Hasbro Reports Q3 2015
Hasbro, Inc., reported financial results for the third quarter 2015. Net revenues for the third quarter 2015 were $1.47 billion, flat with $1.47 billion in 2014. Hasbro says that absent a negative $132.4 million impact from foreign exchange, net revenues increased 9 percent.
Net earnings for the third quarter 2015 were $207.6 million, or $1.64 per diluted share, compared to $180.5 million, or $1.40 per diluted share, in 2014. Adjusted net earnings for the third quarter 2015 were $200.5 million, or $1.58 per diluted share. These exclude a pre-tax gain of $9.9 million, or $0.06 per diluted share, from the sale of the company’s manufacturing operations in East Longmeadow, Mass. and Waterford, Ireland. This compared to adjusted net earnings for the third quarter 2014 of $187.8 million, or $1.46 per diluted share, which excluded a pre-tax charge of $11.6 million, or $0.06 per diluted share, related to the restructuring of the company’s investment in its television joint venture.
“Strong global consumer demand across Hasbro Franchise Brands and Partner Brands drove continued momentum in our business,” said Brian Goldner, Hasbro’s chairman, president, and CEO. “Brand innovation and superior market execution delivered not only underlying revenue growth, but higher profitability in a very challenging foreign exchange environment. We have innovative play experiences and marketing initiatives across brands, demographics, and geographies this holiday season and remain focused on executing and investing for continued growth in future years.”
Third Quarter 2015 Major Segment Performance
U.S. and Canada Segment net revenues increased 5 percent to $803.8 million compared to $764.3 million in 2014. The Segment’s results reflect growth in the Boys and Preschool categories, which was partially offset by a decline in the Games and Girls categories. Absent the 1 percent or $5.4 million negative impact of foreign exchange, the U.S. and Canada Segment increased 6 percent. The U.S. and Canada Segment reported operating profit of $187.1 million, up 10 percent compared to $169.9 million in 2014.
International Segment net revenues were $612.6 million compared to $649.3 million in 2014. Growth in the Boys and Preschool categories were more than offset by declines in the Games and Girls categories. On a regional basis, the negative impact of foreign currency resulted in revenue declines in Europe, Latin America, and Asia Pacific. Emerging markets revenues declined 15 percent in the quarter. Excluding an unfavorable $126.7 million impact of foreign exchange, net revenues in the International Segment grew 14 percent, increasing 15 percent in Europe, 14 percent in Latin America, and 9 percent in Asia Pacific. Emerging markets increased approximately 12 percent absent the impact of foreign exchange. Foreign exchange also negatively impacted operating profit. As reported, International Segment operating profit of $114.2 million was down 2 percent, compared to $116.5 million in 2014. Excluding the negative impact of foreign exchange, operating profit was $133 million, a 14 percent increase versus 2014.
Entertainment and Licensing Segment net revenues declined 2 percent to $52.1 million compared to $53.4 million in 2014. The decline in revenue was primarily driven by a difficult comparison with Transformers: Age of Extinction entertainment and licensing revenue last year. The Entertainment and Licensing Segment reported an increase in operating profit to $16.2 million compared to $0.5 million in 2014. In 2014, operating profit was negatively impacted by the acceleration of certain programming amortization costs.
Third Quarter 2015 Product Category Performance
Third quarter 2015 net revenues in the Boys category increased 24 percent to $593.1 million. The retail launch of Star Wars: The Force Awakens product along with growth in Franchise Brand Nerf and the positive contribution from Jurassic World products drove the strong year-over-year growth. These gains more than offset the decline in Transformers, which faced difficult comparisons versus 2014 shipments in support of the theatrical release of Transformers: Age of Extinction.
Games category revenues declined 8 percent in the quarter to $363.5 million. Growth in Franchise Brand Monopoly and initial shipments of Playmation Marvel’s Avengers were more than offset by declines in Franchise Brand Magic: The Gathering and several other games.
The Girls category revenues declined 28 percent in the third quarter 2015 to $294.8 million. Furby continued to drive this decline along with relatively smaller declines in Franchise Brand My Little Pony, and a decline in Furreal Friends. Growth in Play-Doh DohVinci and shipments of Disney’s Descendants partially offset the revenue declines in other Girls’ brands.
