SEC Filing | Hasbro, Inc.

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has-20200628

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

__________________

FORM 10-Q

__________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-6682

__________________

HASBRO, INC.

(Exact name of registrant as specified in its charter)


Rhode Island			05-0155090
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1027 Newport Avenue
Pawtucket,	Rhode Island	02861
(Address of Principal Executive Offices)			(Zip Code)

(401) 431-8697

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.50 par value per share	HAS	The NASDAQ Global Select Market

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] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No [x]

The number of shares of Common Stock, par value $.50 per share, outstanding as of July 27, 2020 was 137,022,714.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Thousands of Dollars Except Share Data)

(Unaudited)


	June 28, 2020		June 30, 2019	December 29, 2019
ASSETS
Current assets
Cash and cash equivalents including restricted cash of $71,900, $0 and $0	$	1,038,016	1,151,042	4,580,369
Accounts receivable, less allowance for doubtful accounts of $28,000 $17,000 and $17,200	911,320		805,288	1,410,597
Inventories	564,168		564,769	446,105
Prepaid expenses and other current assets	672,163		308,996	310,450
Total current assets	3,185,667		2,830,095	6,747,521
Property, plant and equipment, less accumulated depreciation of $528,200 $490,000 and $505,900	482,215		387,372	382,248
Other assets
Goodwill	3,666,045		485,765	494,584
Other intangible assets, net of accumulated amortization of $855,000 $759,900 and $783,500	1,559,050		670,214	646,305
Other	1,329,073		665,164	584,970
Total other assets	6,554,168		1,821,143	1,725,859
Total assets	$	10,222,050	5,038,610	8,855,628
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings	$	6,419	12,787	503
Current portion of long-term debt	378,558		—	—
Accounts payable	335,236		330,053	343,927
Accrued liabilities	1,261,352		729,856	912,652
Total current liabilities	1,981,565		1,072,696	1,257,082
Long-term debt	4,802,509		1,695,833	4,046,457
Other liabilities	771,692		554,212	556,559
Total liabilities	7,555,766		3,322,741	5,860,098
Redeemable noncontrolling interests	24,133		—	—
Shareholders' equity
Preference stock of $2.50 par value. Authorized 5,000,000 shares; none issued	—		—	—
Common stock of $0.50 par value. Authorized 600,000,000 shares; issued 220,286,736 shares at June 28, 2020, 209,694,630 shares at June 30, 2019, and 220,286,736 shares at December 29, 2019	110,143		104,847	110,143
Additional paid-in capital	2,297,267		1,290,540	2,275,726
Retained earnings	4,064,715		4,053,266	4,354,619
Accumulated other comprehensive loss	(308,128)		(173,175)	(184,220)
Treasury stock, at cost; 83,264,365 shares at June 28, 2020; 83,488,022 shares at June 30, 2019; and 83,424,129 shares at December 29, 2019	(3,559,990)		(3,559,609)	(3,560,738)
Noncontrolling interests	38,144		—	—
Total shareholders' equity	2,642,151		1,715,869	2,995,530
Total liabilities, noncontrolling interests and shareholders' equity	$	10,222,050	5,038,610	8,855,628

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Thousands of Dollars Except Per Share Data)

(Unaudited)


