QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
x | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company | |||
March 29, 2020 | March 31, 2019 | December 29, 2019 | |||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents including restricted cash of $86,177, $0 and $0 | $ | ||||||||
Accounts receivable, less allowance for doubtful accounts of $16,900 $12,100 and $17,200 | |||||||||
Inventories | |||||||||
Prepaid expenses and other current assets | |||||||||
Total current assets | |||||||||
Property, plant and equipment, less accumulated depreciation of $513,200 $484,200 and $505,900 | |||||||||
Other assets | |||||||||
Goodwill | |||||||||
Other intangible assets, net of accumulated amortization of $608,500 $747,800 and $895,200 | |||||||||
Other | |||||||||
Total other assets | |||||||||
Total assets | $ | ||||||||
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY | |||||||||
Current liabilities | |||||||||
Short-term borrowings | $ | ||||||||
Current portion of long-term debt | |||||||||
Accounts payable | |||||||||
Accrued liabilities | |||||||||
Total current liabilities | |||||||||
Long-term debt | |||||||||
Other liabilities | |||||||||
Total liabilities | |||||||||
Redeemable noncontrolling interests | |||||||||
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 at March 29, 2020, 209,694,630 at March 31, 2019, and 220,286,736 at December 29, 2019 | |||||||||
Additional paid-in capital | |||||||||
Retained earnings | |||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) | |||
Treasury stock, at cost; 83,279,734 shares at March 29, 2020; 83,830,809 shares at March 31, 2019; and 83,424,129 shares at December 29, 2019 | ( | ) | ( | ) | ( | ) | |||
Noncontrolling interests | |||||||||
Total shareholders' equity | |||||||||
Total liabilities, noncontrolling interests and shareholders' equity | $ | ||||||||
Quarter Ended | ||||||
March 29, 2020 | March 31, 2019 | |||||
Net revenues | $ | |||||
Costs and expenses: | ||||||
Cost of sales | ||||||
Program cost amortization | ||||||
Royalties | ||||||
Product development | ||||||
Advertising | ||||||
Amortization of intangibles | ||||||
Selling, distribution and administration | ||||||
Acquisition and related costs | ||||||
Total costs and expenses | ||||||
Operating profit (loss) | ( | ) | ||||
Non-operating (income) expense: | ||||||
Interest expense | ||||||
Interest income | ( | ) | ( | ) | ||
Other expense (income), net | ( | ) | ( | ) | ||
Total non-operating expense, net | ||||||
Earnings (loss) before income taxes | ( | ) | ||||
Income tax (benefit) expense | ( | ) | ||||
Net earnings (loss) | ( | ) | ||||
Net earnings attributable to noncontrolling interests | ||||||
Net earnings (loss) attributable to Hasbro, Inc. | ( | ) | ||||
Net earnings (loss) per common share: | ||||||
Basic | $ | ( | ) | |||
Diluted | $ | ( | ) | |||
Cash dividends declared per common share | $ | |||||
Quarter Ended | ||||||
March 29, 2020 | March 31, 2019 | |||||
Net earnings (loss) | $ | ( | ) | |||
Other comprehensive earnings (loss): | ||||||
Foreign currency translation adjustments | ( | ) | ||||
Unrealized holding (losses) gains on available-for-sale securities, net of tax | ( | ) | ||||
Net gains on cash flow hedging activities, net of tax | ||||||
Reclassifications to earnings (loss), net of tax: | ||||||
Net gains on cash flow hedging activities | ( | ) | ( | ) | ||
Amortization of unrecognized pension and postretirement amounts | ||||||
Total other comprehensive earnings (loss), net of tax | ( | ) | ||||
Total comprehensive earnings attributable to noncontrolling interests | ||||||
Total comprehensive earnings (loss) attributable to Hasbro, Inc. | $ | ( | ) | |||
Three Months Ended | ||||||
March 29, 2020 | March 31, 2019 | |||||
Cash flows from operating activities: | ||||||
Net earnings (loss) | $ | ( | ) | |||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | ||||||
Depreciation of plant and equipment | ||||||
Amortization of intangibles | ||||||
Asset impairments | ||||||
Program cost amortization | ||||||
Deferred income taxes | ( | ) | ||||
Stock-based compensation | ||||||
Other non-cash items | ( | ) | ||||
Change in operating assets and liabilities net of acquired balances: | ||||||
Decrease in accounts receivable | ||||||
Increase in inventories | ( | ) | ( | ) | ||
Increase in prepaid expenses and other current assets | ( | ) | ( | ) | ||
Program production costs, net | ( | ) | ( | ) | ||
Decrease in accounts payable and accrued liabilities | ( | ) | ( | ) | ||
Other | ( | ) | ( | ) | ||
Net cash provided by operating activities | ||||||
Cash flows from investing activities: | ||||||
Additions to property, plant and equipment | ( | ) | ( | ) | ||
Acquisitions, net of cash acquired | ( | ) | ||||
Other | ( | ) | ||||
Net cash utilized by investing activities | ( | ) | ( | ) | ||
Cash flows from financing activities: | ||||||
Proceeds from borrowings with maturity greater than three months | ||||||
Repayments of borrowings with maturity greater than three months | ( | ) | ||||
Net repayments of other short-term borrowings | ( | ) | ||||
Purchases of common stock | ( | ) | ||||
Stock-based compensation transactions | ||||||
Dividends paid | ( | ) | ( | ) | ||
Payments related to tax withholding for share-based compensation | ( | ) | ( | ) | ||
Redemption of equity instruments | ( | ) | ||||
Deferred acquisition payments | ( | ) | ||||
Other | ( | ) | ||||
Net cash provided (utilized) by financing activities | ( | ) | ||||
Effect of exchange rate changes on cash | ( | ) | ( | ) | ||
(Decrease) increase in cash, cash equivalents and restricted cash | ( | ) | ||||
Cash, cash equivalents and restricted cash at beginning of year | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | |||||
Supplemental information | ||||||
Cash paid during the period for: | ||||||
Interest | $ | |||||
Income taxes | $ | |||||
Quarter Ended March 29, 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 | $ | ( | ) | ( | ) | $ | $ | |||||||||||||||||||||||||
Noncontrolling interests related to acquisition of Entertainment One Ltd. | — | — | — | — | — | |||||||||||||||||||||||||||
Net loss attributable to Hasbro, Inc. | — | — | ( | ) | — | — | — | ( | ) | — | ||||||||||||||||||||||
Net earnings (loss) attributable to noncontrolling interests | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | ) | — | — | ( | ) | — | ||||||||||||||||||||||
Stock-based compensation transactions | — | ( | ) | — | — | — | ( | ) | — | |||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||
Dividends declared | — | — | ( | ) | — | — | — | ( | ) | — | ||||||||||||||||||||||
Distributions paid to noncontrolling owners | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||
Balance, March 29, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
Quarter Ended March 31, 2019 | ||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Noncontrolling Interests | Total Shareholders' Equity | Redeemable Noncontrolling Interests | |||||||||||||||||||||||||
Balance, December 30, 2018 | $ | ( | ) | ( | ) | $ | $ | |||||||||||||||||||||||||
Net earnings | — | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive earnings | — | — | — | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation transactions | — | ( | ) | — | — | — | ( | ) | — | |||||||||||||||||||||||
Purchases of common stock | — | — | — | — | ( | ) | — | ( | ) | — | ||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||
Dividends declared | — | — | ( | ) | — | — | — | ( | ) | — | ||||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
Name | Country of Incorporation | Proportion held | Principal activity | ||||
Astley Baker Davies Limited | England and Wales | % | Ownership of intellectual property | ||||
Whizz Kid Entertainment Limited | England and Wales | % | Production of television programs | ||||
MR Productions Holdings, LLC | United States | % | Film development | ||||
Renegade Entertainment, LLC | United States | % | Production of television programs | ||||
Round Room Live, LLC | United States | % | Production of live events | ||||
March 29, 2020 | March 31, 2019 | |||||
Assets | ||||||
Contract assets - current | $ | |||||
Contract assets - long term | ||||||
Total | $ | |||||
Liabilities | ||||||
Contract liabilities | ||||||
Total | $ | |||||
Acquisition Consideration | |||
eOne common shares outstanding as of December 30, 2019 | |||
Cash consideration per share | $ | ||
Total consideration for shares outstanding | |||
Cash consideration for employee share based payment awards outstanding | |||
Cash consideration for extinguishment of debt | |||
Total cash consideration | |||
Less: Employee awards to be recorded as future stock compensation expense | |||
Total consideration transferred | $ | ||
Estimated Fair Value | |||
Cash, cash equivalents and restricted cash | $ | ||
Accounts receivable, net | |||
Inventories | |||
Other current assets | |||
Property, plant and equipment (including right of use assets) | |||
Intangible assets | |||
Content assets - IIC and IIP | |||
Other assets | |||
Short-term borrowings | ( | ) | |
Accounts payable, and accrued liabilities | ( | ) | |
Long-term debt (including current portion) | ( | ) | |
Other liabilities | ( | ) | |
Noncontrolling interests | ( | ) | |
Estimated fair value of net assets acquired | |||
Goodwill | |||
Total purchase price | $ | ||
(in thousands of dollars) | U.S and Canada | International | Entertainment, Licensing and Digital | eOne | Total | |||||||||||
Balance at December 29,2019 | $ | $ | ||||||||||||||
Acquired during the period | ||||||||||||||||
Foreign exchange translation | ( | ) | ( | ) | ( | ) | ||||||||||
Balance at March 29, 2020 | $ | $ | ||||||||||||||
Quarter Ended | |||
March 29, 2020 | |||
eOne: | |||
Net revenues | $ | ||
Loss before income taxes | ( | ) | |
• | Acquisition and integration costs of $ |
• | Restructuring and related costs of $ |
Unaudited | |||
March 31, 2019 | |||
Revenues | $ | ||
Net earnings | |||
Net earnings attributable to Hasbro, Inc. | |||
Net earnings per common share: | |||
Diluted | $ | ||
Basic | $ | ||
• | additional amortization expense of $ |
• | estimated differences in interest expense of $ |
• | the income tax effect of the pro forma adjustments in the amount of $ |
2020 | 2019 | |||||||||||
Quarter | Basic | Diluted | Basic | Diluted | ||||||||
Net earnings (loss) attributable to Hasbro, Inc. | $ | ( | ) | ( | ) | |||||||
Average shares outstanding | ||||||||||||
Effect of dilutive securities: | ||||||||||||
Options and other share-based awards | — | — | ||||||||||
Equivalent Shares | ||||||||||||
Net earnings (loss) attributable to Hasbro, Inc. per common share | $ | ( | ) | ( | ) | |||||||
Quarter Ended | ||||||
March 29, 2020 | March 31, 2019 | |||||
Other comprehensive earnings (loss), tax effect: | ||||||
