SEC Info℠  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Hasbro Inc – ‘10-Q’ for 3/28/99

As of:  Wednesday, 5/12/99   ·   For:  3/28/99   ·   Accession #:  46080-99-8   ·   File #:  1-06682   ·   Correction:  This Filing was Corrected by the SEC on 5/17/99. ®

Previous ‘10-Q’:  ‘10-Q’ on 11/12/98 for 9/27/98   ·   Next:  ‘10-Q’ on 8/11/99 for 6/27/99   ·   Latest:  ‘10-Q’ on 11/1/23 for 10/1/23

Find Words in Filings emoji
 		  in    Show  and   ↓Hints

  As Of                Filer                Filing    For·On·As Docs:Size

 5/12/99  Hasbro Inc                        10-Q®       3/28/99    5:40K

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        10-Q Document                                         21     68K 
 2: EX-10       Material Contract                                      1      7K 
 3: EX-11       Statement re: Computation of Earnings Per Share        1      7K 
 4: EX-12       Statement re: Computation of Ratios                    1      6K 
 5: EX-27       Financial Data Schedule (Pre-XBRL)                     1      6K

10-Q   —   10-Q Document
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
19Item 1. Legal Proceedings
"Item 2. Changes in Securities
"Item 3. Defaults Upon Senior Securities
"Item 4. Submission of Matters to a Vote of Security Holders
"Item 5. Other Information
"Item 6. Exhibits and Reports on Form 8-K 
10-Q1st Page of 21TOC↑TopPreviousNext↓BottomJust 1st
 

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.  20549

FORM 10-Q 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended March 28, 1999         Commission file number 1-6682       

HASBRO, INC.    
--------------------    
(Name of Registrant)    

Rhode Island                                O5-0155090            
------------------------             ------------------------------------       
(State of Incorporation)             (I.R.S. Employer Identification No.)       

1027 Newport Avenue, Pawtucket, Rhode Island  02861       
---------------------------------------------------       
(Principal Executive Offices)       

(401) 431-8697      

Indicate by check mark whether the registrant (1) has filed all         
reports required to be filed by Section 13 or 15(d) of the Securities           
Exchange Act of 1934 during the preceding 12 months (or for such shorter        
period that the registrant was required to file such reports) and (2) has       
been subject to such filing requirements for the past 90 days.                  

Yes  X  or No         
---       --- 

The number of shares of Common Stock, par value $.50 per share,         
outstanding as of April 25, 1999 was 195,437,108.                               


10-Q2nd Page of 21TOC1stPreviousNext↓BottomJust 2nd

HASBRO, INC. AND SUBSIDIARIES 
Consolidated Balance Sheets 

(Thousands of Dollars Except Share Data)  
(Unaudited) 

                                        Mar. 28,   Mar. 29,   Dec. 27,
Assets                                      1999       1998       1998    
                                        --------   --------   --------
Current assets                                                                  
Cash and cash equivalents                $  217,276    430,601    177,748   
Accounts receivable, less allowance                                         
for doubtful accounts of $66,000,                                         
$53,400 and $64,400                        518,183    362,328    958,826  
Inventories:                                                                
Finished products                         302,346    219,105    283,160 
Work in process                            13,339     14,743     12,698 
Raw materials                              38,157     35,249     38,943 
                                       ---------  ---------  ---------
 Total inventories                       353,842    269,097    334,801

Deferred income taxes                        97,034     97,576    100,332   
Prepaid expenses                            250,090    107,633    218,279   
                                       ---------  ---------  ---------
   Total current assets                1,436,425  1,267,235  1,789,986

Property, plant and equipment, net            319,908    271,607    330,355     
                                       ---------  ---------  ---------

Other assets                                                                    
Cost in excess of acquired net assets,                                      
less accumulated amortization of                                          
$160,563, $131,873 and $152,008            697,936    478,558    704,282  
Other intangibles, less accumulated                                         
amortization of $189,279, $145,030                                        
and $192,268                               820,939    486,474    837,899  
Other                                       132,035     88,092    131,323   
                                       ---------  ---------  ---------
   Total other assets                  1,650,910  1,053,124  1,673,504
                                       ---------  ---------  ---------

   Total assets                       $3,407,243  2,591,966  3,793,845
                                       =========  =========  =========


10-Q3rd Page of 21TOC1stPreviousNext↓BottomJust 3rd

HASBRO, INC. AND SUBSIDIARIES 
Consolidated Balance Sheets, Continued  

(Thousands of Dollars Except Share Data)  
(Unaudited) 

