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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
__________________
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 2, 2023
or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 1-6682
__________________
HASBRO, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Rhode Island | 05-0155090 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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1027 Newport Avenue |
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Pawtucket, | Rhode Island | 02861 |
(Address of Principal Executive Offices) | (Zip Code) |
(401) 431-8697
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.50 par value per share | HAS | The NASDAQ Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | x | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No [x]
The number of shares of Common Stock, par value $.50 per share, outstanding as of April 27, 2023 was 138,608,781.
Forward Looking Statement Safe Harbor
Certain statements in this Form 10-Q contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by the use of forward-looking words or phrases, include statements relating to: our business and marketing strategies; anticipated payments to be received for content, expected financial performance or business prospects in future periods; the development and timing of planned consumer and digital gaming products and entertainment releases; changes in leadership; expected benefits and cost-savings resulting from the Company’s Operational Excellence Program; expected benefits and cost-reductions from certain restructuring actions and divestiture of non-core businesses or assets, such as parts of the Entertainment One film and television business; inventory; capital expenditures; working capital; cash flow and liquidity; timing of and amount of repayment of indebtedness and production financings; capital allocation strategy, including plans for dividends and share repurchases; and other financial, tax, accounting and similar matters. Our actual actions or results may differ materially from those expected or anticipated in the forward-looking statements due to both known and unknown risks and uncertainties. Factors that might cause such a difference include, but are not limited to:
•our ability to successfully execute on our Blueprint 2.0 strategy, including to focus on and scale select business initiatives and brands to drive profitability;
•our ability to design, develop, manufacture, and ship products on a timely, cost-effective and profitable basis;
•our ability to successfully compete in the global play and entertainment industry;
•our ability to successfully evolve and transform our business and capabilities to successfully address the global consumer landscape;
•inflation and 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;
•our dependence on third party relationships, including with third party manufacturers, licensors of brands, studios, content producers and entertainment distribution channels;
•the risk that any strike by, or lockout of, one or more of the unions that provide personnel essential to the production of films or television programs, such as the strike by the writers’ union in May 2023, could delay or halt our ongoing production activities; halts or delays, depending on the length of time, could cause a delay or interruption in our release of new films and television programs, which could impact our entertainment business;
•risks relating to 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;
•risks related to 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 inflation, rising interest rates, higher commodity prices, labor costs or transportation costs, the coronavirus or other outbreaks of disease, the occurrence of which could create work slowdowns, delays or shortages in production or shipment of products, increases in costs or delays in revenue;
•risks associated with international operations, such as currency conversion, currency fluctuations, the imposition of tariffs, quotas, shipping delays or difficulties, border adjustment taxes or other protectionist measures, and other challenges in the territories in which we operate;
•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;
•risks related to our leadership changes;
•our ability to attract and retain talented and diverse employees;
•our ability to realize the benefits of cost-savings and efficiency and/or revenue and operating profit enhancing initiatives;
•risks relating to the impairment and/or write-offs of products and content we acquire and produce;
•the risk that acquisitions, dispositions and other investments we complete may not provide us with the benefits we expect, or the realization of such benefits may be significantly delayed. We may not achieve a successful sale or license of non-core assets, including certain film and television assets;
•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;
•fluctuations in our business due to seasonality;
•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 significantly impact our reported financial results;
•the impact of litigation or arbitration decisions or settlement actions;
•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 or more of our significant retailers, licensees and other partners; and