Tax benefit (expense) on unrealized holding gains (losses) | $ | ( | ) | |||
Tax expense on cash flow hedging activities | ( | ) | ( | ) | ||
Reclassifications to earnings, tax effect: | ||||||
Tax expense on cash flow hedging activities | ||||||
Tax benefit on unrecognized pension and postretirement amounts reclassified to the consolidated statements of operations | ( | ) | ( | ) | ||
Total tax effect on other comprehensive earnings (loss) | $ | ( | ) | ( | ) | |
Pension and Postretirement Amounts | Gains (Losses) on Derivative Instruments | Unrealized Holding Gains (Losses) on Available- for-Sale Securities | Foreign Currency Translation Adjustments | Total Accumulated Other Comprehensive Loss | |||||||||||
2020 | |||||||||||||||
Balance at December 29, 2019 | $ | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Current period other comprehensive earnings (loss) | ( | ) | ( | ) | ( | ) | |||||||||
Balance at March 29, 2020 | $ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||
2019 | |||||||||||||||
Balance at December 30, 2018 | $ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||
Current period other comprehensive earnings (loss) | |||||||||||||||
Balance at March 31, 2019 | $ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||
March 29, 2020 | March 31, 2019 | December 29, 2019 | ||||||||||||||||
Carrying Cost | Fair Value | Carrying Cost | Fair Value | Carrying Cost | Fair Value | |||||||||||||
3.90% Notes Due 2029 | $ | |||||||||||||||||
3.55% Notes Due 2026 | ||||||||||||||||||
3.00% Notes Due 2024 | ||||||||||||||||||
6.35% Notes Due 2040 | ||||||||||||||||||
3.50% Notes Due 2027 | ||||||||||||||||||
2.60% Notes Due 2022 | ||||||||||||||||||
5.10% Notes Due 2044 | ||||||||||||||||||
3.15% Notes Due 2021 | ||||||||||||||||||
6.60% Debentures Due 2028 | ||||||||||||||||||
Variable % Notes Due December 30, 2022 | ||||||||||||||||||
Variable % Notes Due December 30, 2024 | ||||||||||||||||||
Production Financing Facilities | ||||||||||||||||||
Total long-term debt | $ | |||||||||||||||||
Less: Deferred debt expenses | — | — | — | |||||||||||||||
Less: Current portion | — | — | — | |||||||||||||||
Long-term debt | $ | |||||||||||||||||
Quarter Ended | |||
March 29, 2020 | |||
Production financing held by production subsidiaries | $ | ||
Other loans | |||
Total | $ | ||
Production financing shown in the consolidated balance sheet as: | |||
Non-current | $ | ||
Current | |||
Total | $ | ||
Canadian Dollars | U.S. Dollars | Total | |||||||
As of March 29, 2020 | $ | ||||||||
Production Financing | Other Loans | Total | ||||||||
December 30, 2019 | $ | $ | ||||||||
Drawdowns | ||||||||||
Repayments | ( | ) | ( | ) | ( | ) | ||||
Foreign exchange differences | ( | ) | ( | ) | ||||||
Balance at March 29, 2020 | $ | |||||||||
Quarter Ended | ||||
March 29, 2020 | ||||
Film Programming | ||||
Released, less amortization | $ | |||
Completed and not released | ||||
In production | ||||
Pre-production | ||||
TV Programming | ||||
Released, less amortization | ||||
Completed and not released | ||||
In production | ||||
Pre-production | ||||
Other Programming | ||||
Released, less amortization | ||||
In production | ||||
Total program costs | $ | |||
Investment in Production | Investment in Content | Total | ||||||||
Program cost amortization | $ | |||||||||
• | during the quarter ended March 29, 2020, the Company recorded a discrete net tax benefit of $ |
• | during the quarter ended March 31, 2019, we recorded a discrete net tax benefit of $ |
Fair Value Measurements Using: | ||||||||||||
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
March 29, 2020 | ||||||||||||
Assets: | ||||||||||||
Available-for-sale securities | $ | |||||||||||
Derivatives | ||||||||||||
Total assets | $ | |||||||||||
Liabilities: | ||||||||||||
Derivatives | $ | |||||||||||
Option agreement | ||||||||||||
Total liabilities | $ | |||||||||||
March 31, 2019 | ||||||||||||
Assets: | ||||||||||||
Available-for-sale securities | $ | |||||||||||
Derivatives | ||||||||||||
Total assets | $ | |||||||||||
Liabilities: | ||||||||||||
Derivatives | $ | |||||||||||
Option agreement | ||||||||||||
Total liabilities | $ | |||||||||||
December 29, 2019 | ||||||||||||
Assets: | ||||||||||||
Available-for-sale securities | $ | |||||||||||
Derivatives | ||||||||||||
Total assets | $ | |||||||||||
Liabilities: | ||||||||||||
Derivatives | $ | |||||||||||
Option agreement | ||||||||||||
Total Liabilities | $ | |||||||||||
2020 | 2019 | |||||
Balance at beginning of year | $ | ( | ) | ( | ) | |
Gain from change in fair value | ||||||
Balance at end of first quarter | $ | ( | ) | ( | ) | |
March 29, 2020 | March 31, 2019 | December 29, 2019 | ||||||||||||||||
Hedged transaction | Notional Amount | Fair Value | Notional Amount | Fair Value | Notional Amount | Fair Value | ||||||||||||
Inventory purchases | $ | |||||||||||||||||
Sales | ||||||||||||||||||
Production financing and other | ||||||||||||||||||
Total | $ | |||||||||||||||||
March 29, 2020 | March 31, 2019 | December 29, 2019 | |||||||
Prepaid expenses and other current assets | |||||||||
Unrealized gains | $ | ||||||||
Unrealized losses | ( | ) | ( | ) | ( | ) | |||
Net unrealized gains | $ | ||||||||
Other assets | |||||||||
Unrealized gains | $ | ||||||||
Unrealized losses | ( | ) | |||||||
Net unrealized gains | $ | ||||||||
Accrued liabilities | |||||||||
Unrealized gains | $ | ||||||||
Unrealized losses | ( | ) | ( | ) | ( | ) | |||
Net unrealized losses | $ | ( | ) | ( | ) | ( | ) | ||
Other liabilities | |||||||||
Unrealized gains | $ | ||||||||
Unrealized losses | ( | ) | |||||||
Net unrealized losses | $ | ( | ) | ||||||
Quarter Ended | ||||||
March 29, 2020 | March 31, 2019 | |||||
Statements of Operations Classification | ||||||
Cost of sales | $ | |||||
Net revenues | ||||||
Other | ||||||
Net realized gains | $ | |||||
March 29, 2020 | March 31, 2019 | December 29, 2019 | |||||||
Prepaid expenses and other current assets | |||||||||
Unrealized gains | $ | ||||||||
Unrealized losses | ( | ) | |||||||
Net unrealized gains | $ | ||||||||
Accrued liabilities | |||||||||
Unrealized gains | $ | ||||||||
Unrealized losses | ( | ) | ( | ) | |||||
Net unrealized losses | $ | ( | ) | ( | ) | ||||
Total unrealized (losses) gains, net | $ | ( | ) | ( | ) | ||||
Quarter Ended | |||||||
March 29, 2020 | March 31, 2019 | ||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | $ | |||||
Right-of-use assets obtained in exchange for lease obligations: | |||||||
Operating leases | $ | $ | |||||
Weighted Average Remaining Lease Term | |||||||
Operating leases | |||||||
Weighted Average Discount Rate | |||||||
Operating leases | % | % | |||||
March 29, 2020 | |||
2020 (excluding the three months ended March 29, 2020) | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
2025 and thereafter | |||
Total future lease payments | |||
Less imputed interest | |||
Present value of future operating lease payments | |||
Less current portion of operating lease liabilities (1) | |||
Non-current operating lease liability (2) | |||
Operating lease right-of-use assets, net (3) | $ | ||
Quarter Ended | |||||||||||||
March 29, 2020 | March 31, 2019 | ||||||||||||
Net revenues | External | Affiliate | External | Affiliate | |||||||||
U.S. and Canada | $ | $ | |||||||||||
International | |||||||||||||
Entertainment, Licensing and Digital | |||||||||||||
eOne | |||||||||||||
Global Operations (a) | |||||||||||||
Corporate and Eliminations (b) | ( | ) | ( | ) | |||||||||
$ | $ | ||||||||||||
Quarter Ended | |||||||
Operating profit (loss) | March 29, 2020 | March 31, 2019 | |||||
U.S. and Canada | $ | $ | |||||
International | ( | ) | ( | ) | |||
Entertainment, Licensing and Digital | |||||||
eOne | ( | ) | |||||
Global Operations (a) | |||||||
Corporate and Eliminations (b) | ( | ) | |||||
$ | ( | ) | $ | ||||
Total assets | March 29, 2020 | March 31, 2019 | December 29, 2019 | ||||||
U.S. and Canada | $ | ||||||||
International | |||||||||
Entertainment, Licensing and Digital | |||||||||
eOne | |||||||||
Global Operations (a) | |||||||||
Corporate and Eliminations (b) | ( | ) | ( | ) | ( | ) | |||
$ | |||||||||
Quarter Ended | ||||||
March 29, 2020 | March 31, 2019 | |||||
Europe | $ | |||||
Latin America | ||||||
Asia Pacific | ||||||
Net revenues | $ | |||||
Quarter Ended | |||||||
March 29, 2020 | March 31, 2019 | ||||||
Franchise Brands | $ | $ | |||||
Partner Brands | |||||||
Hasbro Gaming (1) | |||||||
Emerging Brands (2) | |||||||
TV/Film/Entertainment (3) | |||||||
Total | $ | ||||||
Remaining amounts to be paid as of December 29, 2019 | $ | ||
eOne restructuring charges | |||
Payments made in the first quarter of 2020 | ( | ) | |
Remaining amounts as of March 29, 2020 | $ | ||
• | First quarter net revenues of $1,105.6 million increased 51% compared to $732.5 million in the first quarter of 2019 and reflects the 2020 acquisition of eOne. The increase in net revenues included an unfavorable foreign currency translation of $11.7 million. |
• | Net revenues in the U.S. and Canada segment increased 20% to $428.6 million; International segment net revenues decreased 11% to $250.4 million, including an unfavorable foreign currency translation impact of $9.3 million; Entertainment, Licensing and Digital segment net revenues decreased 9% to $84.0 million; and eOne segment net revenues were $342.5 million. |
• | Net revenues from Hasbro Gaming increased 30%; Partner Brands increased 6%; Franchise Brands increased 1%; Emerging Brands net revenues increased 58% and include the addition of preschool brands, PEPPA PIG, PJ MASKS and RICKY ZOOM, acquired as part of the eOne Acquisition; and eOne TV Film and Entertainment portfolio net revenues were $292.5 and represented 26% of total net revenues in the first quarter of 2020. |
• | Operating losses were $23.3 million, or 2.1% of net revenue, in the first quarter of 2020 compared to operating profit of $36.1 million, or 4.9% of net revenue, in the first quarter of 2019. |
• | First quarter 2020 operating losses were negatively impacted by acquisition and related expenses of $149.8 million ($127.5 million after-tax) and $25.0 million ($19.9 million after-tax) of eOne acquired intangible asset amortization. |
• | The net loss attributable to Hasbro, Inc. of $69.6 million, or $0.51 per diluted share, in the first quarter of 2020 compared to net earnings of $26.7 million, or $0.21 per diluted share, in the first quarter of 2019. |
Quarter Ended | |||||||
March 29, 2020 | March 31, 2019 | ||||||
Net revenues | $ | 1,105.6 | $ | 732.5 | |||
Operating profit (loss) | (23.3 | ) | 36.1 | ||||
Earnings (loss) before income taxes | (71.9 | ) | 29.6 | ||||
Income tax expense (benefit) | (4.1 | ) | 2.9 | ||||
Net earnings (loss) | (67.8 | ) | 26.7 | ||||
