -      (5,722)          -      (5,722)  
     Comprehensive earnings                                                                                   200,643   
   Purchase of treasury stock             -           -            -            -           -    (178,917)   (178,917)  
   Stock option and warrant                                                                                             
    transactions                          -      66,818            -            -           -      60,195     127,013   
   Dividends declared                     -           -            -      (42,061)          -           -     (42,061)  
                                  ---------   ---------    ---------    ---------   ---------   ---------   ---------   
 Balance, December 27, 1998         104,849     521,316            -    1,621,799      (9,625)   (293,544)  1,944,795   
   Net earnings                           -           -            -      188,953           -           -     188,953   
   Other comprehensive earnings           -           -            -            -     (23,357)          -     (23,357)  
     Comprehensive earnings                                                                                   165,596   
   Purchase of treasury stock             -           -            -            -           -    (237,532)   (237,532)  
   Stock option and warrant                                                                                             
    transactions                          -     (52,892)           -            -           -     105,747      52,855   
   Dividends declared                     -           -            -      (46,642)          -           -     (46,642)  
   Other                                 (2)        (95)           -            -           -           -         (97)  
                                  ---------   ---------    ---------    ---------   ---------   ---------   ---------   
 Balance, December 26, 1999         104,847     468,329            -    1,764,110     (32,982)   (425,329)  1,878,975   
   Net loss                               -           -            -     (144,631)          -           -    (144,631)  
   Other comprehensive earnings           -           -            -            -     (11,736)          -     (11,736)  
     Comprehensive earnings                                                                                  (156,367)  
   Purchase of treasury stock             -           -            -            -           -    (367,548)   (367,548)  
   Stock option and warrant                                                                                             
    transactions                          -      (1,708)           -            -           -       7,406       5,698   
   Restricted stock activity                     (2,537)      (6,889)           -           -      12,159       2,733   
   Dividends declared                     -           -            -      (36,085)          -           -     (36,085)  
                                  ---------   ---------    ---------    ---------   ---------   ---------   ---------   
 Balance, December 31, 2000      $  104,847     464,084       (6,889)   1,583,394     (44,718)   (773,312)  1,327,406   
                                  =========   =========    =========    =========   =========   =========   =========   

See accompanying notes to consolidated financial statements                                                             

HASBRO, INC. AND SUBSIDIARIES   

Notes to Consolidated Financial Statements    

(Thousands of Dollars Except Share Data)    

(1) Summary of Significant Accounting Policies                                
------------------------------------------                            
Principles of Consolidation                                         
---------------------------                                         
The consolidated financial statements include the accounts of Hasbro,           
Inc. and all significant majority-owned subsidiaries (Hasbro or the             
Company). Investments in affiliates representing 20% to 50% ownership           
interest are accounted for using the equity method. All significant             
intercompany balances and transactions have been eliminated.                    

Preparation of Financial Statements                                 
-----------------------------------                                 
The preparation of financial statements in conformity with generally            
accepted accounting principles requires management to make estimates and        
assumptions that affect the amounts reported in the financial statements        
and notes thereto. Actual results could differ from those estimates.            

Fiscal Year                                                         
-----------                                                         
Hasbro's fiscal years end on the last Sunday in December.  The fiscal           
year ended December 31, 2000 is a fifty-three week period while the             
fiscal years ended December 26, 1999 and December 27, 1998 were fifty-two       
week periods.                                                                   

Cash and Cash Equivalents                                           
-------------------------                                           
Cash and cash equivalents include all cash balances and highly liquid           
investments purchased with a maturity to the Company of three months or         
less.                                                                           

Inventories                                                         
-----------                                                         
Inventories are valued at the lower of cost (first-in, first-out) or            
market.                                                                         

Long-Lived Assets                                                   
-----------------                                                   
The Company reviews long-lived assets (property, plant and equipment,           
cost in excess of acquired net assets and other intangibles) for                
impairment whenever events or changes in circumstances indicate the             
carrying value may not be recoverable. Recoverability is measured by a          
comparison of the carrying amount of an asset to future undiscounted net        
cash flows expected to be generated by the asset. If such assets were           
considered to be impaired, the impairment to be recognized would be             
measured by the amount by which the carrying value of the assets exceed         
their fair value. Fair value is determined based on discounted cash flows       
or appraised values, depending on the nature of the asset. Assets to be         
disposed of are carried at the lower of the carrying amount or their fair       
value less disposal costs.                                                      

Cost in Excess of Net Assets Acquired and Other Intangibles     
-----------------------------------------------------------     
Approximately 43% of Hasbro's goodwill results from the 1984 acquisition        
of Milton Bradley Company (Milton Bradley), including its Playskool and         
international units, and the 1991 acquisition of Tonka Corporation              
(Tonka), including its Kenner, Parker Brothers and international units.         
Approximately 24% results from the Company's 1998 acquisitions of Tiger         
Electronics, Inc. and Galoob Toys, Inc.  An additional approximate 21%          
results from the Company's 1999 acquisition of Wizards of the Coast, Inc.       
Goodwill is being amortized on the straight-line basis over lives ranging       
from ten to forty years.                                                        

Substantially all of the other intangibles consist of the cost of               
acquired product rights. In establishing the value of such rights, the          
Company considers, but does not individually value, existing trademarks,        
copyrights, patents, license agreements and other product-related rights.       
Approximately 61% of these other intangibles relate to rights acquired in       
the acquisitions noted above. These rights, which were valued at their          
acquisition date based on the anticipated future cash flows from the            
underlying product lines, are being amortized over three to twenty-five         
years using the straight-line method. An additional approximate 11% of          
these other intangibles relate to rights acquired from a major motion           
picture studio and are being amortized over the contract life, in               
proportion to projected sales of the licensed products during the same          
period.                                                                         

Depreciation and Amortization                                   
-----------------------------                                   
Depreciation and amortization are computed using accelerated and                
straight-line methods to amortize the cost of property, plant and               
equipment over their estimated useful lives. The principal lives, in            
years, used in determining depreciation rates of various assets are: land       
improvements 15 to 19, buildings and improvements 15 to 25 and machinery        
and equipment 3 to 12.                                                          

Tools, dies and molds are amortized over a three year period or their           
useful lives, whichever is less, using an accelerated method.                   

Revenue Recognition                                                 
-------------------                                                 
Revenue from product sales is recognized upon the passing of title to the       
customer, generally at the time of shipment. Provisions for discounts,          
rebates and returns are made when the related revenues are recognized.          

The Securities and Exchange Commission (SEC) issued Staff Accounting            
Bulletin 101 (SAB 101), Revenue Recognition in Financial Statements, in         
December 1999. The SAB summarizes certain of the SEC staff's views in           
applying generally accepted accounting principles to revenue recognition        
in financial statements. SAB 101 was adopted by the Company in the fourth       
quarter and had no significant impact on the consolidated financial             
statements.                                                                     

Research and Development                                            
------------------------                                            
Research and product development costs for 2000, 1999 and 1998 were             
$208,485, $254,599 and $184,962, respectively.                                  

Advertising                                                         
-----------                                                         
Production costs of commercials and programming are charged to operations       
in the fiscal year during which the production is first aired. The costs        
of other advertising, promotion and marketing programs are charged to           
operations in the fiscal year incurred.                                         

Shipping and Handling                                               
---------------------                                               
Hasbro expenses costs related to the shipment and handling of goods to          
customers as incurred.  For 2000, 1999, and 1998, these costs were              
$177,200, $169,068 and $155,521 and are included in selling, distribution       
and administration expenses.                                                    

Income Taxes                                                        
------------                                                        
Hasbro uses the asset and liability approach for financial accounting and       
reporting for income taxes. Deferred income taxes have not been provided        
on undistributed earnings of international subsidiaries as substantially        
all of such earnings are indefinitely reinvested by the Company.                