•other risks and uncertainties as may be detailed in our public announcements and U.S. Securities and Exchange Commission (“SEC”) filings.
The statements contained herein are based on our current beliefs and expectations. We undertake no obligation to make any revisions to the forward-looking statements contained in this Form 10-Q or to update them to reflect events or circumstances occurring after the date of this Form 10-Q.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of Dollars Except Share Data)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| April 2, 2023 | | March 27, 2022 | | December 25, 2022 |
ASSETS | | | | | |
Current assets | | | | | |
Cash and cash equivalents including restricted cash of $13.4 million, $38.8 million and $14.5 million | $ | 386.2 | | | $ | 1,057.9 | | | $ | 513.1 | |
Accounts receivable, less allowance for doubtful accounts of $21.7 million, $24.1 million and $20.0 million | 685.2 | | | 931.7 | | | 1,132.4 | |
Inventories | 713.4 | | | 644.3 | | | 676.8 | |
Prepaid expenses and other current assets | 754.4 | | | 621.4 | | | 676.8 | |
| | | | | |
Total current assets | 2,539.2 | | | 3,255.3 | | | 2,999.1 | |
Property, plant and equipment, less accumulated depreciation of $637.8 million, $641.5 million and $654.5 million | 509.1 | | | 422.6 | | | 422.8 | |
Other assets | | | | | |
Goodwill | 3,470.1 | | | 3,419.3 | | | 3,470.1 | |
Other intangible assets, net of accumulated amortization of $1,165.3 million, $1,075.2 million and $1,137.2 million | 801.0 | | | 1,136.6 | | | 814.6 | |
Other | 1,604.3 | | | 1,284.9 | | | 1,589.3 | |
Total other assets | 5,875.4 | | | 5,840.8 | | | 5,874.0 | |
Total assets | $ | 8,923.7 | | | $ | 9,518.7 | | | $ | 9,295.9 | |
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY | | | | | |
Current liabilities | | | | | |
Short-term borrowings | $ | 134.5 | | | $ | 104.1 | | | $ | 142.4 | |
Current portion of long-term debt | 109.0 | | | 155.8 | | | 113.2 | |
Accounts payable | 360.1 | | | 411.7 | | | 427.3 | |
Accrued liabilities | 1,293.8 | | | 1,371.4 | | | 1,506.8 | |
| | | | | |
Total current liabilities | 1,897.4 | | | 2,043.0 | | | 2,189.7 | |
Long-term debt | 3,682.4 | | | 3,737.9 | | | 3,711.2 | |
Other liabilities | 585.2 | | | 633.6 | | | 533.1 | |
Total liabilities | $ | 6,165.0 | | | $ | 6,414.5 | | | $ | 6,434.0 | |
Redeemable noncontrolling interests | — | | | 23.5 | | | — | |
Shareholders' equity | | | | | |
Preference stock of $2.50 par value. Authorized 5,000,000 shares; none issued | — | | | — | | | — | |
Common stock of $0.50 par value. Authorized 600,000,000 shares; issued 220,286,736 shares at April 2, 2023, March 27, 2022, and December 25, 2022 | 110.1 | | | 110.1 | | | 110.1 | |
Additional paid-in capital | 2,535.7 | | | 2,475.7 | | | 2,540.6 | |
Retained earnings | 3,951.8 | | | 4,220.9 | | | 4,071.4 | |
Accumulated other comprehensive loss | (237.4) | | | (246.9) | | | (254.9) | |
Treasury stock, at cost; 81,687,608 shares at April 2, 2023; 80,844,603 shares at March 27, 2022; and 82,106,383 shares at December 25, 2022 | (3,629.4) | | | (3,513.8) | | | (3,634.4) | |
Noncontrolling interests | 27.9 | | | 34.7 | | | 29.1 | |
Total shareholders' equity | 2,758.7 | | | 3,080.7 | | | 2,861.9 | |
Total liabilities, noncontrolling interests and shareholders' equity | $ | 8,923.7 | | | $ | 9,518.7 | | | $ | 9,295.9 | |
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Millions of Dollars Except Per Share Data)
(Unaudited)
| | | | | | | | | | | | | | | |
| Quarter Ended | | |
| April 2, 2023 | | March 27, 2022 | | | | |
Net revenues | $ | 1,001.0 | | | $ | 1,163.1 | | | | | |
Costs and expenses: | | | | | | | |
Cost of sales | 285.3 | | | 333.1 | | | | | |
Program cost amortization | 122.5 | | | 138.5 | | | | | |
Royalties | 69.0 | | | 90.1 | | | | | |
Product development | 83.3 | | | 69.6 | | | | | |
Advertising | 82.8 | | | 77.6 | | | | | |
Amortization of intangibles | 23.1 | | | 27.1 | | | | | |
Selling, distribution and administration | 317.1 | | | 307.1 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total costs and expenses | 983.1 | | | 1,043.1 | | | | | |
Operating profit | 17.9 | | | 120.0 | | | | | |
Non-operating expense (income): | | | | | | | |
Interest expense | 46.3 | | | 41.6 | | | | | |
Interest income | (6.0) | | | (2.1) | | | | | |
Other (income) expense, net | (1.4) | | | 0.3 | | | | | |
Total non-operating expense, net | 38.9 | | | 39.8 | | | | | |
Earnings (loss) before income taxes | (21.0) | | | 80.2 | | | | | |
Income tax expense | 0.7 | | | 17.3 | | | | | |
Net earnings (loss) | (21.7) | | | 62.9 | | | | | |
Net earnings attributable to noncontrolling interests | 0.4 | | | 1.7 | | | | | |
Net earnings (loss) attributable to Hasbro, Inc. | $ | (22.1) | | | $ | 61.2 | | | | | |
| | | | | | | |
Net earnings (loss) per common share: | | | | | | | |
Basic | $ | (0.16) | | | $ | 0.44 | | | | | |
Diluted | $ | (0.16) | | | $ | 0.44 | | | | | |
Cash dividends declared per common share | $ | 0.70 | | | $ | 0.70 | | | | | |
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Earnings (Loss)
(Millions of Dollars)
(Unaudited)
| | | | | | | | | | | | | | | |
| Quarter Ended | | |
| April 2, 2023 | | March 27, 2022 | | | | |
Net earnings (loss) | $ | (21.7) | | | $ | 62.9 | | | | | |
Other comprehensive earnings (loss): | | | | | | | |
Foreign currency translation adjustments, net of tax | 24.3 | | | (10.7) | | | | | |
