HAS

Hasbro, Inc. (HAS)

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Hasbro, Inc. (HAS)

Q3 2009 Earnings Call

October 19, 2009 8:30 am ET

Executives

Karen A. Warren - Investor Relations

Brian Goldner - President, Chief Executive Officer, Director

Deborah Thomas - Chief Financial Officer

David D. R. Hargreaves - Chief Operating Officer

Analysts

Tony Gikas - Piper Jaffray

Robert Carroll - UBS

Margaret Whitfield - Stern Agee

Jake Hindelong - Monness Crespi & Martin

Gerrick L. Johnson - BMO Capital Markets

Sean P. McGowan - Needham & Company

Timothy A. Conder - Wells Fargo

Drew Crum - Stifel Nicolaus

Greg Badishkanian - Citi

Jeff Blaeser - Morgan Joseph

Hayley Wolff - Rochdale Securities

Presentation

Operator

Good morning and welcome to the Hasbro third quarter 2009 earnings conference call. (Operator Instructions) With us today from the company is Karen Warren, Senior Vice President of Investor Relations.

Karen A. Warren

Thank you and good morning, everyone. Joining me today are Brian Goldner, President and Chief Executive Officer; David Hargreaves, Chief Operating Officer; and Deb Thomas, Chief Financial Officer.

To better understand our results, it would be helpful to have the press release and financial tables available that we issued earlier today. The press release includes information regarding non-GAAP financial measures discussed on today’s call and it is available on our website at Hasbro.com. We would also like to point out that on this call whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share.

During the call this morning, Brian will discuss key factors impacting our results and Deb will review the financials. We will then open the call to your questions.

Before we begin, let me note that during the call and the question-and-answer session that follows, members of Hasbro management may make forward-looking statements concerning management’s expectations, goals, objectives, and similar matters. These forward-looking statements may include comments concerning our product plans, anticipated product performance, business opportunities and strategies, financial goals and expectations for our future financial performance and achieving our objective.

There are many factors that could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. Some of those factors are set forth in our annual report on Form 10-K, in today’s press release, and in our other public disclosures.

We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call.

Now I would like to introduce Brian Goldner. Brian.

Brian Goldner

Thank you, Karen. Good morning, everyone and thank you for joining us. Our company has continued performed well in this very challenging global environment, as we grew both earnings and earnings per share in the quarter.

Net earnings for the quarter were $150.4 million compared to $138.2 million in 2008, or $0.99 per share compared with $0.89 per share a year ago, an increase of 11% in earnings per share. The growth in earnings and earnings per share includes the dilution from the joint venture and investments we are making in Hasbro's virtual studio. Revenues were down 2%, or $22.7 million, to $1.28 billion in the quarter. However, in constant dollars, revenues grew 1% to $1.32 billion. We experienced growth in a number of key brands, including Transformers, G.I. Joe, Nerf, Littlest Pet Shop, Playdo, and Tonka.

In anticipation of the holidays and as part of our ongoing engagement with consumers, we recently commissioned a proprietary survey in the key U.S. and international markets to better understand holiday spending trends and preferences. The results of this survey revealed some key learnings.

First, toys and games are well-positioned, garnering the highest percentage of the survey respondents planned holiday gift budgets in each market surveyed. Second, brand matters, with the specific brand name requested by a child ranking as the most important factor in purchasing a toy or game. Lastly, confirming what has been reported in the media, the majority of consumers plan to spend at last year’s levels, with about a quarter of consumers indicating they would spend less and approximately 10% saying they would spend more.

In addition, NPD data for the U.S. year-to-date through August highlighted that toys and games outperformed other consumer categories. In this time period, NPD showed a decline in traditional toys and games of just 1.4%, considerably better than other major consumer categories such as apparel and consumer electronics.

Furthermore, Hasbro performed exceptionally well, relative to the industry as NPD data on Hasbro sales of traditional toys and games in the same eight-month time period increased 9.7% compared to a year ago. The data also showed that for the latest three month period, June to August, Hasbro grew more than 16% compared to a year ago, outpacing the overall U.S. toy market, which declined 2%.

POS data for Hasbro's top four domestic accounts further supports these trends and during the third quarter, Hasbro's POS was up 1.8% from a year ago. In recent weeks, Hasbro's POS trends have shown further signs of improvement. While it is still very early in the fourth quarter and the data points are limited, the trends are encouraging.

Now let’s take a look at how our major global product categories performed this quarter. The boys business was up 12% with Transformers, G.I. Joe, and Nerf driving the growth in the category. We had a great summer with the theatrical releases of Transformers: Revenge of the Fallen, and G.I. Joe: The Rise of Cobra, which had a combined global box office receipts in excess of $1.1 billion.

Read the rest of this transcript for free on seekingalpha.com