<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 26, 1993 Commission file number 1-6682
----------------- ------
Hasbro, Inc.
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(Name of registrant)
Rhode Island 05-0155090
- ------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1027 Newport Avenue, Pawtucket, Rhode Island 02861
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(Address of Principal Executive Offices)
(401) 431-8697
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock American Stock Exchange
Preference Share Purchase Rights American Stock Exchange
Common Stock Purchase Warrants
Expiring July 12, 1994 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes[X] or No[ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant computed by reference to the price at which the stock was sold on
March 18, 1994 was $2,865,624,732.
The number of shares of Common Stock outstanding as of March 18, 1994 was
87,977,666.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement for its 1994 Annual Meeting
of Shareholders are incorporated by reference into Part III of this Report.
Selected information contained in registrant's Annual Report to Shareholders
for the fiscal year ended December 26, 1993, is included as Exhibit 13, and
incorporated by reference into Parts I and II of this Report.
PART I
ITEM 1. BUSINESS
--------
(a) General Development of Business
-------------------------------
The Company designs, manufactures and markets a diverse line of toy products
and related items including games and puzzles, preschool, boys' action and
girls' toys, dolls, plush products and infant products, including infant
apparel, throughout the world. The Company also licenses various tradenames,
characters and other property rights for use in connection with the sale by
others of noncompeting toys and non-toy products.
Except as expressly indicated or unless the context otherwise requires, as
used herein, the "Company" means Hasbro, Inc., a Rhode Island corporation
organized on January 8, 1926, and its subsidiaries.
(b) Description of Business Products
--------------------------------
The Company designs, manufactures and markets a diverse line of toy products
and related items categorized for marketing purposes as follows:
(i) Infant and Preschool
--------------------
The Playskool line of products is specifically designed for preschool
children, toddlers and infants.
The Playskool toy line includes such well known products as Lincoln Logs(R),
Tinkertoys(R), Mr. Potato Head(R), In-Line Skates, Play-Doh(R), Raggedy Ann(R)
and Raggedy Andy(R) rag dolls, Magic Tea Party(TM), the "Busy" line of toys and
electronic items including Alphie(R) II, Talking Barney(R) and Teddy Ruxpin(R).
The line also includes toys utilizing the "Sesame Street(R)" character motifs
sold domestically and internationally by the Company under licenses from The
Children's Television Workshop. New items for 1994 include the Playskool
Dollhouse Stable, Magic Smoking Grill(TM), Cool Tools(TM) and 4 in 1 Busy(TM)
Center.
Playskool's line of infant and juvenile items consists of products for very
young children, including the Pur(R) line of silicone nipples and pacifiers,
bibs and other infant accessories such as the Hugger(R) toothbrush, a full line
of health care and safety products, Tommee Tippee(TM) training cups and feeding
items, water-filled teething rings, soft toys, rattles, inflatable and squeeze
toys and infant apparel including the Scootees(R) line of soft shoes for
babies. New products in 1994 include the 1-2-3 High Chair(TM).
<PAGE>
(ii) Promotional Brands
------------------
The Hasbro Toy product line includes innovative new products, traditional
classics and contemporary favorites for both boys and girls. In the girls' toy
category it offers items including the Cabbage Patch Kids(R) family of dolls
and accessories, and the Puppy Surprise(R) line of products. In boys' toys it
offers such products as G.I. Joe(R), The TransFormers(R) and the Tonka(R) line
of trucks and vehicles, including the Electronic Talk'n Play(TM) Fire
Truck(TM). It also offers activity items for both girls and boys including
Fashion Plates(R), Fashion Faces(TM), the Fantastic Flowers(R) flower making
machine and the Real Power Toolshop(TM). Among its new introductions for 1994
in the girls' line are the Fantastic Sticker Maker(TM), Treasure Rocks(TM) and
the Make-up Beauty(TM) doll. In boys' toys, new introductions include the
Stargate(TM) and Street Fighter(TM) action figures.
Kenner Products offers a wide range of products. A leader in toys tied to
entertainment properties, Kenner's offerings for 1994 include The Shadow(TM),
Jurassic Park(TM), Batman(R), Aliens(TM) and Predator(TM) action figures and
accessories, as well as Shaq Attack(TM) and Starting Lineup(R) sports action
figures. Other boys' toys include the CLAW(TM) monster vehicles, Carzillas(TM)
motorized vehicles and the Nerf(R) line of soft action play equipment. For
girls, Kenner markets Baby Check-Up(R), Baby All Gone(R) and the Baby Sitters
Club(R) dolls, Beethoven's 2nd(TM) plush pups and the Littlest Pet Shop(TM)
figures and playsets. In addition, Kenner offers a selection for at home
activity play including the E Z 2 Do(TM) line of items, the Spirograph(R)
family of products, the Colorblaster(TM) series of design toys and the classic
Easy Bake(R) Oven.
(iii) Games
-----
Milton Bradley manufactures and sells quality games and puzzles, including
board, strategy and word games, skill and action games and travel games. It
maintains a diversified line of more than 200 games and puzzles for children
and adults. Its staple items include Battleship(R), The Game of Life(R),
Scrabble(R), Chutes and Ladders(R), Candy Land(R), Lite-Brite(R), Trouble(R),
Mousetrap(R), Operation(R), Hungry Hungry Hippos(R), Connect Four(R),
Twister(R) and Big Ben(R) Puzzles. The Company also manufactures and sells
games for the entire family, including such games as Yahtzee(R), Parcheesi(R),
Aggravation(R), Jenga(R) and Scattergories(R). Games added to the Milton
Bradley line for 1994 include 13 Dead End Drive(TM), Don't Get Rattled(TM) and
Slobberin' Sam(TM).
Parker Brothers markets a full line of games for families, children and
adults. Its classic line of family board games includes Monopoly(R), Clue(R),
Sorry!(R), Risk(R), Boggle(R), Ouija(R) and Trivial Pursuit(R). Some of these
classics have been in the Parker Brothers' line for more than 50 years. The
Company also markets traditional card games such as Mille Bornes(R), Rook(R),
Rack-O(R), Old Maid and Go Fish. Its line of travel games includes travel
editions of Monopoly(R) Junior, Clue(R), Sorry!(R) and Boggle(R) Jr. New to the
Parker Brothers' line in 1994 are Willy Go Boom(TM), Swinging Snakes(TM),
Bottle Topps(R) and, in the electronic talking game line, Sounds of Fun(TM), a
new item featuring licensed characters from Disney's The Lion King.
<PAGE>
(iv) International
-------------
The Company conducts its international operations through subsidiaries which
sell a representative range of the products marketed in the United States
together with some items which are sold only internationally.
Products sold by subsidiaries in the United Kingdom, The Netherlands,
Germany, France, Italy, Spain, Portugal, Belgium, Austria, Switzerland, Hungary
and Greece are manufactured at plants located in Ireland, The Netherlands and
Spain and also supplied by a Hong Kong subsidiary. In early 1994, the Company
announced the planned closure of its manufacturing operation in The Netherlands
with the transfer of its production to plants in Ireland and Spain. Certain
products sold by the Canadian subsidiary are assembled in Canada, although the
U.S. and Mexican operations and a Hong Kong subsidiary supply some component
parts as well as finished goods. The Mexican marketing unit sells products
supplied primarily by the domestic operations and a Hong Kong subsidiary. The
Company also has a manufacturing operation in Mexico which supplies certain
products, primarily for distribution through the North American operations. The
New Zealand and Australian subsidiaries sell products manufactured by the New
Zealand unit and also supplied by a Hong Kong subsidiary. The Company also
markets certain products, primarily supplied by a Hong Kong subsidiary, in
Japan, Hong Kong, Taiwan, China and other areas in the Far East. A Hong Kong
subsidiary sources product for the Company's U.S. and foreign operations
working primarily through unrelated manufacturers in various Far East
countries. The Company also has small investments in joint ventures in India
and The Peoples Republic of China which manufacture and sell products to both
the Company and non-affiliated customers. In early 1993, the Company
established a new Hong Kong subsidiary which markets directly to retailers a
line of high quality, low priced toys, games and related products, primarily on
a direct import basis.
In addition, certain toy products are licensed to other toy companies to
manufacture and sell product in selected foreign markets where the Company does
not otherwise have a presence.