Comprehensive Income                                                
--------------------                                                
Comprehensive income is comprised primarily of gains and losses on the          
translation of foreign currency financial statements and also includes          
unrealized gains and losses on certain investment securities, net of tax.       
The related tax benefit of other comprehensive income items was $720,           
$3,187 and $1,684 for the years 2000, 1999 and 1998, respectively.              
Reclassification adjustments in 2000, net of related income taxes of            
$2,695, were $4,398.                                                            

Foreign Currency Translation                                        
----------------------------                                        
Foreign currency assets and liabilities are translated into dollars at          
current rates, and revenues, costs and expenses are translated at average       
rates during each reporting period. Current earnings include gains or           
losses resulting from foreign currency transactions as well as                  
translation gains and losses resulting from the use of the U.S. dollar as       
the functional currency in highly inflationary economies. Other gains and       
losses resulting from translation of financial statements are the               
principal component of other comprehensive earnings.                            

Pension Plans, Postretirement and Postemployment Benefits           
---------------------------------------------------------           
Hasbro, except for certain international subsidiaries, has pension plans        
covering substantially all of its full-time employees. Pension expense is       
based on actuarial computations of current and future benefits. The             
Company's policy is to fund amounts which are required by applicable            
regulations and which are tax deductible. The estimated amounts of future       
payments to be made under other retirement programs are being accrued           
currently over the period of active employment and are also included in         
pension expense.                                                                

Hasbro has a contributory postretirement health and life insurance plan         
covering substantially all employees who retire under any of its United         
States defined benefit pension plans and meet certain age and length of         
service requirements. It also has several plans covering certain groups         
of employees which may provide benefits to such employees following their       
period of employment but prior to their retirement.                             

Risk Management Contracts                                         
-------------------------                                         
Hasbro does not enter into derivative financial instruments for                 
speculative purposes. The Company enters into foreign currency forward          
and option contracts to mitigate its exposure to foreign currency               
exchange rate fluctuations. This exposure relates to future purchases of        
inventory not denominated in the functional currency of the unit                
purchasing the inventory as well as other cross-border currency                 
requirements. Premiums on option contracts are amortized over their term        
and if such contract is terminated before its maturity, the unamortized         
premium is expensed and included in other expense, net. The carrying            
value of options is included in prepaid expenses and other current              
assets. Gains and losses on forward and option contracts meeting hedge          
accounting requirements are deferred and recognized as adjustments to the       
carrying value of the related transactions. In the event hedge accounting       
requirements are not met, gains and losses on such instruments are              
included currently in the statements of operations.                             

Earnings Per Common Share                                           
-------------------------                                           
Basic earnings per share is computed by dividing net earnings by the            
weighted average number of shares outstanding for the year. Diluted             
earnings per share is similar except that the weighted average number of        
shares outstanding is increased by shares issuable upon exercise of stock       
options and warrants for which market price exceeds exercise price, less        
shares which could have been purchased by the Company with the related          
proceeds. As a result of the Company's net loss during 2000, the basic          
and diluted shares are the same because increasing diluted shares by 526        
related to employee stock options would have an antidilutive effect.            

A reconciliation of earnings per share for the three fiscal years ended         
December 31, 2000 is as follows:                                                

                      2000             1999             1998
                     ---------------  ---------------  ---------------
                        Basic   Diluted    Basic  Diluted   Basic  Diluted
                       -------  -------   ------- -------  ------- -------
Net earnings (loss) $(144,631) (144,631)  188,953 188,953  206,365 206,365
                      =======   =======   ======= =======  ======= =======

Average shares                                                            
    outstanding       176,437   176,437   194,917 194,917  197,927 197,927
Options and warrants        -         -        -    7,186        -   7,493
                      -------   -------   ------- -------  ------- -------
Equivalent shares     176,437   176,437   194,917 202,103  197,927 205,420
                      =======   =======   ======= =======  ======= =======

Earnings (loss)                                                           
    per share       $    (.82)     (.82)      .97     .93     1.04    1.00
                      =======   =======   ======= =======  ======= =======

(2) Acquisitions and Disposals                                                
--------------------------                                            

In December 2000, the Company entered into an agreement to sell certain         
business units comprising Hasbro Interactive, as well as its internet           
portal, Games.com, to Infogrames Entertainment SA (Infogrames) for              
Infogrames securities and cash. The sale of the business units closed in        
January 2001.  Net assets of the business units to be sold have been            
written down to estimated fair value as of December 31, 2000, resulting         
in the recognition of a pretax loss of $43,965.  The net assets of the          
business units held for sale are presented in the balance sheet at              
December 31,2000 as a component of prepaid expenses and other current           
assets.  In the three fiscal years ended December 31, 2000, net revenues        
of the business units sold were $194,300, $237,200 and $197,000,                
respectively.  Operating losses of the business units to be sold,               
including consolidation program charges and discontinued development            
charge, were $(104,200) in 2000, $(124,300) in 1999 and $(2,100) in 1998.       

On September 30, 1999, Hasbro acquired Wizards of the Coast, Inc.               
(Wizards) for an initial purchase price of $325,000 subject to additional       
payments based upon the closing balance sheet and future payments               
contingent upon achieving certain operating objectives. The total               
acquisition cost to date amounts to $492,574, which includes $76,495 of         
contingent payment in accrued liabilities at year end with respect to           
2000, and has been accounted for using the purchase method.  The Company        
also made several smaller acquisitions in 2000, none of which were              
material.                                                                       

On a pro forma basis, reflecting the acquisition of Wizards as if it had        
taken place at the beginning of each period and after giving effect to          
adjustments recording the acquisition, unaudited net revenues, net              
earnings and basic and diluted earnings per share for the year ended            
December 26, 1999 would have been $4,630,368, $270,386, $1.39 and $1.34,        
respectively, and for the year ended December 27, 1998 would have been          
$3,459,343, $177,704, $.90 and $.87, respectively. These pro forma              
results are not indicative of either future performance or actual results       
which would have occurred had the acquisition taken place at the                
beginning of the respective periods.                                            

(3) Inventories                                                               
-----------                                                           
                                                 2000       1999
                                                 ----       ----
Finished products                                $285,884    348,058
Work in process                                    19,071     13,470
Raw materials                                      30,538     47,043
                                                  -------    -------
                                                 $335,493    408,571
                                                  =======    =======

(4) Property, Plant and Equipment                                             
-----------------------------                                         
                                                 2000       1999
                                                 ----       ----
Land and improvements                            $ 12,146     16,323
Buildings and improvements                        206,518    199,713
Machinery and equipment                           297,410    355,958
                                                  -------    -------
                                                  516,074    571,994
Less accumulated depreciation                     253,533    298,766
                                                  -------    -------
                                                  262,541    273,228
Tools, dies and molds, net of                                       
 amortization                                      34,188     45,597
                                                  -------    -------
                                                 $296,729    318,825
                                                  =======    =======

Expenditures for maintenance and repairs which do not materially extend         
the life of the assets are charged to operations.                               

