Hasbro Reports Fourth Quarter and Full-Year 2002 Results
Thursday, February 13th, 2003 12:00am CSTCategory: Site Articles
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Hasbro Arrives at 2003 Toy Fair with Some of the Hottest Toys and Games in Family Entertainment; A Combination of Classic Brands, New Innovation and Technology Highlight 2003 Offerings
PAWTUCKET, R.I.--(BUSINESS WIRE)--
Revenue was up in the fourth quarter;
Earnings per share for the year, excluding certain non-recurring items, of $0.62 vs. prior year of $0.42;
GAAP net loss per share, including accounting change, for the year of $0.98 vs. net earnings of $0.35 for the prior year;
Inventories and Receivables were down and Cash increased to $495.4 million;
Total debt, net of cash, decreased $384.1 million;
Trivial Pursuit 20th Anniversary was the top selling game in the industry.
Hasbro, Inc. (NYSE: HAS) today reported 2002 full year and fourth quarter financial results. For the year, excluding certain non-recurring items detailed below, the Company had net earnings of $106.8 million or $0.62 per diluted share, compared to earnings excluding certain non-recurring items announced last year of $72.1 million or $0.42 per diluted share. The Company reported a GAAP (Generally Accepted Accounting Principles) net loss of $170.7 million or $0.98 per diluted share, including cumulative effect of an accounting change of $1.42 per diluted share, compared to net earnings last year of $59.7 million or $0.35 per diluted share. Eliminating the impact of amortization of goodwill and intangible assets with indefinite lives from 2001 would have resulted in GAAP net earnings for 2001 of $104.7 million or $0.61 per diluted share.
"We are very pleased with our accomplishments in 2002. Excluding certain non-recurring items, we delivered strong earnings and exceeded consensus estimates for both the fourth quarter and the full year in a very challenging economic and retail environment," said Alan G. Hassenfeld, Chairman and Chief Executive Officer.
"Our strategy of driving core brands is working as a number of brands --including G.I. JOE, TRANSFORMERS, PLAY-DOH, LITE BRITE and MAGIC THE GATHERING trading card games were all up significantly for the fourth quarter," Hassenfeld continued.
For the fourth quarter, excluding non-recurring items detailed below, the Company had net earnings of $72.9 million or $0.42 per diluted share, compared to $63.8 million or $0.37 per diluted share last year before non-recurring items. The Company reported GAAP net earnings of $62.2 million or $0.36 per diluted share, compared to net earnings of $52.5 million or $0.30 per diluted share. Adjusting 2001 GAAP net earnings for the impact of amortization noted above would result in 2001 net earnings for the quarter of $68.7 million or $0.39 per diluted share.
In the fourth quarter, non-recurring items included a before and after-tax charge of 4.8 million pounds sterling or approximately U.S. $7.6 million or $0.04 per diluted share, announced yesterday by the Company with respect to decisions by the Office of Fair Trading in its investigation of pricing practices of the Company's U.K. subsidiary. Also in the fourth quarter, there is a non-cash, after-tax charge of $3.2 million or $0.02 per diluted share related to a further decline in the value of the Company's investment in Infogrames Entertainment SA. The 2001 fourth quarter non-recurring items included an after-tax loss of $11.3 million, or $0.06 per diluted share related to the deteriorating business environment in Argentina.
For the full-year 2002 results, non-recurring items included a $245.7 million or $1.42 per diluted share, net of tax, non-cash charge as a cumulative effect of a change in accounting principle related to the adoption of FASB 142 "Goodwill and Other Intangibles." In addition to the OFT charge discussed above, non-recurring items also included a total non-cash, after-tax charge of $31.7 million or $0.18 per diluted share related to the decline in the value of the Company's investment in Infogrames Entertainment SA and $7.6 million or $0.04 per diluted share after tax income from interest received from a U.S. tax settlement. In addition to the Argentina charge discussed above, non-recurring items in 2001 also included a $1.1 million, net of tax, full year cumulative effect of an accounting change that resulted from the implementation of FASB 133.
Total fourth quarter net revenues were $997.4 million, compared to $988.7 million a year ago. For the year, net revenues worldwide were $2.8 billion, a decrease of 1% compared to the prior year of $2.9 billion.
