HAS

Hasbro, Inc. (HAS)

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Hasbro, Inc. (HAS)

Q4 2009 Earnings Call

February 8, 2010 8:30 am ET

Executives

Karen Warren - Senior Vice President Investor Relations

Brian Goldner - President and Chief Executive Officer

David Hargreaves - Chief Operating Officer and Chief Financial Officer

Deb Thomas - Senior Vice President and Head of Corporate Finance

Analysts

Sean McGowan – Needham & Co.

Felicia Hendrix – Barclays Capital

Drew Crum – Stifel Nicolaus

Gerrick Johnson – BMO Capital Markets

Margaret Whitfield - Sterne, Agee

Tony Gikas – Piper Jaffray

Greg Badishkanian – Citigroup

Robert Carroll – UBS

Tim Conder – Wells Fargo

Jim Chartier – Monness Crespi Hardt

Jeff Blaeser – Morgan Joseph

John Taylor – Arcadia Investment Group

Hayley Wolff - Rochdale Securities

Presentation

Operator

(Operator Instructions) Welcome to the Hasbro Fourth Quarter 2009 Earnings Conference Call. With us today from the company is Karen Warren, Senior Vice President of Investor Relations.

Karen Warren

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 this call and the question and answer session that follow, 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 in achieving our objectives.

There are many factors that could cause actual results and experiences 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 Goldner

We’re extremely pleased with our 2009 performance that demonstrates Hasbro’s strategy is working. Across our business Hasbro employees came together to deliver our fifth consecutive year of revenue growth and our ninth consecutive year of EPS growth. These results include the dilution from our television investments and our joint venture with Discovery Communications, and the launch of Hasbro Studios. These investments are part of our strategy to invest in our business for the long term while returning cash to shareholders.

We achieved these results despite challenging global economic trends. Overall in 2009 the global economic environment did not improve significantly but it also did not deteriorate further. There was a continued lower level of consumer spending and poor market conditions in countries like the UK, Spain, and Mexico. Because we stayed committed to our strategy, adapting it to best meet changing consumer spending habits, we were well positioned for when the consumer came out to shop. The consumer did come out to shop albeit it late in the fourth quarter.

At the same time, 2009 was an extremely important year in the evolution of Hasbro as we endeavor to become a branded play company. Over the past 12 months we further assembled the tools we need to be successful in the execution of our strategy over the long term. First and foremost we delivered and remain committed to delivering innovative, compelling, branded products at appropriate price points, coupled with strong marketing programs.

We extended key strategic licenses with our partners Marvel, and Lucas, who continue to be important contributors to our business. We announced a 10 year global strategic alliance with Sesame Workshop an extremely valuable new partner. We believe there is opportunity to grow our businesses together. We further expanded Hasbro’s presence in emerging markets through share gains in our key markets such as Brazil and China, growing our existing businesses in emerging Eastern European, Asian, and Latin American countries and establishing new offices in important geographies including Russia and Romania.

As a result, we grew revenues in our emerging markets in Asia/Pacific, Latin America, and Europe, where key brands like Transformers, Nerf, Littlest Pet Shop and Play-Doh as well as games contributed to the increase in revenues.

We continued the activation of our brands across platforms, growing revenues and lifestyle licensing and digital gaming and making key strides in entertainment including movies, TV and online. In the entertainment arena we partners with Discovery Communications to form a new children’s television network, The Hub, launching in the fall of this year. Simultaneously we established Hasbro Studios to develop compelling programming based on Hasbro brands.

In motion pictures, with more than $1.1 billion in box office revenue between Transformers and G.I. Joe, and strong product sales in 2009, we are working with Paramount on Transformers 3 and G.I. Joe 2. In addition, we are pleased to add Sony as a studio partner as we reached an agreement to develop Risk as a major motion picture.

For the full year we grew key brands including Transformers, G.I. Joe, Nerf, Littlest Pet Shop, Play-Doh, Tonka, and Magic: The Gathering. We gained share in our major markets. This quarter we included the performance of our major product categories in the press release. I will review high level points behind this performance from a total brand perspective.

The total brand performance of Transformers, G.I. Joe, and Nerf delivered double digit growth in 2009 across multiple product categories. Transformers had a record year posting $592 million in revenues, a 23% increase from our last movie year in 2007. G.I. Joe recorded revenue in excess of $125 million and Nerf continued its growth, increasing 25% driven by continued growth in the US and the expansion of the brand internationally. Play-Doh and Tonka also turned in double digit growth, both growing approximately 25% in 2009. Littlest Pet Shop, our largest girl’s brand also grew in 2009.

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