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

Hasbro Inc – ‘10-Q’ for 9/27/98

As of:  Thursday, 11/12/98   ·   For:  9/27/98   ·   Accession #:  46080-98-19   ·   File #:  1-06682   ·   Correction:  This Filing was Corrected by the SEC on 11/16/98. ®

Previous ‘10-Q’:  ‘10-Q’ on 8/12/98 for 6/28/98   ·   Next:  ‘10-Q’ on 5/12/99 for 3/28/99   ·   Latest:  ‘10-Q’ on 8/1/18 for 7/1/18

  in   Show  &   Hints

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

11/12/98  Hasbro Inc                        10-Q®       9/27/98    5:44K

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        10-Q Document                                         20     73K 
 2: EX-11       Exhibit 11.1                                           1      7K 
 3: EX-11       Exhibit 11.2                                           1      7K 
 4: EX-12       Statement re: Computation of Ratios                    1      6K 
 5: EX-27       Financial Data Schedule (Pre-XBRL)                     1      8K 


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

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
17Item 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 20TOCTopPreviousNextBottomJust 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 September 27, 1998 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 November 6, 1998 was 130,816,511.
10-Q2nd Page of 20TOC1stPreviousNextBottomJust 2nd
HASBRO, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands of Dollars Except Share Data) (Unaudited) Sep. 27, Sep. 28, Dec. 28, Assets 1998 1997 1997 --------- --------- --------- Current assets Cash and cash equivalents $ 176,486 80,030 361,785 Accounts receivable, less allowance for doubtful accounts of $56,900, $52,700 and $51,700 1,030,751 1,153,910 783,008 Inventories: Finished products 328,757 285,135 198,215 Work in process 16,627 13,273 12,208 Raw materials 38,425 49,371 32,279 --------- --------- --------- Total inventories 383,809 347,779 242,702 Deferred income taxes 92,748 80,730 96,489 Prepaid expenses 243,513 94,804 89,890 --------- --------- --------- Total current assets 1,927,307 1,757,253 1,573,874 Property, plant and equipment, net 287,872 279,916 280,603 --------- --------- --------- Other assets Cost in excess of acquired net assets, less accumulated amortization of $144,503, $128,187 and $128,237 643,136 504,426 486,502 Other intangibles, less accumulated amortization of $187,554, $121,316 and $135,467 716,123 412,641 478,798 Other 101,866 69,715 79,940 --------- --------- --------- Total other assets 1,461,125 986,782 1,045,240 --------- --------- --------- Total assets $3,676,304 3,023,951 2,899,717 ========= ========= =========
10-Q3rd Page of 20TOC1stPreviousNextBottomJust 3rd
HASBRO, INC. AND SUBSIDIARIES Consolidated Balance Sheets, continued (Thousands of Dollars Except Share Data) (Unaudited) Sep. 27, Sep. 28, Dec. 28, Liabilities and Shareholders' Equity 1998 1997 1997 --------- --------- --------- Current liabilities Short-term borrowings $ 507,596 462,894 122,024 Trade payables 152,350 120,775 179,156 Accrued liabilities 788,902 469,944 596,033 Income taxes 88,654 117,559 106,333 --------- --------- --------- Total current liabilities 1,537,502 1,171,172 1,003,546 Long-term debt, excluding current installments 300,000 148,751 - Deferred liabilities 80,010 68,924 58,054 --------- --------- --------- Total liabilities 1,917,512 1,388,847 1,061,600 --------- --------- --------- 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 139,799,011, 132,191,745 and 139,799,011 69,900 66,096 69,900 Additional paid-in capital 488,535 279,588 489,447 Retained earnings 1,500,478 1,449,867 1,457,495 Accumulated other comprehensive income (5,216) (7,555) (3,903) Treasury stock, at cost; 9,109,846, 5,760,479 and 6,357,948 shares (294,905) (152,892) (174,822) --------- --------- --------- Total shareholders' equity 1,758,792 1,635,104 1,838,117 --------- --------- --------- Total liabilities and shareholders' equity $3,676,304 3,023,951 2,899,717 ========= ========= ========= See accompanying condensed notes to consolidated financial statements.
