HASBRO INC - 10-Q Quarterly Report

Back to GetFilings.com

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 quarterly period ended September 28, 2003

Commission file number 1-6682

HASBRO, INC.

(Exact Name of Registrant, As Specified in its Charter)

Rhode Island	05-0155090
(State of Incorporation)	(I.R.S. Employer Identification No.)

1027 Newport Avenue, Pawtucket, Rhode Island 02862

(Address of Principal Executive Offices, Including Zip Code)

(401) 431-8697

(Registrant's Phone Number, Including Area Code)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes X or No

The number of shares of Common Stock, par value $.50 per share, outstanding as of October 24, 2003 was 174,483,336.

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Thousands of Dollars Except Share Data)

		(Unaudited)
		Sept. 28,	Sept. 29,	Dec. 29,
Assets		2003	2002	2002
		---------	---------	---------
Current assets
Cash and cash equivalents	$	155,357	43,850	495,372
Accounts receivable, less allowance
for doubtful accounts of $54,200,
$51,100 and $50,700		879,669	799,122	555,144
Inventories
Finished products		266,713	260,297	173,168
Work in process		7,762	8,611	6,131
Raw materials		14,936	13,238	10,845
		--------------	--------------	--------------
Total inventories		289,411	282,146	190,144

Deferred income taxes		114,021	101,292	109,839
Prepaid expenses		108,683	189,308	81,125
		--------------	--------------	--------------
Total current assets		1,547,141	1,415,718	1,431,624

Property, plant and equipment, net		206,756	213,628	213,499
		--------------	--------------	--------------

Other assets
Goodwill		462,088	465,444	460,993
Other intangibles, less accumulated
amortization of $412,200, $345,000
and $373,500		734,232	741,075	715,736
Other		298,277	288,333	321,029
		--------------	--------------	--------------
Total other assets		1,494,597	1,494,852	1,497,758
		--------------	--------------	--------------

Total assets	$	3,248,494	3,124,198	3,142,881
		========	========	========

(continued)

HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

(Thousands of Dollars Except Share Data)

				(Unaudited)
				Sept. 28,		Sept. 29,		Dec. 29,
Liabilities and Shareholders' Equity				2003		2002		2002
				---------		---------		---------
Current liabilities
Short-term borrowings			$	104,576		63,392		21,051
Current installments of long-term debt				1,219		255,248		201,841
Accounts payable				169,352		180,197		166,316
Accrued liabilities				698,559		535,461		577,642
				--------------		--------------		--------------
		Total current liabilities		973,706		1,034,298		966,850

Long-term debt, excluding current installments				856,934		856,257		857,274
Deferred liabilities				146,463		94,561		127,391
				--------------		--------------		--------------
		Total liabilities		1,977,103		1,985,116		1,951,515
				--------------		--------------		--------------
Shareholders' equity
Preference stock of $2.50 par value.
	Authorized 5,000,000 shares; none issued			-		-		-
Common stock of $.50 par value.
	Authorized 600,000,000 shares;
	issued 209,694,630 at September 28, 2003,
	September 29, 2002 and December 29, 2002			104,847		104,847		104,847
Additional paid-in capital				409,787		458,199		458,130
Deferred compensation				(771	)	(1,197	)	(613	)
Retained earnings				1,496,388		1,373,989		1,430,950
Accumulated other comprehensive earnings (loss)				(5,917	)	(41,524	)	(46,814	)
Treasury stock, at cost; 35,702,707 shares at
	September 28, 2003, 36,528,037 at September
	29, 2002 and 36,525,120 at December 29, 2002			(732,943	)	(755,232	)	(755,134	)
				--------------		--------------		--------------
		Total shareholders' equity		1,271,391		1,139,082		1,191,366
				--------------		--------------		--------------

		Total liabilities and shareholders' equity	$	3,248,494		3,124,198		3,142,881
				========		========		========

