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Income Taxes
 12 Months Ended
Dec. 29, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of Earnings (loss) before income taxes, determined by tax jurisdiction, are as follows:
(In millions)202420232022
United States$325.2 $(356.9)$17.0 
International171.8 (1,352.2)244.5 
Total earnings (loss) before income taxes$497.0 $(1,709.1)$261.5 
Income taxes attributable to Earnings (loss) before income taxes are:
(In millions)202420232022
Current
United States$47.0 $(29.0)$85.9 
State and local11.0 (6.4)18.0 
International65.2 57.6 84.7 
123.2 22.2 188.6 
Deferred
United States(2.2)(36.3)(105.7)
State and local(9.7)(3.0)(16.6)
International(8.7)(204.2)(7.8)
(20.6)(243.5)(130.1)
Total tax expense (benefit)$102.6 $(221.3)$58.5 
A reconciliation of the statutory United States federal income tax rate to Hasbro’s effective income tax rate is as follows:
202420232022
Statutory income tax rate21.0 %21.0 %21.0 %
State and local income taxes, net0.2 0.5 1.2 
Tax on international earnings1.3 6.7 (4.0)
Domestic tax on foreign earnings(4.0)1.3 (6.5)
Change in unrecognized tax benefits— (0.3)3.1 
U.S. capital loss6.6 22.0 — 
Change in valuation allowance(4.5)(23.3)9.7 
Share-based compensation0.5 (0.3)1.4 
Research and development tax credits(1.5)0.3 (3.5)
Officers' compensation0.9 (0.3)1.9 
Loss on disposal of business1.0 (3.4)1.5 
Goodwill impairments— (11.8)— 
Other, net(0.8)0.5 (3.4)
Effective tax rate20.7 %12.9 %22.4 %
In 2023 the tax impact on reconciling items is the opposite of the expected result due to a pretax loss in the year. The components of deferred income tax expense (benefit) arise from various temporary differences and relate to items included in the Consolidated Statements of Operations as well as items recognized in other comprehensive earnings. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 29, 2024 and December 31, 2023 are as follows:
(In millions)20242023
Deferred tax assets:
Accounts receivable$31.0 $31.8 
Inventories17.4 33.2 
Loss and credit carryforwards426.6 461.9 
Operating leases7.2 3.5 
Operating expenses30.6 19.1 
Pension7.3 6.9 
Other compensation51.9 46.4 
Postretirement benefits5.7 5.9 
Interest rate hedge4.4 4.8 
Tax sharing agreement0.3 0.3 
Deferred revenue0.3 0.4 
Capitalized research and experimentation116.5 100.6 
Depreciation and amortization of long-lived assets174.2 192.0 
Interest expense limitation15.6 28.7 
Other1.7 3.7 
Gross deferred tax assets890.7 939.2 
Deferred tax liabilities:
Depreciation and amortization of long-lived assets94.8 108.0 
Equity method investment1.9 19.0 
Operating leases4.9 1.1 
Prepaid expenses4.1 4.0 
Other14.6 22.8 
Gross deferred tax liabilities120.3 154.9 
Valuation allowance(412.5)(432.0)
Net deferred income taxes$357.9 $352.3 
In May 2019, a public referendum held in Switzerland approved the Swiss Federal Act on Tax Reform and AHV Financing ("TRAF") proposals previously approved by the Swiss Parliament. The Swiss tax reform measures were effective on January 1, 2020. During 2023, the Company concluded its discussions with the tax authorities in Switzerland as to the application of the grandfathering rules related to TRAF. This resulted in the recording of a deferred tax asset of $135.6 million related to tax intangibles that will be amortized over time. This treatment began to apply starting in 2021.
As of December 29, 2024, the Company has loss and credit carryforwards of $426.6 million, which is a decrease of $35.3 million from $461.9 million at December 31, 2023. The most significant amount of the loss and credit carryforwards as of December 29, 2024 relates to U.S. capital losses of $337.6 million resulting from the sale of the eOne Film and TV business during 2023. Other significant loss and credit carryforwards relate to tax attributes of entities that have historically operated at losses in certain jurisdictions, as well as certain state tax attributes. The U.S. capital loss has a carryforward period of five years and will expire if not utilized before 2029. Some U.S. federal, state and international loss and credit carryforwards expire at various dates throughout 2025 while others have an indefinite carryforward period.
