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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
or
| | | | | |
☐ | 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) | | | — | | |