10-Q4th Page of 20TOC1stPreviousNextBottomJust 4th
HASBRO, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Thousands of Dollars Except Share Data) (Unaudited) Quarter Ended Nine Months Ended ------------------ -------------------- Sep. 27, Sep. 28, Sep. 27, Sep. 28, 1998 1997 1998 1997 -------- -------- --------- --------- Net Revenues $ 945,498 915,533 2,000,375 2,055,203 Cost of Sales 402,369 403,027 853,776 891,315 -------- -------- --------- --------- Gross Profit 543,129 512,506 1,146,599 1,163,888 -------- -------- --------- --------- Expenses Amortization 19,275 11,741 49,298 32,967 Royalties, Research and Development 113,755 102,583 263,220 254,339 Advertising 128,053 116,208 257,023 254,418 Selling, Distribution and Administration 162,705 156,215 439,433 433,285 Acquired Research and Development 20,000 - 20,000 - -------- -------- --------- --------- Total Expenses 443,788 386,747 1,028,974 975,009 -------- -------- --------- --------- Operating Profit 99,341 125,759 117,625 188,879 -------- -------- --------- --------- Nonoperating (income) expense Interest Expense 11,308 9,197 20,036 19,120 Other (Income) Expense, Net (1,568) 1,121 (12,082) (6,112) -------- -------- --------- --------- Total nonoperating (income) expense 9,740 10,318 7,954 13,008 -------- -------- --------- --------- Earnings Before Income Taxes 89,601 115,441 109,671 175,871 Income Taxes 28,271 38,041 35,095 59,796 -------- -------- --------- --------- Net Earnings $ 61,330 77,400 74,576 116,075 ======== ======== ========= ========= Per Common Share Net Earnings Basic $ .47 .61 .56 .91 ======== ======== ========= ========= Diluted $ .45 .57 .54 .87 ======== ======== ========= ========= Cash Dividends Declared $ .08 .08 .24 .24 ======== ======== ========= ========= See accompanying condensed notes to consolidated financial statements.
10-Q5th Page of 20TOC1stPreviousNextBottomJust 5th
HASBRO, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Nine Months Ended September 27, 1998 and September 28, 1997 (Thousands of Dollars) (Unaudited) 1998 1997 ------- ------- Cash flows from operating activities Net earnings $ 74,576 116,075 Adjustments to reconcile net earnings to net cash utilized by operating activities: Depreciation and amortization of plant and equipment 69,458 79,232 Other amortization 49,298 32,967 Deferred income taxes (8,141) (3,815) Acquired research and development 20,000 - Change in operating assets and liabilities (other than cash and cash equivalents): Increase in accounts receivable (241,956) (354,339) Increase in inventories (113,951) (60,721) (Increase) Decrease in prepaid expenses (130,678) 15,099 Increase in trade payables and accrued liabilities 59,184 17,009 Other (1,613) 874 ------- ------- Net cash utilized by operating activities (223,823) (157,619) ------- ------- Cash flows from investing activities Additions to property, plant and equipment (87,543) (61,071) Investments and acquisitions, net of cash acquired (389,441) (164,153) Other 6,033 4,069 ------- ------- Net cash utilized by investing activities (470,951) (221,155) ------- ------- Cash flows from financing activities Proceeds from borrowings with original maturities of more than three months 300,850 272,167 Repayments of borrowings with original maturities of more than three months (25,775) (71,322) Net proceeds of other short-term borrowings 378,363 147,453 Purchase of common stock (172,574) (99,983) Stock option transactions 51,579 24,376 Dividends paid (31,817) (28,971) ------- ------- Net cash provided by financing activities 500,626 243,720 ------- ------- Effect of exchange rate changes on cash 8,849 (3,887) ------- ------- Decrease in cash and cash equivalents (185,299) (138,941) Cash and cash equivalents at beginning of year 361,785 218,971 ------- ------- Cash and cash equivalents at end of period $176,486 80,030 ======= =======
10-Q6th Page of 20TOC1stPreviousNextBottomJust 6th
HASBRO, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (continued) Nine Months Ended September 27, 1998 and September 28, 19978 (Thousands of Dollars) (Unaudited) 1998 1997 ------- ------- Supplemental information Cash paid during the period for: Interest $ 14,931 13,449 Income taxes $ 41,980 85,861 See accompanying condensed notes to consolidated financial statements. HASBRO, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Earnings (Thousands of Dollars) (Unaudited) Quarter Ended Nine Months Ended ------------------ ------------------ Sep. 27, Sep. 28, Sep. 27, Sep. 28, 1998 1997 1998 1997 -------- -------- -------- -------- Net earnings $ 61,330 77,400 74,576 116,075 Other comprehensive earnings (loss) 14,860 (480) (1,313) (27,548) -------- -------- -------- -------- Total comprehensive earnings $ 76,190 76,920 73,263 88,527 ======== ======== ======== ======== See accompanying condensed notes to consolidated financial statements.