Net earnings attributable to noncontrolling interests | 1.8 | — | |||||
Net earnings (loss) attributable to Hasbro, Inc. | (69.6 | ) | 26.7 | ||||
Diluted earnings (loss) per share | (0.51 | ) | 0.21 | ||||
Quarter Ended | |||||||||
March 29, 2020 | March 31, 2019 | % Change | |||||||
Franchise Brands | $ | 396.5 | 393.6 | 1 | % | ||||
Partner Brands | 182.3 | 172.0 | 6 | % | |||||
Hasbro Gaming | 140.1 | 107.6 | 30 | % | |||||
Emerging Brands | 94.1 | 59.4 | 58 | % | |||||
TV, Film and Entertainment | 292.5 | — | 100 | % | |||||
Total | $ | 1,105.6 | 732.5 | 51 | % | ||||
Quarter Ended | ||||||||||
March 29, 2020 | March 31, 2019 | % Change | ||||||||
Net Revenues | ||||||||||
U.S. and Canada segment | $ | 428.6 | $ | 357.9 | 20 | % | ||||
International segment | 250.4 | 282.6 | -11 | % | ||||||
Entertainment, Licensing and Digital segment | 84.0 | 92.0 | -9 | % | ||||||
eOne segment | 342.5 | — | 100 | % | ||||||
Operating Profit | ||||||||||
U.S. and Canada segment | $ | 71.8 | $ | 13.5 | >100% | |||||
International segment | (26.7 | ) | (30.4 | ) | 12 | % | ||||
Entertainment, Licensing and Digital segment | 5.2 | 30.0 | -83 | % | ||||||
eOne segment | (33.1 | ) | — | -100 | % | |||||
Quarter Ended | |||||||||
March 29, 2020 | March 31, 2019 | % Change | |||||||
Europe | $ | 162.2 | 153.4 | 6 | % | ||||
Latin America | 33.9 | 62.8 | -46 | % | |||||
Asia Pacific | 54.2 | 66.5 | -18 | % | |||||
Net revenues | $ | 250.4 | 282.6 | -11 | % | ||||
Three Months Ended | |||
March 29, 2020 | |||
eOne Segment Net Revenues | |||
Film and TV | $ | 259.5 | |
Family Brands | 50.8 | ||
Music and Other | 32.2 | ||
Segment Total | $ | 342.5 | |
Quarter Ended | |||||
March 29, 2020 | March 31, 2019 | ||||
Cost of sales | 23.8 | % | 35.5 | % | |
Program cost amortization | 12.0 | 0.9 | |||
Royalties | 10.2 | 8.2 | |||
Product development | 4.9 | 7.7 | |||
Advertising | 9.2 | 10.5 | |||
Amortization of intangibles | 3.3 | 1.6 | |||
Selling, distribution and administration | 25.2 | 30.8 | |||
Acquisition and related costs | 13.5 | 0.0 | |||
March 29, 2020 | March 31, 2019 | % Change | |||||||
Cash and cash equivalents (including restricted cash of $86.2 and $0) | $ | 1,237.9 | 1,196.6 | 3 | % | ||||
Accounts receivable, net | 963.8 | 638.4 | 51 | % | |||||
Inventories | 444.4 | 491.8 | -10 | % | |||||
Prepaid expenses and other current assets | 672.4 | 305.1 | >100% | ||||||
Other assets | 1,461.5 | 739.7 | 98 | % | |||||
Accounts payable and accrued liabilities | 1,664.7 | 935.3 | 78 | % | |||||
Other liabilities | 739.0 | 636.1 | 16 | % | |||||
March 29, 2020 | March 31, 2019 | ||||||
Net cash provided by (used in) | |||||||
Operating activities | $ | 291.6 | $ | 264.5 | |||
Investing activities | (4,430.5 | ) | (27.0 | ) | |||
Financing activities | 819.5 | (220.4 | ) | ||||
Remainder 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | |||||||||||||||
Future film and television obligations | $ | 75.7 | 17.1 | 1.7 | — | — | — | 94.5 | |||||||||||||
First-look commitments | 18.7 | 15.9 | 7.7 | — | — | — | 42.3 | ||||||||||||||
Operating lease commitments | 15.8 | 13.2 | 8.9 | 7.5 | 6.2 | 21.7 | 73.3 | ||||||||||||||
$ | 110.2 | 46.2 | 18.3 | 7.5 | 6.2 | 21.7 | 210.1 | ||||||||||||||
Item 1. | Legal Proceedings. |
Item 1A. | Risk Factors. |
• | the negative impact to our ability to design, develop, manufacture and ship product as well as produce and distribute entertainment content; |
• | delays in entertainment content releases from our partners and licensors, or changes in release plans, that can adversely impact our product sales; examples of releases that have been delayed include Disney’s MULAN, MARVEL’S BLACK WIDOW and SONY PICTURES GHOSTBUSTERS AFTERLIFE; |
• | the negative impact on consumer purchasing behavior and availability of product to consumers, including due to retail store closures, shelter at home instructions and limitations on the capacity of e-commerce; |
• | disruptions or restrictions on the ability of some of our employees to work effectively, including due to illness, quarantines, government actions, and facility closures or other similar restrictions; |
• | closures of, or restrictions on businesses, such as retail stores, in which our products and/or the products or our licensees are sold, as well as studios and theaters in which or for which we produce and distribute entertainment content; and |
• | other negative effects of the coronavirus on our business, including increased risks of accounts receivable collection, delays in payment and negotiations with customers or licensees over payment terms or the ability to perform under contracts or licenses. |
• | our ability to design, develop, produce, manufacture, source and ship products on a timely, cost-effective and profitable basis; |
• | rapidly changing consumer interests in the types of products and entertainment we offer; |
• | the challenge of developing and offering products and storytelling experiences that are sought after by children, families and audiences given increasing technology and entertainment offerings available; |
• | our ability to develop and distribute engaging storytelling across media to drive brand awareness; |
• | our dependence on third party relationships, including with third party manufacturers, licensors of brands, studios, content producers and entertainment distribution channels; |
• | our ability to successfully compete in the global play and entertainment industry, including with manufacturers, marketers, and sellers of toys and games, digital gaming products and digital media, as well as with film studios, television production companies and independent distributors and content producers; |
• | our ability to successfully evolve and transform our business and capabilities to address a changing global consumer landscape and retail environment, including changing inventory policies and practices of our customers; |
• | our ability to develop new and expanded areas of our business, such as through eOne, Wizards of the Coast, and our other entertainment, digital gaming and esports initiatives; |
• | risks associated with international operations, such as currency conversion, currency fluctuations, the imposition of tariffs, quotas, border adjustment taxes or other protectionist measures, and other challenges in the territories in which we operate; |
• | our ability to successfully implement actions to lessen the impact of potential and enacted tariffs imposed on our products, including any changes to our supply chain, inventory management, sales policies or pricing of our products; |
• | downturns in global and regional economic conditions impacting one or more of the markets in which we sell products, which can negatively impact our retail customers and consumers, result in lower employment levels, consumer disposable income, retailer inventories and spending, including lower spending on purchases of our products; |
• | other economic and public health conditions or regulatory changes in the markets in which we and our customers, partners, licensees, suppliers and manufacturers operate, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease, such as the coronavirus, the occurrence of which could create work slowdowns, delays or shortages in production or shipment of products, increases in costs or delays in revenue; |
• | the success of our key partner brands, including the ability to secure, maintain and extend agreements with our key partners or the risk of delays, increased costs or difficulties associated with any of our or our partners’ planned digital applications or media initiatives; |
• | fluctuations in our business due to seasonality; |
• | the concentration of our customers, potentially increasing the negative impact to our business of difficulties experienced by any of our customers or changes in their purchasing or selling patterns; |
• | the bankruptcy or other lack of success of one of our significant retailers, such as the bankruptcy of Toys“R”Us in the United States and Canada; |
• | the bankruptcy or other lack of success of one or more of our licensees and other business partners; |
• | risks relating to the use of third party manufacturers for the manufacturing of our products, including the concentration of manufacturing for many of our products in the People’s Republic of China and our ability to successfully diversify sourcing of our products to reduce reliance on sources of supply in China; |
• | our ability to attract and retain talented employees; |
• | our ability to realize the benefits of cost-savings and efficiency and/or revenue enhancing initiatives, including initiatives to integrate eOne into our business; |
• | our ability to protect our assets and intellectual property, including as a result of infringement, theft, misappropriation, cyber-attacks or other acts compromising the integrity of our assets or intellectual property; |
• | risks relating to the impairment and/or write-offs of products and films and television programs we acquire and produce; |
• | risks relating to investments and acquisitions, such as our acquisition of eOne, which risks include: integration difficulties; inability to retain key personnel; diversion of management time and resources; failure to achieve anticipated benefits or synergies of acquisitions or investments; and risks relating to the additional indebtedness incurred in connection with a transaction; |
• | the risk of product recalls or product liability suits and costs associated with product safety regulations; |
• | changes in tax laws or regulations, or the interpretation and application of such laws and regulations, which may cause us to alter tax reserves or make other changes which would significantly impact our reported financial results; |
• | the impact of litigation or arbitration decisions or settlement actions; and |
• | other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | |||||||||
January 2020 | |||||||||||||
12/30/19 – 1/26/20 | — | $ | — | — | $ | 366,592,558 | |||||||
February 2020 | |||||||||||||
1/27/20 – 3/1/20 | — | $ | — | — | $ | 366,592,558 | |||||||
March 2020 | |||||||||||||
3/2/20 – 3/29/20 | — | $ | — | — | $ | 366,592,558 | |||||||
Total | — | $ | — | — | $ | 366,592,558 | |||||||
Item 3. | Defaults Upon Senior Securities. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Other Information. |
Item 6. | Exhibits |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
3.6 | ||
3.7 | ||
3.8 | ||
3.9 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
4.6 | ||
4.7 | ||
4.8 | ||
10.1* | ||
10.2* | ||
10.3* | ||
10.4* | ||
10.5* | ||
10.6* | ||
10.7* | ||
10.8* | ||
10.9* | ||
10.10* | ||
31.1** | ||
31.2** | ||
32.1** | ||
32.2** | ||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
HASBRO, INC. | |
(Registrant) | |
Date: May 7, 2020 | By: /s/ Deborah Thomas |
