Iconix Acquires Strawberry Shortcake; PONY Athletic Brand
Iconix Brand Group announced at the end of last week that it has acquired Strawberry Shortcake and related intangible assets from American Greetings Corporation for $105 million in cash. The acquisition is expected to close within the next 30 to 45 days.
“The entertainment sector is an exciting area of growth for our company,” said Neil Cole, chairman and CEO of Iconix Brand Group in a statement. Through our Peanuts brand, we have a strong worldwide platform that we believe we can leverage as we add new entertainment properties to our portfolio. With the acquisition of Strawberry Shortcake, we will be expanding this platform as we gain new partnerships with top entertainment companies around the world.”
Strawberry Shortcake made its debut 35 years ago and today it is a global brand with a diversified network of more than 350 licensees. Strawberry Shortcake has a strong international business, with revenue outside of the U.S. representing approximately 50 percent of total sales, according to Iconix. The two largest international markets are Brazil and France, where the brand is highly recognized as a local-based brand, marketed as Moranguinho in Brazil and Charlotte aux Fraises in France.
In a separate statement late last week, Iconix also announced that it has acquired the North American rights to the athletic brand PONY and related intangible assets in partnership with Anthony L&S Athletics, LLC (AL&S) for $37 million in cash from Symphony Holdings Ltd. The assets will be purchased through a newly formed subsidiary, which will be owned 75 percent by Iconix and 25 percent by AL&S. Subsequent to this transaction, Iconix has the option to expand global ownership of the brand and acquire the PONY assets in additional territories.
In exchange for its 25 percent interest in the partnership, AL&S contributed its previously held perpetual rights to the PONY brand in the U.S. and Canada and will be the core footwear licensee going forward. Pony was founded in New York City in 1972.
Goldner Named Hasbro Chairman of the Board; Verrecchia to Retire
Hasbro, Inc., announced that its board of directors has appointed current president and CEO, Brian Goldner, as chairman of the board. The appointment is effective as of the annual shareholders meeting on May 21, 2015, when current chairman, Al Verrecchia, retires. After 50 years of service at Hasbro, Verrecchia is retiring from Hasbro’s board of directors at the target retirement age of 72.
“Since joining Hasbro in 2000 and becoming CEO in 2008, Brian has exhibited tremendous leadership and vision in setting a path for Hasbro,” said Verrecchia, in a statement. “Through his unique ability to understand the consumer and the evolution of our industry, Brian established and is executing a strategy that is delivering strong results and differentiating Hasbro in a very competitive global marketplace. I am confident that the leadership of the company and on the board will successfully guide Hasbro for years to come.”
Goldner commented. “I am truly honored to be appointed chairman of Hasbro and to have the opportunity to further lead the evolution of this tremendous company. The strength of our brands and the quality of our people around the world is undeniable and there remains enormous potential in both. I am confident that, together with the leadership of the board and our global Hasbro teams, we will continue creating the world’s best play experiences and drive enhanced total returns for our shareholders.”
Due primarily to the attainment of retirement age, four additional Hasbro board members will retire and not stand for election at the May annual meeting of shareholders. These include Frank J. Biondi, Jr., John (Jack) M. Connors, Jr., Michael W.O. Garrett, and Jack M. Greenberg.
The board named Basil Anderson to the newly created role of lead independent director, effective May 21, 2015. The role of lead independent director will replace the company’s current role of presiding director effective as of the 2015 annual meeting and will have enhanced duties and responsibilities.
Anderson has served on Hasbro’s board of directors since 2002 and is currently chair of Hasbro’s nominating, governance, and social responsibility committee. Anderson has more than 30 years of business experience including as an operating executive, CFO, and as a board member of major multi-national public companies, including Becton, Dickinson and Company, Moody’s Corporation, and Staples, Inc.
Hasbro Reports Q4 2014
Hasbro, Inc., reported financial results for the full year and fourth quarter 2014. Net revenues for the full-year 2014 increased 5 percent to $4.28 billion compared to $4.08 billion in 2013. Hasbro says that excluding a negative $93.4 million impact from foreign exchange, 2014 revenues increased 7 percent.
As reported, net earnings for the full-year 2014 were $415.9 million, or $3.20 per diluted share, compared to $286.2 million, or $2.17 per diluted share, in 2013. Adjusted net earnings for the full-year 2014 were $408.7 million, or $3.15 per diluted share. Adjusted net earnings exclude pre-tax charges of $28.3 million associated with restructuring of the company’s joint venture television network and $5.2 million associated with other restructuring activities, which were more than offset by a pre-tax benefit of $36 million from the sale of licensed rights for intellectual property and $6.6 million in favorable tax adjustments related to tax exam settlements.
Net earnings for the full-year 2013 include pre-tax charges of $36.7 million associated with restructuring, $7 million of related pension costs, $61.1 million associated with the settlement of an adverse arbitration award, $40.6 million of charges related to certain non-strategic brands as well as a $23.6 million favorable tax adjustment. Excluding these items, 2013 adjusted net earnings were $372.4 million, or $2.83 per diluted share.