10-Q7th Page of 20TOC1stPreviousNextBottomJust 7th
HASBRO, INC. AND SUBSIDIARIES Condensed Notes to Consolidated Financial Statements (Thousands of Dollars and Shares Except Per share Data) (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 September 27, 1998 and September 28, 1997, and the results of operations and cash flows for the periods then ended. The results of operations for the nine months ended September 27, 1998, are not necessarily indicative of results to be expected for the full year. (2) On May 2, 1997, the Company purchased certain assets of OddzOn Products and Cap Toys, Inc. (OddzOn). The consideration for this purchase was $167,379. This acquisition was accounted for using the purchase accounting method and, based on estimates of fair market value, $43,582 was allocated to net tangible assets, $76,700 to product rights and $47,097 to goodwill. (3) 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 the first nine months of 1998, approximately 1,900 employees were terminated. The approximate $87,000 accrual remaining at September 27, 1998, is principally attributable to severance costs, which will be disbursed over the employee's entitlement period, and remaining property, plant and equipment costs, which continue to be incurred upon the transition of the various facilities from production to non-productive status. The program remains on schedule to be substantially completed by the end of 1998. (4) On April 1, 1998, the Company acquired substantially all of the business and operating assets of Tiger Electronics, Inc. and certain affiliates (Tiger) for an initial payment of $335,000, subject to post- closing adjustment, plus the closing date value of inventory, tooling, equipment and prepaid assets. The estimated total cost of this acquisition approximates $395,000 and is being accounted for using the purchase accounting method. Based on current estimates of fair market value, approximately $42,000 has been allocated to net tangible assets, $213,000 to product rights and $140,000 to goodwill.
10-Q8th Page of 20TOC1stPreviousNextBottomJust 8th
HASBRO, INC. AND SUBSIDIARIES Condensed Notes to Consolidated Financial Statements (continued) (Thousands of Dollars and Shares Except Per share Data) (Unaudited) (5) On September 14, 1998, the Company, through its wholly owned subsidiary, New HIAC Corp. (New HIAC), acquired in excess of 90% of the outstanding shares of MicroProse, Inc. (MicroProse) through a cash tender offer of $6.00 for each outstanding share of MicroProse. Upon completion of this tender offer and through a merger into New HIAC, MicroProse became a wholly owned subsidiary of the Company and each untendered share was converted into the right to receive $6.00 in cash. The purchase price, including the assumption of debt and preference stock, approximated $70,000 and is being accounted for using the purchase accounting method. Based on estimates of fair market value, approximately $4,000 has been allocated to net tangible liabilities, $20,000 to product rights, $34,000 to goodwill and $20,000 to acquired research and development which has been written- off. (6) Effective for fiscal 1998, Hasbro adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130 requires that all items recognized under accounting standards as components of comprehensive earnings be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS 130 also requires that an entity classify items of other comprehensive earnings by their nature in the financial statements and display the accumulated amount thereof separately within the equity section of the balance sheet. The Company's other comprehensive earnings (loss) primarily results from foreign currency translation adjustments. (7) On November 2, 1998, the Company announced the successful completion of its cash tender offer to purchase all of the outstanding shares of Galoob Toys, Inc. (Galoob) at a price of $12.00 per share. After giving effect to the purchase of the shares tendered, the Company beneficially owned approximately 93% of the outstanding Galoob shares. Also on November 2, the Company effected a merger pursuant to which Galoob became a wholly- owned subsidiary of the Company and each untendered Galoob share was converted into the right to receive $12.00 per share in cash. The total purchase price of this transaction will approximate $220,000, and will be accounted for using the purchase accounting method.