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				Nine Months Ended
			--------------------				-------------------------
			Sept. 28, 2003 - ---------			Sept. 29, 2002 - ---------	Sept. 28, 2003 - ---------		Sept. 29, 2002 - ---------
Net revenues			$	971,071		820,532	2,014,308		1,818,789
Cost of sales				419,869		342,918	822,913		705,497
				------------		------------	-------------		-------------
Gross profit				551,202		477,614	1,191,395		1,113,292
				------------		------------	-------------		-------------
Expenses
	Amortization			19,319		22,268	53,907		66,483
	Royalties			82,535		85,210	169,005		202,378
	Research and product development			38,811		36,687	102,416		106,670
	Advertising			105,039		82,911	225,903		188,307
	Selling, distribution and administration			168,505		153,821	458,824		445,081
				------------		-------------	-------------		--------------
		Total expenses		414,209		380,897	1,010,055		1,008,919
				------------		-------------	-------------		--------------
Operating profit				136,993		96,717	181,340		104,373
				------------		-------------	-------------		--------------
Nonoperating (income) expense
	Interest expense			12,570		17,897	39,566		55,756
	Other (income) expense, net			6,299		3,350	6,381		31,182
				------------		-------------	-------------		--------------
		Total nonoperating expense		18,869		21,247	45,947		86,938
				------------		-------------	-------------		--------------
Earnings before income taxes and
	cumulative effect of accounting change			118,124		75,470	135,393		17,435
Income taxes				32,309		19,622	36,972		4,533
				------------		-------------	-------------		--------------
Earnings before cumulative
	effect of accounting change			85,815		55,848	98,421		12,902
Cumulative effect of accounting change,
	net of tax			(17,351	)	-	(17,351	)	(245,732	)
				------------		-------------	-------------		--------------
Net earnings (loss)			$	68,464		55,848	81,070		(232,830	)
				=======		=======	=======		========

(continued)

HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (continued)
(Thousands of Dollars Except Per Share Data)
(Unaudited)


			Quarter Ended				Nine Months Ended
			--------------------				-------------------------
			Sept. 28, 2003 - ---------			Sept. 29, 2002 - ---------	Sept. 28, 2003 - ---------		Sept. 29, 2002 - ---------
Per common share
	Earnings before cumulative
	effect of accounting change
	Basic		$	0.49		0.32	0.57		0.07
				=======		=======	=======		========
	Diluted		$	0.48		0.32	0.55		0.07
				=======		=======	=======		========
	Cumulative effect of accounting
	change, net of tax
	Basic and diluted		$	(0.10	)	-	(0.10	)	(1.42	)
				=======		=======	=======		========

	Net earnings (loss)
	Basic		$	0.39		0.32	0.47		(1.35	)
				=======		=======	=======		========
	Diluted		$	0.38		0.32	0.45		(1.34	)
				=======		=======	=======		========

	Cash dividends declared	$		0.03		0.03	0.09		0.09
				=======		=======	=======		========

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended September 28, 2003 and September 29, 2002
(Thousands of Dollars)
(Unaudited)
					2003		2002
					-------		-------
Cash flows from operating activities
	Net earnings (loss)			$	81,070		(232,830	)
	Adjustments to reconcile net earnings (loss) to net cash
	utilized by operating activities:
		Cumulative effect of accounting change, net of tax			17,351		245,732
		Depreciation and amortization of plant and equipment			55,627		67,364
		Other amortization			53,907		66,483
		Loss on impairment of investment			-		38,633
		Change in fair value of liabilities potentially settleable in common stock			1,540		- -
		Deferred income taxes			21,187		7,935
		Compensation earned under restricted stock programs			79		729
	Change in operating assets and liabilities (other
		than cash and cash equivalents):
		Increase in accounts receivable			(309,382	)	(219,520	)
		Increase in inventories			(91,298	)	(57,316	)
		Decrease (increase) in prepaid expenses			(19,772	)	99,795
		Increase (decrease) in accounts payable and accrued liabilities			(1,282	)	1,864
		Other, including long-term advances			15,546		(117,466	)
					------------		------------
			Net cash utilized by operating activities		(175,427	)	(98,597	)
					------------		------------
Cash flows from investing activities
		Additions to property, plant and equipment			(42,872	)	(38,167	)
		Investments and acquisitions, net of cash acquired			-		(7,419	)
		Other			(3,029	)	2,756
					------------		------------
			Net cash utilized by investing activities		(45,901	)	(42,830	)
					------------		------------
Cash flows from financing activities
		Repayments of long-term debt			(200,288	)	(72,650	)
		Net proceeds from short-term borrowings			82,765		29,708
		Purchase of common stock and other equity securities			(3,378	)	-
		Stock option transactions			13,792		3,041
		Dividends paid			(15,607	)	(15,577	)
					------------		------------
			Net cash utilized by financing activities		(122,716	)	(55,478	)
					------------		------------
Effect of exchange rate changes on cash					4,029		7,660
					------------		------------
			Decrease in cash and cash equivalents		(340,015	)	(189,245	)
			Cash and cash equivalents at beginning of year		495,372		233,095
					------------		------------
			Cash and cash equivalents at end of period	$	155,357		43,850
					=======		=======

HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Nine Months Ended September 28, 2003 and September 29, 2002
(Thousands of Dollars)
(Unaudited)


		2003	2002
		-------	-------
Supplemental information
Cash paid (received) during the period for:
Interest	$ 50,534		$ 68,943
Income taxes	$ 18,847		$(45,158	)

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
		--------------------			---------------------------
		Sept. 28, 2003 - -------	Sept. 29, 2002 - -------		Sept. 28, 2003 - -------	Sept. 29, 2002 - -------
Net earnings (loss)	$	68,464	55,848		81,070	(232,830	)
Other comprehensive earnings (loss)		4,311	(3,961	)	40,897	26,874
		----------	----------		----------	----------
Total comprehensive earnings (loss)	$	72,775	51,887		121,967	(205,956	)
		======	======		======	======

See accompanying condensed notes to consolidated financial statements.

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, 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 28, 2003 and September 29, 2002, and the results of its operations and cash flows for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

The quarterly and year to date periods ended September 28, 2003 and September 29, 2002 are 13-week and 39-week periods, respectively.

The results of operations for the nine months ended September 28, 2003 are not necessarily indicative of results to be expected for the full year.

These condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The Company filed audited financial statements for the year ended December 29, 2002 in its annual report on Form 10-K, which includes all such information and disclosures, and accordingly, should be read in conjunction with the financial information included herein.

The Company's accounting policies are the same as those described in Note 1 to the Company's consolidated financial statements for the fiscal year ended December 29, 2002, except for the Company's adoption of Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity", as of June 30, 2003, the impact of which is detailed in note 7, as well as certain other new accounting standards, which are detailed in note 8, which did not have an impact on the Company's consolidated results of operations or financial position.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares, Except Per Share Data)
(Unaudited)

(2) Earnings per share data for the quarters and nine months ended September 28, 2003 and September 29, 2002 were computed as follows:

			2003 - -----------------		2002 - -----------------
Quarter - ----------			Basic - -------	Diluted - -------	Basic - -------	Diluted - ----------
Earnings before cumulative
effect of accounting change		$	85,815	85,815	55,848	55,848
Effect of dilutive securities:
Change in fair value of liabilities
	potentially settleable in common stock		-	1,540	-	-
			-----------	------------	-----------	-----------
Adjusted earnings before cumulative
effect of accounting change		$	85,815	87,355	55,848	55,848
			======	=======	======	======

Average shares outstanding			173,833	173,833	172,758	172,758
Effect of dilutive securities:
Liabilities potentially settleable in
	common stock		-	5,873	-	-
Options and warrants			-	2,289	-	527
			-----------	------------	-----------	-----------
Equivalent shares			173,833	181,995	172,758	173,285
			======	=======	======	======
Earnings per share before
cumulative effect of accounting change		$	0.49	0.48	0.32	0.32
			======	=======	======	======

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares, Except Per Share Data)
(Unaudited)

	2003 - -----------------		2002 - -----------------
Nine Months	Basic	Diluted	Basic	Diluted
----------------	---------	---------