The recoverability of these future tax deductions and credits is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is generally established. To the extent that a valuation allowance was established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the change in the valuation allowance is recognized in the Consolidated Statements of Operations.
The Company has a valuation allowance for certain net deferred tax assets at December 29, 2024 of $412.5 million, which is a decrease of $19.5 million from $432.0 million at December 31, 2023. The decrease primarily pertains to adjustments to the U.S. capital loss resulting from the sale of the Company's eOne Film and TV business, for which the Company recorded a full valuation allowance as of December 29, 2024.
Tax laws are regularly being re-examined and evaluated globally. The Organization for Economic Co-operation and Development ("OECD") has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar 2"). Certain aspects of Pillar 2 were effective in 2024, which were not material to the Company’s financial statements, and other aspects are effective January 1, 2025. Many non-US tax jurisdictions have either (i) enacted legislation to adopt certain components of Pillar 2 beginning in 2024 (including the European Union Member States) with delayed adoption of other components; or (ii) announced their plans to enact legislation in future years. We continue to evaluate the impacts of enacted and pending legislation related to Pillar 2 in our non-US tax jurisdictions.
The Company’s net deferred income taxes are recorded in the Consolidated Balance Sheets as follows:
(In millions)20242023
Other assets$424.6 $427.9 
Other liabilities(66.7)(75.6)
Net deferred income taxes$357.9 $352.3 
We previously considered the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. However, the Tax Cuts and Jobs Act (the "Tax Act") enacted on December 22, 2017 gave the Company more flexibility to manage cash globally. The Company still has significant cash needs outside the United States and continues to consistently monitor and analyze its global working capital and cash requirements. However, we intend to repatriate substantially all of our accumulated foreign earnings when appropriate. As of December 29, 2024, we have recorded $4.6 million of foreign withholding and U.S. state income tax liability. The Company has not finalized the timing of any actual cash distributions or the specific amounts and therefore we could still be subject to some additional foreign withholding taxes and U.S. state income taxes. We will record these additional tax effects, if any, in the period that we complete our analysis and are able to make a reasonable estimate.
A reconciliation of unrecognized tax benefits, excluding potential interest and penalties is as follows:
(In millions)202420232022
Balance at beginning of year$39.9 $77.8 $50.6 
Gross increases in prior period tax positions0.1 11.9 0.9 
Gross decrease from disposition— (10.4)— 
Gross decreases in prior period tax positions(1.6)(23.4)(0.2)
Gross increases in current period tax positions3.6 3.8 28.6 
Decreases related to settlements with tax authorities(1.5)(8.4)— 
Decreases from the expiration of statutes of limitations(4.4)(11.4)(2.1)
Balance at end of year$36.1 $39.9 $77.8 
Unrecognized tax benefits as of December 29, 2024, December 31, 2023 and December 25, 2022 were $36.1 million, $39.9 million, and $77.8 million, respectively, and are recorded within Other liabilities, Prepaid expenses and other current assets, and Other assets in the Company's Consolidated Balance Sheets. If recognized, these tax benefits may have affected our income tax provision for fiscal years 2024, 2023, and 2022 by approximately $44.0 million, $46.0 million, and $53.0 million, respectively.
During 2024, 2023, and 2022, the Company recognized $2.9 million, $5.8 million, and $2.2 million, respectively, of potential interest and penalties, which are included as a component of Income taxes in the accompanying Consolidated Statements of Operations. As of December 29, 2024, December 31, 2023, and December 25, 2022, the Company had accrued potential interest and penalties of $7.7 million, $6.2 million, and $8.8 million, respectively.
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. The Company is no longer subject to U.S. federal income tax examinations for years before 2017. 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 2018. The Company is currently under income tax examination by the Internal Revenue Service and in several U.S. state and local and non-U.S. jurisdictions.
The Company believes it is reasonably possible that a decrease of approximately $0.0 million - $2.0 million in gross unrecognized tax benefits may be necessary within the coming year as a result of expected tax return settlements and lapse of statutes of limitations.