                                        Mar. 28,   Mar. 29,   Dec. 27,
Liabilities and Shareholders' Equity        1999       1998       1998    
                                        --------   --------   --------
Current liabilities                                                             
Short-term borrowings                     $ 295,548    112,465    372,249   
Trade payables                              123,179     83,075    209,119   
Accrued liabilities                         552,533    447,949    729,605   
Income taxes                                 41,334     85,991     55,327   
                                       ---------  ---------  ---------
   Total current liabilities           1,012,594    729,480  1,366,300

Long-term debt, excluding current                                               
installments                                 410,146          -    407,180    
Deferred liabilities                           75,723     59,771     75,570     
                                       ---------  ---------  ---------
   Total liabilities                   1,498,463    789,251  1,849,050
                                       ---------  ---------  ---------
Shareholders' equity                                                            
Preference stock of $2.50 par                                               
value. Authorized 5,000,000                                               
shares; none issued                              -          -          -  
Common stock of $.50 par value.                                             
Authorized 300,000,000 shares; issued                                     
209,694,630, 139,799,011 and 209,698,516   104,847     69,900    104,849  
Additional paid-in capital                  521,421    487,734    521,316   
Retained earnings                         1,623,865  1,454,697  1,621,799   
Accumulated other comprehensive earnings    (21,235)   (12,185)    (9,625)  
Treasury stock, at cost, 14,095,761,                                        
6,726,738 and 13,523,983 shares           (320,118)  (197,431)  (293,544) 
                                       ---------  ---------  ---------
   Total shareholders' equity          1,908,780  1,802,715  1,944,795
                                       ---------  ---------  ---------

Total liabilities and                                           
    shareholders' equity              $3,407,243  2,591,966  3,793,845
                                       =========  =========  =========

See accompanying condensed notes to consolidated financial statements.          


10-Q4th Page of 21TOC1stPreviousNext↓BottomJust 4th

HASBRO, INC. AND SUBSIDIARIES   
Consolidated Statements of Earnings   

(Thousands of Dollars Except Share Data)  
(Unaudited) 

                                                 Quarter Ended
                                                  --------------------
                                                  Mar. 28,    Mar. 29,
                                                  1999        1998
                                                  --------    --------
Net revenues                                           $668,398     482,820     
Cost of sales                                           256,517     204,312     
                                                   -------     -------
Gross profit                                            411,881     278,508     
                                                   -------     -------
Expenses                                                                        
Amortization                                           25,926      14,143   
Royalties, research and development                   111,942      67,336   
Advertising                                            81,084      55,757   
Selling, distribution and administration              163,281     135,249   
                                                   -------     -------
Total expenses                                      382,233     272,485 
                                                   -------     -------
Operating profit                                         29,648       6,023     
                                                   -------     -------
Nonoperating (income) expense                                                   
Interest expense                                       11,973       2,312   
Other (income), net                                    (2,318)     (8,097)  
                                                   -------     -------
Total nonoperating (income) expense                   9,655      (5,785)
                                                   -------     -------
Earnings before income taxes                             19,993      11,808     
Income taxes                                              6,198       4,015     
                                                   -------     -------
Net earnings                                           $ 13,795       7,793     
                                                   =======     =======

Per common share                                                                
Net earnings                                                                  
Basic                                                $    .07         .04   
                                                   =======     =======
Diluted                                              $    .07         .04   
                                                   =======     =======

Cash dividends declared                               $    .06         .05    
                                                   =======     =======

See accompanying condensed notes to consolidated financial statements.          


10-Q5th Page of 21TOC1stPreviousNext↓BottomJust 5th

HASBRO, INC. AND SUBSIDIARIES 
Consolidated Statements of Cash Flows 
Quarters Ended March 28, 1999 and March 29, 1998

(Thousands of Dollars)  
(Unaudited) 