Unrealized holding gains on available-for-sale securities, net of tax | — | | | 0.2 | | | | | |
Net losses on cash flow hedging activities, net of tax | (4.6) | | | (1.2) | | | | | |
| | | | | | | |
Reclassifications to earnings, net of tax: | | | | | | | |
Net gains on cash flow hedging activities | (2.1) | | | — | | | | | |
Amortization of unrecognized pension and postretirement amounts | (0.1) | | | 0.1 | | | | | |
| | | | | | | |
Total other comprehensive earnings (loss), net of tax | $ | 17.5 | | | $ | (11.6) | | | | | |
Total comprehensive earnings attributable to noncontrolling interests | 0.4 | | | 1.7 | | | | | |
Total comprehensive earnings (loss) attributable to Hasbro, Inc. | $ | (4.6) | | | $ | 49.6 | | | | | |
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Millions of Dollars)
(Unaudited)
| | | | | | | | | | | |
| Three months ended |
| April 2, 2023 | | March 27, 2022 |
Cash flows from operating activities: | | | |
Net earnings (loss) | $ | (21.7) | | | $ | 62.9 | |
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | | | |
Depreciation of plant and equipment | 23.9 | | | 25.1 | |
Amortization of intangibles | 23.1 | | | 27.1 | |
| | | |
| | | |
| | | |
Program cost amortization | 122.5 | | | 138.5 | |
Deferred income taxes | (2.8) | | | (33.4) | |
Stock-based compensation | 15.7 | | | 18.1 | |
| | | |
Other non-cash items | (0.5) | | | 3.9 | |
Change in operating assets and liabilities net of acquired balances: | | | |
Decrease in accounts receivable | 454.6 | | | 559.8 | |
Increase in inventories | (32.5) | | | (99.6) | |
(Increase) decrease in prepaid expenses and other current assets | (75.4) | | | 42.1 | |
Program spend, net | (266.3) | | | (169.4) | |
Decrease in accounts payable and accrued liabilities | (167.0) | | | (464.4) | |
| | | |
Other | 15.2 | | | 24.0 | |
Net cash provided by operating activities | 88.8 | | | 134.7 | |
Cash flows from investing activities: | | | |
Additions to property, plant and equipment | (53.2) | | | (29.2) | |
| | | |
| | | |
Other | (2.4) | | | 5.3 | |
Net cash utilized by investing activities | (55.6) | | | (23.9) | |
Cash flows from financing activities: | | | |
Proceeds from borrowings with maturity greater than three months | 1.2 | | | 1.3 | |
Repayments of borrowings with maturity greater than three months | (35.5) | | | (133.9) | |
Net (repayments) proceeds from other short-term borrowings | (7.7) | | | 103.3 | |
| | | |
Stock-based compensation transactions | — | | | 70.2 | |
Dividends paid | (96.7) | | | (94.5) | |
Payments related to tax withholding for share-based compensation | (14.0) | | | (19.3) | |
| | | |
| | | |
| | | |
| | | |
Other | (3.9) | | | (4.6) | |
Net cash utilized by financing activities | (156.6) | | | (77.5) | |
Effect of exchange rate changes on cash | (3.5) | | | 5.4 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (126.9) | | | 38.7 | |
| | | |
| | | |
Cash, cash equivalents and restricted cash at beginning of year | 513.1 | | | 1,019.2 | |
Cash, cash equivalents and restricted cash at end of period | $ | 386.2 | | | $ | 1,057.9 | |
| | | |
Supplemental information | | | |
Cash paid during the period for: | | | |
Interest | $ | 34.3 | | | $ | 30.5 | |
Income taxes | $ | 26.0 | | | $ | 29.2 | |
See accompanying condensed notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interests
(Millions of Dollars)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended April 2, 2023 |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Noncontrolling Interests | | Total Shareholders' Equity | | | Redeemable Noncontrolling Interests |
Balance, December 25, 2022 | $ | 110.1 | | | 2,540.6 | | | 4,071.4 | | | (254.9) | | | (3,634.4) | | | 29.1 | | | $ | 2,861.9 | | | | $ | — | |
| | | | | | | | | | | | | | | | |
Net loss attributable to Hasbro, Inc. | — | | | — | | | (22.1) | | | — | | | — | | | — | | | (22.1) | | | | — | |
Net earnings attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 0.4 | | | 0.4 | | | | — | |
| | | | | | | | | | | | | | | | |
Other comprehensive earnings | — | | | — | | | — | | | 17.5 | | | — | | | — | | | 17.5 | | | | — | |
Stock-based compensation transactions | — | | | (19.0) | | | — | | | — | | | 5.0 | | | — | | | (14.0) | | | | — | |
| | | | | | | | | | | | | | | | |
Stock-based compensation expense | — | | | 15.7 | | | — | | | — | | | — | | | — | | | 15.7 | | | | — | |
Dividends declared | — | | | 0.5 | | | (97.5) | | | — | | | — | | | — | | | (97.0) | | | | — | |
Distributions paid to noncontrolling owners and other foreign exchange | — | | | — | | | — | | | — | | | — | | | (1.6) | | | (1.6) | | | | — | |
Buyout of redeemable noncontrolling interest | — | | | (2.1) | | | — | | | — | | | — | | | — | | | (2.1) | | | | — | |
Balance, April 2, 2023 | $ | 110.1 | | | 2,535.7 | | | 3,951.8 | | | (237.4) | | | (3,629.4) | | | 27.9 | | | $ | 2,758.7 | | | | $ | — | |
| | | | | | | | | | | | | | | | |
Three Months Ended March 27, 2022 |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Noncontrolling Interests | | Total Shareholders' Equity | | | Redeemable Noncontrolling Interests |
Balance, December 26, 2021 | $ | 110.1 | | | 2,428.0 | | | 4,257.8 | | | (235.3) | | | (3,534.7) | | | 37.2 | | | $ | 3,063.1 | | | | $ | 23.9 | |
| | | | | | | | | | | | | | | | |
Net earnings attributable to Hasbro, Inc. | — | | | — | | | 61.2 | | | — | | | — | | | — | | | 61.2 | | | | — | |