	Quarter Ended					Six Months Ended
	June 28, 2020		June 30, 2019	June 28, 2020		June 30, 2019
Net revenues	$	860,279	984,537	$	1,965,849	1,717,047
Costs and expenses:
Cost of sales	253,245		343,694	515,939		603,681
Program cost amortization	50,675		23,502	182,821		30,077
Royalties	97,337		71,061	210,159		130,949
Product development	58,325		65,632	112,154		121,892
Advertising	72,366		92,799	174,007		169,403
Amortization of intangibles	34,702		11,815	71,513		23,631
Selling, distribution and administration	281,192		247,701	560,320		472,954
Acquisition and related costs	10,262		—	160,044		—
Total costs and expenses	858,104		856,204	1,986,957		1,552,587
Operating profit (loss)	2,175		128,333	(21,108)		164,460
Non-operating (income) expense:
Interest expense	49,577		22,018	104,302		44,332
Interest income	(1,031)		(5,996)	(5,698)		(13,678)
Other expense (income), net	(2,643)		106,203	(4,102)		98,103
Total non-operating expense, net	45,903		122,225	94,502		128,757
Earnings (loss) before income taxes	(43,728)		6,108	(115,610)		35,703
Income tax (benefit) expense	(10,830)		(7,325)	(14,902)		(4,457)
Net earnings (loss)	(32,898)		13,433	(100,708)		40,160
Net earnings attributable to noncontrolling interests	1,017		—	2,844		—
Net earnings (loss) attributable to Hasbro, Inc.	$	(33,915)	13,433	$	(103,552)	40,160

Net earnings (loss) per common share:
Basic	$	(0.25)	0.11	$	(0.75)	0.32
Diluted	$	(0.25)	0.11	$	(0.75)	0.32
Cash dividends declared per common share	$	0.68	0.68	$	1.36	1.36

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Earnings (Loss)

(Thousands of Dollars)

(Unaudited)


	Quarter Ended					Six Months Ended
	June 28, 2020		June 30, 2019	June 28, 2020		June 30, 2019
Net earnings (loss)	$	(32,898)	13,433	$	(100,708)	40,160
Other comprehensive earnings (loss):
Foreign currency translation adjustments, net of tax	(7,197)		3,334	(138,964)		10,327
Unrealized holding gains on available-for-sale securities, net of tax	2,534		290	2,124		555
Net (losses) gains on cash flow hedging activities, net of tax	(3,691)		(2,079)	21,324		4,513
Changes in unrecognized pension amounts, net of tax	—		19,589	—		19,589
Reclassifications to earnings (loss), net of tax:
Net gains on cash flow hedging activities	(5,278)		(1,982)	(8,942)		(4,796)
Amortization of unrecognized pension and postretirement amounts	276		4,160	550		5,299
Settlement of U.S. defined benefit plan	—		85,852	—		85,852
Total other comprehensive earnings (loss), net of tax	(13,356)		109,164	(123,908)		121,339
Total comprehensive earnings attributable to noncontrolling interests	1,017		—	2,844		—
Total comprehensive earnings (loss) attributable to Hasbro, Inc.	$	(47,271)	122,597	$	(227,460)	161,499

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Thousands of Dollars)

(Unaudited)


	Six Months Ended
	June 28, 2020		June 30, 2019
Cash flows from operating activities:
Net earnings (loss)	$	(100,708)	40,160
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation of plant and equipment	56,587		62,408
Amortization of intangibles	71,513		23,631
Asset impairments	40,878		—
Program cost amortization	182,821		30,077
Deferred income taxes	(11,086)		(15,236)
Stock-based compensation	26,130		15,894
Non-cash pension settlement	—		110,777
Other non-cash items	7		(8,241)
Change in operating assets and liabilities net of acquired balances:
Decrease in accounts receivable	721,973		431,557
Increase in inventories	(125,356)		(119,647)
Increase in prepaid expenses and other current assets	(40,190)		(33,073)
Program production costs, net	(220,376)		(59,417)
Decrease in accounts payable and accrued liabilities	(344,414)		(134,574)
Change in net deemed repatriation tax	—		(14,550)
Other	560		6,510
Net cash provided by operating activities	258,339		336,276
Cash flows from investing activities:
Additions to property, plant and equipment	(64,009)		(58,195)
Acquisitions, net of cash acquired	(4,403,929)		—
Other	13,152		(2,281)
Net cash utilized by investing activities	(4,454,786)		(60,476)
Cash flows from financing activities:
Proceeds from borrowings with maturity greater than three months	1,023,453		—
Repayments of borrowings with maturity greater than three months	(98,193)		—
Net (repayments of) proceeds from other short-term borrowings	(4,480)		3,095
Purchases of common stock	—		(58,633)
Stock-based compensation transactions	1,830		25,779
Dividends paid	(186,243)		(164,908)
Payments related to tax withholding for share-based compensation	(5,669)		(11,889)
Redemption of equity instruments	(47,399)		—
Deferred acquisition payments	—		(100,000)
Other	(4,835)		—
Net cash provided (utilized) by financing activities	678,464		(306,556)
Effect of exchange rate changes on cash	(24,370)		(573)
Decrease in cash, cash equivalents and restricted cash	(3,542,353)		(31,329)
Cash, cash equivalents and restricted cash at beginning of year	4,580,369		1,182,371
Cash, cash equivalents and restricted cash at end of period	$	1,038,016	1,151,042

