SEC Info - Hasbro Inc - ‘10-Q’ for 9/27/98

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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. `®`

  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
			Alternative Formats (Word, et al.) Changes in Securities Defaults Upon Senior Securities Exhibits and Reports on Form 8-K Legal Proceedings Other Information Submission of Matters to a Vote of Security Holders
1	1st Page - Filing Submission
17	Item 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-Q 1st Page of 20 TOC ↑Top Previous Next ↓Bottom Just 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-Q 2nd Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 3rd Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 4th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 5th Page of 20 TOC 1st Previous Next ↓Bottom Just 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
                                                   =======   =======

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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-Q 7th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 8th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 9th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 10th Page of 20 TOC 1st Previous Next ↓Bottom Just 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.                                                                       

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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-Q 12th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 13th Page of 20 TOC 1st Previous Next ↓Bottom Just 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.      

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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.        

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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     

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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-Q 17th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 18th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q 19th Page of 20 TOC 1st Previous Next ↓Bottom Just 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-Q Last Page of 20 TOC 1st Previous Next ↓Bottom Just 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

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	7/15/28	15	17
	7/15/08	15	17
	11/1/05	16	17	8-K
Corrected on:	11/16/98
Filed on:	11/12/98	19
	11/6/98	1
	11/2/98	8	17	SC 14D1/A
	10/25/98	12
	10/15/98	18		8-K
	10/2/98	16		SC 14D1
	9/28/98	16	17	8-K
For Period End:	9/27/98	1	20
	9/14/98	8	11	SC 14D1/A
	7/17/98	15	17	8-K
	4/1/98	7		8-K
	10/26/97	12
	9/28/97	5	20	10-Q
	5/2/97	7
				List all Filings

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Filing Submission 0000046080-98-000019 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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. ®

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Dates Referenced Herein and Documents Incorporated by Reference

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. `®`

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