Deborah Thomas | |
Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) | |
Period | Cumulative Percent of Option Exercisable | |
________ ____ to ________ ____ | 0% | |
________ ____ to ________ ____ | 33 1/3% | |
________ ____ to ________ ____ | 66 2/3% | |
________ ____ to ________ ____ | 100% | |
Period | Cumulative Percent of Option Exercisable | |
________ ____ to ________ ____ | 0% | |
________ ____ to ________ ____ | 33 1/3% | |
________ ____ to ________ ____ | 66 2/3% | |
________ ____ to ________ ____ | 100% | |
Period | Cumulative Percent of Option Exercisable | |
________ ____ to ________ ____ | 0% | |
________ ____ to ________ ____ | 33 1/3% | |
________ ____ to ________ ____ | 66 2/3% | |
________ ____ to ________ ____ | 100% | |
EPS | $ | |
Revenues | $ | |
Average ROIC | $ | |
EPS | $ | |
Revenues | $ | |
Average ROIC | $ | |
EPS | $ | |
Revenues | $ | |
Average ROIC | $ | |
If to the Executive: | At his address on file with the Company; |
and | |
If to the Company: | Hasbro, Inc. |
1011 Newport | |
Pawtucket, RI 02862 | |
Attention: Tarrant Sibley, Executive Vice President, | |
Chief Legal Officer and Corporate Secretary | |
Hasbro, Inc., | |
by | |
/s/ Brian Goldner | |
Name: Brian Goldner | |
Title:Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |
January 10, 2020 | |
Hasbro, B.V., | |
by | |
/s/ Wijnhold Vos | |
Name: Wijnhold Vos | |
Title: Manager Finance | |
Date: January 21, 2020 | |
If to the Company: | Hasbro, Inc. |
Hasbro, Inc., | |
by | |
/s/ Deborah M. Thomas | |
Name: Deborah M. Thomas | |
Title: Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |
Date: March 5, 2020 | |
Hasbro Studios, LLC | |
by | |
/s/ Deborah M. Thomas | |
Name: Deborah M. Thomas | |
Title: Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |
Date: March 5, 2020 | |
1. | I have reviewed this quarterly report on Form 10-Q of Hasbro, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Brian Goldner | |
Brian Goldner Chairman and Chief Executive Officer | |
1. | I have reviewed this quarterly report on Form 10-Q of Hasbro, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Deborah Thomas | |
Deborah Thomas Executive Vice President and Chief Financial Officer | |
1) | the Company’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2020, as filed with the Securities and Exchange Commission (the “10-Q Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2) | the information contained in the Company's 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Brian Goldner Brian Goldner Chairman and Chief Executive Officer of Hasbro, Inc. | |
1) | the Company’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2020, as filed with the Securities and Exchange Commission (the “10-Q Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2) | the information contained in the Company's 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Deborah Thomas Deborah Thomas Executive Vice President and Chief Financial Officer of Hasbro, Inc. | |
Derivative Financial Instruments - Fair Values of Undesignated Derivative Financial Instruments (Details) - Foreign Exchange Forward - Not Designated as Hedging Instrument - USD ($) $ in Thousands |
Mar. 29, 2020 |
Dec. 29, 2019 |
Mar. 31, 2019 |
|---|---|---|---|
| Derivatives, Fair Value [Line Items] | |||
| Net unrealized gains | $ (9,984) | $ (3,807) | $ 2,054 |
| Prepaid expenses and other current assets | |||
| Derivatives, Fair Value [Line Items] | |||
| Unrealized gains | 1,170 | 0 | 2,391 |
| Unrealized losses | 0 | 0 | (337) |
| Net unrealized gains | 1,170 | 0 | 2,054 |
| Accrued liabilities | |||
| Derivatives, Fair Value [Line Items] | |||
| Unrealized gains | 1,252 | 13 | 0 |
| Unrealized losses | (12,406) | (3,820) | 0 |
| Net unrealized gains | $ (11,154) | $ (3,807) | $ 0 |
Financial Instruments - Production Financing Loans (Details) - USD ($) $ in Thousands |
Mar. 29, 2020 |
Dec. 29, 2019 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| Other loans | $ 9,405 | |
| Total | 184,977 | $ 218,753 |
| Non-current | 141,131 | |
| Current | 34,441 | |
| Total | $ 175,572 |
eOne Investments in Productions and Investments in Acquired Content Rights (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Industries [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Program Production Costs | Costs associated with the Company's investments in eOne productions and investments in acquired content rights consisted of the following at March 29, 2020:
|
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| Program Cost Amortization | The Company recorded $123,383 of program cost amortization related to the above programming in the quarter ended March 29, 2020, consisting of the following:
|
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Restructuring Actions |
3 Months Ended | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 29, 2020 | |||||||||||||||||||||||||
| Restructuring Charges [Abstract] | |||||||||||||||||||||||||
| Restructuring Actions | Restructuring Actions During 2018, the Company announced a comprehensive restructuring plan which consists of re-designing its go-to market strategy and re-shaping its organization to become a more responsive, innovative and digitally-driven play and entertainment company. As part of this process the Company took certain actions, which continued through 2019. The actions primarily included headcount reduction aimed at right-sizing the Company’s cost-structure and giving it the ability to add required new talent in the future. In connection with the eOne Acquisition, in the first quarter of 2020, the Company recorded severance and other employee charges related to the integration of eOne. Charges related to the 2018 restructuring were included within selling, distribution and administration costs on the Consolidated Statements of Operations for the year ended December 30, 2018. Charges related to the eOne restructuring costs were recorded within acquisition and related charges on the Consolidated Statements of Operations for the quarter ended March 29, 2020, and reported within Corporate and Eliminations. The detail of activity related to the programs for the first quarter of 2020 is as follows:
|
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Business Combination (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Total Consideration Transferred | The total consideration transferred, in thousands of dollars except per share data, was as follows:
|
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| Summary of Preliminary Allocation of Purchase Price | The following table summarizes our preliminary allocation of the December 30, 2019 eOne purchase price (in thousands of dollars):
|
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| Changes in Carrying Amount of Goodwill | Changes in the carrying amount of goodwill, by operating segment, for the three months ended March 29, 2020 is as follows:
|
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| Unaudited Supplemental Pro Forma Results of Operations | Pursuant to Topic 805, unaudited supplemental pro forma results of operations for the three months ended March 31, 2019, as if the acquisition of eOne had occurred on December 31, 2018, the first day of the Company’s 2019 fiscal year are presented below (in thousands, except per share amounts):
The following table summarizes net revenues and loss before income taxes of eOne included in the Company's Consolidated Statement of Operations since the date of acquisition for the quarter ended March 29, 2020 (in thousands of dollars).
|
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Revenue Recognition - Narrative (Details) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
|
Mar. 29, 2020
USD ($)
brand_category
|
Dec. 30, 2019
USD ($)
|
Mar. 31, 2019
USD ($)
|
|
| Disaggregation of Revenue [Line Items] | |||
| Contract assets | $ 358,616 | $ 27,291 | |
| Prepaid expenses and other current assets | 271,120 | 23,857 | |
| Contract assets - long term | $ 87,496 | $ 3,434 | |
| Number of brand categories | brand_category | 5 | ||
| eOne | |||
| Disaggregation of Revenue [Line Items] | |||
| Contract assets | $ 291,427 | ||
| Prepaid expenses and other current assets | 234,532 | ||
| Contract assets - long term | 56,895 | ||
| Aggregate deferred revenues recorded as liabilities | $ 189,654 | ||
| Revenue recognized | $ 80,652 | ||
| Contract With Customer, Asset, Percentage | 87.00% | ||
| Contract With Customer, Liability, Percentage | 79.00% |
Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Information Related to Leases | Information related to the Company’s leases for the quarters ended March 29, 2020 and March 31, 2019 are as follows:
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| Reconciliation of Future Undiscounted Cash Flows | The following is a reconciliation of future undiscounted cash flows to the operating liabilities, and the related right of use assets, included in our Consolidated Balance Sheets as of March 29, 2020:
(1) Included in Accrued liabilities on the consolidated balance sheets. (2) Included in Other liabilities on the consolidated balance sheets. (3) Included in Property, plant, and equipment on the consolidated balance sheets.
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Business Combination - Preliminary Allocation of Purchase Price (Details) - USD ($) $ in Thousands |
Mar. 29, 2020 |
Dec. 30, 2019 |
Dec. 29, 2019 |
Mar. 31, 2019 |
|---|---|---|---|---|
| Business Acquisition [Line Items] | ||||
| Goodwill | $ 3,572,650 | $ 494,584 | $ 485,528 | |
| eOne | ||||
| Business Acquisition [Line Items] | ||||
| Cash, cash equivalents and restricted cash | $ 183,713 | |||
| Accounts receivable, net | 259,061 | |||
| Inventories | 7,029 | |||
| Other current assets | 286,270 | |||
| Property, plant and equipment (including right of use assets) | 90,339 | |||
| Intangible assets | 1,055,249 | |||
| Content assets - IIC and IIP | 751,524 | |||
| Other assets | 183,209 | |||
| Short-term borrowings | (60,533) | |||
| Accounts payable, and accrued liabilities | (772,097) | |||
| Long-term debt (including current portion) | (149,118) | |||
| Other liabilities | (262,644) | |||
| Noncontrolling interests | (63,541) | |||
| Estimated fair value of net assets acquired | 1,508,461 | |||
| Goodwill | 3,079,181 | |||
| Total purchase price | $ 4,587,642 |
Other Comprehensive Earnings (Loss) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Earnings (Loss) | Other Comprehensive Earnings (Loss) Components of other comprehensive earnings (loss) are presented within the consolidated statements of comprehensive earnings (loss). The following table presents the related tax effects on changes in other comprehensive earnings (loss) for the quarters ended March 29, 2020 and March 31, 2019.