Revenues in the U.S. Toys segment were $996.5 million for the year and $288.8 million for the quarter, an increase of 7% and 2%, respectively. Full year operating profit increased significantly year over year to $75.7 million, compared with $15.8 million last year. The segment experienced strength in sales of certain core product lines including G.I. JOE, TRANSFORMERS, PLAY-DOH and PLAYSKOOL. The Company also had a number of successful new product introductions, including BEYBLADES and FURREAL FRIENDS, two of the industry's hottest products.
Revenues in the Games segment were $739.8 million for the year and $269 million for the quarter, a decline of 8% and an increase of 6%, respectively. Revenue for the year was impacted by the decline in licensed trading card games and electronic games. However, retail sales of board games in our top five U.S. accounts continued to do well, with double-digit increases for both the year and the quarter. In addition, the adult category was up significantly at retail, led by the success of TRIVIAL PURSUIT 20th ANNIVERSARY EDITION. The Games segment continued to be profitable, with full year operating profit of $124.5 million compared to $156.1 million last year.
International segment revenues were $970.8 million for the year and $392 million for the quarter, a decline of 3% and 2%, respectively. For the full year and quarter, this represents a decline of 6% and 8% in local currency, respectively. Revenue for the year was impacted by the decline in licensed trading card games and electronic toys. However, the segment experienced strength in sales of certain core product lines including TRANSFORMERS, PLAY-DOH, MICRO-MACHINES and MAGIC THE GATHERING trading card games. The segment continued to be profitable, with operating profit of $12.7 million, prior to the OFT charge, compared with operating profit of $28.7 million in the prior year.
"We are pleased with the progress we have made in 2002," said Alfred J. Verrecchia, President and Chief Operating Officer. "We maintained our focus on managing the balance sheet as we reduced inventory levels and increased cash. Inventories decreased by $27.3 million or 13% and total debt, net of cash, decreased $384 million as compared to the fourth quarter last year and was down $684 million compared to two years ago."
"Going forward, we believe over time we can grow revenue between three to five percent per annum and we expect to deliver operating margins of 10% or better this year," Verrecchia concluded.
Full Year Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was $403 million, compared to $435 million last year.
The Company will webcast its fourth quarter earnings conference call at 9:00 a.m. Eastern time today. Investors and the media are invited to listen at http://www.hasbro.com (select "Corporate Info" from the home page, then click on "Investor Information", and then click on the webcast icon).
Hasbro is a worldwide leader in children's and family leisure time entertainment products and services, including the design, manufacture and marketing of games and toys ranging from traditional to high-tech. Both internationally and in the U.S., its PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, TIGER and WIZARDS OF THE COAST brands and products provide the highest quality and most recognizable play experiences in the world.
Certain statements contained in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as "anticipate", "believe", "could", "expect", "intend", "look forward", "may", "planned", "potential", "should", "will" and "would". 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: the Company's ability to manufacture, source and ship new and continuing products on a timely basis and the acceptance of those products by customers and consumers at prices that will be sufficient to profitably recover development, manufacturing, marketing, royalty and other costs of products; economic conditions, including the retail market, higher fuel prices, currency fluctuations and government regulation and other actions in the various markets in which the Company operates throughout the world; the inventory policies of retailers, including the concentration of the Company's revenues in the second half and fourth quarter of the year, together with increased reliance by retailers on quick response inventory management techniques, which increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve tight and compressed shipping schedules; work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product, the bankruptcy or other lack of success of one of the Company's significant retailers which could negatively impact the Company's revenues or bad debt exposure; the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees in a competitive environment; market conditions, third party actions or approvals and the impact of competition that could delay or increase the cost of implementation of the Company's consolidation programs or alter the Company's actions and reduce actual results; the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization; and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances occurring after the date of this release.