Working Capital Requirements
----------------------------
The Company's shipments of products are greater in each of the third and
fourth quarters than shipments in each of the first and second quarters. During
the past several years, the Company has experienced a gradual shift in its
revenue pattern wherein the second half of the year has grown in significance
to its overall business and within that half, the fourth quarter has become
more prominent and the Company expects this trend to continue. Production has
been financed historically by means of short-term borrowings which reach peak
levels during September through November of each year when receivables also
generally reach peak levels. The toy business is also characterized by customer
order patterns which vary from year to year largely because of differences each
year in the degree of consumer acceptance of a product line, product
availability, marketing strategies and inventory levels of retailers and
differences in overall
<PAGE>
economic conditions. As a result, comparisons of unshipped orders on any date
with those at the same date in a prior year are not necessarily indicative of
sales for that entire given year. In addition, as more retailers move to just-
in-time inventory management practices, fewer orders are being placed in
advance of shipment and more orders, when placed, are for immediate delivery.
The Company's unshipped orders at March 11, 1994 and March 12, 1993 were
approximately $205,000,000 and $265,000,000, respectively. Also, it is a
general industry practice that orders are subject to amendment or cancellation
by customers prior to shipment. The backlog at any date in a given year can be
affected by programs the Company may employ to induce its customers to place
orders and accept shipments early in the year. This method is a general
industry practice. The programs the Company is employing to promote sales in
1994 are not substantially different from those employed in 1993.
As part of the traditional marketing strategies of the toy industry, many
sales made early in the year are not due for payment until the fourth quarter,
thus making it necessary for the Company to borrow significant amounts pending
collection of these receivables. The Company relies on internally generated
funds and short-term borrowing arrangements, including commercial paper, to
finance its working capital needs. Currently, the Company has available to it
unsecured lines of credit, which it believes are adequate, of approximately
$1,550,000,000 including a $500,000,000 revolving credit agreement with a group
of banks which is also used as a back-up to commercial paper issued by the
Company.
Research and Development
------------------------
The Company's business is based to a substantial extent on the continuing
development of new products and the redesigning of existing items for
continuing market acceptance. In 1993, 1992 and 1991, approximately
$125,566,000, $109,655,000 and $78,983,000, respectively, were incurred on
activities relating to the development, design and engineering of new products
and their packaging (including items brought to the Company by independent
designers) and to the improvement or modification of ongoing products. Much of
this work is performed by the Company's staff of designers, artists, model
makers and engineers.
In addition to its own staff, the Company deals with a number of independent
toy designers for whose designs and ideas the Company competes with many other
toy manufacturers. Rights to such designs and ideas, when acquired by the
Company, are usually exclusive under agreements requiring the Company to pay
the designer a royalty on the Company's net sales of the item. These designer
royalty agreements in some cases provide for advance royalties and minimum
guarantees.
The Company also produces a number of toys under trademarks and copyrights
utilizing the names or likenesses of Sesame Street, Walt Disney, Barney(R) and
other familiar movie, television and comic strip characters. Licensing fees are
paid as a royalty on the Company's net sales of the item. Licenses for the use
of characters are generally exclusive for specific products or product lines in
specified territories. In many instances, advance royalties and minimum
guarantees are required by character license agreements.
<PAGE>
Marketing and Sales
-------------------
The Company's products are sold nationally and internationally to a broad
spectrum of customers including wholesalers, distributors, chain stores,
discount stores, mail order houses, catalog stores, department stores and other
retailers, large and small. The Company and its subsidiaries employ their own
sales forces which account for nearly all of the sales of their products.
Remaining sales are generated by independent distributors who sell the
Company's products principally in areas of the world where the Company does not
otherwise maintain a presence. The Company maintains showrooms in New York and
selected other major cities world-wide as well as at most of its subsidiary
locations. In the United States and Canada, the Company had more than 2,000
customers, most of which are wholesalers, distributors or large chain stores,
although there has been significant consolidation at the retail level over the
last several years. In other countries, the Company has in excess of 20,000
customers, many of which are individual retail stores. During 1993, sales to
the Company's two largest customers represented 20% and 11%, respectively, of
consolidated net revenues.
The Company advertises its toy and game products extensively on television.
The Company generally advertises selected items in its product groups in a
manner designed to promote the sale of other specific items in those product
groups. Each year, the Company introduces its new products at its New York City
showroom at the time of the American International Toy Fair in February. It
also introduces some of its products to major customers during the last half of
the prior year.
In 1993, the Company spent approximately $383,918,000 in advertising,
promotion and marketing programs compared to $377,219,000 in 1992 and
$325,282,000 in 1991.
Manufacturing and Importing
---------------------------
The Company manufactures its products in facilities within the United States
and various foreign countries (see "Properties"). Most of its toy products are
manufactured from basic raw materials such as plastic and cardboard which are
readily available. The Company's manufacturing process includes injection
molding, blow molding, metal stamping, printing, box making, assembly and wood
processing. The Company purchases certain components and accessories used in
its toys and some finished items from domestic manufacturers as well as from
manufacturers in the Far East, which is the largest manufacturing center of
toys in the world, and other foreign countries. The Company believes that the
manufacturing capacity of its facilities and the supply of components,
accessories and completed products which it purchases from unaffiliated
manufacturers is adequate to meet the foreseeable demand for the products which
it markets. The Company's reliance on external sources of manufacturing can be
shifted, over a period of time, to alternative sources of supply for products
it sells, should such changes be necessary. However, if the Company is
prevented from obtaining products from a substantial number of its current Far
East suppliers due to political, labor and other factors beyond its control,
the Company's operations would be disrupted while alternative sources of
product were secured. In addition, the loss by the People's Republic of China
of "most favored nation" trading status as granted by the United States, could
significantly increase the cost of the Company's products imported into the
United States from China
<PAGE>
The Company makes its own tools and fixtures but purchases dies and molds
principally from independent domestic and foreign sources. Several of the
Company's domestic production departments operate on a two-shift basis and its
molding departments operate on a continuous basis through most of the year.
Competition
-----------
The Company's business is highly competitive. The Company competes with
several large and hundreds of small domestic and foreign manufacturers in such
areas as design, development and marketing of product. The Company is the
largest toy company in the world.
Employees
---------
The Company employs approximately 12,500 persons worldwide, approximately
8,000 of whom are located in the United States.
Trademarks, Copyrights and Patents
----------------------------------
The Company's products are protected, for the most part, by registered
trademarks, copyrights and patents to the extent that such protection is
available and meaningful. The loss of such rights concerning any particular
product would not have a material adverse effect on the Company's business,
although the loss of such protection for a number of significant items might
have such an effect.
Government Regulation
---------------------
The Company's toy products sold in the United States are subject to the
provisions of the Consumer Product Safety Act (the "CPSA"), The Federal
Hazardous Substances Act (the "FHSA") and the regulations promulgated
thereunder. The CPSA empowers the Consumer Product Safety Commission (the
"CPSC") to take action against hazards presented by consumer products,
including the formulation and implementation of regulations and uniform safety
standards. The CPCS has the authority to seek to declare a product "a banned
hazardous substance" under the CPSA and to ban it from commerce. The CPSC can
file an action to seize and condemn an "imminently hazardous consumer product"
under the CPSA and may also order equitable remedies such as recall,
replacement, repair or refund for the product. The FHSA provides for the
repurchase by the manufacturer of articles which are banned. Similar laws exist
in some states and cities and in Canada, Australia and Europe. The Company
maintains a laboratory which has testing and other procedures intended to
maintain compliance with the CPSA and FHSA. Notwithstanding the foregoing,
there can be no assurance that all of the Company's products are or will be
hazard free. While the Company neither has had any material product recalls nor
knows of any currently, should any such problem arise, it could have an effect
on the Company depending on the product and could affect sales of other
products.
The Children's Television Act of 1990 and the rules promulgated thereunder by
the Federal Communications Commission as well as the laws of certain foreign
countries place certain limitations on television commercials during children's
programming.
<PAGE>
(c) Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
and Export Sales
----------------
The information required by this item is included in note 16 of Notes to
Consolidated Financial Statements in Exhibit 13 to this Report and is
incorporated herein by reference.