                                                   1999       1998
                                                   ----       ----
Cash flows from operating activities                                            
Net earnings                                          $ 13,795      7,793   
Adjustments to reconcile net earnings to net cash                           
provided by operating activities:                                         
Depreciation and amortization of plant and equipment  20,225     19,548 
Other amortization                                    25,926     14,143 
Deferred income taxes                                 (2,324)    (5,644)
Change in operating assets and liabilities (other                           
than cash and cash equivalents):                                          
Decrease in accounts receivable                      430,525    413,956 
Increase in inventories                              (24,502)   (29,002)
Increase in prepaid expenses                         (34,221)   (18,525)
Decrease in trade payables and accrued liabilities  (272,221)  (255,514)
Other                                                      889     (5,289)  
                                                    -------    -------
 Net cash provided by operating activities          158,092    141,466
                                                    -------    -------
Cash flows from investing activities                                            
Additions to property, plant and equipment             (18,547)   (17,559)  
Investments and acquisitions, net of cash acquired           -    (17,500)  
Other                                                    5,763     10,627   
                                                    -------    -------
  Net cash utilized by investing activities          (12,784)   (24,432)
                                                    -------    -------
Cash flows from financing activities                                            
Proceeds from borrowings with original maturities                           
of more than three months                               3,500        850  
Repayments of borrowings with original maturities                           
of more than three months                                  (6)      (838) 
Net repayments of other short-term borrowings          (69,195)    (7,234)  
Purchase of common stock                               (44,349)   (52,371)  
Stock option transactions                               17,879     28,049   
Dividends paid                                         (10,445)   (10,640)  
                                                    -------    -------
  Net cash utilized by financing activities         (102,616)   (42,184)
                                                    -------    -------
Effect of exchange rate changes on cash                   (3,164)    (6,034)    
                                                    -------    -------
 Increase in cash and cash equivalents               39,528     68,816
Cash and cash equivalents at beginning of year           177,748    361,785     
                                                    -------    -------
 Cash and cash equivalents at end of period        $217,276    430,601
                                                    =======    =======


10-Q6th Page of 21TOC1stPreviousNext↓BottomJust 6th

HASBRO, INC. AND SUBSIDIARIES 
Consolidated Statements of Cash Flows 
Quarters Ended March 28, 1999 and March 29, 1998

(Thousands of Dollars)  
(Unaudited) 

                                                   1999       1998
                                                    -------     ------
Supplemental information                                                        
Cash paid during the period for:                                            
Interest                                            $ 14,371      1,740 
Income taxes                                        $ 10,267     25,226 

See accompanying condensed notes to consolidated financial statements.          


10-Q7th Page of 21TOC1stPreviousNext↓BottomJust 7th

HASBRO, INC. AND SUBSIDIARIES 
Consolidated Statements of Comprehensive Earnings 
Quarters Ended March 28, 1999 and March 29, 1998  

(Thousands of Dollars)
(Unaudited) 

                                                     Quarter Ended
                                                    ------------------
                                                    March 28,  March 29,
                                                   1999       1998
                                                   --------   --------
Net earnings                                           $  13,795      7,793     
Other comprehensive                                                             
earnings (loss)                                         (11,610)    (8,282)   
                                                   --------   --------
Total comprehensive earnings (loss)                    $   2,185       (489)    
                                                   ========   ========

See accompanying condensed notes to consolidated financial statements.          


10-Q8th Page of 21TOC1stPreviousNext↓BottomJust 8th

HASBRO, INC. AND SUBSIDIARIES 
Condensed Notes to Consolidated Financial Statements  

(Thousands of Dollars)  
(Unaudited) 

(1)  In the opinion of management and subject to year-end audit, the            
accompanying unaudited interim financial statements contain all adjustments     
(consisting of only normal recurring accruals) necessary to present fairly the  
financial position of the Company as of March 28, 1999 and March 29, 1998, and  
the results of operations and cash flows for the periods then ended.            

The results of operations for the quarter ended March 28, 1999 are not
necessarily indicative of results to be expected for the full year.             

(2)  Except for the balance sheet presentation of the March 29, 1998            
outstanding and treasury shares, all share and per share amounts have been      
adjusted to reflect the three-for-two stock split paid March 15, 1999.          

(3)  Earnings per share data for the fiscal quarters ended March 28, 1999 and   
March 29, 1998 were computed as follows:                                        

                                1999                  1998
                               -----------------     -----------------
                                Basic    Diluted      Basic    Diluted
                               -------   -------     -------   -------
Net earnings                     $ 13,795    13,795       7,793     7,793   
                               =======   =======     =======   =======

Average shares outstanding (in                                              
thousands)                       195,898   195,898     199,665   199,665  
Effect of dilutive securities;                                              
Options and warrants                  -     8,723           -     7,648 
                               -------   -------     -------   -------
Equivalent shares                 195,898   204,621     199,665   207,313   
                               =======   =======     =======   =======

Earnings per share               $    .07       .07         .04       .04   
                               =======   =======     =======   =======

(4)  The Company's other comprehensive earnings (loss) primarily results from   
foreign currency translation adjustment.                                        

(5)  Effective at year end 1998, the Company adopted Statement of Financial     
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and   
Related Information.  Hasbro and its subsidiaries operate in one segment, the   
marketing, licensing, development, manufacture and sourcing of toy and game     
products on a global basis.  The Company has continued to manage its business   
under this segment during the first quarter of 1999.                            