Net earnings attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 1.2 | | | 1.2 | | | | 0.5 | |
Change in put option value | — | | | (0.4) | | | — | | | — | | | — | | | — | | | (0.4) | | | | — | |
Other comprehensive loss | — | | | — | | | — | | | (11.6) | | | — | | | — | | | (11.6) | | | | — | |
Stock-based compensation transactions | — | | | 30.0 | | | — | | | — | | | 20.9 | | | — | | | 50.9 | | | | — | |
| | | | | | | | | | | | | | | | |
Stock-based compensation expense | — | | | 18.1 | | | — | | | — | | | — | | | — | | | 18.1 | | | | — | |
Dividends declared | — | | | — | | | (98.1) | | | — | | | — | | | — | | | (98.1) | | | | — | |
Distributions paid to noncontrolling owners and other foreign exchange | — | | | — | | | — | | | — | | | — | | | (3.7) | | | (3.7) | | | | (0.9) | |
Balance, March 27, 2022 | $ | 110.1 | | | 2,475.7 | | | 4,220.9 | | | (246.9) | | | (3,513.8) | | | 34.7 | | | $ | 3,080.7 | | | | $ | 23.5 | |
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(Unaudited)
(1) 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 April 2, 2023 and March 27, 2022, 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 April 2, 2023 and March 27, 2022 were 14-week and 13-week periods, respectively.
The results of operations for the quarter ended April 2, 2023 are not necessarily indicative of results to be expected for the full year 2023, nor were those of the comparable 2022 period representative of those actually experienced for the full year 2022.
Significant Accounting Policies
The Company's significant accounting policies are summarized in note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 25, 2022 ("2022 Form 10-K").
Blueprint 2.0 and Operational Excellence
On October 4, 2022, following a several months long strategic review of our business led by our CEO, the Company announced a go-forward strategic plan guided by our new Blueprint 2.0, a consumer-centric framework for bringing compelling and expansive brand experiences to audiences around the world. During the review, the Company identified opportunities to focus and scale its business, enhance operational excellence, including through specialized organizational programs and supply chain transformation, to drive growth and profit and enhance shareholder value. The Company is increasing strategic investment in its most valuable and profitable franchises across toys, games, entertainment and licensing, and exiting certain non-core aspects of the business.
TV and Film Business
On November 17, 2022, the Company announced an authorization by Hasbro's Board of Directors to initiate a marketing process to explore a sale of parts of our eOne TV and film business that do not directly support the Company’s Branded Entertainment strategy. In the event a transaction were to occur, Hasbro is expected to maintain the capability to develop and produce animation, digital shorts, scripted TV and theatrical films for audiences related to core Hasbro IP. The family brands business, including the brands PEPPA PIG and PJ MASKS, is not expected to be part of any sale transaction involving parts of the eOne film and television business. The sale process was ongoing as of the close of the first quarter of 2023 however, there can be no assurance that the process will result in a sale.
Brand Portfolio Realignment
Effective for the first quarter 2023, we realigned our brand portfolios to correspond with the evolution of our Blueprint 2.0 strategy. We are focusing on fewer, bigger, more profitable brands that showcase our leadership in preschool toys, action figures and accessories, games, arts & crafts, and outdoor action brands.
Our new product categories beginning in the first quarter of 2023 are as follows:
Franchise Brands - A refreshed group of our most financially significant brands which we consider to have the greatest long-term potential including DUNGEONS & DRAGONS, Hasbro Gaming, MAGIC: THE GATHERING, NERF, PEPPA PIG, PLAY-DOH, and TRANSFORMERS.
Partner Brands - The Partner Brands category includes those brands we license from other parties such as Disney's STAR WARS and MARVEL brands as well as other partners, for which we develop toy and game products, with a focus on those key Partner Brands that give us the biggest growth potential and where we can lead and innovate in the category.
Portfolio Brands - Our Portfolio Brands category includes those brands we own or control which we feel have upside in revenue and profitability that have not yet grown to the significance of a franchise brand.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Non-Hasbro Branded Film & TV - The Non-Hasbro Branded Film & TV category includes non-Hasbro-branded film, TV and other entertainment related revenues. All Hasbro-branded content is included in the portfolios noted above.
These consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the 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 25, 2022 in its 2022 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
As of April 2, 2023, there were no recently adopted accounting standards that had a material effect on the Company’s financial statements.
Issued Accounting Pronouncements
As of April 2, 2023, there were no recently issued accounting pronouncements that had a material effect on the Company’s financial statements.