(5) Short-Term Borrowings                                                     
---------------------                                                 
At December 31, 2000, Hasbro has available secured committed and                
unsecured uncommitted lines of credit from various banks approximating          
$704,000 and $419,000, respectively. Substantially all of the short-term        
borrowings outstanding at the end of 2000 and 1999 represent borrowings         
made under, or supported by, these lines of credit and the weighted             
average interest rates of the outstanding borrowings were 10.0% and 6.4%,       
respectively. During 2000, Hasbro's working capital needs were fulfilled        
by borrowing under these lines of credit and through the issuance of            
commercial paper, both of which were on terms and at interest rates             
generally extended to companies of comparable creditworthiness.  Certain        
domestic accounts receivable and inventory of the Company secured the           
committed lines at December 31, 2000.  In February 2001, the Company            
entered into amended and restated secured revolving and line of credit          
facility agreements with its existing lenders.  These committed lines           
include $325,000 and $325,000 available under long-term and short-term          
secured credit agreements, respectively. The facilities are secured by          
substantially all domestic accounts receivable and inventory, as well as        
certain investments and intangible assets of the Company.  The Company is       
not required to maintain compensating balances, however, it is required         
to pay a fee of 3/8% per annum of the unused amount of the facility             
available for borrowing.  The agreements contain certain restrictive            
covenants setting forth minimum cash flow and coverage requirements, and        
a number of other limitations, including with respect to capital                
expenditures, investments, acquisitions, share repurchases and dividend         
payments.                                                                       

(6) Accrued Liabilities                                                       
-------------------                                                   
                                                 2000       1999
                                                 ----       ----
Royalties                                        $149,020    178,211
Advertising                                        86,480    140,129
Payroll and management incentives                  71,840    114,852
Other                                             481,788    550,088
                                                  -------    -------
                                                 $789,128    983,280
                                                  =======    =======

(7) Long-Term Debt                                                            
--------------                                                        
                                                 2000       1999
                                                 ----       ----
7.95% Notes Due 2003                           $  550,000          -
5.60% Notes Due 2005                              100,000    100,000
8.50% Notes Due 2006                              200,000          -
6.15% Notes Due 2008                              150,000    150,000
6.60% Debentures Due 2028                         150,000    150,000
Other                                              17,838     20,654
                                                  -------    -------
                                               $1,167,838    420,654
                                                =========    =======

Current installments of $1,793 in 2000 and $4,142 in 1999 are aggregated        
with short-term borrowings. The maturities of long-term debt in 2002 and        
in the succeeding three years are $2,400, $550,900, $1,000 and $101,000.        

(8) Income Taxes                                                              
------------                                                          
Income taxes attributable to earnings (loss) before income taxes are:           

                                      2000       1999       1998
                                      ----       ----       ----
Current                                                             
  United States                       $(41,343)    77,512     40,256
  State and local                         (443)     5,566      5,226
  International                         28,121     40,489     49,952
                                       -------    -------    -------
                                       (13,665)   123,567     95,434
                                       -------    -------    -------
Deferred                                                            
   United States                        (59,775)   (40,131)    (6,458)
   State and local                       (5,124)    (3,440)      (554)
  International                         (2,791)     4,896      8,691
                                       -------    -------    -------
                                       (67,690)   (38,675)     1,679
                                       -------    -------    -------
                                      $(81,355)    84,892     97,113
                                       =======    =======    =======

Certain tax benefits are not reflected in income taxes in the statements        
of operations.  Such benefits of $248 in 2000, $16,735 in 1999 and              
$14,377 in 1998, relate primarily to stock options.                             

A reconciliation of the statutory United States federal income tax rate         
to Hasbro's effective income tax rate is as follows:                            

                                     2000      1999       1998
                                      ----       ----       ----
Statutory income tax rate              (35.0)%     35.0%      35.0% 
State and local income taxes, net       (1.6)        .5        1.0  
Goodwill amortization                    4.6        3.3        1.8  
Tax on international earnings           (3.1)      (7.9)      (5.4) 
Other, net                               (.9)        .1        (.4) 
                                      ----       ----       ----
                                      (36.0)%     31.0%      32.0%
                                      ====       ====       ====

The components of earnings (loss) before income taxes, determined by tax        
jurisdiction, are as follows:                                                   
                                      2000       1999       1998
                                      ----       ----       ----
United States                        $(318,859)    79,519    123,969
International                           92,873    194,326    179,509
                                       -------    -------    -------
                                     $(225,986)   273,845    303,478
                                       =======    =======    =======

The components of deferred income tax expense arise from various                
temporary differences and relate to items included in the statements of         
operations.                                                                     

The tax effects of temporary differences that give rise to significant          
portions of the deferred tax assets and liabilities at December 31, 2000        
and December 26, 1999 are:                                                      

                                                 2000       1999
Deferred tax assets:                               ----       ----  
  Accounts receivable                            $ 33,227     36,696
  Inventories                                      22,839     26,205
  Net operating loss carryovers                    29,885     28,930
  Operating expenses                               50,713     39,512
  Postretirement benefits                          12,032     12,243
  Other                                           147,023     99,143
                                                  -------    -------
    Gross deferred tax assets                     295,719    242,729
   Valuation allowance                             (11,124)   (15,146)
                                                  -------    -------
    Net deferred tax assets                       284,595    227,583
                                                  -------    -------
Deferred tax liabilities                          118,870    100,820
                                                  -------    -------
Net deferred income taxes                        $165,725    126,763
                                                  =======    =======

Hasbro has a valuation allowance for deferred tax assets at December 31,        
2000 of $11,124, which is a decrease of $4,022 from the $15,146 at              
December 26, 1999. The allowance pertains to United States and                  
international operating loss carryforwards, some of which have no               
expiration and others that would expire beginning in 2003. If fully             
realized, $7,103 will reduce goodwill and the balance will reduce future        
income tax expense. Deferred tax liabilities relate primarily to property       
rights.                                                                         

Based on Hasbro's history of taxable income and the anticipation of             
sufficient taxable income in years when the temporary differences are           
expected to become tax deductions, it believes that it will realize the         
benefit of the deferred tax assets, net of the existing valuation               
allowance.                                                                      

Deferred income taxes of $155,291 and $115,646 at the end of 2000 and           
1999, respectively, are included as a component of prepaid expenses and         
other current assets, and $14,693 and $19,592, respectively, are included       
as a component of other assets. At the same dates, deferred income taxes        
of $806 and $1,236, respectively, are included as a component of accrued        
liabilities, and $3,453 and $7,239, respectively, are included as a             
component of deferred liabilities.                                              

The cumulative amount of undistributed earnings of Hasbro's international       
subsidiaries held for reinvestment is approximately $408,000 at December        
31, 2000. In the event that all international undistributed earnings were       
remitted to the United States, the amount of incremental taxes would be         
approximately $60,000.                                                          

(9) Capital Stock                                                             
-------------                                                         
Preference Share Purchase Rights                                    
--------------------------------                                    
Hasbro maintains a Preference Share Purchase Rights plan (the Rights            
Plan). Under the terms of the Rights Plan, each share of common stock is        
accompanied by a Preference Share Purchase Right. Each Right is only            
exercisable under certain circumstances and, until exercisable, the             
Rights are not transferable apart from Hasbro's common stock. When              
exercisable, each Right will entitle its holder to purchase until June          
30, 2009, in certain merger or other business combination or                    
recapitalization transactions, at the Right's then current exercise             
price, a number of the acquiring company's or Hasbro's, as the case may         
be, common shares having a market value at that time of twice the Right's       
exercise price.  Under certain circumstances, the Company may substitute        
cash, other assets, equity securities or debt securities for the common         
stock.  At the option of the Board of Directors of Hasbro (the Board),          
the rightholder may, under certain circumstances, receive shares of             
Hasbro's stock in exchange for Rights.                                          

Prior to the acquisition by the person or group of beneficial ownership         
of a certain percentage of Hasbro's common stock, the Rights are                
redeemable for $.01 per Right. The Rights Plan contains certain                 
exceptions with respect to the Hassenfeld family and related entities.          