10-Q9th Page of 21TOC1stPreviousNext↓BottomJust 9th

HASBRO, INC. AND SUBSIDIARIES 
Condensed Notes to Consolidated Financial Statements (continued)  

(Thousands of Dollars)  
(Unaudited) 

(6)  Late in the fourth quarter of 1997, the Company announced a global         
integration and profit enhancement program which anticipated the redundancy of  
approximately 2,500 employees, principally in manufacturing, and provided for   
actions in three principal areas: a continued consolidation of the Company's    
manufacturing operations; the streamlining of marketing and sales, while        
exiting from certain underperforming markets and product lines; and the         
further leveraging of overheads. Of the $140,000 estimated costs related to     
these actions, $125,000 was reported as a nonrecurring charge and $15,000 was   
reflected in cost of sales. Of the nonrecurring amount, approximately $54,000   
related to severance and people costs, $52,000 to property, plant and           
equipment and leases and $19,000 to product line related costs. During 1998,    
all employees planned for redundancy had their employment terminated. The       
approximate $54,000 accrual remaining at March 28, 1999, is principally         
attributable to severance costs, which will be disbursed over the employee's    
entitlement period, and costs associated with lease terminations and closing    
of certain facilities.  In the balance sheet, such property, plant and          
equipment is included as a component of other assets.  With the exception of    
the disposition of certain facilities closed as a result of this program, the   
program has been substantially completed.                                       

(7)  The Company made three major acquisitions during 1998, having an           
aggregate purchase price of $669,737.  On April 1, 1998, the Company acquired   
substantially all of the business and operating assets of Tiger Electronics,    
Inc. and certain affiliates (Tiger).  On September 14, 1998, the Company        
acquired MicroProse, Inc. (MicroProse) through a cash tender offer of $6.00     
for each outstanding share of MicroProse. Upon completion of a short-form       
merger, MicroProse became a wholly-owned subsidiary of the Company and each     
untendered share was converted into the right to receive $6.00 in cash.  On     
October 30, 1998, the Company acquired Galoob Toys, Inc. (Galoob) through a     
cash tender offer of $12.00 for each outstanding share of Galoob.  Upon         
completion of a short-form merger, Galoob became a wholly-owned subsidiary of   
the Company and each untendered Galoob share was converted into the right to    
receive $12.00 in cash.                                                         

These three acquisitions were accounted for using the purchase method, and      
accordingly, the net assets acquired have been recorded at their estimated      
fair value and the results of their operations included from the dates of       
acquisition. Based on estimates of fair market value, $90,494 has been          
allocated to net tangible assets, $306,710 to product rights, $252,533 to       
goodwill and $20,000 to acquired in-process research and development. The       
appraised fair value of this acquired in-process research and development       
(interactive game software projects under development at the date of            


10-Q10th Page of 21TOC1stPreviousNext↓BottomJust 10th

HASBRO, INC. AND SUBSIDIARIES   
Condensed Notes to Consolidated Financial Statements (continued)  

(Thousands of Dollars)  
(Unaudited) 

acquisition) was determined using the discounted cash flow approach,            
considered the percentage of completion at the date of acquisition and was      
expensed at acquisition.                                                        

On a pro forma basis, reflecting these three acquisitions as if they had taken  
place at the beginning of the period and after giving effect to adjustments     
recording the acquisitions, and excluding the charge for in-process research    
and development, unaudited net revenues, net loss and basic and diluted loss    
per share for the thirteen weeks ended March 29, 1998 would have been           
$562,331, $(20,590), $(.10) and $(.10), respectively.  These pro forma results  
are not indicative of either future performance or actual results which would   
have occurred had the acquisitions taken place at the beginning of the period.  


10-Q11th Page of 21TOC1stPreviousNext↓BottomJust 11th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations 

(Thousands of dollars)  

NET REVENUES                                                                    
------------                                                                    
Net revenues for the first quarter of 1999 were $668,398, an increase of 38%    
over the $482,820 reported for the same period of 1998. This increase reflects  
the impact of Tiger Electronics, Inc. (Tiger), acquired on April 1, 1998,       
shipments of TELETUBBIES product, increased volume in the Hasbro Interactive    
line, WINNERS CIRCLE product line and water toys from the Larami line , as      
well as selected shipments of product related to STAR WARS: EPISODE 1: THE      
PHANTOM MENACE, the first episode of the new STAR WARS trilogy.  The effect of  
currency on revenues for the quarter was not material. The first quarter of     
1998 was adversely affected by changes in inventory flow policies at Toys `R    
Us, a key customer, including a significant reduction in their absolute level   
of inventories and a change in their seasonal purchasing patterns.              

