Hasbro Inc. Reports Operating Results (10-Q)

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Aug 03, 2012
Hasbro Inc. (HAS, Financial) filed Quarterly Report for the period ended 2012-07-01.

Hasbro, Inc. has a market cap of $4.7 billion; its shares were traded at around $35.36 with a P/E ratio of 13.4 and P/S ratio of 1.1. The dividend yield of Hasbro, Inc. stocks is 4%. Hasbro, Inc. had an annual average earning growth of 6.3% over the past 10 years. GuruFocus rated Hasbro, Inc. the business predictability rank of 2.5-star.

Highlight of Business Operations:

RESULTS OF OPERATIONS ----------------------------------------- The quarters ended July 1, 2012 and June 26, 2011 were each 13-week periods. The six month period ended July 1, 2012 was a 27-week period whereas the six month period ended June 26, 2011 was a 26-week period. Net earnings for the quarter and six months ended July 1, 2012 were $43,427 and $40,848, respectively, compared to $58,051 and $75,247 for the respective periods of 2011. Diluted earnings per share were $0.33 and $0.31 for the quarter and six months ended July 1, 2012, compared with diluted earnings per share of $0.42 and $0.54 for the respective periods in 2011. Net earnings for the six months ended July 1, 2012 include severance costs, net of tax, of $7,675, or $0.06 per share related to a restructuring of certain business units and functions. Net earnings for the quarter and six months ended June 26, 2011 include expenses, net of tax, of $8,383 related to a reorganization of the Companys global games business, along with a favorable tax adjustment of approximately $20,500 related to the recognition of previously unrecognized tax benefits and reversal of related accrued interest due to the completion of a tax audit.

International segment net revenues decreased by 4% to $360,493 for the quarter ended July 1, 2012 from $374,471 for the quarter ended June 26, 2011. Net revenues for the six months ended July 1, 2012 increased 3% to $650,222 from $628,803 for the six months ended June 26, 2011. For the quarter ended July 1, 2012, International segment net revenues were negatively impacted by currency translation of approximately $33,400, as a result of the stronger U.S. dollar during the quarter. For the six months ended July 1, 2012, International segment net revenues were negatively impacted by currency translation of approximately $41,600 as a result of the stronger U.S. dollar in the first six months of 2012. Net revenues in Latin America increased 15% in the second quarter 2012 compared to 2011, while Europe and Asia Pacific declined 11% and 1%, respectively. Excluding the impact of currency translation in the quarter, net revenues in Latin America and Asia Pacific increased 29% and 1%, respectively, and Europe declined 1%. For the six-month period ended July 1, 2012, net revenues grew 17% in Latin America, 3% in Asia Pacific, and were flat in Europe compared to the comparable period in 2011. Excluding the impact of unfavorable currency translation for the six-month period, revenues increased by 28% in Latin America, 7% in Europe and 4% in Asia Pacific.

Product development expenses for the quarter ended July 1, 2012 decreased in dollars but increased as percentage of net revenues to $50,113, or 6.2% of net revenues, from $54,965, or 6.0% of net revenues, for the quarter ended June 26, 2011. For the six months ended July 1, 2012, product development expense decreased to $95,039, or 6.5% of net revenues compared to $100,783, or 6.4% of net revenues, for the comparable period of 2011. Product development expense for the quarter and six month period in 2011 included approximately $6,500 of expense related to the Companys reorganization of its games business in the second quarter of 2011. Product development expense for the six month period in 2012 includes approximately $2,400 of severance costs in the first quarter of 2012, as well as higher employee costs due to the extra week in 2012 compared to 2011.

Other (income) expense, net, was $5,899 for the second quarter of 2012, compared to $6,069 for the second quarter of 2011. Other (income) expense, net, for the six months ended July 1, 2012 was $5,854 compared to $12,191 in 2011. Other (income) expense, net in the quarter and six month periods includes the Companys 50% share in the losses (earnings) of THE HUB. During the second quarter of 2012, the Company recognized losses from THE HUB of approximately $2,400 compared to gains of approximately $200 during the second quarter of 2011. In addition, foreign currency losses for the quarter were approximately $700 in 2012 compared to approximately $3,100 in 2011. During the first half of 2012, the Company recognized losses from THE HUB of approximately $4,200 compared to a loss of approximately $1,800 during the first half of 2011. Foreign currency gains were approximately $1,000 for the six months ended July 1, 2012 compared to foreign currency losses of approximately $6,700 in 2011. Foreign currency losses for the six months ended June 26, 2011 include a loss of approximately $3,700 related to the termination of certain hedging instruments.

Income tax expense for the quarter ended July 1, 2012 was $16,232 on pretax earnings of $59,659 compared to income tax benefit of $5,097 on pretax earnings of $52,954 for the quarter ended June 26, 2011. Income tax expense for the six months ended July 1, 2012 was $13,945 on pretax earnings of $54,793 compared to income tax expense of $545 on pretax earnings of $75,792 for the six months ended June 26, 2011. Both periods, as well as the full year 2011, are impacted by certain discrete tax events including the accrual of potential interest and penalties on certain tax positions. Income tax expense for the quarter and six months ended June 26, 2011 also includes a $20,477 tax benefit as a result of the effective settlement of the 2006 and 2007 IRS exam during the second quarter of 2011. Absent these tax benefits and other discrete tax events, the effective six month income tax rates for 2012 and 2011 were 26.8% and 27.7%, respectively. The adjusted rate of 26.8% for the six months ended July 1, 2012 is comparable to the full year 2011 adjusted rate of 26.2%, increasing primarily due to our expectations of increased earnings in higher tax jurisdictions.

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