Changes in the components of accumulated other comprehensive earnings (loss) for the three months ended March 29, 2020 and March 31, 2019 are as follows:
Gains (Losses) on Derivative Instruments At March 29, 2020, the Company had remaining net deferred gains on foreign currency forward contracts, net of tax, of $33,687 in accumulated other comprehensive loss ("AOCE"). These instruments hedge payments related to inventory purchased in the first quarter of 2020 or forecasted to be purchased during the remainder of 2020 through 2022, intercompany expenses expected to be paid or received during 2020, television and movie production costs paid in 2020, and cash receipts for sales made at the end of the first quarter of 2020 or forecasted to be made in the remainder of 2020 and, to a lesser extent, 2021 through 2022. These amounts will be reclassified into the consolidated statements of operations upon the sale of the related inventory or recognition of the related sales or expenses. In addition to foreign currency forward contracts, the Company entered into hedging contracts on future interest payments related to the long-term notes due in 2021 and 2044. At the date of debt issuance, these contracts were terminated and the fair value on the date of settlement was deferred in AOCE and is being amortized to interest expense over the life of the related notes using the effective interest rate method. At March 29, 2020, deferred losses, net of tax of $17,568 related to these instruments remained in AOCE. For the quarters ended March 29, 2020 and March 31, 2019, previously deferred losses of $450, were reclassified from AOCE to net earnings. Of the amount included in AOCE at March 29, 2020, the Company expects net gains of approximately $24,085 to be reclassified to the consolidated statements of operations within the next 12 months. However, the amount ultimately realized in earnings is dependent on the fair value of the hedging instruments on the settlement dates.
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Income Taxes |
3 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Mar. 29, 2020 | |||||||||
| Income Tax Disclosure [Abstract] | |||||||||
| Income Taxes | Income Taxes The Company and its subsidiaries file income tax returns in the United States and various state and international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal, state and local, and international tax authorities in various tax jurisdictions. Our effective tax rate (ETR) from continuing operations was 5.7% for the quarter ended March 29, 2020 and 9.7% for the quarter ended March 31, 2019. The following items caused the quarterly ETR to be significantly different from our historical annual ETR:
In May 2019, a public referendum held in Switzerland approved Swiss Federal Act on Tax Reform and AHV Financing (TRAF) proposals previously approved by Swiss Parliament. The Swiss tax reform measures were effective on January 1, 2020. Changes in tax reform include the abolishment of preferential tax regimes for holding companies, domicile companies and mixed companies at the cantonal level. The enacted changes in Swiss federal tax were not material to the Company's consolidated financial statements. Swiss cantonal tax was enacted in December 2019. The Company is still assessing the transitional provision options it may elect; however, the legislation is not expected to have a material effect on the Company’s consolidated financial statements. We will continue to review TRAF as the Swiss authorities provide additional interpretive guidance on the new law and related transitional methodology. The Company is no longer subject to U.S. federal income tax examinations for years before 2013. With few exceptions, the Company is no longer subject to U.S. state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions for years before 2012. The Company is currently under income tax examination in several U.S. state and local and non-U.S. jurisdictions.
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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 29, 2020 |
Dec. 29, 2019 |
Mar. 31, 2019 |
|---|---|---|---|
| ASSETS | |||
| Accounts receivable, allowance for doubtful accounts | $ 16,900 | $ 17,200 | $ 12,100 |
| Property, plant and equipment, accumulated depreciation | 513,200 | 505,900 | 484,200 |
| Other intangibles, accumulated amortization | $ 608,500 | $ 895,200 | $ 747,800 |
| Preference stock, par value (in dollars per share) | $ 2.5 | $ 2.5 | $ 2.5 |
| Preference stock, authorized shares (in shares) | 5,000,000 | 5,000,000 | 5,000,000 |
| Preference stock, issued (in shares) | 0 | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.5 | $ 0.5 | $ 0.5 |
| Common stock, authorized shares (in shares) | 600,000,000 | 600,000,000 | 600,000,000 |
| Common stock, issued (in shares) | 220,286,736 | 220,286,736 | 209,694,630 |
| Treasury stock (in shares) | 83,279,734 | 83,424,129 | 83,830,809 |
Derivative Financial Instruments - Summary of Cash Flow Hedging Instruments (Details) - Cash Flow Hedging - Designated as Hedging Instrument - USD ($) $ in Thousands |
Mar. 29, 2020 |
Dec. 29, 2019 |
Mar. 31, 2019 |
|---|---|---|---|
| Derivative [Line Items] | |||
| Notional Amount | $ 605,650 | $ 543,219 | $ 776,642 |
| Fair Value | 43,634 | 12,904 | 30,197 |
| Inventory purchases | |||
| Derivative [Line Items] | |||
| Notional Amount | 343,227 | 398,800 | 486,999 |
| Fair Value | 32,186 | 8,727 | 21,649 |
| Sales | |||
| Derivative [Line Items] | |||
| Notional Amount | 101,120 | 124,920 | 263,221 |
| Fair Value | 4,761 | 4,037 | 8,358 |
| Production financing and other | |||
| Derivative [Line Items] | |||
| Notional Amount | 161,303 | 19,499 | 26,422 |
| Fair Value | $ 6,687 | $ 140 | $ 190 |
Financial Instruments - Schedule of Line of Credit Facilities (Details) $ in Thousands, $ in Thousands |
Mar. 29, 2020
USD ($)
|
Mar. 29, 2020
CAD ($)
|
Dec. 29, 2019
USD ($)
|
|---|---|---|---|
| Line of Credit Facility [Line Items] | |||
| Production Financing Loan and Other Loans | $ 184,977 | $ 218,753 | |
| CANADA | |||
| Line of Credit Facility [Line Items] | |||
| Production Financing Loan and Other Loans | $ 73,485 | ||
| U.S. | |||
| Line of Credit Facility [Line Items] | |||
| Production Financing Loan and Other Loans | $ 111,492 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
|
| Income Tax Contingency [Line Items] | ||
| Effective income tax rate | 5.70% | 9.70% |
| Discrete Income Tax Expense (Benefit) | $ 20,081 | |
| Income tax expense (benefit) | (4,072) | $ 2,868 |
| Discrete Income Tax Expense (Benefit), Decrease In Liability | $ 2,607 | |
| eOne | ||
| Income Tax Contingency [Line Items] | ||
| Discrete Income Tax Expense (Benefit) | $ 22,332 | |
| Maximum | eOne | ||
| Income Tax Contingency [Line Items] | ||
| Effective income tax rate | 20.60% | |
| Minimum | eOne | ||
| Income Tax Contingency [Line Items] | ||
| Effective income tax rate | 18.50% | |
Business Combination - Total Consideration Transferred (Details) - Dec. 30, 2019 - eOne £ / shares in Units, $ / shares in Units, £ in Thousands, shares in Thousands, $ in Thousands |
USD ($)
shares
|
GBP (£)
£ / shares
shares
|
$ / shares |
|---|---|---|---|
| Business Acquisition [Line Items] | |||
| eOne common shares outstanding (in shares) | shares | 498,040 | 498,040 | |
| Cash consideration per share (in dollars per share) | (per share) | £ 5.60 | $ 7.35 | |
| Total consideration for shares outstanding | $ 3,658,345 | ||
| Cash consideration for employee share based payment awards outstanding | 145,566 | ||
| Cash consideration for extinguishment of debt | 831,130 | ||
| Total cash consideration | 4,635,041 | £ 2,900,000 | |
| Less: Employee awards to be recorded as future stock compensation expense | 47,399 | ||
| Total consideration transferred | $ 4,587,642 |
Derivative Financial Instruments (Tables) |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Cash Flow Hedging Instruments | At March 29, 2020, March 31, 2019 and December 29, 2019, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:
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| Schedule of Foreign Currency Forward Contracts Designated as Cash Flow Hedges | The fair values of the Company's foreign currency forward contracts designated as cash flow hedges are recorded in the consolidated balance sheets at March 29, 2020, March 31, 2019 and December 29, 2019 as follows:
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| Schedule of Net Gains (Losses) on Cash Flow Hedges Activities | Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters ended March 29, 2020 and March 31, 2019 as follows:
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| Fair Values of Undesignated Derivative Financial Instruments | At March 29, 2020, March 31, 2019 and December 29, 2019, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:
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Financial Instruments |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments | Financial Instruments The Company's financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities. At March 29, 2020, March 31, 2019 and December 29, 2019, the carrying cost of these instruments approximated their fair value. The Company's financial instruments at March 29, 2020, March 31, 2019 and December 29, 2019 also include certain assets and liabilities measured at fair value (see Notes 9 and 10) as well as long-term borrowings. The carrying costs, which are equal to the outstanding principal amounts, and fair values of the Company's long-term borrowings as of March 29, 2020, March 31, 2019 and December 29, 2019 are as follows:
In November of 2019, in conjunction with the Company's acquisition of eOne, the Company issued an aggregate of $2,375,000 of senior unsecured debt securities (the "Notes") consisting of the following tranches: $300,000 of notes due 2022 (the "2022 Notes") that bear interest at a fixed rate of 2.60%, $500,000 of notes due 2024 (the "2024 Notes") that bear interest at a fixed rate of 3.00%, $675,000 of notes due 2026 (the "2026 Notes") that bear interest at a fixed rate of 3.55% and $900,000 of notes due 2029 (the "2029 Notes") that bear interest at a fixed rate of 3.90%. Net proceeds from the issuance of the Notes, after deduction of $20,043 of underwriting discount and fees, totaled $2,354,957. These costs are being amortized over the life of the Notes, which range from three to ten years. The Notes bear interest at the stated rates but may be subject to upward adjustment if the credit rating of the Company is reduced by Moody's or Standard & Poors. The adjustment can be from 0.25% to 2.00% based on the extent of the ratings decrease. The Company may redeem the Notes at its option at the greater of the principal amount of the Notes or the present value of the remaining scheduled payments discounted using the effective interest rate on applicable U.S. Treasury bills at the time of repurchase, plus (1) 15 basis points (in the case of the 2022 Notes); (2) 25 basis points (in the case of the 2024 Notes); (3) 30 basis points (in the case of the 2026 Notes); and (4) 35 basis points (in the case of the 2029 Notes). In addition, on and after October 19, 2024 for the 2024 Notes, September 19, 2026 for the 2026 Notes and August 19, 2029 for the 2029 Notes, such series of Notes will be redeemable, in whole at any time or in part from time to time, at the Company's option at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus an accrued and unpaid interest. Of the Company’s long-term borrowings, the $300,000 of 3.15% Notes mature in 2021. All of the Company’s other long-term borrowings have contractual maturities that occur subsequent to 2021 with the exception of certain of the Company’s production financing facilities. In September of 2019, the Company entered into a $1.0 billion Term Loan Agreement (the "Term Loan Agreement”) with Bank of America N.A. (“Bank of America”), as administrative agent, and certain financial institutions as lenders, pursuant to which such lenders committed to provide, contingent upon the completion of the eOne Acquisition and certain other customary conditions to funding, (1) a three-year senior unsecured term loan facility in an aggregate principal amount of $400,000 (the “Three-Year Tranche”) and (2) a five-year senior unsecured term loan facility in an aggregate principal amount of $600,000 (the “Five-Year Tranche” and together with the Three-Year Tranche, the “Term Loan Facilities”). Loans under the Term Loan Facilities will bear interest at the Company’s option, at either the Eurocurrency Rate or the Base Rate, in each case plus a per annum applicable rate that fluctuates (1) in the case of the Three-Year Tranche, between 87.5 basis points and 175.0 basis points, in the case of loans priced at the Eurocurrency Rate, and between 0.0 basis points and 75.0 basis points, in the case of loans priced at the Base Rate, and (2) in the case of the Five-Year Tranche, between 100.0 basis points and 187.5 basis points, in the case of loans priced at the Eurocurrency Rate, and between 0.0 basis points and 87.5 basis points, in the case of loans priced at the Base Rate, in each case, based upon the non-credit enhanced, senior unsecured long-term debt ratings of the Company by Fitch Ratings Inc., Moody’s Investor Service, Inc. and S&P Global Rankings, subject to certain provisions taking into account potential differences in ratings issued to the relevant rating agencies or a lack of ratings issued by such rating agencies. Loans under the Five-Year Tranche will require principal amortization payments that will be payable in equal quarterly installments of 5.0% per annum of the original principal amount thereof for each of the first two years after funding, increasing to 10.0% per annum of the original principal amount thereof for each subsequent year. The Term Loan Agreement contains affirmative and negative covenants typical of this type of facility, including: (i) restrictions on the Company’s and its domestic subsidiaries’ ability to allow liens on their assets, (ii) restrictions on the incurrence of indebtedness, (iii) restrictions on the Company’s and certain of its subsidiaries’ ability to engage in certain mergers, (iv) the requirement that the Company maintain a Consolidated Interest Coverage Ratio of no less than 3.00:1.00 as of the end of any fiscal quarter and (v) the requirement that the Company maintain a Consolidated Total Leverage Ratio of no more than, depending on the gross proceeds of equity securities issued after the effective date of the acquisition of eOne, 5.65:1.00 or 5.40:1.00 for each of the first, second and third fiscal quarters ended after the funding of the Term Loan Facilities, with periodic step downs to 3.50:1.00 for the fiscal quarter ending December 31, 2023 and thereafter. The notes were drawn down on December 30, 2019, the closing date of the eOne Acquisition. As of March 29, 2020, the Company was in compliance with the financial covenants contained in the Term Loan Agreement. The fair values of the Company's long-term debt are considered Level 3 fair values (see Note 9 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a similar debt security. This assumption is considered an unobservable input in that it reflects the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. Production Financing In addition to the Company's financial instruments, the Company uses production financing to fund certain of its television and film productions which are arranged on an individual production basis by special purpose production subsidiaries. Production financing facilities are secured by the assets and future revenue of the individual production subsidiaries and are non-recourse to the Company's assets. Production financing facilities typically have maturities of less than two years, while the titles are in production, and are repaid once delivered and all credits, broadcaster pre-sales and international sales have been received.