GROSS PROFIT                                                                    
------------                                                                    
The Company's gross profit margin, expressed as a percentage of net revenues,   
was 61.6% compared to the 1998 level of 57.7%. This increase is attributable    
to the removal of excess capacity resulting from the closure of seven           
manufacturing facilities throughout 1998, increased sales of interactive and    
promotional products which have a higher gross margin and more favorable        
material prices.                                                                

EXPENSES                                                                        
--------                                                                        
Amortization expense of $25,926 in 1999 compares to $14,143 in the same period  
of 1998.  The increase reflects amortization of both cost in excess of net      
assets acquired and property rights arising from the Company's 1998             
acquisitions (see note 7).                                                      

Royalties, research and development expenses for the quarter increased from     
1998 levels in both amount and as a percentage of revenues. The increase in     
the royalty component primarily reflects higher rates on Tiger and TELETUBBIES  
product sales, the commencement of shipments of new STAR WARS product and       
sales of product acquired in connection with the Galoob acquisition, which      
occurred in the fourth quarter of 1998. The Company believes this trend of      
increasing royalty expense is likely to continue with the higher percentage of  
the Company's product which is expected to arise from licensed product          
carrying higher royalty rates. Research and development expenditures were       
$42,787 and $35,276 in the first quarter of 1999 and 1998, respectively.        


10-Q12th Page of 21TOC1stPreviousNext↓BottomJust 12th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations, Continued    

(Thousands of dollars)  

As a percentage of net revenues, research and development was 6.4% in 1999,     
down from 7.3% in 1998. The increase in amount results from the Company's 1998  
acquisitions as well as continued investment to grow the Hasbro Interactive     
line, while the decrease in percentage reflects higher revenues in the first    
quarter of 1999.                                                                

Advertising expense increased as a percentage of net revenues to 12.1% from     
11.5% a year ago, as well as increasing in amount. These increases result       
primarily from the inclusion of Tiger.                                          

The Company's selling, distribution and administration expenses, which are      
largely fixed, increased in amount while decreasing as a percentage of net      
revenues from their 1998 levels. The increase in amount is due primarily to     
the inclusion of Tiger and the effect of increased 1999 volume on shipping      
costs. The decrease in percentage from 1998 reflects the increase in 1999       
revenues and the leveraging of costs relating to the 1998 acquisitions of       
MicroProse and Galoob.                                                          

NONOPERATING (INCOME) EXPENSE                                                   
-----------------------------                                                   
Interest expense for the first quarter of 1999 was $11,973, compared with       
$2,312 in the same period of 1998. The increase reflects the costs associated   
with funding the Company's 1998 acquisitions as well as the continuation of     
the share repurchase program. The change in other nonoperating income, net,     
primarily reflects lower earnings from short-term investments and the impact    
of foreign exchange.                                                            

INCOME TAXES                                                                    
------------                                                                    
Income tax expense as a percentage of pretax earnings in the first quarter of   
1999 decreased to 31.0% from the full year 1998 rate of 32.0%, while            
decreasing from 34.0% in the first quarter of 1998.  The decrease in the        
quarter to quarter rate reflects the impact of the Tiger acquisition, the       
implementation of various tax strategies and the downward trend of the tax on   
international earnings due to the reorganization of the Company's global        
business.                                                                       


10-Q13th Page of 21TOC1stPreviousNext↓BottomJust 13th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations, Continued    

(Thousands of dollars)  

OTHER INFORMATION                                                               
-----------------                                                               
During the past several years the Company has experienced a shift in its        
revenue pattern wherein the second half of the year has grown in significance   
to its overall business and, within that half, the fourth quarter has become    
more prominent. The Company expects that this trend generally will continue,    
although the first half of 1999 may represent a greater proportion of full      
year revenues than the first half of 1998, principally because of the May 19,   
1999 theatrical release of STAR WARS: EPISOSE 1: THE PHANTOM MENACE. This       
concentration increases the risk of (a) underproduction of popular items, (b)   
overproduction of less popular items and (c) failure to achieve tight and       
compressed shipping schedules. The business of the Company is characterized by  
customer order patterns which vary from year to year largely because of         
differences in the degree of consumer acceptance of a product line, product     
availability, marketing strategies and inventory levels and policies of         
retailers and differences in overall economic conditions. Also, quick response  
inventory management practices now being used results in fewer orders being     
placed in advance of shipment and more orders, when placed, for immediate       
delivery. As a result, comparisons of unshipped orders on any date in a given   
year with those at the same date in a prior year are not necessarily            
indicative of sales for the entire year. In addition, it is a general industry  
practice that orders are subject to amendment or cancellation by customers      
prior to shipment. At the end of its fiscal April (April 25, 1999 and April     
26, 1998) the Company's unshipped orders were approximately $788,500 and        
$190,000, respectively.                                                         