ITEM 2. PROPERTIES
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Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
Rhode Island
- ------------
Pawtucket Executive Offices &
Product Development 343,000 Owned(1) --
Pawtucket Marketing Office 23,000 Owned --
Pawtucket Manufacturing 306,500 Owned --
Central Falls Manufacturing 261,500 Owned --
West Warwick Warehouse 402,000 Leased 1994
East Providence Administrative & Sales
Offices 120,000 Leased 1994
Massachusetts
- -------------
East Longmeadow Office, Manufacturing
& Warehouse 1,147,500 Owned --
East Longmeadow Office, Manufacturing
& Warehouse 254,400 Owned --
East Longmeadow Warehouse 500,000 Leased 1998
Beverly Office 100,000 Owned --
Salem Manufacturing
& Warehouse 344,000 Owned --
Danvers Warehouse 125,000 Leased 1996
Holyoke Warehouse 15,000 Leased 1994
New Jersey
- ----------
Northvale Office & Manufacturing 75,000 Leased 2002
Wayne Manufacturing 65,000 Leased 1995
New York
- --------
New York Office & Showroom 70,300 Leased 2000
New York Office & Showroom 32,300 Leased 1999
Arcade Manufacturing 15,000 Leased 1998
Amsterdam Manufacturing 297,400 Owned --
Orangeburg Warehouse 51,000 Leased 2002
Ohio
- ----
Cincinnati Office 161,000 Leased 2007
Cincinnati Warehouse 33,000 Leased 1999
<PAGE>
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
Pennsylvania
- ------------
Lancaster Warehouse 150,000 Owned(2) --
South Carolina
- --------------
Easley Manufacturing 31,500 Leased 1997
Easley Manufacturing 75,000 Owned --
Easley Manufacturing 29,000 Owned --
Texas
- -----
El Paso Manufacturing
& Warehouse 373,000 Owned --
El Paso Manufacturing
& Warehouse 487,000 Leased 1998
El Paso Warehouse 48,800 Leased 1994
Vermont
- -------
Fairfax Manufacturing 43,000 Owned --
Washington
- ----------
Seattle Office & Warehouse 125,100 Leased(3) 1994
Australia
- ---------
Rydalmere Office & Warehouse 68,000 Leased 1994
Rydalmere Office & Warehouse 22,300 Leased 1994
Austria
- -------
Vienna Office 2,505 Leased 1997
Belgium
- -------
Brussels Office & Showroom 16,700 Leased 1995
Canada
- ------
Montreal Office, Manufacturing
& Showroom 133,900 Leased 1997
Montreal Warehouse 88,100 Leased 1997
Boucherville Warehouse 110,000 Leased 1994
Mississauga Sales Office & Showroom 16,300 Leased 1998
Peoples Republic of China
- -------------------------
Guangzhou Warehouse 32,900 Leased 1994
Guangzhou Manufacturing 22,900 Leased 1995
<PAGE>
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
England
- -------
Uxbridge Office & Showroom 94,500 Leased 2013
Coalville Office & Warehouse 141,200 Owned --
France
- ------
Le Bourget
du Lac Office, Manufacturing
& Warehouse 108,300 Owned --
Savoie
Technolac Office 33,500 Owned --
Pantin Office 20,900 Leased 2001
Creutzwald Warehouse 108,700 Owned --
Germany
- -------
Fuerth Office & Warehouse 28,400 Owned --
Soest Warehouse 78,800 Owned --
Dietzenbach Office 30,400 Leased 1998
Greece
- ------
Athens Office & Warehouse 134,400 Leased 1995
Zakynthos
Island Manufacturing 57,500 Owned --
Athens Office 26,900 Leased 1995
Hong Kong
- ---------
Kowloon Office 36,700 Leased 1994
Kowloon Office & Warehouse 14,900 Leased 1994
Harbour City Office 11,000 Leased 1996
Hungary
- -------
Budapest Office 3,700 Leased 1996
Ireland
- -------
Waterford Office, Manufacturing
& Warehouse 184,400 Owned --
Italy
- -----
Milan Office & Showroom 12,100 Leased 1998
Japan
- -----
Tokyo Office 10,800 Leased 1995
<PAGE>
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
Malaysia
- -------
Selangor
Darul Ehsan Office 6,800 Leased 1995
Mexico
- ------
Tijuana Office & Manufacturing 144,000 Leased 1995
Tijuana Warehouse 45,000 Leased 1994
Tijuana Warehouse 69,800 Leased 1994
Reyna Office 61,000 Leased 1996
Espana Warehouse 53,700 Leased 1996
Venados Warehouse 59,100 Leased 1995
The Netherlands
- ---------------
Ter Apel Office, Manufacturing
& Warehouse 139,300 Owned --
Utrecht Sales Office & Showroom 17,000 Leased 1996
Emmen Warehouse 40,800 Leased 1994
Emmen Warehouse 21,500 Leased 1994
New Zealand
- -----------
Auckland Office, Manufacturing
& Warehouse 110,900 Leased 2005
Singapore
- ---------
Singapore Office & Warehouse 12,900 Leased 1994
Spain
- -----
Valencia Office, Manufacturing
& Warehouse 115,100 Leased 1999
Valencia Office 46,300 Leased 1995
Valencia Manufacturing
& Warehouse 161,700 Leased 1997
Valencia Warehouse 94,400 Owned --
Valencia Warehouse 38,700 Leased 1994
Valencia Warehouse 43,000 Leased 1996
Switzerland
- -----------
Mutschellen Office & Warehouse 23,400 Leased 1994
Taiwan
- ------
TPE County Warehouse 9,800 Leased 1996
Wales
- -----
Newport Warehouse 76,000 Leased 2003
Newport Warehouse 52,000 Owned --
<PAGE>
(1) Although this property is leased pursuant to industrial revenue
bond financing, the Company has an option to purchase the property
for $1 at any time upon making all rental and other payments
required under terms of the lease.
(2) In addition, the Company owns an additional 316,000 square feet at
this location which is not currently being utilized and is included
in the unused property noted below.
(3) In addition, at this location the Port of Seattle operates a
400,000 square foot distribution facility pursuant to an agreement
with the Company.
In addition to the above listed facilities, the Company either owns or leases
various other properties approximating 200,000 square feet which are utilized
in its operations. The Company also either owns or leases an aggregate of
approximately 650,000 square feet not currently being utilized in its
operations. Most of these properties are being leased, subleased or offered
for sublease or sale. A portion of this space not used in the Company's
operations represent facilities used by the Tonka Corporation units prior to
their acquisition by the Company and integration into its existing operations.
The foregoing properties consist, in general, of brick, cinder block or
concrete block buildings which the Company believes are in good condition and
well maintained. The Company is continuing the renovation of its principal
offices in Pawtucket, Rhode Island.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is currently proceeding with an environmental clean-up at its
former manufacturing facility in Lancaster, Pennsylvania. This facility, a
portion of which is being utilized for limited warehousing operations in 1994,
was acquired in 1986 from the CBS Toys Division of CBS Inc. (CBS) in
conjunction with the purchase of rights to selected products formerly marketed
by CBS. CBS has acknowledged its responsibility with respect to some areas of
contamination and some of the remedial actions needed to facilitate this clean-
up, but has not yet funded any of these obligations. The Company believes that
CBS has full responsibility and is engaged in legal action against CBS to
recover all of the costs associated with the environmental clean-up. While it
is impossible to assure the outcome of the court action, the Company believes
that it will prevail. The Consolidated Financial Statements reflect, pursuant
to Statement of Financial Accounting Standards No. 5, Accounting for
Contingencies, certain costs that the Company expects to ultimately recover
from CBS.
Preston Robert Tisch, a director of the Company, is also a director of CBS
and President and Co-Chief Executive Officer of Loews Corporation, a major
shareholder of CBS. By virtue of the foregoing, Mr. Tisch may be deemed to have
an interest adverse to the Company with respect to the above-described action.
<PAGE>
The Company is party to certain other legal proceedings involving routine
litigation incidental to the Company's business, none of which, individually or
in the aggregate, is deemed to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following persons are the executive officers of the Company and its
subsidiaries and divisions. Such executive officers are elected annually. The
position and office listed below are the principal position(s) and office(s)
held by such person with the Company, subsidiary or divisions employing such
person. The persons listed below generally also serve as officers and directors
of the Company's various subsidiaries at the request and convenience of the
Company.
Period
Serving in
Current
Name Age Position and Office Held Position
- ---- --- ------------------------ ----------
Alan G. Hassenfeld (1) 45 Chairman of the Board,
President and Chief Executive
Officer Since 1989
Barry J. Alperin (2) 53 Vice Chairman Since 1990
George R. Ditomassi, Jr.(3) 59 Chief Operating Officer,
Games and International Since 1990
Alfred J. Verrecchia (4) 51 Chief Operating Officer,
Domestic Toy Operations Since 1990
John T. O'Neill (5) 49 Executive Vice President and
Chief Financial Officer Since 1989
Norman C. Walker (6) 55 Executive Vice President and
President, International Since 1990
Lawrence H. Bernstein (7) 51 Executive Vice President and
President, Hasbro Toy Since 1989
Dan D. Owen (8) 45 President, Playskool Since 1990
Bruce L. Stein (9) 39 President, Kenner Products Since 1990
Robert F. S. Wann (10) 43 President, Parker Brothers Since 1992
E. David Wilson (11) 56 President, Milton Bradley Since 1990
Richard B. Holt (12) 52 Senior Vice President
and Controller Since 1992
<PAGE>
Period
Serving in
Current
Name Age Position and Office Held Position
- ---- --- ------------------------ ----------
Donald M. Robbins (13) 58 Senior Vice President
General Counsel and
Corporate Secretary Since 1992
Phillip H. Waldoks (14) 41 Senior Vice President-
Corporate Legal Affairs Since 1992
Russell L. Denton (15) 49 Vice President and Treasurer Since 1989
(1) Prior thereto, President and Chief Operating Officer.