10-Q9th Page of 20TOC1stPreviousNextBottomJust 9th
HASBRO, INC. AND SUBSIDIARIES Condensed Notes to Consolidated Financial Statements (continued) (Thousands of Dollars and Shares Except Per share Data) (Unaudited) (8) Earnings per share data for the fiscal quarters and nine months ended September 27, 1998 and September 28, 1997 were computed as follows: 1998 1997 ----------------- ----------------- Basic Diluted Basic Diluted ------- ------- ------- ------- Quarter ------- Net earnings $ 61,330 61,330 77,400 77,400 Effect of dilutive securities; 6% Convertible Notes due 1998 - - - 1,433 ------- ------- ------- ------- Adjusted net earnings $ 61,330 61,330 77,400 78,833 ======= ======= ======= ======= Average shares outstanding 131,368 131,368 126,922 126,922 Effect of dilutive securities; 6% Convertible Notes due 1998 - - - 7,616 Options and warrants - 5,007 - 2,565 ------- ------- ------- ------- Equivalent Shares 131,368 136,375 126,922 137,103 ======= ======= ======= ======= Earnings per share $ .47 .45 .61 .57 ======= ======= ======= ======= Nine Months ----------- Net earnings $ 74,576 74,576 116,075 116,075 Effect of dilutive securities; 6% Convertible Notes due 1998 - - - 4,307 ------- ------- ------- ------- Adjusted net earnings $ 74,576 74,576 116,075 120,382 ======= ======= ======= ======= Average shares outstanding 132,346 132,346 127,789 127,789 Effect of dilutive securities; 6% Convertible Notes due 1998 - - - 7,627 Options and warrants - 5,258 - 2,390 ------- ------- ------- ------- Equivalent Shares 132,346 137,604 127,789 137,806 ======= ======= ======= ======= Earnings per share $ .56 .54 .91 .87 ======= ======= ======= =======
10-Q10th Page of 20TOC1stPreviousNextBottomJust 10th
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 third quarter of 1998 increased approximately 3% to $945,498, from the $915,533 in the third quarter of 1997, despite the impact of ongoing and recently accelerated changes in inventory flow policies at Toys `R Us, a major customer. This revenue increase reflects the positive impacts from the acquisition of Tiger Electronics, Inc. (Tiger), in April (see note 4), and increased revenues at Hasbro Interactive, both partially offset by the previously mentioned Toys 'R Us volume reductions and the adverse impact of the stronger U.S. dollar, which reduced revenues by approximately $7,000. For the nine months, revenues were $2,000,375 and $2,055,203 in 1998 and 1997, respectively. The 1998 nine month amounts were adversely impacted by approximately $26,000 from the strengthened U.S. dollar, that period's impact of the Toys `R Us inventory flow policy change and the fact that in 1997 there were three motion picture releases related to the Company's major entertainment properties. Partially offsetting these unfavorable impacts was the positive effect from the Tiger acquisition and increases at Hasbro Interactive. GROSS PROFIT ------------ The Company's gross margins for the quarter and nine months of 1998, at 57.4% and 57.3%, were improved from the 1997 amounts of 56.0% and 56.6%. These increases reflect the benefit being experienced from the removal of excess manufacturing capacity, as addressed within the Company's global integration and profit enhancement program initiative announced in December of 1997 (see note 3). Additionally, increased revenues from the Company's interactive products, which carry a higher gross margin, and an overall more favorable mix of products sold, both contributed positively. EXPENSES -------- Amortization expense in both periods of 1998 was greater than in the comparable periods of 1997, reflecting the Company's recent acquisitions, including OddzOn in May of 1997 (see note 2) and Tiger in April of 1998. Royalties, research and development expenses for the quarter increased in both amount and as a percentage of net revenues from comparable 1997 levels. The royalty component increase reflects the higher rates of Tiger, Hasbro Interactive and Teletubbies products. Research and development, at $43,165 and $117,544 for the quarter and nine months of 1998, respectively, increased in both dollars and as a percentage of net revenues from $37,868 and $106,301 a year ago. These increases reflect both the inclusion of new units, OddzOn in May 1997, and Tiger in April 1998, and the ongoing investment to grow Hasbro Interactive. The Company believes that this trend of increasing royalties, research and development expenses is likely to continue.
10-Q11th Page of 20TOC1stPreviousNextBottomJust 11th
HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) (Thousands of dollars) Advertising expense for each of the third quarter and nine months increased both in dollars and as a percentage of net revenues. The increase in dollars reflects the inclusion of Tiger while the increase in percentage reflects the mix of more non-entertainment based product in 1998, in the absence of major movie support. Selling, distribution and administration expenses, which are largely fixed, increased marginally in amount and as a percentage of net revenues during each of the third quarter and nine months of 1998 from comparable 1997 levels. These increases reflect the inclusion of Tiger from April 1, as well as OddzOn for the full nine months. 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. (MicroProse), which was acquired for approximately $70,000 on September 14, 1998 (see note 5). NONOPERATING (INCOME) EXPENSE ----------------------------- Interest expense during the third quarter of 1998 was $11,308 compared with $9,197 in 1997, and reflects the increased borrowing requirements related to the funding of the Tiger acquisition and the continuation of the Company's share repurchase plan. For the nine months of 1998, interest expense was $20,036 compared with $19,120 in the same period of 1997, largely for the same reasons. The change in other nonoperating income, in both the quarter and nine months, reflects the earnings differential resulting from changes in levels of short-term investments, the impact of minority investments in certain subsidiaries, as well as foreign exchange transactions and translation. INCOME TAXES ------------ Income tax expense for the third quarter of 1998 decreased to 31.6% from the 33.0% of a year ago. For the nine months of 1998 and 1997, the rates were 32.0% and 34.0%, respectively. The lower rates in each of the third quarters compared with each of the nine months, reflect the impact of the year to date changes made during the respective quarters. The lower 1998 rates reflect 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 continued reorganization of the Company's global business.