Common Stock                                                        
------------                                                        
On December 6, 1999, the Board authorized a common share repurchase             
program up to $500,000. At December 31, 2000, $204,500 remained under           
this authorization.                                                             

On February 19, 1999, the Board declared a three-for-two stock split,           
payable in the form of a 50% stock dividend, on March 15, 1999 to               
shareholders of record on March 1, 1999.  All earnings per common share         
amounts, references to common stock and shareholders' equity amounts are        
reflective of the stock split.                                                  

(10) Stock Options, Restricted Stock and Warrants                               
--------------------------                                            
Hasbro has various stock plans for employees as well as a plan for non-         
employee members of the Board (collectively, the plans) and has reserved        
30,316,339 shares of its common stock for issuance upon exercise of             
options granted or to be granted under the plans. These options generally       
vest in equal annual amounts over three to five years. The plans provide        
that options be granted at exercise prices not less than market value on        
the date the option is granted and options are adjusted for such changes        
as stock splits and stock dividends. No options are exercisable for             
periods of more than ten years after date of grant. Certain of the plans        
permit the granting of awards in the form of stock options, stock               
appreciation rights, stock awards and cash awards.                              

During 2000, the Company issued restricted stock and granted deferred           
restricted stock units to certain key employees.  At December 31, 2000,         
these awards, net of forfeitures, aggregated the equivalent of 634,076          
shares.  These shares or units are nontransferable and subject to               
forfeiture for periods prescribed by the Company.  Upon granting of these       
awards, unearned compensation equivalent to the market value at the date        
of grant is charged to shareholders' equity and subsequently amortized          
over the periods during which the restrictions lapse, generally 3 years.        
Deferred compensation relating to the grants, net of forfeitures,               
amounted to $9,622.  Amortization of deferred, unearned compensation            
relating to the restricted stock and deferred restricted stock units of         
$2,733 was recorded in fiscal 2000.  During 2000, the Company also made         
awards under a Long Term Incentive Program (LTIP) under the Company's           
omnibus employee stock plans.  Conditional upon the Company reaching            
certain volume, earnings per share and stock price benchmarks within a          
three year performance cycle, restricted shares would be awarded which          
would vest over the two years following that cycle.  Unearned                   
compensation equivalent to the market value of the target number of             
shares that would be awarded if these conditions were met was recorded at       
the date of the LTIP award and is being amortized over a five-year              
period.  Adjustments are made to compensation expense for changes in            
market value and achievement of financial goals. For the year ended             
December 31, 2000, conditional requirements of the LTIP award had not           
been met and accordingly no compensation expense has been recognized.           

As permitted by Statement of Financial Accounting Standards No. 123 (SFAS       
123), Hasbro continues to apply Accounting Principles Board Opinion No.         
25 (APB 25) in accounting for the plans under which no compensation cost        
is recognized. Had compensation expense been recorded under the                 
provisions of SFAS 123, the impact on the Company's net earnings (loss)         
and earnings (loss) per share would have been:                                  

                                      2000       1999       1998
                                      ----       ----       ----
Reported net earnings (loss)         $(144,631)   188,953    206,365
Pro forma compensation expense,                                     
  net of tax                            (21,981)   (18,335)   (10,339)
                                       -------    -------    -------
Pro forma net earnings (loss)        $(166,612)   170,618    196,026
                                       =======    =======    =======

Pro forma earnings (loss) per share                                 
  Basic                              $    (.94)       .88        .99
  Diluted                            $    (.94)       .84        .95
                                       =======    =======    =======

The weighted average fair value of options granted in 2000, 1999 and 1998       
were $6.43, $12.13 and $8.66, respectively. The fair value of each option       
grant is estimated on the date of grant using the Black-Scholes option          
pricing model with the following weighted average assumptions used for          
grants in 2000, 1999 and 1998, respectively: risk-free interest rates of        
6.77%, 5.60% and 5.70%; expected dividend yields of 1.58%, 0.78% and            
0.85% and expected volatility of approximately 41%, 34% and 26%, and            
expected lives of approximately 6 years.                                        

Additionally, the Company has reserved 18,962,500 shares of its common          
stock for issuance upon exercise of outstanding warrants.  During 2000,         
in connection with the acquisition of certain rights, the Company issued        
warrants to purchase 500,000 shares at an exercise price of $15.00 and a        
fair value at date of grant of $6.00.  In addition, the Company granted         
warrants to purchase 1,000,000 and 700,000 shares at exercise prices of         
$15.70 and $18.84 respectively, relating to future rights.                      

Information with respect to options and warrants, in thousands of shares,       
for the three years ended December 31, 2000 is as follows:                      

                                        2000       1999       1998
                                        ----       ----       ----
Number of shares:                                               
  Outstanding at beginning of year      33,776     36,361     31,424
    Granted                              9,029      7,168      8,639
     Exercised                             (475)    (8,313)    (3,468)
     Expired or canceled                 (1,872)    (1,440)      (234)
                                        ------     ------     ------
  Outstanding at end of year            40,458     33,776     36,361
                                        ======     ======     ======
  Exercisable at end of year            27,656     23,456     11,673
                                        ======     ======     ======
Weighted average exercise price:                                
    Granted                            $ 15.59      31.32      23.86
    Exercised                          $  7.81      14.51      13.34
    Expired or canceled                $ 22.40      27.43      18.75
    Outstanding at end of year         $ 20.27      21.46      18.17
    Exercisable at end of year         $ 20.11      19.09      14.43
                                        ======     ======     ======

Information, in thousands of shares, with respect to the 40,458 options         
and warrants outstanding and the 27,656 exercisable at December 31, 2000,       
is as follows:                                                                  

                                    Weighted
                                                 Average      Weighted
                                                Remaining    Average
 Range of                                        Contractual  Exercise
Exercise Prices                        Shares   Life         Price  
---------------                        -------  ----------   -------
Outstanding                                                         
  $11.10-$14.06                          2,823   2.7 years    $13.13
  $14.14-$16.81                         10,466   7.0 years    $15.44
  $17.34-$23.27                         13,989   7.8 years    $18.90
  $23.33-$36.27                         13,180   8.6 years    $27.09
                                        ======                 =====
Exercisable                                                         
  $11.10-$14.06                          2,630                $13.26
  $14.14-$16.81                          3,257                $15.76
  $17.34-$23.27                         12,453                $18.82
  $23.33-$36.27                          9,316                $25.30
                                        ======                 =====

(11) Pension, Postretirement and Postemployment Benefits                        
---------------------------------------------------                   
Pension and Postretirement Benefits                                 
-----------------------------------                                 
Hasbro's net pension, 401(k) matching contribution and profit sharing           
cost for 2000, 1999 and 1998 was approximately $13,700, $14,200 and             
$14,500, respectively.                                                          

United States Plans                                               
-------------------                                               
Substantially all United States employees are covered under at least one        
of several non-contributory defined benefit pension plans maintained by         
the Company. Benefits under the two major plans, principally covering           
non-union employees, are based primarily on salary and years of service.        
One of these plans is funded. Benefits under the remaining plans are            
based primarily on fixed amounts for specified years of service. One of         
these plans is also funded. At December 31, 2000, the two funded plans          
have plan assets of $236,296 and accumulated benefit obligations of             
$145,589. The unfunded plans have accumulated benefit obligations of            
$17,747.                                                                        