Preschool category revenues increased 17 percent in the third quarter 2015 to $219.6 million. Growth in Franchise Brand Play-Doh, along with shipments of Playskool Heroes Star Wars Galactic Heroes and Jurassic World as well as the launch of Playskool Friends My Little Pony more than offset revenue declines in core Playskool products.
Dividend and Share Repurchase
Hasbro paid $57.5 million in cash dividends to shareholders during the third quarter 2015. The next quarterly cash dividend payment of $0.46 per common share is scheduled for November 16, 2015, to shareholders of record at the close of business on November 2, 2015.
During the third quarter, Hasbro repurchased 338,077 shares of common stock at a total cost of $26 million and an average price of $76.88 per share. Through the first three quarters, Hasbro repurchased 1.09 million shares of common stock at a total cost of $72.8 million and an average price of $67.07 per share. At quarter-end, $491.3 million remained available in the current share repurchase authorization.
Mattel Reports Q3 2015
Mattel, Inc., announced that for the third quarter of 2015 worldwide net sales were down 4 percent in constant currency, with adjusted operating income of $321.6 million, and adjusted earnings per share of $0.71.
“Our results for the quarter, excluding the significant impact from currency exchange rates, were broadly in line with our expectations at this stage of our turnaround,” said Christopher Sinclair, Mattel chairman and CEO. “Importantly, we’re very encouraged by the progress we are making on reenergizing the company, building momentum in our core brands, improving retail execution, reducing costs, and building scale in key emerging markets. As we continue our turnaround efforts, we remain comfortable with our full-year outlook.”
For the quarter, worldwide net sales were down 4 percent in constant currency compared to last year. In the North American Region, which consists of the United States, Canada, and American Girl, third quarter gross sales decreased by 4 percent in constant currency, and 5 percent as reported. In the International Region, gross sales decreased by 2 percent in constant currency, and decreased 19 percent as reported. Adjusted gross margin decreased 170 basis points and 140 basis points as reported, primarily from the negative impact from changes in currency exchange rates. Adjusted other selling and administrative expenses decreased $30 million, reflecting continued cost improvement initiatives. Adjusted operating income for the quarter was $321.6 million, compared to prior year’s adjusted operating income of $434.5 million, reflecting the negative impact from changes in currency exchange rates and lower sales, partially offset by lower other selling and administrative expenses.
The Company’s debt-to-total capital ratio as of September 30, 2015, was 46.8 percent.
Cash flows used for operating activities were approximately $222 million, compared to approximately $144 million in 2014. Cash flows used for investing activities were approximately $206 million, a decrease of approximately $398 million, primarily due to the prior-year acquisition of MEGA Brands. Cash flows used for financing activities and other were approximately $254 million, compared to approximately $29 million in 2014. The change was primarily driven by prior-year net proceeds from long-term borrowings, partially offset by prior-year share repurchases.
The Board of Directors declared a fourth quarter cash dividend of $0.38 per share, which is flat compared to the fourth quarter of 2014. The dividend will be payable on December 11, 2015, to stockholders of record on November 25, 2015.
Sales by Brand
Mattel Girls and Boys Brands
For the third quarter, worldwide gross sales for Mattel Girls and Boys Brands were $1.12 billion, down 5 percent in constant currency versus the prior year. Worldwide gross sales for the Barbie brand were down 4 percent in constant currency. Year-to-date retail sales for Barbie are up slightly on a global basis, driven by strong performance in the United States, partially offset by a decline in international markets. Worldwide gross sales for Other Girls brands were down 20 percent in constant currency. Worldwide gross sales for the Wheels category, which includes the Hot Wheels and Matchbox brands, were up 19 percent in constant currency. Worldwide gross sales for the Entertainment business, which includes Radica and Games, were down 4 percent in constant currency.
Third quarter worldwide gross sales for Fisher-Price Brands, which includes the Fisher-Price Core, Fisher-Price Friends, and Power Wheels brands, were $625.3 million, up 1 percent in constant currency versus the prior year.
American Girl Brands
Third quarter gross sales for American Girl Brands, which offers American Girl-branded products directly to consumers, were $109.9 million, down 2 percent in constant currency versus the prior year.
Construction and Arts & Crafts Brands
Third quarter gross sales for Construction and Arts & Crafts Brands, which includes the MEGA Bloks and RoseArt brands, were $118.5 million, up 2 percent in constant currency versus the prior year. Mattel acquired MEGA Brands, Inc., on April 30, 2014.