Late in the fourth quarter of 1997, the Company announced a global integration  
and profit enhancement program which anticipated the redundancy of              
approximately 2,500 employees, principally in manufacturing, and provided for   
actions in three principal areas: a continued consolidation of the Company's    
manufacturing operations; the streamlining of marketing and sales, while        
exiting from certain underperforming markets and product lines; and the         
further leveraging of overheads. Of the $140,000 estimated costs related to     
these actions, $125,000 was reported as a nonrecurring charge and $15,000 was   
reflected in cost of sales. Of the nonrecurring amount, approximately $54,000   
related to severance and people costs, $52,000 to property, plant and           
equipment and leases and $19,000 to product line related costs. During 1998,    
all employees planned for redundancy had their employment terminated. The       
approximate $54,000 accrual remaining at March 28, 1999, is principally         
attributable to severance costs, which will be disbursed over the employee's    
entitlement period, and costs associated with lease terminations and closing    


10-Q14th Page of 21TOC1stPreviousNext↓BottomJust 14th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations, Continued    

(Thousands of dollars)  

of certain facilities.  In the balance sheet, such property, plant and          
equipment is included as a component of other assets.  With the exception of    
the disposition of certain facilities closed as a result of this program, the   
program has been substantially completed. The Company initially estimated its   
pretax cost savings from this initiative to be $40,000 in 1998 and $350,000     
over the period 1998 through 2002. Because of the unanticipated shortfall in    
sales to Toys 'R Us during 1998 and product mix, factory utilization rates      
were not as high as initially anticipated, which resulted in below target       
savings in 1998. The Company estimates that it realized pretax savings of       
approximately $30,000 for the full year 1998 and approximately $10,000 for the  
first quarter of 1999. The positive cash flow impact from this program has and  
will occur largely in the form of reduced outflows for payment of costs         
associated with the manufacture and sourcing of products.                       

LIQUIDITY AND CAPITAL RESOURCES                                                 
-------------------------------                                                 
The seasonality of the Company's business coupled with certain customer         
incentives, mainly in the form of extended payment terms, result in the         
interim cash flow statements being not representative of that which may be      
expected for the full year. Historically, the majority of the Company's cash    
collections occur late in the fourth quarter and early in the first quarter of  
the subsequent year. As receivables are collected, cash flow from operations    
becomes positive and is used to repay a significant portion of the short-term   
borrowings.                                                                     

As a result, management believes that on an interim basis, rather than          
discussing its cash flows, a better understanding of its liquidity and capital  
resources can be obtained through a discussion of the various balance sheet     
categories. Also, as several of the major categories, including cash and cash   
equivalents, accounts receivable, inventories and short-term borrowings,        
fluctuate significantly from quarter to quarter, again due to the seasonality   
of its business and the extended payment terms offered, management believes     
that a comparison to the comparable period in the prior year is generally more  
meaningful than a comparison to the prior year-end.                             


10-Q15th Page of 21TOC1stPreviousNext↓BottomJust 15th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations, Continued    

(Thousands of dollars)  

Receivables, at $518,183, were $155,855 greater than March 1998 levels in       
spite of higher collections made during the first quarter of 1999. This         
primarily reflects the impact of increased 1999 first quarter revenues, which   
had a higher proportion of sales in the last month of the quarter, as well as   
higher balances at the beginning of the current year, in part due to units      
acquired during 1998. Inventories increased approximately 31% from last year's  
levels, reflecting the Company's 1998 acquisitions and the planned build-up     
for product shipments in connection with the May 19, 1999 release of STAR       
WARS: EPISODE 1: THE PHANTOM MENACE, the first episode of the new STAR WARS     
trilogy. Other current assets increased to $347,124 at March 1999 from          
$205,209 at March 1998 reflecting the impact of the Tiger and MicroProse        
acquisitions and an advance royalty under the STAR WARS license agreement.      
Property, plant and equipment and other assets, as a group, increased from      
their 1998 levels, reflecting the Company's acquisitions of Tiger, MicroProse   
and Galoob as well as several acquisitions of product rights and licenses       
during the most recent twelve months, all partially offset by twelve            
additional months of depreciation and amortization expense.                     