“2014 was a good year for Hasbro,” said Brian Goldner, Hasbro’s president and CEO, in a statement. “We grew revenues, profitability, and returned significant capital to our shareholders. These results highlight the power of building innovative brand experiences based firmly in global consumer insights and supported by compelling stories. Investments in our brand blueprint are unlocking value in our brand portfolio and we begin 2015 well positioned to capitalize on our efforts in ‘Creating the World’s Best Play Experiences.’”
Fourth Quarter 2014 Financial Results
For the fourth quarter 2014, net revenues increased 1 percent to $1.30 billion versus $1.28 billion in 2013. Excluding a negative $75.4 million impact from foreign exchange, fourth quarter 2014 revenues increased 7 percent.
As reported, net earnings for the fourth quarter 2014 were $169.9 million, or $1.34 per diluted share, compared to $129.8 million, or $0.98 per diluted share, in 2013. Adjusted net earnings for the fourth quarter were $154.9 million, or $1.22 per diluted share. Adjusted net earnings exclude pre-tax charges of $16.8 million associated with restructuring of the company’s joint venture television network and $5.2 million associated with other restructuring activities, which were more than offset by a pre-tax benefit of $36 million from the sale of licensed rights for intellectual property and $6.9 million in favorable tax adjustments related to tax exam settlements.
Fourth quarter 2013 as reported net earnings included pre-tax charges of $48.8 million associated with restructuring and related pension costs and product-related charges, and a benefit of $15.4 million related to the settlement of an adverse arbitration award for less than the previously recorded charge. Excluding these items, as adjusted fourth quarter 2013 net earnings were $148.8 million, or $1.12 per diluted share.
Full-Year 2014 Major Segment Performance
Full-year 2014 U.S. and Canada segment net revenues increased 1 percent to $2.02 billion compared to $2.01 billion in 2013. Growth in the Boys category offset declines in the Girls, Games, and Preschool categories. The U.S. and Canada segment reported operating profit growth of 7 percent to $334.7 million, or 16.5 percent of revenues, compared to $313.7 million, or 15.6 percent of revenues, in 2013.
International segment net revenues increased 8 percent to $2.02 billion compared to $1.87 billion in 2013. Revenues grew 13 percent excluding a negative $87.7 million impact from foreign exchange. Revenues in the International segment reflect 6 percent growth in Europe, 14 percent growth in Latin America, and 10 percent growth in the Asia Pacific region, as well as growth in the Boys, Girls, and Preschool categories, partially offset by a decline in the Games category. In total, Emerging Markets revenues increased 20 percent to $689.8 million. The International segment reported operating profit growth of 15 percent to $270.5 million, or 13.4 percent of revenues, compared to $235.5 million, or 12.6 percent of revenues, in 2013.
Entertainment and Licensing segment net revenues increased 15 percent to $219.5 million compared to $191 million in 2013. The segment primarily benefited from growth in lifestyle licensing globally. The Entertainment and Licensing segment reported 33 percent operating profit growth to $60.6 million, or 27.6 percent of revenues, compared to $45.5 million, or 23.8 percent of revenues, in 2013.
Fourth Quarter and Full-Year 2014 Product Category Performance
Full-year 2014 Boys category revenues increased 20 percent to $1.48 billion. Hasbro says that growth in Transformers, Nerf, and Marvel properties more than offset declines in Beyblade.
Games category revenues declined 4 percent for the year to $1.26 billion. Growth in Franchise Brands Magic: The Gathering and Monopoly as well as Simon and The Game of Life in 2014, was offset by declines in Duel Masters, Twister, and Angry Birds games.
2014 Girls category revenues grew 2 percent to $1.02 billion. Revenue growth in My Little Pony, My Little Pony Equestria Girls, Nerf Rebelle, and the introduction of Play-Doh DohVinci offset declines in Furby.
Preschool category revenues decreased 4 percent to $510.8 million for the full-year 2014. Play-Doh and Transformers Rescue Bots revenue growth was more than offset by declines in other Preschool initiatives, including core Playskool and Sesame Street products.
Dividend and Share Repurchase
In 2014, Hasbro returned $677.6 million to shareholders including $216.9 million in cash dividends. Hasbro’s board of directors has declared a quarterly cash dividend of $0.46 per common share. This represents an increase of $0.03 per share, or 7 percent, from the previous quarterly dividend of $0.43 per common share. The dividend will be payable on May 15, 2015, to shareholders of record at the close of business on May 1, 2015.
In addition, the board of directors has authorized the company to repurchase an additional $500 million of its common stock. At year-end, $64.2 million remained available in the current share repurchase authorization. In 2014, Hasbro repurchased 8.5 million shares at a total cost of $460.7 million and an average price of $54.26 per share.
LeapFrog Reports Q3 Results
LeapFrog Enterprises, Inc., announced financial results for the third fiscal quarter ended December 31, 2014. The company’s fiscal year covers the 12-month period ending March 31, 2015.