Hasbro also provides certain postretirement health care and life                
insurance benefits to eligible employees who retire and have either             
attained age 65 with 5 years of service or age 55 with 10 years of              
service. The cost of providing these benefits on behalf of employees who        
retired prior to 1993 is and will continue to be substantially borne by         
the Company. The cost of providing benefits on behalf of employees who          
retire after 1992 is shared, with the employee contributing an increasing       
percentage of the cost, resulting in an employee-paid plan after the year       
2002. The plan is not funded.                                                   

                                   Pension        Postretirement
                                ---------------    ---------------
                                2000     1999      2000     1999
                                ----     ----      ----     ----
Change in projected benefit                                         
---------------------------                                         
obligation                                                        
----------                                                        
Projected benefit obligation                                        
 at beginning of year          $ 188,318  207,063    24,683   28,428
Service cost                       8,032    9,356       241      227
Interest cost                     13,656   13,670     1,792    1,775
Plan amendments                      955   (2,298)        -        -
 Actuarial gain                   (18,660) (32,438)   (1,155)  (3,263)
 Benefits paid                     (7,652)  (6,305)   (2,238)  (2,484)
Expenses paid                       (371)    (730)        -        -
Other                             (1,735)       -      (384)       -
                                 -------  -------   -------  -------
Projected benefit obligation                                        
 at end of year                $ 182,543  188,318    22,939   24,683
                                 =======  =======   =======  =======

Change in plan assets                                               
---------------------                                               
Fair value of plan assets at                                        
 beginning of year             $ 242,889  219,410         -        -
Actual return on plan assets         919   30,061         -        -
Employer contribution                511      453         -        -
Benefits paid                     (7,652)  (6,305)        -        -
Expenses paid                       (371)    (730)        -        -
                                 -------  -------   -------  -------
Fair value of plan assets at                                        
 end of year                   $ 236,296  242,889         -        -
                                 =======  =======   =======  =======

 Funded status                   $ 53,752   54,571   (22,939) (24,683)
 Unrecognized net gain            (73,588) (80,496)   (1,424)    (406)
Unrecognized prior service cost    5,191    5,836      (384)       -
                                 -------  -------   -------  -------
 Accrued benefit cost            $(14,645) (20,089)  (24,747) (25,089)
                                 =======  =======   =======  =======

The assets of the funded plans are managed by investment advisors and           
consist primarily of pooled indexed and actively managed stock and bond         
funds. For measuring the expected pension accumulated benefit obligation,       
assumed discount rates of 8.00%, 7.75% and 6.75% were used for 2000, 1999       
and 1998, respectively; assumed long-term rates of compensation increase        
of 4.50% in 2000, 1999 and 1998, and an assumed long-term rate of return        
on plan assets of 9.00% in all years.                                           

For measuring the expected postretirement benefit obligation, a 7.00%,          
7.25% and 7.50% annual rate of increase in the per capita cost of covered       
health care benefits was assumed for 2000, 1999 and 1998, respectively.         
The  rates for all years were further assumed to decrease gradually to          
4.50% in 2012. All were assumed to remain constant after 2012. The              
discount rates used in the pension calculation were also used for the           
postretirement calculation.                                                     

                                      2000       1999       1998
                                      ----       ----       ----
Components of net periodic cost                                     
-------------------------------                                     
Pension                                                             
-------                                                             
Service cost                           $ 8,032      9,356      9,362
Interest cost                           13,656     13,670     12,798
 Expected return on assets              (21,368)   (19,484)   (17,465)
 Net amortization and deferrals          (4,498)      (786)      (448)
                                       -------    -------    -------
Net periodic benefit cost (benefit)    $(4,178)     2,756      4,247
                                       =======    =======    =======
Postretirement                                                      
--------------                                                      
Service cost                           $   241        227        224
Interest cost                            1,792      1,775      1,893
Net amortization and deferrals            (136)        27         57
                                       -------    -------    -------
Net periodic benefit cost              $ 1,897      2,029      2,174
                                       =======    =======    =======

If the health care cost trend rate were increased one percentage point in       
each year, the accumulated postretirement benefit obligation at December        
31, 2000 and the aggregate of the benefits earned during the period and         
the interest cost would have each increased by approximately 10%.               

Hasbro has a retirement savings plan to which eligible employees may make       
contributions of up to 18% of their salary, as allowed under Section            
401(k) of the Internal Revenue Code. In 2000, the plan was amended to           
increase Hasbro's matching percentage of employee contributions, in lieu        
of discretionary contributions to the profit sharing component of the           
plan.  The Company contributed approximately $11,200, $6,500 and $6,600         
to the plan in 2000, 1999 and 1998, respectively.                               

International Plans                                               
-------------------                                               
Pension coverage for employees of Hasbro's international subsidiaries is        
provided, to the extent deemed appropriate, through separate defined            
benefit and defined contribution plans.  These plans were neither               
significant individually nor in the aggregate.                                  

Postemployment Benefits                                             
-----------------------                                             
Hasbro has several plans covering certain groups of employees which may         
provide benefits to such employees following their period of active             
employment but prior to their retirement. These plans include certain           
severance plans which provide benefits to employees involuntarily               
terminated and certain plans which continue the Company's health and life       
insurance contributions for employees who have left Hasbro's employ under       
terms of its long-term disability plan.                                         

(12) Leases                                                                     
------                                                                
Hasbro occupies certain manufacturing facilities and sales offices and          
uses certain equipment under various operating lease arrangements. The          
rent expense under such arrangements, net of sublease income which is not       
material, for 2000, 1999 and 1998 amounted to $57,470, $56,072 and              
$50,932, respectively.                                                          

Minimum rentals, net of minimum sublease income which is not material,          
under long-term operating leases for the five years subsequent to 2000          
and in the aggregate are as follows:                                            

2001                                                        $ 32,443
2002                                                          23,982
2003                                                          19,561
2004                                                          16,181
2005                                                          13,121
Later years                                                   51,243
                                                             -------
                                                            $156,531
                                                             =======

All leases expire prior to 2014. Real estate taxes, insurance and               
maintenance expenses are generally obligations of the Company. It is            
expected that in the normal course of business, leases that expire will         
be renewed or replaced by leases on other properties; thus, it is               
anticipated that future minimum lease commitments will not be less than         
the amounts shown for 2000.                                                     

In addition, Hasbro leases certain facilities which, as a result of             
restructurings, are no longer in use. Future costs relating to such             
facilities were included as a component of the restructuring charge and         
are not included in the table above.                                            

(13) Consolidation Program and Restructuring Charge                             
----------------------------------------------                        
The Company recognized $63,951 of restructuring expense in 2000. This           
amount reflects charges under the 2000 restructuring plan of $70,079 and        
adjustments to the 1999 plan of $(6,128). The pretax impact of all              
consolidation program charges and adjustments to the statement of               
operations for the fiscal year ended December 31, 2000 was $146,142.            