Net borrowings (short- and long-term borrowings less cash and cash              
equivalents) were $488,418 at March 28, 1999 compared to net cash (cash and     
cash equivalents less short and long-term borrowings) of $318,136 at March 29,  
1998.  This change reflects the utilization of approximately $820,000 of cash   
during the last twelve months for acquisitions and the Company's continued      
repurchase of its common stock on the open market, both of which are            
traditionally funded through a combination of cash provided by operating        
activities and short- and long-term borrowings. During the year ended December  
27, 1998, the Company issued $150,000 of 6.15% notes due July 15, 2008,         
$100,000 of 5.60% notes due November 1, 2005 and $150,000 of 6.60% debentures   
due July 15, 2028. At March 28, 1999, the Company had committed unsecured       
lines of credit totaling approximately $500,000 available to it. It also had    
available uncommitted lines approximating $750,000. The Company believes that   
these amounts are adequate for its needs. Of these available lines,             
approximately $320,000 was in use at March 28, 1999. Trade payables and         
accrued liabilities both increased from the comparable 1998 levels, largely     
due to the impact of the Company's 1998 acquisitions and increased inventory    
purchases.                                                                      


10-Q16th Page of 21TOC1stPreviousNext↓BottomJust 16th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations, Continued    

(Thousands of dollars)  

YEAR 2000                                                                       
---------                                                                       
The Company has developed plans that address its possible exposure from the     
impact of the Year 2000. This project is being managed by a global cross-       
functional team of employees. The team meets regularly and makes periodic       
reports on its progress to a management steering committee, the Audit           
Committee of the Board of Directors and the Board of Directors.                 

The Company has completed the awareness and assessment phases of this project   
through the inventorying and assessment of its critical financial, operational  
(including imbedded and non-information technology) and information systems.    
The renovation phase is now nearing completion, as a number of non-compliant    
systems have been modified or replaced and plans are in place for the required  
modifications or replacements of other non-compliant systems. A planned global  
'enterprise' system became operational at several of the Company's major units  
during 1998 and replaced a number of older non-compliant systems. As the        
global rollout of this enterprise system continues, additional Year 2000        
compliance will occur. The Company is now in the validation and implementation  
phases and believes that approximately 90% of its mission critical systems are  
currently Year 2000 compliant and virtually all will be by mid-1999. Excluding  
costs related to the enterprise system, the Company's out of pocket costs       
associated with becoming Year 2000 compliant are estimated to approximate       
$3,000. These costs are being expensed as incurred and more than half of this   
amount has been spent to date.                                                  

The Company is also well into the process of reviewing the Year 2000 readiness  
of its customers, vendors and service providers. This review process includes   
both the obtaining of confirmation from these business partners of their        
readiness as well as reviews of such readiness by independent third party       
consultants. While this review process is ongoing, nothing has come to the      
attention of the Company that would lead it to believe that its material        
customers, vendors and service providers will not be Year 2000 ready.           

The Company's risk management program includes disaster recovery contingency    
plans that will be expanded by mid-year 1999 to include Year 2000 issues and    
may include, for example, the maintaining and development of back-up systems    
and procedures, early identification and selection of alternative Year 2000     
ready suppliers and service providers, revisions to credit policies and         
possible temporary increases in levels of inventories.                          


10-Q17th Page of 21TOC1stPreviousNext↓BottomJust 17th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations, Continued    

(Thousands of dollars)  

Year 2000 readiness has been a senior management priority of the Company for    
some time and the Company believes that it is taking such reasonable and        
prudent steps as are necessary to mitigate its risks related to Year 2000.      
However, the effect, if any, on the Company's results of operations from Year   
2000 if it, its customers, vendors or service providers are not fully Year      
2000 compliant cannot be reasonably estimated. Notwithstanding the above, the   
most likely impact on the Company would be a reduced level of activity in the   
early part of the first quarter of the year 2000, a time at which, as a result  
of the seasonality of the Company's business, its activities in sales,          
manufacturing and sourcing are at their low.                                    

Certain statements contained in this discussion contain "forward-looking        
statements" within the meaning of the Private Securities Litigation Reform Act  
of 1995.  Such forward-looking statements are inherently subject to known and   
unknown risks and uncertainties.  The Company's actual actions or results may   
differ materially from those expected or anticipated in the forward-looking     
statements. Specific factors that might cause such a difference include, but    
are not limited to, delays in, or increases in the anticipated cost of, the     
implementation of planned actions as a result of unanticipated technical        
malfunctions or difficulties which would arise during the validation process    
or otherwise; the inherent risk that assurances, warranties, and                
specifications provided by third parties with respect to the Company's          
systems, or such third party's Year 2000 readiness, may prove to be             
inaccurate, despite the Company's review process; the continued availability    
of qualified persons to carry out the remaining anticipated phases; the risk    
that governments may not be Year 2000 ready, which could affect the commercial  
sector in trade, finance and other areas, notwithstanding private sector Year   
2000 readiness; whether, despite a comprehensive review, the Company has        
successfully identified all Year 2000 issues and risks; and the risk that       
proposed actions and contingency plans of the Company and third parties with    
respect to Year 2000 issues may conflict or themselves give rise to additional  
issues.                                                                         