(2) Prior thereto, Co-Chief Operating Officer from 1989 to 1990; prior
thereto, Executive Vice President.
(3) Prior thereto, Group Vice President and President, Milton Bradley.
(4) Prior thereto, Co-Chief Operating Officer from 1989 to 1990; prior
thereto, Executive Vice President and President, Hasbro
Manufacturing Services Division.
(5) Prior thereto, Senior Vice President - Finance, Chief Financial
Officer and Treasurer during 1989; prior thereto, Senior Vice
President - Finance and Chief Financial Officer.
(6) Prior thereto, Senior Vice President and President - European
Operations.
(7) Prior thereto, Senior Vice President - Sales.
(8) Prior thereto, Senior Vice President - Sales, Playskool.
(9) Prior thereto, Executive Vice President - Marketing and Design,
Kenner Products.
(10) Prior thereto, Chief Operating Officer, Parker Brothers from 1991
to 1992; prior thereto, Executive Vice President - Marketing and
R & D, Playskool from 1990 to 1991; prior thereto, Senior Vice
President - Marketing, Playskool.
(11) Prior thereto, Senior Vice President - Sales, Milton Bradley.
(12) Prior thereto, Vice President and Controller.
(13) Prior thereto, Vice President/General Counsel and Secretary.
(14) Prior thereto, Vice President - Corporate Legal Affairs.
(15) Prior thereto, independent financial consultant.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
-----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
The information required by this item is included in Market for the
Registrant's Common Equity and Related Stockholder Matters in Exhibit 13 to
this Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The information required by this item is included in Selected Financial Data
in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The information required by this item is included in Management's Review in
Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information required by this item is included in Financial Statements and
Supplementary Data in Exhibit 13 to this Report and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
PART III
ITEMS 10, 11, 12 and 13.
The information required by these items is included in registrant's
definitive proxy statement for the 1994 Annual Meeting of Shareholders and is
incorporated herein by reference, except that the sections under the headings
(a) "Comparison of Five Year Cumulative Total Shareholder Return Among Hasbro,
S&P 500 and Russell 1000 Consumer Discretionary Economic Sector" and
accompanying material and (b) "Report of the Compensation and Stock Option
Committee of the Board of Directors" in the definitive proxy statement shall
not be deemed "filed" with the Securities and Exchange Commission or subject to
Section 18 of the Securities Exchange Act of 1934.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) Financial Statements, Financial Statement Schedules and Exhibits
----------------------------------------------------------------
(1) Financial Statements
--------------------
Included in PART II of this report:
Independent Auditors' Report
Consolidated Balance Sheets at December 26, 1993 and
December 27, 1992
Consolidated Statements of Earnings for the Three Fiscal
Years Ended in December 1993, 1992 and 1991
Consolidated Statements of Shareholders' Equity for the
Three Fiscal Years Ended in December 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the Three
Fiscal Years Ended in December 1993, 1992 and 1991
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
-----------------------------
Included in PART IV of this Report:
Report on Financial Statement Schedules of Independent
Certified Public Accountants
For the Three Fiscal Years Ended in December 1993, 1992
and 1991:
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation and Amortization
of Property, Plant and Equipment
Schedule VIII - Valuation and Qualifying Accounts and
Reserves
Schedule IX - Short-Term Borrowings
Schedules other than those listed above are omitted for the reason that they
are not required or are not applicable, or the required information is shown in
the financial statements or notes thereto. Columns omitted from schedules filed
have been omitted because the information is not applicable.
(3) Exhibits
--------
The Company will furnish to any shareholder, upon written request, any
exhibit listed below upon payment by such shareholder to the Company of the
Company's reasonable expenses in furnishing such exhibit.
<PAGE>
Exhibit
- -------
3. Articles of Incorporation and Bylaws
(a) Restated Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit (c)(2) to the
Company's Current Report on Form 8-K, dated July 15,
1993, File No. 1-6682.)
(b) Amended and Restated Bylaws of the Company. (Incorporated by
reference to Exhibit (c)(3) to the Company's Current
Report on Form 8-K, dated July 15, 1993, File No. 1-6682.)
4. Instruments defining the rights of security holders, including
indentures.
(a) Revolving Credit Agreement, dated as of June 22, 1992, among
the Company, certain banks (the "Banks"), and The First
National Bank of Boston, as agent for the Banks (the
"Agent"). (Incorporated by reference to Exhibit 4(a) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
(b) Subordination Agreement, dated as of June 22, 1992, among
the Company, certain subsidiaries of the Company, and the
Agent. (Incorporated by reference to Exhibit 4(b) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
10. Material Contracts
(a) Agreement and Plan of Merger, dated January 31, 1991, by and
among the Company, HIAC III Corp., a subsidiary of the
Company ("Sub") and Tonka Corporation ("Tonka"). (Incorpo-
rated by reference to Exhibit (c)(1) to the Company's Tender
Offer Statement on Schedule 14D-1, dated February 6, 1991,
relating to the Common Stock of Tonka.)
(b) Amendment, dated April 17, 1991 to Agreement and Plan of
Merger among the Company, Sub and Tonka. (Incorporated by
reference to Exhibit (c)(4) to Amendment No. 9 to the
Company's Tender Offer Statement on Schedule 14D-1, dated
April 18, 1991, relating to the Common Stock of Tonka.)
(c) Letter Agreement, dated April 29, 1991, among the Company,
Sub and Tonka. (Incorporated by reference to Exhibit (c)(8)
to Amendment No. 11 to the Company's Tender Offer Statement
on Schedule 14D-1, dated April 29, 1991, relating to the
Common Stock of Tonka.)
(d) Shareholder Rights Agreement, dated May 17, 1983, between
Warner Communications Inc. ("Warner") and the Company.
(Incorporated by reference to Exhibit 3 to the Statement on
Schedule 13D, dated May 17, 1983, relating to the Company's
Common Stock.)
<PAGE>
(e) Amendment No. 1 to Shareholder Rights Agreement, dated as of
December 1, 1985, between Warner and the Company.
(Incorporated by reference to Exhibit 9(b) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 29, 1985, File No. 1-6682.)
(f) Exchange Agreement, dated as of December 1, 1985, between
the Company and Warner. (Incorporated by reference to
Exhibit 10(f) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 29, 1985, File No.
1-6682.)
(g) Lease between Hasbro Canada Inc. (formerly named Hasbro
Industries (Canada) Ltd.) and Central Toy Manufacturing Co.
("Central Toy"), dated December 23, 1976. (Incorporated by
reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-14, File No. 2-92550.)
(h) Lease between Hasbro Canada Inc. and Central Toy, together
with an Addendum thereto, each dated as of May 1, 1987.
(Incorporated by reference to Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
Executive Compensation Plans and Arrangements
(i) Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8, File No. 2-78018.)
(j) Amendment No. 1 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 28, 1986, File No. 1-6682.)
(k) Amendment No. 2 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
(l) Amendment No. 3 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(o) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 25, 1988, File No. 1-6682.)
(m) Amendment No. 4 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(s) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(n) Form of Incentive Stock Option Agreement for incentive stock
options. (Incorporated by reference to Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1987, File No. 1-6682.)
<PAGE>
(o) Form of Non Qualified Stock Option Agreement under the
Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 10(q) to the Company's Annual Report
on Form 10-K for the Fiscal Year Ended December 25, 1988,
File No. 1-6682.)
(p) Non Qualified Stock Option Plan. (Incorporated by reference
to Exhibit 10.10 to the Company's Registration Statement on
Form 14, File No. 2-92550.)
(q) Amendment No. 1 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(j) to the
Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 28, 1986, File No. 1-6682.)
(r) Amendment No. 2 to Non Qualified Stock Option Plan.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1987 Annual Meeting of
Shareholders, File No. 1-6682.)
(s) Amendment No. 3 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(t) Form of Stock Option Agreement (For Employees) under the Non
Qualified Stock Option Plan. (Incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1992, File No.
1-6682.)
(u) 1992 Stock Incentive Plan (Incorporated by reference to
Appendix A to the Company's definitive proxy statement for
its 1992 Annual Meeting of Shareholders, File No. 1-6682.)
(v) Form of Stock Option Agreement (For Employees) under the
1992 Stock Incentive Plan. (Incorporated by reference to
Exhibit 10(v) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1992, File No.
1-6682.)
(w) Form of Stock Option Agreement (For Participants in the Long
Term Incentive Program) under the 1992 Stock Incentive Plan.