On October 12, 2000, the Company announced a plan approved by its Board         
of Directors to consolidate its U.S. Toy group into Rhode Island,               
significantly reduce overhead through reductions in product development,        
sales and marketing, and administrative functions across the Company and        
to increase its focus on development of the Company's core brands.  The         
impact of this plan was recorded in the fourth quarter as follows:              

Restructuring charge                                         $  70,079          
                                                    --------

Other operating expenses:                                                       
Cost of sales                                                    6,625          
Amortization                                                    25,046          
Royalties, research and development                             42,270          
Advertising                                                      3,155          
Selling, distribution and administration                         5,095          
                                                    --------
                                                      82,191
                                                    --------
Total 2000 consolidation program cost                        $ 152,270          
                                                    ========

The significant components of the 2000 plan include the closing of              
offices in Cincinnati, Ohio, the Napa, California office and warehouse          
and a small office in San Francisco, California, thereby essentially            
consolidating the U.S. Toy group in Rhode Island. These actions were            
substantially completed at December 31, 2000.  Additionally, the plan           
includes the reduction of overhead, particularly in marketing and sales,        
product development and administration.  This includes a curtailment of         
expansion of the retail business of Wizards, the further consolidation of       
certain international operating offices into regional centers and               
consolidation and streamlining of the Company's marketing activities. The       
Company is also increasing its focus on developing and marketing its core       
brands, reducing its reliance on licenses. This focus has resulted in           
product lines which will be discontinued or for which the Company has           
significantly reduced expectations.                                             

Together, the components of this plan anticipate the redundancy of              
approximately 850 employees, including 125 in manufacturing and sourcing        
activities and 725 worldwide in research and product development,               
marketing, sales and administration. Employee redundancies by area are as       
follows:                                                                        

                          Opening                 Balance at
                            Balance  Activity  December 31, 2000
                          --------   --------  -----------------
Manufacturing activities             125        (98)            27          
Research, product development, sales                                        
marketing and administration        725       (403)           322         
                       -------    -------        -------
                           850       (501)           349
                       =======    =======        =======

Total charges under the 2000 plan represent cash charges of $89,400,            
comprised of approximately $31,800 for severance benefits which will be         
disbursed over the employee's entitlement period, $5,100 in related             
charges paid in 2000 to relocate certain U.S. Toy group employees to            
Rhode Island, $21,400 for lease costs to be expended over the contractual       
lease term of the closed facilities and approximately $31,100 of                
contractual commitments on exited product lines and certain other               
licensed product lines with reduced expectations due to the Company's           
enhanced focus on its core brands.  The product lines being exited were         
not, either individually or in the aggregate, material to the Company's         
revenues or operating results.  Total non-cash charges were $62,900. Non-       
cash charges of $16,900 for fixed asset write-offs relate primarily to          
Corporate and the U.S. Toy segment. The remaining approximate $46,000           
relates to asset write-offs and a write-down of assets impaired due to          
the Company's enhanced focus on its core brands. This includes impairment       
of intangible assets arising from the decision to discontinue product           
line offerings. Non-cash charges relating to asset write-offs have been         
credited to the respective line items on the balance sheet.  The                
components of the plan included in the restructuring charge in the              
statement of operations are severance costs of $31,800, lease costs of          
$21,400 and fixed asset write-offs of $16,900.  Included in accrued             
liabilities at December 31, 2000 is $53,200 relating to amounts due to          
terminated employees over their severance entitlement period and costs          
associated with lease and closing costs. The restructuring plan is              
expected to be completed in fiscal 2001.                                        

On December 7, 1999, the Company announced a program to consolidate             
manufacturing and sourcing activities and product lines, as well as             
streamline and further regionalize marketing, sales and research and            
development activities worldwide. Costs associated with the 1999                
consolidation program, recorded in the fourth quarter of 1999, amounted         
to $141,575, of which $64,232 was recorded as a restructuring charge and        
$77,343 in various other operating expense categories. Adjustments to the       
restructuring plan of $(6,128) were recorded in 2000.                           

The significant components of the plan included the closing of factories        
in Mexico and in the United Kingdom, reducing capacity at the remaining         
three factories, shifting production to third party manufacturers in the        
Far East and further consolidation and regionalization of the                   
International marketing and sales structure. Actions under the plan             
commenced in December 1999 and were completed in fiscal 2000. There were        
no material changes to the plan, however, adjustments were recognized in        
2000 reflecting the reversal of excess restructuring accruals due to            
lower than previously estimated costs to achieve the overall objectives         
of the plan, primarily in the consolidation and regionalization of the          
International marketing and sales structure. The 1999 restructuring             
charge of $64,232 represented approximately $38,700 of cash charges for         
severance benefits for termination of approximately 2,200 employees,            
which will be disbursed over the employee's entitlement period, $14,300         
of cash charges for lease and facility closing costs to be expended over        
the contractual lease terms and closing process and non-cash charges of         
$11,200 for fixed asset write-offs, arising primarily in the                    
manufacturing area. Of the cash amount, approximately $4,700 was paid           
prior to December 26, 1999 for severance benefits relating to                   
approximately 200 employees terminated prior to that date. Non-cash             
charges relating to fixed asset write-offs were credited to the                 
respective line items on the balance sheet. Details of activity in the          
restructuring plan for fiscal 2000 follow:                                      

                  Balance at                        Balance at
                    Dec. 26,                          Dec. 31,
                     1999    Adjustments  Activity      2000
                     -------  -----------  --------     ------
Severance                   $  34,000      (4,800)   (25,200)     4,000         
Lease and facility                                                              
closing costs               14,300      (1,300)    (9,100)     3,900      
                     -------     -------    -------     ------
                   $  48,300      (6,100)   (34,300)     7,900
                     =======     =======    =======     ======

Employee redundancies by area:                                                  
Manufacturing and sourcing                                                  
activities                   1,700           -     (1,700)         -      
Research, product development, sales                                        
marketing and administration   300         (40)      (260)         -      
                     -------     -------    -------     ------
                       2,000         (40)    (1,960)         -
                     =======     =======    =======     ======

The remaining severance liability represents cash charges for severance         
benefits for employees made redundant which will be disbursed over the          
employee's entitlement period. The balance in lease and facility closing        
costs will be expended over the contractual lease term.                         

The components of the consolidation program included in other operating         
expenses in 1999 represent costs associated with exiting certain product        
lines and reevaluating other product lines resulting in reduced                 
expectations. The product lines being exited were not, either                   
individually or in the aggregate, material to the Company's revenues or         
operating results. Approximately $12,000 represented cash charges to be         
incurred on contractual royalty, product development and advertising            
commitments associated with the discontinued product lines. Non-cash            
charges of approximately $65,000 related to asset write-offs and write-         
downs of underutilized assets. This includes impairment of intangible           
assets arising from the decision to discontinue or significantly reduce         
product line offerings. The resulting sum of undiscounted future cash           
flows of these assets was not sufficient to cover the carrying amount of        
the assets, and as such, they were written down to their fair market            
value. Items relating to property rights and licenses, goodwill,                
inventory, prepaid and other current assets were credited to the                
respective asset in the balance sheet.                                          

(14) Financial Instruments                                                      
---------------------                                                 
Hasbro's financial instruments include cash and cash equivalents,               
accounts receivable, short- and long-term borrowings, accounts payable          
and accrued liabilities. At December 31, 2000, the carrying cost of these       
instruments approximated their fair value. Its financial instruments also       
include foreign currency forwards and options. At December 31, 2000, the        
carrying value of these instruments approximated their fair value based         
on quoted or publicly available market information.                             