10-Q12th Page of 20TOC1stPreviousNextBottomJust 12th
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 will continue. 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 October (October 25, 1998 and October 26, 1997) the Company's unshipped orders were approximately $580,000 and $480,000. 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 the first nine months of 1998, approximately 1,900 employees were terminated. The approximate $87,000 accrual remaining at September 27, 1998, is principally attributable to severance, which will be disbursed over the employee's entitlement period, and remaining property, plant and equipment costs, which continue to be incurred upon the transition of the various manufacturing facilities from productive to non- productive status. The program remains on schedule to be substantially completed by the end of 1998. The Company 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 the current year and changes in product mix, factory utilization rates are not as high as initially anticipated, which could
10-Q13th Page of 20TOC1stPreviousNextBottomJust 13th
HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) (Thousands of dollars) result in the Company not meeting its targeted savings during 1998. Through the end of September, the Company estimates that it has realized pretax savings of approximately $20,000 during the first nine months of 1998. The positive cash flow impact from this program will occur largely in the form of reduced outflows for payment of costs associated with the manufacture and sourcing of products. 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 substantially 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 well underway, 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 the current year and has replaced a number of older non-compliant systems. As the global roll-out 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 70% of its mission critical systems are currently Year 2000 compliant, that an additional 15% will be so by the end of 1998 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 have been estimated to approximate $3,000. These costs are being expensed as incurred and approximately 40% 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-Q14th Page of 20TOC1stPreviousNextBottomJust 14th
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 operation 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. 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. As a result of these extended payment terms, 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 late in the fourth quarter and through the first quarter of the subsequent year, cash flow from operations becomes positive and is used to repay a significant portion of the short-term borrowings.
10-Q15th Page of 20TOC1stPreviousNextBottomJust 15th
HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) (Thousands of dollars) 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. Receivables, both in dollars and in days sales outstanding, decreased from September 1997 levels. In amount, receivables were approximately $1,031,000, or 11% lower and, at 103 days sales outstanding, 24 days less than the 127 days sales outstanding at the same point in 1997. These improvements continue to reflect the increased impact of the Company's letter of credit business and its non-traditional toy and game businesses, both of which have shorter payment terms. Inventories increased approximately 10% from 1997 levels, reflecting the inclusion of both Tiger and MicroProse in 1998. Other current assets increased significantly from 1997 levels, reflecting, in addition to Tiger and MicroProse, an advance royalty under a key license agreement. Other assets, as a group, increased approximately $474,000 from their September 1997 levels reflecting the acquisition of Tiger and MicroProse as well as other acquisitions of product rights and licenses during the most recent twelve months, all partially offset by an additional year of amortization expense. Net borrowings (short- and long-term borrowings less cash and cash equivalents) increased by approximately $99,500 to $631,110 from $531,615 at September 28, 1997. This increase reflects the utilization of more than $600,000 of cash during the last twelve months for acquisitions and the continuation of the Company's share repurchase program, both of which are traditionally funded through a combination of cash provided by operating activities and cash provided by external short- and long-term borrowings. On July 17, 1998, in a public offering, the Company issued $150,000 of 6.15% notes due July 15, 2008 and $150,000 of 6.60% debentures due July 15, 2028. The net proceeds from the sale of these notes was used to repay a portion of the Company's outstanding short-term debt, primarily incurred in connection with the acquisition of Tiger. At September 27, 1998, 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, augmented by a November 2, 1998 $200,000 increase in its committed unsecured lines of credit, are adequate for its needs. Of these available lines, approximately