(Incorporated by reference to Exhibit 10(w) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1992, File No. 1-6682.)
(x) Form of Employment Agreement, dated July 5, 1989, between
the Company and seven executive officers of the Company.
(Incorporated by reference to Exhibit 10(v) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(y) Change in Control Agreement dated as of December 13, 1990
between Tonka and Bruce L. Stein. (Incorporated by
reference to Exhibit 10.2 to Tonka's Annual Report on Form
10-K for the Fiscal Year Ended December 29, 1990, File No.
1-4683.)
<PAGE>
(z) Letter Agreement between Tonka and Bruce L. Stein, dated
March 21, 1994.
(aa) Hasbro, Inc. Retirement Plan for Directors. (Incorporated
by reference to Exhibit 10(x) to the Company's Annual
Report on Form 10-K for the Fiscal Year Ended December 30,
1990, File No. 1-6682.)
(bb) Form of Director's Indemnification Agreement. (Incorporated
by reference to Appendix B to the Company's definitive proxy
statement for its 1988 Annual Meeting of Shareholders, File
No. 1-6682.)
(cc) Hasbro, Inc. Deferred Compensation Plan for Non-Employee
Directors.
(dd) Hasbro, Inc. Stock Option Plan for Non-Employee Directors.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1994 Annual Meeting of
Shareholders, File No. 1-6682.)
(ee) Hasbro, Inc. Senior Management Annual Performance Plan.
(Incorporated by reference to Appendix B to the Company's
definitive proxy statement for its 1994 Annual Meeting of
Shareholders, File No.1-6682.)
11. Statement re computation of per share earnings
12. Statement re computation of ratios
13. Selected information contained in Annual Report to Shareholders
22. Subsidiaries of the registrant
24. Consents of experts and counsel
(a) Consent of KPMG Peat Marwick.
<PAGE>
The Company agrees to furnish the Securities and Exchange Commission, upon
request, a copy of each agreement with respect to long-term debt of the
Company, the authorized principal amount of which does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
-------------------
A current report on Form 8-K dated February 10, 1994 was filed to
announce the Company's results of the quarter and year ended
December 26, 1993. Consolidated statements of earnings (without
notes) for the quarter and year ended December 26, 1993 and
December 27, 1992 and consolidated condensed balance sheets
(without notes) as of said dates were also filed.
(c) Exhibits
--------
See (a)(3) above
(d) Financial Statement Schedules
-----------------------------
See (a)(2) above
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
Under date of February 8, 1994, we reported on the consolidated balance
sheets of Hasbro, Inc. and subsidiaries as of December 26, 1993 and December
27, 1992 and the related consolidated statements of earnings, shareholders'
equity, and cash flows for each of the fiscal years in the three-year period
ended December 26, 1993, as contained in the 1993 annual report to
shareholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1993. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related supporting schedules listed
in Item 14 (a)(2). These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.
In our opinion, such schedules when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/ KPMG Peat Marwick
Providence, Rhode Island
February 8, 1994
<PAGE>
SCHEDULE V
HASBRO, INC. AND SUBSIDIARIES
Property, Plant and Equipment
Fiscal Years Ended in December
(Thousands of Dollars)
Balance at Translation Balance
Beginning of Disposals/ Adjustments at End of
Description Year Additions Retirements and Other(a) Year
- ----------- ------------ --------- ----------- ------------ ---------
1993
Land and
improvements $ 13,585 1,022 (1,195) (1,402) $ 12,010
Buildings and
improvements 170,220 22,062 (4,339) 770 188,713
Machinery and
equipment 150,851 33,282 (7,527) (3,556) 173,050
------- ------- ------- ------- -------
$334,656 56,366 (13,061) (4,188) $373,773
======= ======= ======= ======= =======
Tools, dies
and molds $ 28,485 43,426 (32,627)(b) (72) $ 39,212
======= ======= ======= ======= =======
1992
Land and
improvements $ 13,548 1,556 (1,235) (284) $ 13,585
Buildings and
improvements 160,604 11,773 (7,255) 5,098 170,220
Machinery and
equipment 122,074 44,167 (13,748) (1,642) 150,851
-------- ------- ------- ------- -------
$296,226 57,496 (22,238) 3,172 $334,656
======= ======= ======= ======= =======
Tools, dies
and molds $ 28,819 32,935 (33,593)(b) 324 $ 28,485
======= ======= ======= ======= =======
1991
Land and
improvements $ 8,586 446 (3) 4,519 $ 13,548
Buildings and
improvements 129,607 11,061 (2,375) 22,311 160,604
Machinery and
equipment 101,307 16,650 (8,003) 12,120 122,074
------- ------- ------- ------- -------
$239,500 28,157 (10,381) 38,950 $296,226
======= ======= ======= ======= =======
Tools, dies
and molds $ 13,335 27,847 (26,742)(b) 14,379 $ 28,819
======= ======= ======= ======= =======
<PAGE>
(a) 1992 includes $8,665 and $1,746 of buildings and improvements and
machinery and equipment, respectively, relating to the gross-up of
assets acquired in prior business combinations as required by SFAS
109. 1992 also includes $622 and $415 of machinery and equipment
and tools, dies and molds, respectively, of acquired companies.
1991 includes $4,434, $21,789, $12,449 and $14,549 of land and
improvements, buildings and improvements, machinery and equipment
and tools, dies and molds, respectively, of acquired company.
(b) Primarily represents amortization which is credited directly
against the cost of the assets.
<PAGE>
SCHEDULE VI
HASBRO, INC. AND SUBSIDIARIES
Accumulated Depreciation and Amortization of
Property, Plant and Equipment
Fiscal Years Ended in December
(Thousands of Dollars)
Balance at Balance
Beginning of Disposals/ Translation at End of
Description Year Additions Retirements Adjustments Year
- ----------- ------------ --------- ----------- ----------- ----------
1993
Land
improvements $ 638 121 - (6) $ 753
Buildings and
improvements 42,734 11,601 (2,536) (877) 50,922
Machinery and
equipment 68,429 20,933 (5,787) (2,068) 81,507
------- ------- ------- ------- -------
$111,801 32,655 (8,323) (2,951) $133,182
======= ======= ======= ======= =======
1992
Land
improvements $ 533 118 (9) (4) $ 638
Buildings and
improvements 39,184 7,534 (3,327) (657) 42,734
Machinery
and equipment 60,136 20,842 (11,134) (1,415) 68,429
------- ------- ------- ------- -------
$ 99,853 28,494 (14,470) (2,076) $111,801
======= ======= ======= ======= =======
1991
Land
improvements $ 418 119 (3) (1) $ 533
Buildings and
improvements 32,012 9,453 (1,551) (730) 39,184
Machinery and
equipment 51,216 16,210 (7,038) (252) 60,136
------- ------- ------- ------- -------
$ 83,646 25,782 (8,592) (983) $ 99,853
======= ======= ======= ======= =======
<PAGE>
SCHEDULE VIII
HASBRO, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Fiscal Years Ended in December
(Thousands of Dollars)
Provision
Balance at Charged to Write-Offs Balance
Beginning of Costs and Other Allowances at End of
Year Expenses Additions(a) Taken(b) Year
------------ ---------- ------------ ----------- ---------
Valuation
accounts
deducted
from assets
to which
they apply -
for doubtful
accounts
receivable:
1993 $52,200 13,078 - (11,078) $54,200
====== ====== ====== ====== ======
1992 $60,500 10,674 - (18,974) $52,200
====== ====== ====== ====== ======
1991 $43,100 15,024 29,285 (26,909) $60,500
====== ====== ====== ====== ======
(a) Doubtful accounts reserve of acquired company.
(b) Includes write-offs, recoveries of previous write-offs and
translation adjustments.
<PAGE>
SCHEDULE IX
HASBRO, INC. AND SUBSIDIARIES
Short-Term Borrowings
Fiscal Years Ended in December
(Thousands of Dollars)
Weighted Weighted
Average Average Average
Interest Maximum Amount Interest
Category of Balance Rate Amount Outstanding Rate
Short-Term at End at End Outstanding During During
Borrowings(b) of Year of Year During Year Year (a) Year (a)
- ------------- ------- -------- ----------- ----------- --------
1993
Bank $ 62,242 9.0% $182,588 $152,004 7.6%
======= ==== ======= ======= ====
Commercial
Paper - - $385,160 $134,944 3.4%
======= ==== ======= ======= ====
1992
Bank (b) $ 64,174 11.8% $401,956 $254,036 6.8%
======= ==== ======= ======= ====
Commercial
Paper - - $154,748 $ 65,704 3.7%
======= ==== ======= ======= ====
1991
Bank (b) $186,084 8.5% $568,391 $238,410 7.5%
======= ==== ======= ======= ====
Commercial
Paper - - $332,278 $135,384 6.1%
======= ==== ======= ======= ====
(a) Computed daily.
