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Hasbro Reports Third Quarter 2005 Results
Miscellaneous: Jay Cochran - 2005.10.17


PAWTUCKET, R.I.--(BUSINESS WIRE)--Oct. 17, 2005--Hasbro, Inc. (NYSE: HAS)


Highlights:

-- Net revenues up 4% to $988.1 million, compared to $947.3 million a year ago, driven by strong performance from STAR WARS products and the global games business;

-- Net earnings of $92.1 million, or $0.47 per diluted share, compared to net earnings of $88.7 million, or $0.43 per diluted share in 2004;

-- Games segment net revenues up 7%, with a strong performance from a number of board and electronic games, including CANDY LAND and MONOPOLY brands, as well as STAR WARS LIGHT SABER, MX DIRT REBEL, DREAMLIFE and WILD ADVENTURE MINI-GOLF plug and play games;

-- U.S. Toys segment net revenues up 6%, reflecting strong performance from STAR WARS, FURBY, NERF, TRANSFORMERS, PLAYSKOOL and LITTLEST PET SHOP;

-- Strong cash flow with a $300 million year-over-year improvement in debt, net of cash.

Hasbro, Inc. (NYSE: HAS) today reported strong third quarter results. Worldwide net revenues for the quarter were $988.1 million compared to $947.3 million a year ago and included a $5.9 million favorable impact from foreign exchange. Net earnings for the quarter were $92.1 million or $0.47 per diluted share, compared to net earnings of $88.7 million or $0.43 per diluted share in 2004. The 2004 earnings per share amount has been restated due to the required adoption of EITF 04-08 in the fourth quarter of 2004.

Alfred J. Verrecchia, President and Chief Executive Officer, said, "We are pleased with our third quarter results. Global revenues were up 4%, driven in part by STAR WARS and a significant increase in our games business excluding trading card games, as well as a strong performance from a number of other Hasbro brands, including FURBY, NERF, TRANSFORMERS, PLAYSKOOL, LITTLEST PET SHOP, MX DIRT REBEL plug and play game, CANDY LAND and MONOPOLY.

"Our performance year-to-date, along with the diversity, strength and innovation in our product line, reinforces the confidence we have in our ability to achieve our full-year financial goals. It's important however, to keep in mind that there is still a lot of business to be done in the fourth quarter. With the higher cost of gasoline and expected increases in home heating costs, it remains to be seen how much of an impact this will have on consumer spending during the holiday season," Verrecchia concluded.

Revenues in the U.S. Toys segment were $393.1 million for the quarter compared to $369.7 million a year ago, reflecting a strong performance from STAR WARS and a number of other brands including FURBY, NERF, TRANSFORMERS, PLAYSKOOL and LITTLEST PET SHOP. The segment reported an operating profit of $34.0 million for the quarter compared to $20.8 million last year.

Revenues in the Games segment were $252.9 million for the quarter compared to $236.5 million a year ago. The segment experienced strength in board and electronic games, including the CANDY LAND and MONOPOLY brands, as well as the following plug and play games: STAR WARS LIGHT SABER, MX DIRT REBEL, DREAMLIFE and WILD ADVENTURE MINI-GOLF. This was partially offset by a decline in trading card games, with both DUEL MASTERS and MAGIC: THE GATHERING trading card games down year over year. The Games segment reported operating profit of $45.5 million compared to $46.4 million last year, primarily due to a higher mix of games with electronic components which tend to have higher product costs than the traditional board games, as well as increases in royalty and amortization expenses related to STAR WARS.

International segment revenues were $333.1 million for the quarter compared to $331.6 million a year ago, reflecting strong performance from STAR WARS and new product introductions such as FURBY and B'DAMAN, as well as a number of other toy and game brands, including MY LITTLE PONY, LITTLEST PET SHOP, PARKER BROTHERS and MILTON BRADLEY board games. Partially offsetting this increase was a decline in BEYBLADE, VIDEONOW and trading card games. Absent a $4.7 million positive impact from foreign exchange, International segment revenues decreased 1% in local currency to $328.4 million. The International segment reported an operating profit of $45.0 million compared to an operating profit of $48.8 million a year ago, primarily due to increases in royalty and amortization expense related to STAR WARS.