(2) Revenue Recognition
Contract Assets and Liabilities
In the ordinary course of business, the Company’s Consumer Products, Wizards of the Coast and Digital Gaming and Entertainment segments enter into contracts to license certain of the Company’s intellectual property, providing licensees right-to-use or access to such intellectual property for use in the production and sale of consumer products and digital game development, and for use within content for distribution over streaming platforms and for television and film. The Company also licenses owned television and film content for distribution to third parties in formats that include broadcast, digital streaming and theatrical. Through these arrangements, the Company may receive advanced royalty payments from licensees, either in advance of a licensees’ subsequent sales to customers or, prior to the completion of the Company’s performance obligation. In addition, the Company’s Wizards of the Coast and Digital Gaming segment may receive advanced payments from end users of its digital games at the time of the initial purchase or through in-application purchases. These digital gaming revenues are recognized over a period of time, determined based on player usage patterns or the estimated playing life of the user or when additional downloadable content is made available. The Company defers revenues on all licensee and digital gaming advanced payments until the respective performance obligations are satisfied. The Company records the aggregate deferred revenues as contract liabilities, with the current portion recorded within Accrued Liabilities and the long-term portion recorded as Other Non-current Liabilities in the Company’s consolidated balance sheets. The Company records contract assets, primarily related to (1) minimum guarantees being recognized in advance of contractual invoicing, which are recognized ratably over the terms of the respective license periods, and (2) film and television distribution revenues recorded for content delivered, where payment will occur over the license term. The current portion of contract assets is recorded in Prepaid Expenses and Other Current Assets, respectively, and the long-term portion is recorded within Other Long-Term Assets.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
The changes in carrying amounts of contract assets and liabilities for the quarter ended April 2, 2023 are as follows:
| | | | | | | |
| April 2, 2023 | | |
Assets | | | |
Balance at beginning of the year | $ | 594.4 | | | |
Recognized in current year | 213.8 | | | |
Amounts reclassified to accounts receivable | (218.7) | | | |
Foreign currency impact | 7.7 | | | |
Ending Balance | $ | 597.2 | | | |
| | | |
Liabilities | | | |
Balance at beginning of the year | $ | 113.0 | | | |
Recognized in current year | 80.3 | | | |
Amounts in beginning balance reclassified to revenue | (53.3) | | | |
Current year amounts reclassified to revenue | (22.5) | | | |
| | | |
Foreign currency impact | (2.2) | | | |
Ending Balance | $ | 115.3 | | | |
Unsatisfied performance obligations
Unsatisfied performance obligations relate primarily to in-production television content to be delivered in the future under existing agreements with partnering content providers such as broadcasters, distributors, television networks and subscription video on demand services. As of April 2, 2023, unrecognized revenue attributable to unsatisfied performance obligations expected to be recognized in the future was $293.8 million. Of this amount, we expect to recognize $244.4 million in the remainder of 2023, $38.0 million in 2024, $11.3 million in 2025 and $0.1 million in 2026. These amounts include only fixed consideration.
Accounts Receivable and Allowance for Credit Losses
The Company’s balance for accounts receivable on the consolidated balance sheets as of April 2, 2023 and March 27, 2022 are primarily from contracts with customers. The Company had no material expense for credit losses for the quarters ended April 2, 2023 and March 27, 2022.
Disaggregation of revenues
The Company disaggregates its revenues from contracts with customers by reportable segment: Consumer Products, Wizards of the Coast and Digital Gaming, and Entertainment. The Company further disaggregates revenues within its Consumer Products segment by major geographic region: North America, Europe, Latin America, and Asia Pacific; within its Wizards of the Coast and Digital Gaming segment by category: Tabletop Gaming and Digital and Licensed Gaming; and within its Entertainment segment by category: Film & TV, Family Brands, and Other. Finally, the Company disaggregates its revenues by brand portfolio into four brand categories: Franchise Brands, Partner Brands, Portfolio Brands, and Non-Hasbro Branded Film & TV. We believe these collectively depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. See note 13 for further information.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(3) Earnings (Loss) Per Share
Net earnings (loss) per share data for the quarters ended April 2, 2023 and March 27, 2022 were computed as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | 2022 |
Quarter | Basic | | Diluted | | Basic | | Diluted |
Net (loss) earnings attributable to Hasbro, Inc. | $ | (22.1) | | | (22.1) | | | $ | 61.2 | | | 61.2 | |
| | | | | | | |
Average shares outstanding | 138.6 | | | 138.6 | | | 139.3 | | | 139.3 | |
Effect of dilutive securities: | | | | | | | |
Options and other share-based awards | — | | | — | | | — | | | 0.3 | |
Equivalent Shares | 138.6 | | | 138.6 | | | 139.3 | | | 139.6 | |
| | | | | | | |
Net (loss) earnings attributable to Hasbro, Inc. per common share | $ | (0.16) | | | (0.16) | | | $ | 0.44 | | | 0.44 | |
For the quarters ended April 2, 2023 and March 27, 2022, options and restricted stock units totaling 4.2 million and 2.5 million, respectively, were excluded from the calculation of diluted earnings per share because to include them would have been anti-dilutive. Of the fiscal 2023 amount, 2.0 million shares would have been included in the calculation of diluted shares had the Company not had a net loss for the quarter ended April 2, 2023. Assuming that these options and restricted stock units were included, under the treasury stock method, they would have resulted in an additional 0.1 million shares being included in the diluted earnings per share calculation for the quarter ended April 2, 2023.