(b) Includes short-term borrowings (none at end of 1992 and $150,000
at end of 1991) classified as long-term debt reflecting the
Company's ability and intent to refinance such borrowings on a
long-term basis.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HASBRO, INC. (Registrant)
By: /s/Alan G. Hassenfeld Date: March 25, 1994
------------------------- ---------------
Alan G. Hassenfeld
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/Alan G. Hassenfeld
- ---------------------------- Chairman of the Board, March 25, 1994
Alan G. Hassenfeld President,Chief Executive
Officer and Director
(Principal Executive Officer)
/s/John T. 0'Neill
- ---------------------------- Executive Vice President March 25, 1994
John T. 0'Neill and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/Barry J. Alperin
- ---------------------------- Director March 25, 1994
Barry J. Alperin
/s/Alan R. Batkin
- ---------------------------- Director March 25, 1994
Alan R. Batkin
/s/George R. Ditomassi, Jr.
- ---------------------------- Director March 25, 1994
George R. Ditomassi, Jr.
/s/Harold P. Gordon
- ---------------------------- Director March 25, 1994
Harold P. Gordon
<PAGE>
/s/Alex Grass
- ---------------------------- Director March 25, 1994
Alex Grass
/s/Sylvia K. Hassenfeld
- ---------------------------- Director March 25, 1994
Sylvia K. Hassenfeld
/s/Claudine B. Malone
- ---------------------------- Director March 25, 1994
Claudine B. Malone
/s/James R. Martin
- ---------------------------- Director March 25, 1994
James R. Martin
/s/Norma T. Pace
- ---------------------------- Director March 25, 1994
Norma T. Pace
/s/E. John Rosenwald, Jr.
- ---------------------------- Director March 25, 1994
E. John Rosenwald, Jr.
/s/Carl Spielvogel
- ---------------------------- Director March 25, 1994
Carl Spielvogel
/s/Henry Taub
- ---------------------------- Director March 25, 1994
Henry Taub
/s/Preston Robert Tisch
- ---------------------------- Director March 25, 1994
Preston Robert Tisch
/s/Alfred J. Verrecchia
- ---------------------------- Director March 25, 1994
Alfred J. Verrecchia
<PAGE>
HASBRO, INC.
Annual Report on Form 10-K
for the Year Ended December 26, 1993
Exhibit Index
Exhibit
- -------
3. Articles of Incorporation and Bylaws
(a) Restated Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit (c)(2) to the
Company's Current Report on Form 8-K, dated July 15,
1993, File No. 1-6682.)
(b) Amended and Restated Bylaws of the Company. (Incorporated by
reference to Exhibit (c)(3) to the Company's Current
Report on Form 8-K, dated July 15, 1993, File No. 1-6682.)
4. Instruments defining the rights of security holders, including
indentures.
(a) Revolving Credit Agreement, dated as of June 22, 1992, among
the Company, certain banks (the "Banks"), and The First
National Bank of Boston, as agent for the Banks (the
"Agent"). (Incorporated by reference to Exhibit 4(a) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
(b) Subordination Agreement, dated as of June 22, 1992, among
the Company, certain subsidiaries of the Company, and the
Agent. (Incorporated by reference to Exhibit 4(b) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
10. Material Contracts
(a) Agreement and Plan of Merger, dated January 31, 1991, by and
among the Company, HIAC III Corp., a subsidiary of the
Company ("Sub") and Tonka Corporation ("Tonka"). (Incorpo-
rated by reference to Exhibit (c)(1) to the Company's Tender
Offer Statement on Schedule 14D-1, dated February 6, 1991,
relating to the Common Stock of Tonka.)
(b) Amendment, dated April 17, 1991 to Agreement and Plan of
Merger among the Company, Sub and Tonka. (Incorporated by
reference to Exhibit (c)(4) to Amendment No. 9 to the
Company's Tender Offer Statement on Schedule 14D-1, dated
April 18, 1991, relating to the Common Stock of Tonka.)
(c) Letter Agreement, dated April 29, 1991, among the Company,
Sub and Tonka. (Incorporated by reference to Exhibit (c)(8)
to Amendment No. 11 to the Company's Tender Offer Statement
on Schedule 14D-1, dated April 29, 1991, relating to the
Common Stock of Tonka.)
<PAGE>
(d) Shareholder Rights Agreement, dated May 17, 1983, between
Warner Communications Inc. ("Warner") and the Company.
(Incorporated by reference to Exhibit 3 to the Statement on
Schedule 13D, dated May 17, 1983, relating to the Company's
Common Stock.)
(e) Amendment No. 1 to Shareholder Rights Agreement, dated as of
December 1, 1985, between Warner and the Company.
(Incorporated by reference to Exhibit 9(b) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 29, 1985, File No. 1-6682.)
(f) Exchange Agreement, dated as of December 1, 1985, between
the Company and Warner. (Incorporated by reference to
Exhibit 10(f) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 29, 1985, File No.
1-6682.)
(g) Lease between Hasbro Canada Inc. (formerly named Hasbro
Industries (Canada) Ltd.) and Central Toy Manufacturing Co.
("Central Toy"), dated December 23, 1976. (Incorporated by
reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-14, File No. 2-92550.)
(h) Lease between Hasbro Canada Inc. and Central Toy, together
with an Addendum thereto, each dated as of May 1, 1987.
(Incorporated by reference to Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
Executive Compensation Plans and Arrangements
(i) Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8, File No. 2-78018.)
(j) Amendment No. 1 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 28, 1986, File No. 1-6682.)
(k) Amendment No. 2 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
(l) Amendment No. 3 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(o) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 25, 1988, File No. 1-6682.)
(m) Amendment No. 4 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(s) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
<PAGE>
(n) Form of Incentive Stock Option Agreement for incentive stock
options. (Incorporated by reference to Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1987, File No. 1-6682.)
(o) Form of Non Qualified Stock Option Agreement under the
Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 10(q) to the Company's Annual Report
on Form 10-K for the Fiscal Year Ended December 25, 1988,
File No. 1-6682.)
(p) Non Qualified Stock Option Plan. (Incorporated by reference
to Exhibit 10.10 to the Company's Registration Statement on
Form 14, File No. 2-92550.)
(q) Amendment No. 1 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(j) to the
Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 28, 1986, File No. 1-6682.)
(r) Amendment No. 2 to Non Qualified Stock Option Plan.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1987 Annual Meeting of
Shareholders, File No. 1-6682.)
(s) Amendment No. 3 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(t) Form of Stock Option Agreement (For Employees) under the Non
Qualified Stock Option Plan. (Incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1992, File No.
1-6682.)
(u) 1992 Stock Incentive Plan (Incorporated by reference to
Appendix A to the Company's definitive proxy statement for
its 1992 Annual Meeting of Shareholders, File No. 1-6682.)
(v) Form of Stock Option Agreement (For Employees) under the
1992 Stock Incentive Plan. (Incorporated by reference to
Exhibit 10(v) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1992, File No.
1-6682.)
(w) Form of Stock Option Agreement (For Participants in the Long
Term Incentive Program) under the 1992 Stock Incentive Plan.
(Incorporated by reference to Exhibit 10(w) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1992, File No. 1-6682.)
(x) Form of Employment Agreement, dated July 5, 1989, between
the Company and seven executive officers of the Company.
(Incorporated by reference to Exhibit 10(v) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
<PAGE>
(y) Change in Control Agreement dated as of December 13, 1990
between Tonka and Bruce L. Stein. (Incorporated by
reference to Exhibit 10.2 to Tonka's Annual Report on Form
10-K for the Fiscal Year Ended December 29, 1990, File No.
1-4683.)
(z) Letter Agreement between Tonka and Bruce L. Stein, dated
March 21, 1994.
(aa) Hasbro, Inc. Retirement Plan for Directors. (Incorporated
by reference to Exhibit 10(x) to the Company's Annual
Report on Form 10-K for the Fiscal Year Ended December 30,
1990, File No. 1-6682.)
(bb) Form of Director's Indemnification Agreement. (Incorporated
by reference to Appendix B to the Company's definitive proxy
statement for its 1988 Annual Meeting of Shareholders, File
No. 1-6682.)
(cc) Hasbro, Inc. Deferred Compensation Plan for Non-Employee
Directors.
(dd) Hasbro, Inc. Stock Option Plan for Non-Employee Directors.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1994 Annual Meeting of
Shareholders, File No. 1-6682.)
(ee) Hasbro, Inc. Senior Management Annual Performance Plan.
(Incorporated by reference to Appendix B to the Company's
definitive proxy statement for its 1994 Annual Meeting of
Shareholders, File No.1-6682.)