Hasbro uses foreign currency forwards and options, generally purchased          
for terms of not more than twelve months, to protect itself from adverse        
currency rate fluctuations on firmly committed and anticipated foreign          
currency transactions. These over-the-counter contracts, which hedge            
future purchases of inventory and other cross-border currency                   
requirements, are primarily denominated in United States and Hong Kong          
dollars and Irish punts and entered into with counterparties who are            
major financial institutions with which Hasbro also has other financial         
relationships. The Company believes any risk related to default by a            
counterparty to be remote.                                                      

The Company had the equivalent of approximately $166,500 and $85,000 of         
foreign currency forwards outstanding, and approximately $89,500 and            
$132,000 of foreign currency options outstanding at December 31, 2000 and       
December 26, 1999, respectively. Gains and losses deferred under hedge          
accounting provisions are subsequently included in the measurement of the       
related foreign currency transaction. Gains and losses on contracts not         
meeting hedge accounting provisions are included currently in earnings.         
The aggregate amount of gains and losses resulting from all foreign             
currency transactions was not material.                                         

(15) Commitments and Contingencies                                            
-----------------------------                                         
Hasbro had unused open letters of credit of approximately $40,000 and           
$15,000 at December 31, 2000 and December 26, 1999, respectively.               

The Company routinely enters into license agreements with inventors,            
designers and others for the use of intellectual properties in its              
products. Certain of these agreements contain provisions for the payment        
of guaranteed or minimum royalty amounts. Under terms of currently              
existing agreements, in certain circumstances the Company may become            
liable for remaining guaranteed minimum royalties of up to $741,000             
between 2001 and 2008.  Of this amount, approximately $238,000 has been         
paid.  Approximately $58,000 is included in the $66,509 of prepaid              
royalties which are a component of prepaid expenses and other current           
assets in the balance sheet.  Included in other assets is $180,000              
representing the long-term portion of amounts paid.  Of the remaining           
unpaid minimum guaranties, Hasbro may be required to pay amounts as             
follows:                                                                        

2001           $   44,000         
2002              193,000         
2003               89,000         
2004               56,000         
2005              121,000         
         -------
      $  503,000
         =======

Such payments are related to royalties which are expected to be incurred        
on anticipated revenues in the years 2001 through 2008.                         

Hasbro is party to certain legal proceedings, substantially involving           
routine litigation incidental to the Company's business, none of which,         
individually or in the aggregate, is deemed to be material to the               
financial condition of the Company.                                             

(16) Segment Reporting                                                          
-----------------                                                     
Segment and Geographic Information                                  
----------------------------------                                  
Hasbro is a worldwide marketer and distributor of children's and family         
entertainment products, principally engaged in the design, manufacture          
and marketing of games and toys ranging from traditional to high-tech.          
The Company's reportable segments are U.S. Toys, Games, International and       
Global Operations.                                                              

In the United States, the U.S. Toy segment includes the design, marketing       
and selling of boys action figures, vehicles and playsets, girls toys,          
preschool toys and infant products and creative play products. The Games        
segment includes the development, marketing and selling of traditional          
board games and puzzles, handheld electronic games, electronic                  
interactive products, children's consumer electronics, electronic               
learning aids, trading card and role-playing games and interactive              
software games based on the Company's owned and licensed brands. Within         
the International segment, the Company develops, markets and sells both         
toy and certain game products in non-U.S. markets. Global Operations            
manufactures and sources product for the majority of the Company's              
segments. The Company also has other segments which license certain toy         
properties and which develop and market non-traditional toy and game            
based product realizing more than half of their revenues and the majority       
of their operating profit in the first half of the year, which is contra-       
seasonal to the rest of the Company's business. These other segments do         
not meet the quantitative thresholds for reportable segments and have           
been combined for reporting purposes.                                           

Segment performance is measured at the operating profit level, prior to         
certain charges. In 2000, segment profitability was measured prior to           
$146,142 and $43,965 in charges incurred in connection with the                 
consolidation programs and loss on sale of business units, respectively.        
In 1999, segment profitability was measured prior to $141,575 in charges        
incurred in connection with the 1999 consolidation program. For 1998,           
operating profits are reflected prior to the $20,000 charge incurred to         
write-off acquired in-process research and development arising on the           
MicroProse acquisition. Included in Corporate and eliminations are              
general corporate expenses, the elimination of intersegment transactions        
and assets not identified with a specific segment. Intersegment sales and       
transfers are reflected in management reports at amounts approximating          
cost.                                                                           

As a result of the complexity of the Company's organizational changes, it       
is unable to segregate assets and related expenses between the U.S. Toys        
and Games segments for 1999 and prior and these balances are reported as        
one. Assets are segregated in 2000 and are separately reported for that         
period. The total of U.S. Toys and Games assets in 2000 is presented for        
comparative purposes only, and is not used by management in assessing           
segment performance in 2000. Certain asset related expense items,               
including depreciation and amortization of intangibles, have been               
allocated to segments in 1999 and 1998 based upon estimates in order to         
arrive at segment operating profit. In December of 2000, the Company            
announced that it entered into an agreement to dispose of certain               
business units included in its Games segment (see note 2).  During 1999,        
the Company's Games segment acquired Wizards of the Coast, Inc.                 

The accounting policies of the segments are the same as those described         
in note (1) to the consolidated financial statements.                           

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

                                                        [Enlarge/Download Table]

                                   Revenues                                                             
                                     from                 Operating  Depreciation                       
                                   External   Affiliate     Profit       and        Capital      Total  
                                  Customers    Revenues     (Loss)   Amortization  Additions    Assets  
                                  ---------   ---------   ---------   ---------   ---------   --------- 
                                                                                                        
2000                                                                                                    
----                                                                                                    
 U.S. Toys                       $  558,915       5,130    (112,338)     24,240         923     273,381 
 Games                            1,898,177      83,164     146,009      90,196      45,463   2,099,809 
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  U.S. Toys and Games             2,457,092      88,294      33,671     114,436      46,386   2,373,190 
 International                    1,085,839           -      61,458      35,073      19,447   1,244,479 
 Global Operations (b)               24,885     825,594      (1,329)     56,542      42,989     504,105 
 Other segments                     219,399      17,898     (18,749)     21,328       2,467     276,203 
 Corporate and eliminations               -    (931,786)     10,779      11,796      13,766    (569,518)
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  Segment total                   3,787,215           -      85,830     239,175     125,055   3,828,459 
 Consolidation program (c)                -           -    (146,142)     25,046           -           - 
 Loss on sale of business units (d)       -           -     (43,965)          -           -           - 
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  Consolidated Total             $3,787,215           -    (104,277)    264,221     125,055   3,828,459 
                                  =========   =========   =========   =========   =========   ========= 

1999                                                                                                    
----                                                                                                    
 U.S. Toys (a)                   $1,056,700           -      91,588                                     
 Games (a)                        1,703,216      81,948     259,314                                     
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  U.S. Toys and Games (a)         2,759,916      81,948     350,902     109,250      12,077   3,588,994 
 International                    1,227,949       6,403     140,567      34,150       9,539   1,285,342 
 Global Operations (b)               24,923   1,030,028      (1,878)     61,175      67,644     572,454 
 Other segments                     219,475      18,988       5,777      22,517       4,301     269,435 
 Corporate and eliminations               -  (1,137,367)    (26,224)     11,783      13,907  (1,252,877)
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  Segment total                   4,232,263           -     469,144     238,875     107,468   4,463,348 
 Consolidation program (c)                -           -    (141,575)     38,449           -           - 
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  Consolidated Total             $4,232,263           -     327,569     277,324     107,468   4,463,348 
                                  =========   =========   =========   =========   =========   ========= 
                                                        [Enlarge/Download Table]

                                   Revenues                                                             
                                     from                 Operating  Depreciation                       
                                   External   Affiliate     Profit       and        Capital      Total  
                                  Customers    Revenues     (Loss)   Amortization  Additions    Assets  
                                  ---------   ---------   ---------   ---------   ---------   --------- 
                                                                                                        