10-Q18th Page of 21TOC1stPreviousNext↓BottomJust 18th

HASBRO, INC. AND SUBSIDIARIES 
Management's Discussion and Analysis of Financial   
Condition and Results of Operations, Continued    

(Thousands of dollars)  

RECENT INFORMATION                                                              
------------------                                                              

In June 1998, the Financial Accounting Standards Board issued Statement of      
Financial Accounting Standards No. 133, Accounting for Derivative Instruments   
and Hedging Activities (SFAS 133), which the Company is required to adopt not   
later than the beginning of fiscal 2000.  SFAS 133 will require that the        
Company record all derivatives, such as foreign exchange contracts, on 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.      
Any portion of a hedging derivative's change in fair value which does not       
offset the change in fair value of the underlying exposure will be immediately  
recognized in earnings.  The Company does not believe adoption of SFAS 133      
will have a material impact on either the Company's financial condition or its  
results of operations.                                                          


10-Q19th Page of 21TOC1stPreviousNext↓BottomJust 19th

PART II.  Other Information                                                     

Item 1.   Legal Proceedings.                                                    

None.                                                     

Item 2.   Changes in Securities.                                                

None.                                                     

Item 3.   Defaults Upon Senior Securities.                                      

None.                                                     

Item 4.   Submission of Matters to a Vote of Security Holders.                  

None                                                      

Item 5.   Other Information.                                                    

None.                                                     

Item 6.   Exhibits and Reports on Form 8-K.                                     

(a)  Exhibits.                                            

       10    Amendment No. 1, Dated as of April 22, 1999, to Hasbro,
Inc. Employee Non-Qualified Stock Plan.   

         11    Computation of Earnings Per Common Share - Quarters Ended
March 28, 1999 and March 29, 1998.        

   12    Computation of Ratio of Earnings to Fixed Charges -
Quarter Ended March 28, 1999.             

27    Financial Data Schedule.                        

(b)  Reports on Form 8-K                                  

        A Current Report on Form 8-K dated April 15, 1999 was filed by
         the Company and included the Press Release dated April 15, 1999
   announcing the Company's results for the current quarter.
     Consolidated Statements of Earnings (without notes) for the
quarters ended March 28, 1999 and March 29, 1998 and  
          Consolidated Condensed Balance Sheets (without notes) as of said
dates were also filed.                                


10-Q20th Page of 21TOC1stPreviousNext↓BottomJust 20th

SIGNATURES  

Pursuant to the requirements of the Securities Exchange Act of 1934, the        
Registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

                                    HASBRO, INC.
                                    ------------
                                    (Registrant)

Date: May 12, 1999                           By:  /s/ John T. O'Neill           
                                       ---------------------
                                         John T. O'Neill
                                      Executive Vice President and
                                 Chief Financial Officer
                                      (Duly Authorized Officer and
                                      Principal Financial Officer)


10-QLast Page of 21TOC1stPreviousNext↓BottomJust 21st

HASBRO, INC. AND SUBSIDIARIES   
Quarterly Report on Form 10-Q   
For the Period Ended March 28, 1999   

Exhibit Index   

Exhibit                                                                         
No.                            Exhibits                                     
-------                          --------                                       

10          Amendment No. 1, Dated as of April 22, 1999, to Hasbro, Inc.    
Employee Non-Qualified Stock Plan.                  

11          Statement re computation of per share earnings - quarter        

12          Statement re computation of ratios                              

27          Financial Data Schedule

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘10-Q’ Filing    Date First  Last      Other Filings
7/15/2815
7/15/0815
11/1/05158-K
5/19/991315
Corrected on:5/17/99
Filed on:5/12/9920DEF 14A
4/25/99113
4/22/991921
4/15/99198-K
For Period End:3/28/99121
3/15/998
12/27/981510-K405
10/30/989424B2
9/14/989SC 14D1/A
4/26/9813
4/1/989118-K
3/29/9851910-Q
 List all Filings 
↑Top
Filing Submission 0000046080-99-000008   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help — Wed., Apr. 24, 11:59:38.2am ET