11. Statement re computation of per share earnings
12. Statement re computation of ratios
13. Selected information contained in Annual Report to Shareholders
22. Subsidiaries of the registrant
24. Consents of experts and counsel
(a) Consent of KPMG Peat Marwick.
<PAGE>
<PAGE>
EXHIBIT 10(z)
TONKA CORPORATION
1027 Newport Avenue
Pawtucket, Rhode Island 02862
March 21, 1994
Bruce L. Stein
1026 Hatch Street
Cincinnati, Ohio 45202
Dear Bruce:
On behalf of Tonka Corporation, I am pleased to confirm that, in
recognition of the superlative 1993 performance of the Kenner
Products Division of Tonka Corporation and your outstanding
leadership as President of that division, you have been awarded a
special and extraordinary bonus in the amount of $1,000,000, payable
as follows:
1) $250,000 paid on or before March 15, 1994, receipt of
which you hereby acknowledge;
2) $250,000 payable on March 15, 1995, together with
accrued interest;
3) $250,000 payable on March 15, 1996, together with
accrued interest; and
4) $250,000 payable on March 15, 1997, together with
accrued interest;
provided, however, that you shall be eligible to receive the payments
described in clauses 2, 3 and 4 above (collectively the
"Installments" and individually an "Installment") only if you are
employed by Tonka Corporation or an affiliate thereof (the
"Corporation") on the date the Installment is otherwise payable.
Interest shall accrue on the unpaid portion of the bonus from March
15, 1994 at the Prime Rate, as reported in the Wall Street Journal,
and all such accrued and unpaid interest shall be paid annually as
part of an Installment.
Notwithstanding the foregoing, if you cease to be employed by
the Corporation as a result of:
(a) your being afflicted with any physical or mental
condition which would qualify you for a disability
benefit under the Corporation's long term disability
plan, or
(b) your death,
unpaid Installments will still continue to be paid to you, your
personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees, as the case may be.
In addition, if you cease to be an employee of the Corporation
as a result of the involuntary termination of your employment by the
Corporation, you shall receive, within 30 days of such termination,
payment in full of all unpaid Installments,
<PAGE>
except if such involuntary termination was based upon (a) your wilful
and continued failure substantially to perform your duties and
obligations (other than any such failure resulting from your
incapacity due to physical or mental illness) or (b) your wilful
misconduct which is materially injurious to the Corporation,
monetarily or otherwise. For purposes of the previous sentence, no
act, or failure to act, on your part shall be considered "wilful"
unless done, or omitted to be done, by you in bad faith and without
reasonable belief that your act or omission was in the best interest
of the Corporation.
You hereby acknowledge that the extraordinary bonus described
herein is in lieu of, and substitution for, any bonus to which you
may have otherwise been entitled to receive with respect to fiscal
1993 under the Corporation's normal management incentive bonus
program.
You hereby acknowledge that you understand and agree that if you
voluntary terminate your employment with the Corporation prior to the
date any Installment is otherwise payable hereunder, you shall not be
entitled to receive such Installment or any future Installments from
the Corporation.
All payments made by the Corporation pursuant to this letter
agreement shall have deducted or withheld therefrom all amounts as
shall be required by applicable law and regulation.
Hasbro, Inc. (the "Guarantor") hereby guarantees the obligations
of Tonka Corporation set forth in this letter.
If the foregoing is acceptable to you, please so signify by
signing a copy of this letter below and returning it to the
Corporation.
Again, let me offer my congratulations on a job very well done.
Very truly yours,
TONKA CORPORATION
By: /s/ Alfred J. Verrecchia
------------------------
Alfred J. Verrecchia
Executive Vice President
HASBRO, INC., as Guarantor
By: /s/ Alan G. Hassenfeld
-----------------------
Alan G. Hassenfeld
Chairman and Chief
Executive Officer
ACCEPTED AND AGREED:
/s/ Bruce L. Stein
- ------------------
Bruce L. Stein
<PAGE>
<PAGE>
EXHIBIT 10(cc)
HASBRO, INC. DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
Article I - Purpose and Participation
1.1 The purpose of this Plan is to enhance the ability of
Hasbro, Inc. ("Hasbro") to attract and retain as members of
its Board of Directors ("Board") individuals of outstanding
competence.
1.2 Non-employee members ("Directors") of the Board of Hasbro
may elect to defer receipt of all or any portion of
earned Director's fees into either a stock unit account (the
"Stock Unit Account") or an interest-bearing account (the
"Interest Account"). (A Director must, however, defer a
minimum of 20% of the annual Board retainer fee into the
Stock Unit Account.) All other amounts deferred are at the
election of the Director. One-Quarter of a Director's
annual Board (and Committee Chair, if applicable) retainer
fee shall be deemed earned on the last business day of each
calendar quarter and all Board and Board committee
attendance fees shall be deemed earned on the last business
day of the calendar quarter in which the meeting is attended
by the Director.
1.3 Each Director must file with Hasbro by December 15 in
any year a Deferral Election Form (Exhibit 1) indicating
deferrals during the following calendar year.
1.4 If any individual initially becomes a Director during a
calendar year, he or she may elect to defer Director's fees
for that calendar year at any time before the start of such
Director's term.
Article II - Deferred Compensation Accounts
2.1 For record-keeping purposes only, Hasbro shall maintain
a Stock Unit Account and an Interest Account.
2.2 Stock Unit Account
------------------
The Stock Unit Account shall consist of fictional shares
("Stock Units") of Hasbro common stock ("Common Stock")
accumulated and accounted for the sole purpose of
determining the cash payout of any distribution under this
portion of deferred compensation.
As of the end of each calendar quarter, Hasbro shall
credit to the Stock Unit Account 110% (which includes a 10%
deemed matching contribution by Hasbro (the "Hasbro
Contribution")) of the amount deferred into this account
(whether voluntarily or mandatorily) by the Director during
the quarter.
<PAGE>
2.2 Stock Unit Account (con't)
--------------------------
Deferred Director's retainers and fees will be applied
on the last business day of the calendar quarter to the
hypothetical purchase of whole shares of Common Stock.
Amounts remaining after purchase of whole shares shall be
carried forward to the next quarter.
For purposes of determining the number of shares of
Common Stock which shall be credited to the Stock Unit
Account, the hypothetical purchase shall be deemed to be
made on the last day of such quarter at a price equal to the
closing price of such shares as reported in the Wall Street
Journal for the last trading day in that quarter.
The equivalent of any cash dividends paid with respect
to the shares of Common Stock shall be applied on the last
business day of the quarter in which such dividends are
paid, based on the hypothetical number of shares of Common
Stock in the Stock Unit Account as of the record date for
such dividend, to the hypothetical purchase of shares of
Common Stock in accordance with the foregoing formula and
credited to the Stock Unit Account.
In the event the Company pays a stock dividend or
reclassifies or divides or combines its outstanding Common
Stock then an appropriate adjustment shall be made in the
hypothetical number of shares of Common Stock held in the
Stock Unit Account.
Half of the 10% Hasbro Contribution shall vest (become
nonforfeitable) on December 31 of the calendar year in which
the deferred compensation otherwise would have been paid and
the remaining half on the next December 31, but only to the
extent that the participant is a Director on such vesting
date. Unvested Hasbro Contributions shall vest immediately
upon the death or total disability of the Director as
determined by the Board or retirement by the Director at or
after the mandatory retirement age then in effect.
2.3 Interest Account
----------------
As of the end of each calendar quarter Hasbro shall
credit to the Interest Account 100% of the amount deferred
into this account by the Director during the quarter
together with an amount equal to interest on the balance in
the Interest Account during such quarter. Interest will be
credited at a rate per annum for each calendar quarter fixed
by the Chief Financial Officer of Hasbro based upon the
average quoted rate for five year U.S. Treasury Notes for
the last full week of the preceding calendar quarter and
compounded quarterly.
<PAGE>
Article III - Payments
3.1 Payments or withdrawals from either the Stock Unit
Account or the Interest Account or transfers between the two
accounts shall not be allowed while the individual remains a
Director of Hasbro.
3.2 As of the last day of the calendar quarter in which a
Director dies, resigns, retires or is removed from, or does
not otherwise stand for reelection to, the Board, all
amounts in the Stock Unit Account will automatically be
converted to the Interest Account. The cash amount
transferred will be determined by multiplying the then
current value of the Common Stock by the number of whole
Stock Units in the Stock Unit Account plus any amounts
remaining to be carried forward. The current value shall be
the price equal to the closing price, as reported in the
Wall Street Journal, for the last trading day of the
calendar quarter in which the participant is no longer a
Director.