(4) Goodwill
Changes in the carrying amount of goodwill, by operating segment, for the quarters ended April 2, 2023 and March 27, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Consumer Products | | Wizards of the Coast and Digital Gaming | | Entertainment | | Total |
2023 | | | | | | | | |
Balance at December 25, 2022 | | $ | 1,584.7 | | 371.5 | | 1,513.9 | | $ | 3,470.1 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Balance at April 2, 2023 | | $ | 1,584.7 | | 371.5 | | 1,513.9 | | $ | 3,470.1 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Consumer Products | | Wizards of the Coast and Digital Gaming | | Entertainment | | Total |
2022 | | | | | | | | |
Balance at December 26, 2021 | | $ | 1,584.9 | | 307.3 | | 1,527.4 | | $ | 3,419.6 |
Foreign exchange translation | | (0.1) | | 0.2 | | (0.4) | | (0.3) |
Balance at March 27, 2022 | | $ | 1,584.8 | | | 307.5 | | | 1,527.0 | | | $ | 3,419.3 | |
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(5) 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 April 2, 2023 and March 27, 2022.
| | | | | | | | | | | | | | | |
| Quarter Ended | | |
| April 2, 2023 | | March 27, 2022 | | | | |
| | | | | | | |
Other comprehensive earnings (loss), tax effect: | | | | | | | |
Tax expense on unrealized holding gains | $ | — | | | $ | (0.1) | | | | | |
Tax benefit on cash flow hedging activities | 1.2 | | | 0.9 | | | | | |
| | | | | | | |
| | | | | | | |
Reclassifications to earnings, tax effect: | | | | | | | |
Tax expense (benefit) on cash flow hedging activities | 0.1 | | | (0.2) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total tax effect on other comprehensive earnings | $ | 1.3 | | | $ | 0.6 | | | | | |
Changes in the components of accumulated other comprehensive earnings (loss), net of tax for the quarters ended April 2, 2023 and March 27, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
2023 | | | | | | | | | |
Balance at December 25, 2022 | $ | (3.0) | | | (12.0) | | | (0.1) | | | (239.8) | | | $ | (254.9) | |
Current period other comprehensive earnings (loss) | (0.1) | | | (6.7) | | | — | | | 24.3 | | | 17.5 | |
Balance at April 2, 2023 | $ | (3.1) | | | (18.7) | | | (0.1) | | | (215.5) | | | $ | (237.4) | |
| | | | | | | | | |
2022 | | | | | | | | | |
Balance at December 26, 2021 | $ | (35.1) | | | (6.0) | | | 0.2 | | | (194.4) | | | $ | (235.3) | |
| | | | | | | | | |
Current period other comprehensive earnings (loss) | 0.1 | | | (1.2) | | | 0.2 | | | (10.7) | | | (11.6) | |
Balance at March 27, 2022 | $ | (35.0) | | | (7.2) | | | 0.4 | | | (205.1) | | | $ | (246.9) | |
Gains (Losses) on Derivative Instruments
At April 2, 2023, the Company had remaining net deferred losses on foreign currency forward contracts, net of tax, of $4.0 million in accumulated other comprehensive earnings (loss) ("AOCE"). These instruments hedge payments related to inventory purchased in the first quarter of 2023 or forecasted to be purchased during the remainder of 2023, intercompany expenses expected to be paid or received during 2023, television and movie production costs paid in 2023 or expected to be paid in 2024, and cash receipts for sales made at the end of the first quarter of 2023 or forecasted to be made in the remainder of 2023. These amounts will be reclassified into the consolidated statements of operations upon the sale of the related inventory, the recognition of the related production costs or the recognition of the related sales or intercompany expenses to be paid or received.
In addition to foreign currency forward contracts, the Company entered into hedging contracts on future interest payments related to the 3.15% Notes that were repaid in full in the aggregate principal amount of $300.0 million in 2021 (See note 7), and the 5.10% Notes due 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 April 2, 2023, deferred losses, net of tax of $14.7 million related to these instruments remained in AOCE. For each of the quarters ended April 2, 2023 and March 27, 2022, previously deferred losses of $0.2 million related to these instruments were reclassified from AOCE to net earnings.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Of the net deferred losses included in AOCE at April 2, 2023, the Company expects net losses of approximately $4.2 million 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.
See note 11 for additional discussion on reclassifications from AOCE to earnings.