1998                                                                                                    
----                                                                                                    
 U.S. Toys (a)                   $  894,279          61      55,103                                     
 Games (a)                        1,043,623       1,019     143,216                                     
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  U.S. Toys and Games (a)         1,937,902       1,080     198,319      54,543      12,739   2,390,147 
 International                    1,106,565        (174)    130,232      23,905      34,480     840,246 
 Global Operations (b)                6,453     935,683      (6,560)     62,397      71,585     415,872 
 Other segments                     253,534       8,992      35,565      19,106       4,925     354,717 
 Corporate and eliminations               -    (945,581)    (12,674)      9,248      18,221    (207,137)
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  Segment total                   3,304,454           -     344,882     169,199     141,950   3,793,845 
 Acquired in-process research                                                                           
  and development                         -           -     (20,000)          -           -           - 
                                  ---------   ---------   ---------   ---------   ---------   --------- 
  Consolidated Total             $3,304,454           -     324,882     169,199     141,950   3,793,845 
                                  =========   =========   =========   =========   =========   ========= 

(a)  As a result of the complexity of the Company's organizational changes, it was unable to segregate  
assets and related expenses between the U.S. Toys and Games segments prior to fiscal 2000.  Certain     
asset related expense items including depreciation and amortization of intangibles have been allocated  
to segments based upon estimates in order to arrive at segment operating profit.                        

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

(c) The impact of the consolidation programs to operating profit by segment was $45,437 to U. S. Toys,  
$5,937 to Games, $29,301 to International, $401 to Global Operations and $65,066 to Corporate and Other 
segments for 2000. In 1999, the impact to operating profit by segment was $16,150 to U.S. Toys, $35,732 
to Games, $23,044 to International, $44,324 to Global Operations and $22,325 to Other.                  

(d) The loss on sale of business units relates to the sale of the Games segment's business units        
comprising Hasbro Interactive and Games.com (see note 2).                                               

The following table presents consolidated net revenues by classes of            
principal products for the years ended in December:                             

                                          2000     1999       1998
                                          ----     ----       ----

Boys toys                             $  719,900 1,232,300   891,600
Games and puzzles                      2,146,800 1,936,100 1,268,700
Interactive software games               179,600   229,400   192,300
Preschool toys                           202,000   273,600   341,600
Other                                    538,915   560,863   610,254
                                         ------- --------- ---------
Net revenues                          $3,787,215 4,232,263 3,304,454
                                       ========= ========= =========

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

                                      2000       1999       1998
                                      ----       ----       ----
Net revenues                                                        
  United States                     $2,251,023  2,818,837  2,113,057
  International                      1,536,192  1,413,426  1,191,397
                                     ---------  ---------  ---------
                                    $3,787,215  4,232,263  3,304,454
                                     =========  =========  =========

Pretax earnings (loss)                                              
  United States                     $ (242,758)   158,834    194,050
  International                         16,772    115,011    109,428
                                     ---------  ---------  ---------
                                    $ (225,986)   273,845    303,478
                                     =========  =========  =========

Long-lived assets                                                   
  United States                     $1,803,688  1,880,029  1,694,967
  International                        199,123    194,677    177,569
                                     ---------  ---------  ---------
                                    $2,002,811  2,074,706  1,872,536
                                     =========  =========  =========

Principal international markets include Western Europe, Canada, Mexico,         
Australia, New Zealand and Hong Kong.                                           

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

Sales to the Company's two largest customers, Wal-Mart Stores, Inc. and         
Toys `R Us, Inc., amounted to 14% and 13%, respectively, of consolidated        
net revenues during 2000, 16% each during 1999 and 18% and 17%,                 
respectively, during 1998.                                                      

Hasbro purchases certain components and accessories used in its                 
manufacturing process and certain finished products from manufacturers          
in the Far East. The Company's reliance on external sources of                  
manufacturing can be shifted, over a period of time, to alternative             
sources of supply for products it sells, should such changes be                 
necessary. However, if the Company were prevented from obtaining                
products from a substantial number of its current Far East suppliers due        
to political, labor or other factors beyond its control, the Company's          
operations would be disrupted while alternative sources of product were         
secured. The imposition of trade sanctions by the United States or the          
European Union against a class of products imported by Hasbro from, or          
the loss of "normal trade relations" status by, the People's Republic of        
China could significantly increase the cost of the Company's products           
imported into the United States or Europe.                                      

(17) Quarterly Financial Data (Unaudited)                                       
------------------------------------                                  

2000                                                                  
----                                                                  
       Quarter
       -----------------------------------
                     First   Second     Third     Fourth     Full Year
                     -----   ------     -----     ------     ---------
Net revenues        $773,481  778,373  1,072,617  1,162,744   3,787,215 
Gross profit        $473,180  480,330    613,082    546,650   2,113,242 
Earnings (loss) before                                                  
 income taxes       $ 21,923    9,421     20,046   (277,376)(a)(225,986)
Net earnings (loss) $ 15,127    6,500     13,832   (180,090)   (144,631)
                    =======  =======    =======  =========   =========
Per common share                                                        
Earnings (loss)                                                     
    Basic           $    .08      .04        .08      (1.05)       (.82)
    Diluted         $    .08      .04        .08      (1.05)       (.82)

Market price                                                        
    High            $ 19 1/8  18 9/16    17 13/16   12 15/16      19 1/8
    Low             $ 13 3/4  15         10 3/16     8 3/8         8 3/8

Cash dividends                                                      
     declared       $    .06      .06        .06        .03          .21
                     =======  =======    =======  =========    =========

1999                                                                  
----                                                                  
       Quarter
       -----------------------------------
                     First   Second     Third     Fourth     Full Year
                     -----   ------     -----     ------     ---------
Net revenues        $668,398  874,574  1,098,179  1,591,112   4,232,263 
Gross profit        $411,881  529,548    654,166    938,426   2,534,021 
Earnings before                                                         
income taxes       $ 19,993   46,796    123,434     83,622(a)  273,845
Net earnings        $ 13,795   32,289     85,170     57,699     188,953 
                    =======  =======    =======  =========   =========
Per common share                                                        
Earnings                                                            
   Basic           $    .07      .17        .44        .30         .97
   Diluted         $    .07      .16        .43        .29         .93

Market price                                                        
High            $ 30 1/8   37       28 5/8     24 1/4       37  
  Low             $ 21 13/16 27       21 15/16   16 7/8       16 7/8

Cash dividends                                                      
  declared         $    .06      .06      .06        .06           .24
                    =======  =======  =======  =========     =========

(a) In 2000 and 1999, includes $63,951 and $64,232, respectively,               
relating to restructuring of operations.                                        

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K405 Filing		Date		Other Filings
		12/9/97		8-K
		12/28/97		10-K405
		4/1/98		8-K
		9/14/98		SC 14D1/A
		10/30/98		424B2
		12/27/98		10-K405
		1/1/99
		2/19/99
		3/1/99
		3/15/99
		6/23/99
		9/30/99
		12/6/99
		12/7/99		8-K, S-3/A
		12/26/99		10-K405
		12/31/99
		10/12/00		8-K
For The Period Ended		12/31/00		11-K
		1/1/01
		2/7/01		SC 13G
		2/28/01
		3/4/01
Filed On		3/30/01
		4/1/01		10-Q
Filed As Of		4/2/01
		1/1/02
		6/30/02		10-Q
		3/15/03
		11/1/05		8-K
		3/15/06
		7/15/08
		6/30/09
		7/15/28
Top				List All Filings