Q1 2011 Earnings Call
April 14, 2011 8:30 am ET
Brian Goldner - Chief Executive Officer, President, Director and Member of Executive Committee
Deborah Thomas - Chief Financial Officer, Principal Accounting Officer and Senior Vice President
Debbie Hancock - VP, IR
David Hargreaves - Chief Operating Officer
Eric Handler - MKM Partners LLC
Michael Kelter - Goldman Sachs Group Inc.
Gerrick Johnson - BMO Capital Markets U.S.
Per Ostlund - Jefferies & Company, Inc.
Andrew Crum - Stifel, Nicolaus & Co., Inc.
Timothy Conder - Wells Fargo Securities, LLC
Robert Carroll - UBS Investment Bank
Gregory Badishkanian - Citigroup Inc
Margaret Whitfield - Sterne Agee & Leach Inc.
Sean McGowan - Needham & Company, LLC
Previous Statements by HAS
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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.
Our first quarter 2011 earnings release was issued earlier this morning and is available on our website. The press release includes information regarding non-GAAP financial measures included in today's call. Additionally, whenever we discuss earnings per share, or EPS, we are referring to earnings per diluted share.
Please note that beginning in the first quarter 2011, Hasbro has reclassified certain of its products from the Boys category to the Preschool category. A table restating net revenues by category for 2010 and 2009 to reflect the 2011 category classification is included in today's press release.
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 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 and entertainment planned, anticipated product performance, business opportunities and strategies, costs, 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?
Thank you, Debbie. Good morning, everyone, and thank you for joining us today. In February, we indicated that Q1 would be challenging given the higher retail inventories entering the year as well as the timing of several of our new initiatives. Having said this, we are pleased with our first quarter performance, which is on track with our plan for the full year.
The International segment posted another quarter of strong growth, increasing 15% year-over-year, with positive gains in every major geographic region. This growth helped offset the decline in the U.S. and Canada segment, which was down as expected in the quarter.
Our global portfolio approach continued to deliver growth in brands across categories. During the first quarter, a number of brands grew, including TRANSFORMERS, BEYBLADE and Super Soaker. Additionally, FURREAL FRIENDS in the Girls category and Magic: The Gathering in the Games and Puzzles category continued their recent trend of strong year-over-year gains.
During the first quarter, we shipped a limited amount of product associated with Transformers: Dark of the Moon, the third installment of the TRANSFORMERS movie franchise, which is being released in theaters on July 1. These shipments will increase significantly in the second quarter as product is scheduled to be on shelf the week of May 16, ahead of the movie release date.
Also in the first quarter, we shipped product in support of Marvel's release of Thor, due in theaters May 6, and so far, it is selling well. In recent weeks, we began shipments of product for Captain America: The First Avenger, due in theaters July 22.
BEYBLADE continues to be in short supply around the world. We are increasing production, but demand is so strong we'll likely not fully catch up until during the third quarter.
First quarter spending reflects our continued investment in our business for the longer-term. Increases in product development in the quarter reflect developing innovative product lines for this year and beyond. In addition, Q1 reflects being fully staffed at Hasbro Studios and increased spending levels for our overall television initiatives versus a year ago, including program amortization costs and support for hubworld.com. Overall, we remain on track for our long-term plan in respect to television.
Shows based on Hasbro's brands and produced by Hasbro Studios have led The Hub's ratings, with seven of the top 10 rated shows being Hasbro Studios productions.
The Hub just completed its upfront presentation to advertisers who are enthusiastic about the great lineup of new and returning shows for Season 2. From Hasbro Studios, there are six new original shows based on a number of our brands. Those series are joining five shows from Hasbro Studios that are returning with all new episodes for Season 2. The network continues to add advertisers and currently has more than 100 advertisers, the vast majority of which did not advertise on Discovery Kids.