Interest is charged at bank prime rate plus a margin based on the risk of the respective production. The weighted average interest rate on all production financing as of March 29, 2020 was 4.1%. The Company has Canadian dollar and U.S. dollar production credit facilities with various banks. The carrying amounts are denominated in the following currencies:
The following table represents the movements in production financing and other related loans acquired as a result of the eOne Acquisition during the first quarter of 2020:
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Derivative Financial Instruments |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments | Derivative Financial Instruments Hasbro uses foreign currency forward contracts and zero-cost collar options to mitigate the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. These over-the-counter contracts, which hedge future currency requirements related to purchases of inventory, product sales, television and film production cost and production financing loans (see Note 6) as well as other cross-border transactions not denominated in the functional currency of the business unit, are primarily denominated in United States and Hong Kong dollars, and Euros. All contracts are entered into with a number of counterparties, all of which are major financial institutions. The Company believes that a default by a single counterparty would not have a material adverse effect on the financial condition of the Company. Hasbro does not enter into derivative financial instruments for speculative purposes. Cash Flow Hedges The Company uses foreign currency forward contracts and zero-cost collar options to reduce the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. All of the Company's designated foreign currency forward contracts and zero-cost collar options are considered to be cash flow hedges. These instruments hedge a portion of the Company's currency requirements associated with anticipated inventory purchases, product sales, certain production financing loans and other cross-border transactions in 2020 through 2022. At March 29, 2020, March 31, 2019 and December 29, 2019, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:
The Company has a master agreement with each of its counterparties that allows for the netting of outstanding forward contracts. The fair values of the Company's foreign currency forward contracts designated as cash flow hedges are recorded in the consolidated balance sheets at March 29, 2020, March 31, 2019 and December 29, 2019 as follows:
Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters ended March 29, 2020 and March 31, 2019 as follows:
Undesignated Hedges The Company also enters into foreign currency forward contracts to minimize the impact of changes in the fair value of intercompany loans due to foreign currency changes. The Company does not use hedge accounting for these contracts as changes in the fair values of these contracts are substantially offset by changes in the fair value of the intercompany loans. Additionally, with the acquisition of eOne during the first quarter of 2020, the Company continued eOne's balance sheet hedging program designed to manage transactional exposure to fair value movements on certain of eOne's foreign currency denominated monetary assets and liabilities. The Company does not use hedge accounting for these contracts as changes in the fair values of these contracts are offset by changes in the fair value of the balance sheet item. As of March 29, 2020, March 31, 2019 and December 29, 2019 the total notional amounts of the Company's undesignated derivative instruments were $238,187, $293,326 and $307,351, respectively. At March 29, 2020, March 31, 2019 and December 29, 2019, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:
The Company recorded net gains of $2,499 and $4,809 on these instruments to other (income) expense, net for the quarters ended March 29, 2020 and March 31, 2019, respectively, relating to the change in fair value of such derivatives, substantially offsetting gains and losses from the change in fair value of intercompany loans to which the contracts relate. eOne Purchase Price Hedge During the third quarter of 2019 the Company hedged a portion of its exposure to fluctuations in the British pound sterling in relation to the eOne Acquisition purchase using a series of both foreign exchange forward and option contracts. These contracts did not qualify for hedge accounting and as such, were marked to market through the Company's Consolidated Statement of Operations. For tax purposes these contracts qualified as nontaxable integrated tax hedges. These contracts matured on December 30, 2019 (the closing date of the transaction) and net gains or losses recognized on these contracts in the first quarter of 2020 were immaterial. For additional information related to the Company's derivative financial instruments see Note 5.
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Restructuring Actions - Schedule of Restructuring and Related Costs (Details) $ in Thousands |
3 Months Ended |
|---|---|
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Mar. 29, 2020
USD ($)
| |
| Restructuring Reserve [Roll Forward] | |
| Beginning balance | $ 31,113 |
| eOne restructuring charges | 13,186 |
| Payments for restructuring | (9,876) |
| Ending balance | $ 34,423 |
Financial Instruments - Schedule of Production Financing Loan and Other Loans (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 29, 2020
USD ($)
| |
| Production Financing | |
| Production financing loan, beginning balance | $ 209,651 |
| Drawdowns | 20,511 |
| Repayments | (50,186) |
| Foreign exchange differences | (4,404) |
| Production financing loan, ending balance | 175,572 |
| Other Loans | |
| Other loans, beginning balance | 9,102 |
| Drawdowns | 7,996 |
| Repayments | (8,916) |
| Foreign exchange differences | 1,223 |
| Other loans, ending balance | 9,405 |
| Production financing loan and other loans, beginning balance | 218,753 |
| Drawdowns | 28,507 |
| Repayments | (59,102) |
| Foreign exchange differences | (3,181) |
| Production financing loan and other loans, ending balance | $ 184,977 |
Fair Value of Financial Instruments - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
Dec. 29, 2019 |
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| Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |||
| Redeemable period | 45 days | ||
| Minimum | |||
| Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |||
| Redeemable period | 30 days | ||
| Maximum | |||
| Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |||
| Redeemable period | 90 days | ||
| Fair Value, Recurring | |||
| Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |||
| Fair value of investments | $ 24,804 | $ 24,188 | $ 25,518 |
| Net gains to other (income) expense, net | $ (431) | $ 550 | |
Leases - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
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| Lessee, Lease, Description [Line Items] | ||
| Operating lease expense | $ 22,897 | $ 16,561 |
| Minimum | ||
| Lessee, Lease, Description [Line Items] | ||
| Remaining lease terms | 1 year | |
| Maximum | ||
| Lessee, Lease, Description [Line Items] | ||
| Remaining lease terms | 18 years | |
Other Comprehensive Earnings (Loss) - Schedule of Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
|
| Other comprehensive earnings (loss), tax effect: | ||
| Tax benefit (expense) on unrealized holding gains (losses) | $ 118 | $ (77) |
| Tax expense on cash flow hedging activities | (7,203) | (3) |
| Reclassifications to earnings, tax effect: | ||
| Tax expense on cash flow hedging activities | 267 | 346 |
| Tax benefit on unrecognized pension and postretirement amounts reclassified to the consolidated statements of operations | (80) | (331) |
| Total tax effect on other comprehensive earnings (loss) | $ (6,898) | $ (65) |
Business Combination - Unaudited Supplemental Pro Forma Results of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
|
| Business Acquisition [Line Items] | ||
| Net revenues | $ 1,105,570 | $ 732,510 |
| Pro Forma Results | ||
| Revenues | 1,198,722 | |
| Net earnings attributable to Hasbro, Inc. | 79,134 | |
| Net earnings attributable to Hasbro, Inc. | $ 76,405 | |
| Earnings per share attributable to Hasbro, Inc.: Diluted (in dollars per share) | $ 0.56 | |
| Earnings per share attributable to Hasbro, Inc.: Basic (in dollars per share) | $ 0.56 | |
| Operating Segments | eOne | ||
| Business Acquisition [Line Items] | ||
| Loss before income taxes | $ (33,620) | |
Basis of Presentation (Policies) |
3 Months Ended |
|---|---|
Mar. 29, 2020 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial position of Hasbro, Inc. and all majority-owned subsidiaries ("Hasbro" or the "Company") as of March 29, 2020 and March 31, 2019, and the results of its operations and cash flows and shareholders' equity for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes thereto. Actual results could differ from those estimates.