"We are particularly pleased to have re-established year-over-year revenue growth in our Games segment, with continued strength in a number of our traditional board games, as well as new introductions in the plug and play category," said David Hargreaves, Chief Financial Officer.

"As a result of our strong cash flow and continued efforts to strengthen our balance sheet we improved our year-over-year debt, net of cash position by $300 million despite having repurchased $31.8 million of common stock year to date," Hargreaves concluded.

The Company reported third quarter Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $187.9 million compared to $168.6 million in 2004. The attached schedules provide a reconciliation of diluted earnings per share and EBITDA to net earnings for the third quarters and nine-month periods of 2005 and 2004.

The Company will webcast its third quarter earnings conference call at 9:00 a.m. Eastern Standard Time today. Investors and the media are invited to listen at http://www.hasbro.com (select "Corporate Info" from the home page, click on "Investor Information," and then click on the webcast microphone).

Hasbro is a worldwide leader in children's and family leisure time entertainment products and services, including the design, manufacture and marketing of games and toys ranging from traditional to high-tech. Both internationally and in the U.S., its PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, TIGER, and WIZARDS OF THE COAST brands and products provide the highest quality and most recognizable play experiences in the world.

Certain statements contained in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements concerning the ability to achieve the Company's financial goals and may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend," "look forward," "may," "planned," "potential," "should," "will" and "would." Such forward-looking statements are inherently subject to known and unknown risks and uncertainties. The Company's actual actions or results may differ materially from those expected or anticipated in the forward-looking statements. Specific factors that might cause such a difference include, but are not limited to: the Company's ability to manufacture, source and ship new and continuing products on a timely basis and the acceptance of those products by customers and consumers at prices that will be sufficient to profitably recover development, manufacturing, marketing, royalty and other costs of products; economic and public health conditions in the various markets in which the Company and its customers and suppliers operate throughout the world, including factors which impact the retail market or consumer demand, the Company's ability to manufacture and deliver products, higher fuel and other commodity prices, higher transportation costs and potential transportation delays, currency fluctuations and government regulation; the concentration of the Company's customers; the inventory policies of retailers, including the concentration of the Company's revenues in the second half and fourth quarter of the year, together with increased reliance by retailers on quick response inventory management techniques, which increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve tight and compressed shipping schedules; work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product; the bankruptcy or other lack of success of one of the Company's significant retailers which could negatively impact the Company's revenues or bad debt exposure; the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees in a competitive environment; market conditions, third party actions or approvals and the impact of competition that could delay or increase the cost of implementation of the Company's consolidation programs or alter the Company's actions and reduce actual results; the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization; and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances occurring after the date of this release.

This presentation includes a non-GAAP financial measure as defined under rules of the Securities and Exchange Commission ("SEC"), specifically EBITDA. As required by SEC rules, we have provided reconciliation on the attached schedule of this measure to the most directly comparable GAAP measure. EBITDA (earnings before interest, taxes, depreciation and amortization) represents net earnings (loss) before cumulative effect of accounting change, excluding, interest expense, income taxes, depreciation and amortization. Management believes that EBITDA is one of the appropriate measures for evaluating the operating performance of the Company because it reflects the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet, and make strategic acquisitions. However, this measure should be considered in addition to, not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with GAAP as more fully discussed in the Company's financial statements and filings with the SEC. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. This presentation also discusses the Company's International segment net revenues excluding the impact of exchange rates. Management believes that the presentation of International segment net revenues excluding the impact of exchange rates is helpful to an investor's understanding of the segment's underlying business performance absent currency fluctuations which are beyond the Company's control.

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