10-Q16th Page of 20TOC1stPreviousNextBottomJust 16th
HASBRO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) (Thousands of dollars) $525,000 was in use at September 27, 1998. Trade payables and accrued liabilities both increased from the comparable 1997 levels, largely reflecting the impact of the unpaid amounts relating to the Tiger acquisition, royalty advances and the Company's global integration and profit enhancement program. RECENT INFORMATION ------------------ On September 28, 1998, the Company announced that it had entered into a definitive agreement to acquire Galoob Toys, Inc. (Galoob), an international toy manufacturer whose leading brands include Micro Machines(R) miniature-scale boys' toys, Star Wars(TM) small-scale figures and vehicles, Spice Girls(TM) fashion dolls and Pound Puppies(R) mini- dolls. The purchase price was $12.00 per common share of Galoob, payable in cash, for a total transaction value of approximately $220 million. Under terms of the merger agreement, a wholly owned subsidiary of the Company commenced a tender offer on October 2, 1998 for all of Galoob's approximately 18 million outstanding common shares. The offer was conditioned upon, among other things, the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the tender of a majority of the common shares outstanding on a diluted basis of Galoob. On November 2, 1998. following the successful completion of the offer, the transaction was completed, the Company's subsidiary was merged with Galoob and all remaining Galoob common shares were converted into the right to receive $12.00 per share in cash. On November 2, 1998, in a public offering, the Company issued $100,000 of 5.60% notes due November 1, 2005. The net proceeds from the sale of these notes will be used to repay a portion of the Company's outstanding short- term commercial paper primarily incurred in connection with the acquisition of MicroProse and to fund the balance of the purchase price of Tiger.
10-Q17th Page of 20TOC1stPreviousNextBottomJust 17th
PART II. Other Information Item 1. Legal Proceedings. None. Item 2. Changes in Securities. On July 17, 1998, in a public offering, the Company issued $150,000,000 of 6.15% notes due July 15, 2008 and $150,000,000 of 6.60% debentures due July 15, 2028. On November 2, 1998, in a second public offering, the Company issued $100,000,000 of 5.60% notes due November 1, 2005. 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. 11.1 Computation of Earnings Per Common Share - Nine Months Ended September 27, 1998 and September 28, 1997. 11.2 Computation of Earnings Per Common Share - Quarter Ended September 27, 1998 and September 28, 1997. 12 Computation of Ratio of Earnings to Fixed Charges - Nine Months and Quarter Ended September 27, 1998. 27 Article 5 Financial Data Schedule - Third Quarter 1998 (b) Reports on Form 8-K A Current Report on Form 8-K, dated September 28, 1998, was filed by the Company and included the Press Release dated September 28, 1998, announcing the Company's expected results for the second half of 1998.
10-Q18th Page of 20TOC1stPreviousNextBottomJust 18th
A Current Report on Form 8-K, dated October 15, 1998 was filed by the Company and included the Press Release dated October 15, 1998, announcing the Company's results for the current quarter. Consolidated Statements of Earnings (without notes) for the quarters and nine months ended September 27, 1998 and September 28, 1997 and Consolidated Condensed Balance Sheets (without notes) as of said dates were also filed.
10-Q19th Page of 20TOC1stPreviousNextBottomJust 19th
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: November 12, 1998 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 20TOC1stPreviousNextBottomJust 20th
HASBRO, INC. AND SUBSIDIARIES Quarterly Report on Form 10-Q For the Period Ended September 27, 1998 Exhibit Index Exhibit No. Exhibits ------- -------- 11.1 Computation of Earnings Per Common Share - Nine Months Ended September 27, 1998 and September 28, 1997 11.2 Computation of Earnings Per Common Share - Quarter Ended September 27, 1998 and September 28, 1997 12 Computation of Ratio of Earnings to Fixed Charges - Nine Months and Quarter Ended September 27, 1998 27 Article 5 Financial Data Schedule - Third Quarter 1998

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘10-Q’ Filing    Date First  Last      Other Filings
7/15/281517
7/15/081517
11/1/0516178-K
Corrected on:11/16/98
Filed on:11/12/9819
11/6/981
11/2/98817SC 14D1/A
10/25/9812
10/15/98188-K
10/2/9816SC 14D1
9/28/9816178-K
For Period End:9/27/98120
9/14/98811SC 14D1/A
7/17/9815178-K
4/1/9878-K
10/26/9712
9/28/9752010-Q
5/2/977
 List all Filings 
Top
Filing Submission 0000046080-98-000019   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2018 Fran Finnegan & Company.  All Rights Reserved.
AboutPrivacyRedactionsHelp — Sat., Oct. 20, 9:34:55.0pm ET