“We are very disappointed that our performance in the third quarter declined significantly year-over-year and was below our previously-provided guidance,” said John Barbour, CEO, in a statement. “As we previously stated, the sales shortfall was mainly due to the following factors:
• In our major territories, holiday sales of children’s tablets across the toy and electronics segments declined more than expected. This fall in consumer demand resulted in lower than planned LeapPad shipments in the quarter.
• Due to development issues, we shipped and promoted our new LeapTV educational video game system later than planned. This delay, along with associated LeapTV advertising and promotion being late in the holiday season, and inconsistent execution at retail, resulted in us significantly missing our sales expectations on this innovative new platform.
• The lower consumer sales of LeapPad and LeapTV hardware resulted in less demand for cartridges, accessories, and digital content.
• Our LeapReader learn-to-read system sales were also lower than expected over the quarter, partly due to the significant drop in the retail prices of children’s tablets.
• In addition to the primary drivers above, retail in-stocks of our new tablets were hampered by tighter inventory management and open-to-buy challenges across a number of our retailer partners and the West Coast port slowdown in the US.”
Barbour continued. “Despite these sales declines, the children’s tablet business remains a sizeable business around the world, and we believe based on market data that LeapPad tablets continued to be the No. 1-selling kids’ tablets in the U.S. based on units. In addition, our LeapPad tablets were also the overall No. 1-selling toy in the UK for the year according to NPD. LeapTV has also won a wide variety of independent awards and has been getting good online consumer reviews.”
Summary of financial results for the quarter ended December 31, 2014, compared to the quarter ended December 31, 2013:
• Consolidated net sales were $144.6 million, down 23 percent. U.S. segment net sales were down 20 percent, and international segment net sales were down 28 percent.
• Net loss per basic and diluted share was $1.77 and included $0.23 per share of goodwill impairment, net of the associated tax benefit, and $1.29 per share of an additional deferred tax asset valuation allowance. In the prior-year period, net income per diluted share was $0.90 and included $0.88 per share benefit from the reduction of deferred tax asset valuation allowance.
• Adjusted net loss per basic and diluted share, which excludes goodwill impairment, the tax benefit associated with goodwill impairment and the deferred tax asset valuation allowance adjustment, was $0.25, compared to adjusted net income per diluted share of $0.02 a year ago.
• Cash and cash equivalents were $94 million as of December 31, 2014, down 44 percent compared to $168.1 million as of December 31, 2013.
“In light of the sales decline and losses, we are reviewing our product strategies, operations, and cost structure. In this regard, we internally announced an approximate 16 percent reduction in our worldwide organization,” said Barbour. “LeapFrog is a strong brand that parents trust with a rich, 20-year history of innovation and education. We are confident we can leverage our core assets to return the company to growth and continue to help children achieve their potential.”
Financial Overview for the Third Fiscal Quarter Ended December 31, 2014, Compared to the Quarter Ended December 31, 2013:
Third fiscal quarter net sales were $144.6 million, down 23 percent compared to $186.7 million last year, and included a 1 percent negative impact from changes in currency exchange rates. In the U.S. segment, net sales were $99.2 million, down 20 percent compared to $123.7 million last year. In the International segment, net sales were $45.4 million, down 28 percent compared to $63 million last year, and included a 3 percent negative impact from changes in currency exchange rates.
Loss from operations for the third fiscal quarter was $36.5 million, compared to income from operations of $0.7 million last year.
Net loss for the third fiscal quarter was $124.2 million and included non-cash charges of $19.5 million for goodwill impairment, net of the associated non-cash tax benefit of $3.8 million, and $90.8 million for additional non-cash deferred tax asset valuation allowance. In the prior year period, net income was $63.9 million and included a non-cash benefit of $62.8 million from the reduction of deferred tax asset valuation allowance.
Net loss per basic and diluted share was $1.77 and included $0.23 per share of goodwill impairment, net of the associated tax benefit, and $1.29 per share of an additional deferred tax asset valuation allowance. In the prior year period, net income per diluted share was $0.90 and included $0.88 per share benefit from the reduction of deferred tax asset valuation allowance.
Adjusted net loss per basic and diluted share, which excludes goodwill impairment, the tax benefit associated with goodwill impairment and the deferred tax asset valuation allowance adjustment, was $0.25, compared to adjusted net income per diluted share of $0.02 a year ago.
Adjusted EBITDA for the third fiscal quarter was a loss of $7.3 million, compared to a gain of $9.2 million last year. Adjusted EBITDA excludes stock-based compensation and goodwill impairment.
“We expect our net sales to decline in the fourth quarter compared to the same period of the prior year given our recent sales trends,” said Ray Arthur, CFO.
TLC Named Fox’s European Agent
Twentieth Century Fox Consumer Products announced the appointment of TLC as its new licensing agent for the company in key European regions including Germany, France, Benelux, Spain, Italy, and Portugal.
TLC will establish and grow the licensing business for Fox Consumer Products’ portfolio of TV and film brands including The Simpsons, Family Guy, Sons of Anarchy, Ice Age, Rio, and Avatar, among others.
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