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| Production Financing | Production Financing Production financing relates to financing facilities for certain of the Company's television and film productions. Beginning in the first quarter of 2020 with the acquisition of eOne, the Company funded certain of its television and film productions using production financing facilities. Production financing facilities are secured by the assets and future revenues of the individual production subsidiaries, typically have maturities of less than two years while the titles are in production, and are repaid once the production is delivered and all tax credits, broadcaster pre-sales and international sales have been received. In connection with the production of a television or film program, the Company records initial cash outflows within cash flows from operating activities due to its investment in the production and concurrently records cash inflows within cash flows from financing activities from the production financing it normally obtains. Under these facilities, certain of the Company's cash is restricted while the financing is outstanding. At March 29, 2020, $86,177 of the Company's cash was restricted by such facilities. |
| Investment in Productions and Acquired Content Rights | Investment in Productions and Acquired Content Rights The cost of investments in programming ("IIP") and investments in content rights ("IIC") for eOne's television and film libraries are recorded in the consolidated balance sheets at amounts considered recoverable against future revenues. These amounts are amortized to program cost amortization using a model that reflects the consumption of the asset as it is released through different exploitation windows (e.g., broadcast licenses, theatrical release and home entertainment) and the expected revenue earned in each of those stages of release over a period not exceeding 10 years. Amounts capitalized are reviewed regularly and any portion of the unamortized amount that appears not to be recoverable from future net revenues will be written off to program cost amortization during the period in which the loss becomes evident. Certain of these agreements require the Company to pay minimum guaranteed advances ("MGs") for participations and residuals. MGs are recognized in the consolidated balance sheets when a liability arises, usually on delivery of the television or film program to the Company. The current portion of MGs are recorded as Payables and Accrued Liabilities and the long-term portion are recorded as Other Liabilities. These consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
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| Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements | Recently Adopted Accounting Standards The Company's significant accounting policies are the same as those described in Note 1 to the Company's consolidated financial statements in its 2019 Form 10-K with the exception of the accounting policies disclosed above. In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-13 (ASU 2016-13) Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard update replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and early adoption was permitted. The Company adopted the standard in the first quarter of 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (ASU 2018-13), Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, specifically related to disclosures surrounding Level 3 asset balances, fair value measurement methods, related gains and losses and fair value hierarchy transfers. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and early adoption was permitted. The Company adopted the standard in the first quarter of 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements. In March 2019, the FASB issued Accounting Standards Update No. 2019-02 (ASU 2019-02) Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials. The amendments in this update align cost capitalization of episodic television series production costs with that of film production cost capitalization. In addition, this update addresses impairment testing procedures with regard to film groups, when a film or license agreement is expected to be monetized with other films and/or license agreements. The intention of this update is to align accounting treatment with changes in production and distribution models within the entertainment industry and to provide increased transparency of information provided to users of financial statements about produced and licensed content. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and early adoption was permitted. The Company adopted the standard in the first quarter of 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements. Recently Issued Accounting Pronouncements In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14) Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2020, and early adoption is permitted. The standard relates to financial statement disclosure only and will not have an impact on the Company's consolidated statement of financial position, statements of operations and comprehensive earnings (loss) or statement of cash flows.
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| Revenue Recognition | Revenue Recognition Revenue is recognized when control of the promised goods or content is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or content. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Contract Assets and Liabilities Within our Entertainment, Licensing and Digital segment and our eOne segment the Company may receive royalty payments from licensees in advance of the licensees’ subsequent sales to their customers, or in advance of the Company’s performance obligation being satisfied. In addition, the Company may receive payments from its digital gaming business in advance of the recognition of the revenues. The Company defers revenues on these advanced payments until its performance obligation is satisfied and records the aggregate deferred revenues as liabilities. The Company records contract assets in the case of minimum guarantees that are being recognized ratably over the term of the respective license periods which varies based on sales over and above the contracts’ minimum guarantee. The current portion of contract assets were recorded in Prepaid Expenses and Other Current Assets, respectively, and the long-term portion were recorded as Other Long-Term Assets. Disaggregation of revenues The Company disaggregates its revenues from contracts with customers by segment: U.S. and Canada, International, Entertainment, Licensing and Digital, and eOne. The Company further disaggregates revenues within its International segment by major geographic region: Europe, Latin America, and Asia Pacific. Finally, the Company disaggregates its revenues by brand portfolio into five brand categories: Franchise brands, Partner brands, Hasbro gaming, Emerging brands, and TV/Film/Entertainment. We believe these collectively depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
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| Leases | The Company occupies offices and uses certain equipment under various operating lease arrangements. The Company has no finance leases. These leases have remaining lease terms of 1 to 18 years, some of which include options to extend lease terms or options to terminate current lease terms at certain times, subject to notice requirements set out in the lease agreement. Payments under certain of the lease agreements may be subject to adjustment based on a consumer price index or other inflationary indices. The lease liability for such lease agreements as of the adoption date, was based on fixed payments as of the adoption date. Any adjustments to these payments based on the related indices will be recorded to expense as incurred. Leases with an expected term of 12 months or less are not capitalized. Lease expense under such leases is recorded straight line over the life of the lease. The Company capitalizes non-lease components for equipment leases, but expenses non-lease components as incurred for real estate leases.
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Earnings (Loss) Per Share (Tables) |
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| Schedule of Earnings (Loss) Per Share | Net earnings per share data for the quarters ended March 29, 2020 and March 31, 2019 were computed as follows:
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Fair Value of Financial Instruments (Tables) |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | At March 29, 2020, March 31, 2019 and December 29, 2019, the Company had the following assets and liabilities measured at fair value in its consolidated balance sheets (excluding assets for which the fair value is measured using net asset value per share):
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| Reconciliation of Level 3 Fair Value | The following is a reconciliation of the beginning and ending balances of the fair value measurements of the Company's financial instruments which use significant unobservable inputs (Level 3):
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Segment Reporting |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting | Segment Reporting Hasbro is a global play and entertainment company with a broad portfolio of brands and entertainment properties spanning toys, games, licensed products ranging from traditional to high-tech and digital, and film and television entertainment. The Company's segments are (i) U.S. and Canada, (ii) International, (iii) Entertainment, Licensing and Digital, (iv) eOne, and (v) Global Operations. Following the eOne Acquisition on December 30, 2019, the eOne operating segment was added to the Company's existing reporting structure. The U.S. and Canada segment includes the marketing and selling of action figures, arts and crafts and creative play products, electronic toys and related electronic interactive products, fashion and other dolls, infant products, play sets, preschool toys, plush products, sports action blasters and accessories, vehicles and toy-related specialty products, as well as traditional board games, and trading card and role-playing games primarily within the United States and Canada. Within the International segment, the Company markets and sells both toy and game products in markets outside of the U.S. and Canada, primarily in the European, Asia Pacific, and Latin and South American regions. The Company's Entertainment, Licensing and Digital segment includes the Company's Wizards of the Coast digital gaming business, consumer products licensing, owned and licensed digital gaming, movie and television entertainment operations. The eOne segment engages in the development, acquisition, production, financing, distribution and sales of entertainment content and is comprised of all legacy eOne operations. These diversified offerings span across film, television and music production and sales, family programming, merchandising and licensing, and digital content. Over time, the Company plans to transition towards reflecting all of its entertainment operations in the eOne segment. The Company also expects to shift the consumer product and digital licensing business and toy and game sales related to the eOne preschool brands to legacy Hasbro segments; including related toy and game operations into the Company's geographic commercial segments in late 2021 and 2022. The Global Operations segment is responsible for sourcing finished products for the Company's U.S. and Canada and International segments. Segment performance is measured at the operating profit level. Included in Corporate and Eliminations are certain corporate expenses, including the elimination of intersegment transactions and certain assets benefiting more than one segment. Intersegment sales and transfers are reflected in management reports at amounts approximating cost. Certain shared costs, including global development and marketing expenses and corporate administration, are allocated to segments based upon expenses and foreign exchange rates fixed at the beginning of the year, with adjustments to actual expenses and foreign exchange rates included in Corporate and Eliminations. The significant accounting policies of the segments are the same as those referenced in Note 1. Results shown for the quarter ended March 29, 2020 are not necessarily representative of those which may be expected for the full year 2020, nor were those of the comparable 2019 periods representative of those actually experienced for the full year 2019. Similarly, such results are not necessarily those which would be achieved were each segment an unaffiliated business enterprise. Information by segment and a reconciliation to reported amounts for the quarters ended March 29, 2020 and March 31, 2019 are as follows:
(a) The Global Operations segment derives substantially all of its revenues, and thus its operating results, from intersegment activities. (b) Certain long-term assets, including property, plant and equipment, goodwill and other intangibles, which benefit multiple operating segments, are included in Corporate and Eliminations. Allocations of certain expenses related to these assets to the individual operating segments are done at the beginning of the year based on budgeted amounts. Any differences between actual and budgeted amounts are reflected in Corporate and Eliminations because allocations are translated from the U.S. Dollar to local currency at budgeted rates when recorded. Corporate and Eliminations also includes the elimination of inter-company balance sheet amounts. The following table represents consolidated International segment net revenues by major geographic region for the quarters ended March 29, 2020 and March 31, 2019:
As a result of the Company's acquisition of eOne, beginning in 2020, the Company's brand architecture reflects the addition of the eOne Entertainment portfolio which consists of legacy eOne film and TV revenues. Revenues related to eOne brands, including PEPPA PIG, PJ MASKS and RICKY ZOOM, are reported in the Emerging Brands portfolio. The following table presents consolidated net revenues by brand and entertainment portfolio for the quarters ended March 29, 2020 and March 31, 2019:
(1) Hasbro's total gaming category, which includes all gaming net revenues, both those reported in Hasbro Gaming and those reported elsewhere, most notably MAGIC: THE GATHERING and MONOPOLY, totaled $340,480 and $243,390, respectively, for the quarters ended March 29, 2020 and March 31, 2019. (2) First quarter 2020 balance in Emerging Brands portfolio includes eOne brands PEPPA PIG, PJ MASKS and RICKY ZOOM. (3) TV/Film/Entertainment represents eOne revenues not allocated to the Emerging Brands portfolio.
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Earnings (Loss) Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (Loss) Per Share | Earnings (Loss) Per Share Net earnings per share data for the quarters ended March 29, 2020 and March 31, 2019 were computed as follows:
For the quarters ended March 29, 2020 and March 31, 2019, options and restricted stock units totaling 4,055 and 1,693, respectively, were excluded from the calculation of diluted earnings per share because to include them would have been anti-dilutive. Of the 2020 amount, 1,151 shares would have been included in the calculation of diluted shares had the Company not had a net loss in the first quarter of 2020. Assuming that these awards and options were included, under the treasury stock method, they would have resulted in an additional 372 shares being included in the diluted earnings per share calculation for the quarter ended March 29, 2020.