EBITDA (earnings before interest, taxes, depreciation and amortization) represents operating profit (loss) excluding, restructuring, depreciation and all amortization. EBITDA is not adjusted for all noncash expenses or for working capital, capital expenditures or other investment requirements and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. Thus, EBITDA should not be considered in isolation or as a substitute for net earnings or cash provided by operating activities, each prepared in accordance with generally accepted accounting principles, when measuring Hasbro's profitability or liquidity as more fully discussed in the Company's financial statements and filings with the Securities and Exchange Commission.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of Dollars) December 29, December 30,
Cash and Cash Equivalents $495,372 $233,095
Accounts Receivable, Net 555,144 572,499
Inventories 190,144 217,479
Other Current Assets 190,964 345,545
Total Current Assets 1,431,624 1,368,618
Property, Plant and Equipment, Net 213,499 235,360
Other Assets 1,497,758 1,765,001
Total Assets $3,142,881 $3,368,979
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term Borrowings $21,051 $34,024
Current Installments of Long-term Debt 201,841 2,304
Payables and Accrued Liabilities 743,958 722,263
Total Current Liabilities 966,850 758,591
Long-term Debt 857,274 1,165,649
Deferred Liabilities 127,391 91,875
Total Liabilities 1,951,515 2,016,115
Total Shareholders' Equity 1,191,366 1,352,864
Total Liabilities and Shareholders' Equity $3,142,881 $3,368,979
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended Year Ended
(Thousands of Dollars Dec. 29, Dec. 30, Dec. 29, Dec. 30,
and Shares Except Per 2002 2001 2002 2001
Net Revenues $997,441 $988,729 $2,816,230 $2,856,339
Cost of Sales 393,665 427,515 1,099,162 1,223,483
Gross Profit 603,776 561,214 1,717,068 1,632,856
Amortization 28,093 33,608 94,576 121,652
Royalties 93,774 78,221 296,152 209,725
Research and Product
Development 47,105 33,352 153,775 125,633
Advertising 108,242 101,496 296,549 290,829
and Administration 211,644 194,628 656,725 675,482
Restructuring Charge - (1,795) - (1,795)
Operating Profit 114,918 121,704 219,291 211,330
Interest Expense 21,743 26,361 77,499 103,688
Other (Income) Expense,
Net 6,522 11,369 37,704 11,443
Earnings Before Income
Taxes and Cumulative
Effect of Accounting
Change 86,653 83,974 104,088 96,199
Income Taxes 24,497 31,489 29,030 35,401
Cumulative Effect of
Accounting Change 62,156 52,485 75,058 60,798
Cumulative Effect of
Accounting Change, Net
of Tax - - (245,732) (1,066)
Net Earnings (Loss) $62,156 $52,485 $(170,674) $59,732
Per Common Share
Cumulative Effect of
Basic $0.36 $0.30 $0.43 $0.35
Diluted $0.36 $0.30 $0.43 $0.35
Net Earnings (Loss)
Basic $0.36 $0.30 ($0.99) $0.35
Diluted $0.36 $0.30 ($0.98) $0.35
Declared $0.03 $0.03 $0.12 $0.12
Weighted Average Number
Basic 172,802 172,428 172,720 172,131
Diluted 173,240 174,123 173,488 173,018
Earnings Per Share Table
Quarter Ended Year Ended
(Thousands of Dollars and Dec. 29, Dec. 30, Dec. 29, Dec. 30,
Shares Except Per Share Data) 2002 2001 2002 2001
Diluted Shares 173,240 174,123 173,488 173,018
Net Earnings, Excluding
Certain Non-recurring Items $72,881 $63,775 $106,815 $72,088
Diluted Earnings Per Share,
Non-recurring Items $0.42 $0.37 $0.62 $0.42
After Tax Impact of:
OFT Charge $(7,566) - $(7,566) -
Infogrames Write-down (3,159) - (31,747) -
Interest on Tax Refund - - 7,556 -
Argentina Losses - (11,290) - (11,290)
Accounting Changes - - (245,732) (1,066)
Net Earnings (Loss), GAAP $62,156 $52,485 $(170,674) $59,732
Diluted Earnings (Loss) Per
Share, GAAP $0.36 $0.30 $(0.98) $0.35
Amortization Impact - $16,219 - $45,013
Net Earnings (Loss), Adjusted
for Amortization Impact $62,156 $68,704 $(170,674) $104,745
Diluted Earnings (Loss) Per
Share, Adjusted for
Amortization Impact $0.36 $0.39 $(0.98) $0.61
Major Segment Results
(Thousands of Dollars) Dec. 29, Dec. 30,
2002 2001 % Change
External Revenues $288,837 $283,232 2%
Operating Profit 9,379 12,434 (25)%
External Revenues 269,023 252,777 6%
Operating Profit 56,202 53,918 4%
External Revenues 391,966 401,250 (2)%
Operating Profit (excluding OFT
charge) 49,194 48,135 2%
Dec. 29, Dec. 30,
2002 2001 % Change
External Revenues $996,496 $935,530 7%
Operating Profit 75,664 15,808 379%
External Revenues 739,782 801,467 (8)%
Operating Profit 124,523 156,089 (20)%
External Revenues 970,825 996,266 (3)%
Operating Profit (excluding OFT
charge) 12,743 28,658 (56)%