(6) Accrued Liabilities
Components of accrued liabilities for the periods ended April 2, 2023, March 27, 2022 and December 25, 2022 were as follows:
| | | | | | | | | | | | | | | | | |
| April 2, 2023 | | March 27, 2022 | | December 25, 2022 |
Participations and residuals | $ | 275.7 | | | $ | 301.4 | | | $ | 300.2 | |
Royalties | 131.0 | | | 162.0 | | | 195.4 | |
Deferred revenue | 113.7 | | | 97.6 | | | 111.3 | |
Dividends | 97.0 | | | 97.6 | | | 96.7 | |
Cancellation charges | 84.6 | | | 55.7 | | | 89.2 | |
Severance | 82.4 | | | 27.6 | | | 100.3 | |
Other taxes | 71.6 | | | 74.1 | | | 82.1 | |
Accrued expenses - IIP & IIC | 60.6 | | | 70.7 | | | 80.8 | |
General vendor accruals | 50.1 | | | 32.6 | | | 44.3 | |
Interest | 40.8 | | | 38.8 | | | 31.0 | |
Lease liability - current | 37.9 | | | 45.0 | | | 39.6 | |
Advertising | 36.7 | | | 58.6 | | | 53.2 | |
Accrued income taxes | 33.5 | | | 33.1 | | | 44.8 | |
Freight | 22.7 | | | 65.6 | | | 28.5 | |
Payroll and management incentives | 15.4 | | | 56.9 | | | 66.7 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other | 140.1 | | | 154.1 | | | 142.7 | |
Total accrued liabilities | $ | 1,293.8 | | | $ | 1,371.4 | | | $ | 1,506.8 | |
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
(7) Financial Instruments
The Company's financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities. At April 2, 2023, March 27, 2022 and December 25, 2022, the carrying cost of these instruments approximated their fair value. The Company's financial instruments at April 2, 2023, March 27, 2022 and December 25, 2022 also include certain assets and liabilities measured at fair value (see notes 10 and 11) 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 April 2, 2023, March 27, 2022 and December 25, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| April 2, 2023 | | March 27, 2022 | | December 25, 2022 |
| Carrying Cost | | Fair Value | | Carrying Cost | | Fair Value | | Carrying Cost | | Fair Value |
3.90% Notes Due 2029 | $ | 900.0 | | | 817.3 | | | $ | 900.0 | | | 901.7 | | | $ | 900.0 | | | 808.2 | |
3.55% Notes Due 2026 | 675.0 | | | 634.2 | | | 675.0 | | | 677.2 | | | 675.0 | | | 635.3 | |
3.00% Notes Due 2024 | 500.0 | | | 482.8 | | | 500.0 | | | 498.0 | | | 500.0 | | | 482.2 | |
6.35% Notes Due 2040 | 500.0 | | | 501.7 | | | 500.0 | | | 604.2 | | | 500.0 | | | 498.4 | |
3.50% Notes Due 2027 | 500.0 | | | 470.8 | | | 500.0 | | | 496.5 | | | 500.0 | | | 465.8 | |
| | | | | | | | | | | |
5.10% Notes Due 2044 | 300.0 | | | 261.2 | | | 300.0 | | | 321.7 | | | 300.0 | | | 261.1 | |
| | | | | | | | | | | |
6.60% Debentures Due 2028 | 109.9 | | | 112.8 | | | 109.9 | | | 125.4 | | | 109.9 | | | 112.1 | |
| | | | | | | | | | | |
Variable % Notes Due December 30, 2024 | 280.0 | | | 280.0 | | | 340.0 | | | 340.0 | | | 310.0 | | | 310.0 | |
Production Financing Facilities | 49.0 | | | 49.0 | | | 95.8 | | | 95.8 | | | 53.2 | | | 53.2 | |
Total long-term debt | $ | 3,813.9 | | | 3,609.8 | | | $ | 3,920.7 | | | 4,060.5 | | | $ | 3,848.1 | | | 3,626.3 | |
Less: Deferred debt expenses | 22.5 | | | — | | | 27.0 | | | — | | | 23.7 | | | — | |
Less: Current portion | 109.0 | | | — | | | 155.8 | | | — | | | 113.2 | | | — | |
Long-term debt | $ | 3,682.4 | | | 3,609.8 | | | $ | 3,737.9 | | | 4,060.5 | | | $ | 3,711.2 | | | 3,626.3 | |
In November 2019, in conjunction with the Company's acquisition of eOne, the Company issued an aggregate of $2.4 billion of senior unsecured debt securities (the "Notes") consisting of the following tranches: $300.0 million of notes due 2022 (the "2022 Notes") that bear interest at a fixed rate of 2.60%, $500.0 million of notes due 2024 (the "2024 Notes") that bear interest at a fixed rate of 3.00%, $675.0 million of notes due 2026 (the "2026 Notes") that bear interest at a fixed rate of 3.55% and $900.0 million 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 $20.0 million of underwriting discount and fees, totaled $2.4 billion. These costs are being amortized over the life of the Notes outstanding, which range from five years to ten years from the date of issuance.
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) 25 basis points (in the case of the 2024 Notes); (2) 30 basis points (in the case of the 2026 Notes); and (3) 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 any accrued and unpaid interest.
In September 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 $400.0 million (the “Three-Year Tranche”) and (2) a five-year senior unsecured term loan facility in an aggregate principal amount of $600.0 million (the “Five-Year Tranche” and together with the Three-Year Tranche, the “Term Loan Facilities”). The full amount of the Term Loan Facilities was drawn down on December 30, 2019, the closing date of the eOne Acquisition. As of September 25, 2022, the Company has fully repaid the Three-Year Tranche $400.0 million principal term loan, and of the Five-Year Tranche $600.0 million principal balance, the Company has repaid a total of $320.0 million in the following increments: $22.5 million in 2020; $180.0 million in 2021; $87.5 million in 2022; and $30.0 million of principal amortization payments in the first quarter of 2023.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Loans under the remaining Five-Year Tranche bear interest at the Company’s option, at either the adjusted Term Secured Overnight Financing Rate ("SOFR"), plus an applicable margin, or the Base Rate, plus a per annum applicable rate that fluctuates between 100.0 basis points and 187.5 basis points, in the case of loans priced at the SOFR, 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 by the relevant rating agencies or a lack of ratings issued by such rating agencies. Loans under the Five-Year Tranche require principal amortization payments that are 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. As of April 2, 2023, the Company was in compliance with the financial covenants contained in the Term Loan Agreement.