Supplemental information
Cash paid during the period for:
Interest	$	81,456	40,807
Income taxes	$	30,449	40,014

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interests

(Thousands of Dollars)

(Unaudited)


	Quarter Ended June 28, 2020
	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Noncontrolling Interests	Total Shareholders' Equity		Redeemable Noncontrolling Interests
Balance, March 29, 2020	$	110,143	2,282,379	4,191,810	(294,772)	(3,560,336)	35,283	$	2,764,507	$	26,041
Noncontrolling interests related to acquisition of Entertainment One Ltd.	—		—	—	—	—	(1,364)	(1,364)		2,645
Net loss attributable to Hasbro, Inc.	—		—	(33,915)	—	—	—	(33,915)		—
Net earnings (loss) attributable to noncontrolling interests	—		—	—	—	—	1,104	1,104		(87)
Other comprehensive loss	—		—	—	(13,356)	—	—	(13,356)		—
Stock-based compensation transactions	—		(290)	—	—	45	—	(245)		—

Stock-based compensation expense	—		15,178	—	—	301	—	15,479		—
Dividends declared	—		—	(93,180)	—	—	—	(93,180)		—
Distributions paid to noncontrolling owners and other foreign exchange	—		—	—	—	—	3,121	3,121		(4,466)
Balance, June 28, 2020	$	110,143	2,297,267	4,064,715	(308,128)	(3,559,990)	38,144	$	2,642,151	$	24,133

	Quarter Ended June 30, 2019
	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Noncontrolling Interests	Total Shareholders' Equity		Redeemable Noncontrolling Interests
Balance, March 31, 2019	$	104,847	1,269,230	4,125,686	(282,339)	(3,562,893)	—	$	1,654,531	$	—
Net earnings	—		—	13,433	—	—	—	13,433		—


Other comprehensive earnings	—		—	—	109,164	—	—	109,164		—
Stock-based compensation transactions	—		10,937	—	—	12,499	—	23,436		—
Purchases of common stock	—		—	—	—	(9,451)	—	(9,451)		—
Stock-based compensation expense	—		10,373	—	—	236	—	10,609		—
Dividends declared	—		—	(85,853)	—	—	—	(85,853)		—
Balance, June 30, 2019	$	104,847	1,290,540	4,053,266	(173,175)	(3,559,609)	—	$	1,715,869	$	—

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interests

(Thousands of Dollars)

(Unaudited)


	Six Months Ended June 28, 2020
	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Noncontrolling Interests	Total Shareholders' Equity		Redeemable Noncontrolling Interests
Balance, December 29, 2019	$	110,143	2,275,726	4,354,619	(184,220)	(3,560,738)	—	$	2,995,530	$	—
Noncontrolling interests related to acquisition of Entertainment One Ltd.	—		—	—	—	—	38,561	38,561		26,241
Net loss attributable to Hasbro, Inc.	—		—	(103,552)	—	—	—	(103,552)
Net earnings (loss) attributable to noncontrolling interests	—		—	—	—	—	2,968	2,968		(124)
Other comprehensive loss	—		—	—	(123,908)	—	—	(123,908)		—
Stock-based compensation transactions	—		(4,288)	—	—	447	—	(3,841)		—

Stock-based compensation expense	—		25,829	—	—	301	—	26,130		—
Dividends declared	—		—	(186,352)	—