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Fair Value of Financial Instruments |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures certain financial instruments at fair value. The fair value hierarchy consists of three levels: Level 1 fair values are based on quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access; Level 2 fair values are those based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 fair values are based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Accounting standards permit entities to measure many financial instruments and certain other items at fair value and establish presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar assets and liabilities. The Company has elected the fair value option for certain available-for-sale investments. At March 29, 2020, March 31, 2019 and December 29, 2019, these investments totaled $24,804, $24,188 and $25,518, respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheets. The Company recorded net (losses) gains of $(431) and $550 on these investments in other (income) expense, net for the quarters ended March 29, 2020 and March 31, 2019, respectively, related to the change in fair value of such instruments. At March 29, 2020, March 31, 2019 and December 29, 2019, the Company had the following assets and liabilities measured at fair value in its consolidated balance sheets (excluding assets for which the fair value is measured using net asset value per share):
Available-for-sale securities include equity securities of one company quoted on an active public market. The Company's derivatives consist of foreign currency forward and option contracts and zero-cost collar options. The Company used current forward rates of the respective foreign currencies to measure the fair value of these contracts. The Company’s option agreement relates to an equity method investment in Discovery Family Channel ("Discovery"). The option agreement is included in other liabilities at March 29, 2020, March 31, 2019 and December 29, 2019, and is valued using an option pricing model based on the fair value of the related investment. Inputs used in the option pricing model include the volatility and fair value of the underlying company which are considered unobservable inputs as they reflect the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. There were no changes in these valuation techniques during the three month period ended March 29, 2020. The following is a reconciliation of the beginning and ending balances of the fair value measurements of the Company's financial instruments which use significant unobservable inputs (Level 3):
In addition to the above, the Company has three investments for which the fair value is measured using net asset value per share. At March 29, 2020, March 31, 2019 and December 29, 2019, these investments had fair values of $24,804, $24,188 and $25,518, respectively. Two of the investments have net asset values that are predominantly based on underlying investments which are traded on an active market and are redeemable within 45 days. The third investment invests in hedge funds which are generally redeemable on a quarterly basis with 30 days – 90 days’ notice.
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Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands |
Mar. 29, 2020 |
Mar. 31, 2019 |
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| Revenue from Contract with Customer [Abstract] | ||
| Assets | $ 271,120 | $ 23,857 |
| Contract assets - long term | 87,496 | 3,434 |
| Total | 358,616 | 27,291 |
| Contract liabilities | $ 184,064 | $ 47,678 |
Segment Reporting (Tables) |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Information by Segment and Reconciliation to Reported Amounts | Information by segment and a reconciliation to reported amounts for the quarters ended March 29, 2020 and March 31, 2019 are as follows:
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| Operating Profit (Loss) by Segment |
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| Total Assets by Segment |
(a) The Global Operations segment derives substantially all of its revenues, and thus its operating results, from intersegment activities. (b) Certain long-term assets, including property, plant and equipment, goodwill and other intangibles, which benefit multiple operating segments, are included in Corporate and Eliminations. Allocations of certain expenses related to these assets to the individual operating segments are done at the beginning of the year based on budgeted amounts. Any differences between actual and budgeted amounts are reflected in Corporate and Eliminations because allocations are translated from the U.S. Dollar to local currency at budgeted rates when recorded. Corporate and Eliminations also includes the elimination of inter-company balance sheet amounts.
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| Schedule of Net Revenues by Major Geographic Region | The following table represents consolidated International segment net revenues by major geographic region for the quarters ended March 29, 2020 and March 31, 2019:
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| Schedules of Net Revenues by Brand Portfolio | The following table presents consolidated net revenues by brand and entertainment portfolio for the quarters ended March 29, 2020 and March 31, 2019:
(1) Hasbro's total gaming category, which includes all gaming net revenues, both those reported in Hasbro Gaming and those reported elsewhere, most notably MAGIC: THE GATHERING and MONOPOLY, totaled $340,480 and $243,390, respectively, for the quarters ended March 29, 2020 and March 31, 2019. (2) First quarter 2020 balance in Emerging Brands portfolio includes eOne brands PEPPA PIG, PJ MASKS and RICKY ZOOM. (3) TV/Film/Entertainment represents eOne revenues not allocated to the Emerging Brands portfolio.
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eOne Investments in Productions and Investments in Acquired Content Rights - Program Costs Amortization (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
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| Product Information [Line Items] | ||
| Program cost amortization | $ 132,146 | $ 6,575 |
| eOne | ||
| Product Information [Line Items] | ||
| Program cost amortization | 123,383 | |
| eOne | Production Investment | ||
| Product Information [Line Items] | ||
| Program cost amortization | 83,404 | |
| eOne | Content Investment | ||
| Product Information [Line Items] | ||
| Program cost amortization | $ 39,979 | |
Fair Value of Financial Instruments - Reconciliation of Level 3 Fair value (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
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| Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
| Balance at beginning of year | $ (22,145) | $ (23,440) |
| Gain from change in fair value | 1,309 | 296 |
| Balance at end of third quarter | $ (20,836) | $ (23,144) |
Segment Reporting - Net Revenues by Product Category (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 29, 2020 |
Mar. 31, 2019 |
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| Revenue from External Customer [Line Items] | ||
| Net revenues | $ 1,105,570 | $ 732,510 |
| Franchise Brands | ||
| Revenue from External Customer [Line Items] | ||
| Net revenues | 396,497 | 393,574 |
| Partner Brands | ||
| Revenue from External Customer [Line Items] | ||
| Net revenues | 182,331 | 171,989 |
| Hasbro Gaming (1) | ||
| Revenue from External Customer [Line Items] | ||
| Net revenues | 140,084 | 107,565 |
| Emerging Brands (2) | ||
| Revenue from External Customer [Line Items] | ||
| Net revenues | 94,145 | 59,382 |
| TV/Film/Entertainment (3) | ||
| Revenue from External Customer [Line Items] | ||
| Net revenues | $ 292,513 | $ 0 |
Basis of Presentation |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial position of Hasbro, Inc. and all majority-owned subsidiaries ("Hasbro" or the "Company") as of March 29, 2020 and March 31, 2019, and the results of its operations and cash flows and shareholders' equity for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes thereto. Actual results could differ from those estimates. The quarters ended March 29, 2020 and March 31, 2019 were each 13-week periods. The results of operations for the quarter ended March 29, 2020 are not necessarily indicative of results to be expected for the full year, nor were those of the comparable 2019 period representative of those actually experienced for the full year 2019. Following the Company's acquisition of Entertainment One Ltd. ("eOne" or "eOne Acquisition") (see Note 3), beginning with the first quarter of 2020, the eOne operating segment was added to the Company's reporting structure and is comprised of all legacy eOne operations. Over time, the Company plans to transition towards reflecting all of its entertainment operations within the eOne segment. The Company also expects to shift the consumer product and digital licensing business and toy and game sales related to the eOne preschool brands to legacy Hasbro segments; including related toy and game operations into the Company's geographic commercial segments in late 2021 and 2022. In addition to the eOne segment, the Company's brand architecture now reflects the addition of the TV, Film and Entertainment brand portfolio which consists of legacy eOne film and TV revenues. Operations related to eOne brands, including PEPPA PIG, PJ MASKS and RICKY ZOOM, are reported in the Emerging Brands portfolio. eOne's results of operations and financial position are included in the Company's consolidated financial statements and accompanying condensed footnotes since the date of acquisition. For more information on the eOne Acquisition see Note 3, Business Combination. Significant Accounting Policies The Company's significant accounting policies are summarized in Note 1 to the consolidated financial statements included in our Form 10-K for the year ended December 29, 2019. An update and supplement to these accounting policies associated with our acquisition of eOne is below. Noncontrolling Interests The financial results and position of the noncontrolling interests acquired through the acquisition of eOne are included in their entirety in the Company’s consolidated statements of operations and consolidated balance sheets beginning with the first quarter of 2020. The value of the redeemable noncontrolling interests is presented in the consolidated balance sheets as temporary equity between liabilities and shareholders' equity. The value of the noncontrolling interests is presented in the consolidated balance sheets within total shareholders' equity. Earnings (losses) attributable to the redeemable noncontrolling interests and noncontrolling interests are presented as a separate line on the consolidated statements of operations which is necessary to identify those earnings (losses) specifically attributable to Hasbro. A breakout of the redeemable noncontrolling interests and noncontrolling interests acquired is listed below.
Production Financing Production financing relates to financing facilities for certain of the Company's television and film productions. Beginning in the first quarter of 2020 with the acquisition of eOne, the Company funded certain of its television and film productions using production financing facilities. Production financing facilities are secured by the assets and future revenues of the individual production subsidiaries, typically have maturities of less than two years while the titles are in production, and are repaid once the production is delivered and all tax credits, broadcaster pre-sales and international sales have been received. In connection with the production of a television or film program, the Company records initial cash outflows within cash flows from operating activities due to its investment in the production and concurrently records cash inflows within cash flows from financing activities from the production financing it normally obtains. Under these facilities, certain of the Company's cash is restricted while the financing is outstanding. At March 29, 2020, $86,177 of the Company's cash was restricted by such facilities. Investment in Productions and Acquired Content Rights The cost of investments in programming ("IIP") and investments in content rights ("IIC") for eOne's television and film libraries are recorded in the consolidated balance sheets at amounts considered recoverable against future revenues. These amounts are amortized to program cost amortization using a model that reflects the consumption of the asset as it is released through different exploitation windows (e.g., broadcast licenses, theatrical release and home entertainment) and the expected revenue earned in each of those stages of release over a period not exceeding 10 years. Amounts capitalized are reviewed regularly and any portion of the unamortized amount that appears not to be recoverable from future net revenues will be written off to program cost amortization during the period in which the loss becomes evident. Certain of these agreements require the Company to pay minimum guaranteed advances ("MGs") for participations and residuals. MGs are recognized in the consolidated balance sheets when a liability arises, usually on delivery of the television or film program to the Company. The current portion of MGs are recorded as Payables and Accrued Liabilities and the long-term portion are recorded as Other Liabilities. These consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The Company filed with the SEC audited consolidated financial statements for the fiscal year ended December 29, 2019 in its Annual Report on Form 10-K ("2019 Form 10-K"), which includes all such information and disclosures and, accordingly, should be read in conjunction with the financial information included herein. Recently Adopted Accounting Standards The Company's significant accounting policies are the same as those described in Note 1 to the Company's consolidated financial statements in its 2019 Form 10-K with the exception of the accounting policies disclosed above. In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-13 (ASU 2016-13) Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard update replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and early adoption was permitted. The Company adopted the standard in the first quarter of 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (ASU 2018-13), Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, specifically related to disclosures surrounding Level 3 asset balances, fair value measurement methods, related gains and losses and fair value hierarchy transfers. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and early adoption was permitted. The Company adopted the standard in the first quarter of 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements. In March 2019, the FASB issued Accounting Standards Update No. 2019-02 (ASU 2019-02) Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials. The amendments in this update align cost capitalization of episodic television series production costs with that of film production cost capitalization. In addition, this update addresses impairment testing procedures with regard to film groups, when a film or license agreement is expected to be monetized with other films and/or license agreements. The intention of this update is to align accounting treatment with changes in production and distribution models within the entertainment industry and to provide increased transparency of information provided to users of financial statements about produced and licensed content. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2019, and early adoption was permitted. The Company adopted the standard in the first quarter of 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements. Recently Issued Accounting Pronouncements In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14) Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2020, and early adoption is permitted. The standard relates to financial statement disclosure only and will not have an impact on the Company's consolidated statement of financial position, statements of operations and comprehensive earnings (loss) or statement of cash flows.
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