Hasbro (HAS), a worldwide leader in children’s and family leisure products and services with a broad portfolio of brands and entertainment properties (such as Playskool, Tonka, Milton Bradley and Parker Brothers), reported third quarter 2011 results on Monday. Here are some of the highlights from the press release and the conference call:
Net revenues for the third quarter 2011 grew 5% to$1.38 billion compared to$1.31 billion for the third quarter 2010; excluding the positive impact of foreign currency ($37.1 million), net revenues were 2% higher than a year ago.
The U.S. and Canada segment net revenues were $764.6 million, a decrease of 7% compared to $825.5 million last year. As a result of lower revenues in the segment, operating profit decreased to $128.8 million, or 16.8% of revenues, compared to $158.8 million (19.2% of revenues) in 2010.
The international segment was much stronger - net revenues came in at $563.3 million, an increase of 23% compared to$458.9 million in 2010; on a constant currency basis, the increase was 15% year over year. Year-to-date, the International segment revenues have grown 27% (19% on a constant currency basis).
Operating profit in the International segment grew 42% to $100.7 million; operating profit margin in the International segment as increased significantly (250 basis points to 17.9% of revenues) due to higher volume and greater leverage of investments.
Operating profit for the company as a whole grew 4% for the quarter to $248.1 million or 18% of revenues; this is relatively in line (10 basis points lower) with operating profit margin in third quarter 2010.
Net earnings for the third quarter 2011 increased 10% to$171.0 million from $155.2 million in third quarter 2010; diluted EPS was up meaningful higher (16.5%) to$1.27 per diluted share, largely outpacing net earnings growth due to share repurchases (average diluted shares in the quarter was 134.9 million compared to 141.7 million last year).
During the third quarter, the company repurchased 5.6 million shares of common stock at an average price of $37.74 per share (total cost of $211 million); year to date, the company has repurchased 9.4 million shares at an average price of $40.97, spending nearly $390 million doing so. At the end of the third quarter, more than $260 million remained available under the current share repurchase authorization, enough to buy more than 7 million additional shares at the current price. When asked about this remaining about during the Q&A, Deborah Thomas, the chief financial officer, had this to say:
“Where we saw our stock price get to in the fourth quarter, we thought it was very opportunistic time to buy back the shares in line with our plans. We do have remaining amount under our authorization at the end of the third quarter of $263.5 million. And we — we'll certainly look to the market and be opportunistic in our repurchases there.”
This was a record third quarter for Hasbro in respect to revenues, operating profit and net earnings. The stock closed up 0.7% higher, on a day when the major indices in the U.S. declined around 2%.
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As it relates to portfolio construction, my goal is to make a small number of meaningful decisions. In the words of Charlie Munger, my preferred approach is "patience followed by pretty aggressive conduct." I run a concentrated portfolio, with a handful of equities accounting for the majority of my portfolio (currently two). In the eyes of a businessman, I believe this is adequate diversification.