The Company may redeem its 5.10% notes due in 2044 (the "2044 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.
Current portion of long-term debt at April 2, 2023 of $109.0 million, as shown on the consolidated balance sheet, represents the current portion of required quarterly principal amortization payments for the Five-Year Tranche of the Term Loan Facilities and production financing facilities. All of the Company’s other long-term borrowings have contractual maturities that occur subsequent to 2023 with the exception of certain of the Company's production financing facilities and annual principal payments related to the Term Loan Facilities.
The fair values of the Company's long-term debt are considered Level 3 fair values (see note 10 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.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
Production Financing
In addition to the Company's financial instruments, the Company uses production financing facilities to fund its film and television productions which are arranged on an individual production basis by either special purpose production subsidiaries, each secured by future revenues of such production subsidiaries, which are non-recourse to the Company's assets, or through a senior revolving credit facility dedicated to production financing obtained in November 2021. The Company's senior revolving film and television production credit facility (the “RPCF”) with MUFG Union Bank, N.A., as administrative agent and lender and certain other financial institutions, as lenders thereto (the “Revolving Production Financing Agreement”) provides the Company with commitments having a maximum aggregate principal amount of $250.0 million. The Revolving Production Financing Agreement also provides the Company with the option to request a commitment increase up to an aggregate additional amount of $150.0 million subject to agreement of the lenders. The Revolving Production Financing Agreement extends through November 22, 2024. The Company uses the RPCF to fund certain of the Company’s original film and TV production costs. Borrowings under the RPCF are non-recourse to the Company's assets. Going forward, the Company expects to utilize the RPCF for the majority of its production financing needs.
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. The production financing facilities as of April 2, 2023, March 27, 2022 and December 25, 2022 are as follows:
| | | | | | | | | | | | | | | | | |
| April 2, 2023 | | March 27, 2022 | | December 25, 2022 |
Production financing facilities included in the consolidated balance sheet as: | | | | | |
Current liabilities | $ | 183.5 | | | $ | 199.1 | | | $ | 195.6 | |
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 April 2, 2023 was 5.9%.
The Company has Canadian dollar and U.S. dollar production financing loans with various banks. The carrying amounts are denominated in the following currencies:
| | | | | | | | | | | | | | | | | |
| Canadian Dollars | | U.S. Dollars | | Total |
As of April 2, 2023 | $ | 14.8 | | | $ | 168.7 | | | $ | 183.5 | |
The following table represents the movements in production financing loans during the first quarter of 2023:
| | | | | | | | | |
| Production Financing | | | | |
December 25, 2022 | $ | 195.6 | | | | | |
Drawdowns | 42.8 | | | | | |
Repayments | (54.8) | | | | | |
Foreign exchange differences | (0.1) | | | | | |
Balance at April 2, 2023 | $ | 183.5 | | | | | |
The Company expects to repay all of its currently outstanding production financing loans by the first quarter of 2024.
(8) Investments in Productions and Investments in Acquired Content Rights
Investments in productions and investments in acquired content rights are predominantly monetized on a title-by-title basis and are recorded within other assets in the Company's consolidated balance sheets, to the extent they are considered recoverable against future revenues. These amounts are being amortized to program cost amortization using a model that reflects the consumption of the asset as it is released through various channels including broadcast licenses, theatrical release and home entertainment. Amounts capitalized are reviewed periodically on an individual title basis and any portion of the unamortized amount that appears not to be recoverable from future net revenues is expensed as part of program cost amortization during the period the loss becomes evident.
Condensed Notes to Consolidated Financial Statements
(Millions of Dollars and Shares Except Per Share Data)
The Company's unamortized investments in productions and investments in acquired content rights consisted of the following at April 2, 2023, March 27, 2022, and December 25, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| | April 2, 2023 | | March 27, 2022 | | December 25, 2022 | | | |
Investment in Films and Television Programs: | | | | | | | | | |
Individual Monetization | | | | | | | | | |
Released, net of amortization | | $ | 613.3 | | | $ | 489.1 | | | $ | 584.5 | | | | |
Completed and not released | | 53.0 | | | 12.7 | | | 23.3 | | | | |
In production | | 85.8 | | | 157.8 | | | 199.4 | | | | |
Pre-production | | 126.4 | | | 87.7 | | | 41.3 | | | | |
| | 878.5 | | | 747.3 | | | 848.5 | | | | |
Film/TV Group Monetization | | | | | | | | | |
Released, net of amortization | | 17.6 | | | 31.5 | | | 25.8 | | | | |
| | | | | | | | | |
In production | | 24.0 | | | 15.8 | | | 22.2 | | | | |
| | | | | | | | | |
| | 41.6 | | | 47.3 | | | 48.0 | | | | |
Investment in Other Programming | | | | | | | | | |
Released, net of amortization | | 13.2 | | | 5.2 | | | |