3.3 At the time of filing a Deferral Election Form, a
Director must also file a Payment Election Form (Exhibit 2),
indicating an election to receive (1) the entire amount in
the Interest Account immediately following the end of the
quarter in which the participant is no longer a Director,
(2) the entire amount in the following January, or (3)
payments annually over a period of up to ten years with the
initial payment paid in the following January. If no
Payment Election Form is filed by the Director or is in
effect at the time a participant is no longer a Director,
the balance of the Interest Account will be paid in
installments over five years. Annual installments shall be
calculated each year by dividing the unpaid amount as of
January 1 of that year by the remaining number of unpaid
installments.
3.4 During the installment period, the unpaid balance in the
Interest Account will continue to earn interest at the same
rate as if the participant had continued as a Director.
3.5 If the Director or former Director dies before all
payments have been made, payment(s) shall be made to the
beneficiary designated on the Designation of Beneficiary
Form (Exhibit 3). The designated beneficiary may be changed
from time to time by delivering a new Designation of
Beneficiary Form to Hasbro. If no designation is made, or
if the named beneficiary predeceases the Director, payment
shall be made to the Director's estate.
<PAGE>
At the discretion of the Board (without the participation of
the affected Director), the payments to be made after the
participant is no longer a Director pursuant to this Article
III may be accelerated as to such amounts and at such times
as the Board determines.
Article IV - Miscellaneous
4.1 Benefits provided under this Plan are unfunded
obligations of Hasbro. Nothing contained in this Plan shall
require Hasbro to segregate any monies from its general
funds with respect to such obligations. This Plan is not an
employee benefit plan as defined in the Employee Retirement
Income Security Act of 1974, as amended, and is not intended
for the benefit of any common law employee of the Company.
4.2 The Board shall be the plan administrator of this Plan
and shall be solely responsible for its general
administration and interpretation and for carrying out the
provisions hereof, and shall have all such powers as may be
necessary to do so. The Board shall have the right to
delegate from time to time the administration of the Plan,
in whole or in part, to any committee of the Board. The
decisions made, and the actions taken, by the Board or any
committee thereof in the administration of the Plan shall be
final and conclusive on all persons, and no member of the
Board or any committee thereof shall be subject to
individual liability with respect to the Plan.
4.3 Neither the Director nor any beneficiary nor any next-
of-kin shall have the right to assign or otherwise alienate
the right to receive payments hereunder, in whole or in
part, which payments are expressly non-assignable and non-
transferable, whether voluntarily or involuntarily. Any
attempt to alienate, sell, transfer, assign, pledge or
otherwise encumber any such amount, whether presently or
thereafter payable, shall be void. Except as required by
law, no benefit payable under this Plan shall in any manner
be subject to garnishment, attachment, execution or other
legal process, or be liable for or subject to the debts or
liability of any Director.
4.4 Hasbro shall withhold from amounts paid under this Plan
any taxes or other amounts required to be withheld by law.
<PAGE>
4.5 The Board may at any time amend or terminate the Plan
for whatever reasons it may deem appropriate. No amendment
or termination shall (a) impair the rights of a participant
with respect to amounts then in the participant's account
or (b) be effective without the written consent of the
Continuing Directors. A "Continuing Director" means a
director of Hasbro serving continuously as a director of
Hasbro from and including December 6, 1993 or a person
designated (before or simultaneously with initially becoming
a Director) as a Continuing Director by at least a majority
of the then Continuing Directors. All references to action
by the Continuing Directors shall mean a vote of a majority
of the total number of the then Continuing Directors.
4.6 Each participant in the Plan will receive an annual
statement indicating the amount credited to the
participant's account as of the end of the preceding
calendar year.
4.7 This Plan shall become effective with respect to
retainer and attendance fees earned on and after January 1,
1994, with all elections and designations filed by the
Directors prior to January 1, 1994 becoming effective as of
such date.
4.8 Nothing contained in the Plan shall be construed as a
commitment by Hasbro to nominate any person for election or
re-election to the Board. Nothing contained in this Plan
shall be construed to create a right in any person to be
elected or continued as a Director.
4.9 This Plan shall be governed by the laws of the State of
Rhode Island.
4.10 The adoption of this Plan shall have no effect on the
existing Hasbro, Inc. Retirement Plan for Directors.
Nothing contained in this Plan shall prevent Hasbro from
adopting other or additional compensation plans or
arrangements for its non-employee Directors.
ADOPTED AND APPROVED BY THE BOARD OF DIRECTORS OF HASBRO, INC.
this 6th day of December, 1993.
BY ORDER OF THE BOARD OF DIRECTORS
<PAGE>
Exhibit 1
HASBRO, INC.
Deferred Compensation Plan
for
Non-Employee Directors
Deferral Election Form
[1993]
In accordance with the provisions of the Deferred Compensation
Plan for Non-Employee Directors, I hereby elect to defer fees payable
to me for [1994] and following years as indicated below. The
percentage deferral set forth below shall remain in effect until I
shall have filed an election superseding this election. I understand
that, although a superseding election will become effective to alter
the deferral percentages for future fees payable beginning in the
year following the election, the amounts already deferred in the
aAccounts set forth below may not be transferred or withdrawn so long
as I remain a Director of Hasbro.
Annual Retainer (including
Annual Chair Retainer, if any) All Other Fees
----------------------------- --------------
Mandatory Deferral to
Stock Unit Account 20% N.A.
Voluntary Deferral to
Stock Unit Account % %
--- ---
Voluntary Deferral to
Interest Account % %
--- ---
TOTAL* TOTAL**
=== ===
* Total may not exceed 100% and must not be less than 20%
** Total may not exceed 100%
----------------------------- --------------
Signature Date
<PAGE>
Exhibit 2
HASBRO, INC.
Deferred Compensation Plan
for
Non-Employee Directors
Payment Election Form
Select one:
( ) Pay full amount immediately following the end of
the quarter in which I no longer serve as a
Hasbro Director.
( ) Pay full amount in the January following the end of
the quarter in which I no longer serve as a Hasbro
Director.
( ) Pay annually over _________________ (2 to 10) years
beginning in the January following the end of the
quarter in which I no longer serve as a Hasbro
Director.
----------------------------- --------------
Signature Date
<PAGE>
Exhibit 3
HASBRO, INC.
Deferred Compensation Plan
for
Non-Employee Directors
Designation of Beneficiary
I hereby designate the following person to receive from the
Hasbro, Inc. Deferred Compensation Plan for Non-Employee Directors
any amounts payable in the event of my death.
Social Security
Name Number Address
-------------------- --------------- -------------------
-------------------
This designation is intended to replace all prior designations
made by me.
------------------------------ ------------
Signature Date
<PAGE>
<PAGE>
EXHIBIT 11
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(Thousands of Dollars and Shares Except Per Share Data)
1993 1992 1991
--------------- --------------- ---------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
Net earnings applicable to common shares:
Net earnings $200,004 200,004 179,164 179,164 81,654 81,654
Interest and amort-
ization on 6%
convertible notes,
net of taxes (a) - 5,745 - 5,826 - -
------- ------- ------- ------- ------- -------
Total $200,004 205,749 179,164 184,990 81,654 81,654
======= ======= ======= ======= ======= =======
Average number of shares outstanding (b):
Beginning balance 87,176 87,176 86,184 86,184 84,743 84,743
Exercise of stock
options and warrants:
Actual 304 304 530 530 698 698
Assumed 2,551 2,647 2,372 2,790 1,542 2,700
Assumed conversion
of 6% convertible
notes (a) - 5,114 - 5,114 - -
------- ------- ------- ------- ------- -------
Total 90,031 95,241 89,086 94,618 86,983 88,141
======= ======= ======= ======= ======= =======
Earnings per common
share $ 2.22 2.16 2.01 1.96 .94 .93
======= ======= ======= ======= ======= =======
(a) The effect of these notes, issued in November 1991, was anti-
dilutive in 1991 and as such was not included.
(b) Computation to arrive at the average number is a weighted average
computation.
<PAGE>
<PAGE>
EXHIBIT 12
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Fiscal Years Ended in December
(Thousands of Dollars)
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Earnings available for fixed charges:
Net earnings $200,004 179,164 81,654 89,182 92,194
Fixed charges 42,839 48,050 52,801 23,185 30,817
Taxes on income 125,206 113,212 63,897 63,266 64,599
------- ------- ------- ------- -------
Total $368,049 340,426 198,352 175,633 187,610
======= ======= ======= ======= =======
Fixed charges:
Interest on long-term
debt $ 10,178 16,932 22,913 6,856 13,888
Other interest charges 19,636 18,959 19,417 9,620 10,135
Amortization of debt
expense 386 623 267 47 265
Rental expense representa-
tive of interest factor 12,639 11,536 10,204 6,662 6,529
------- ------- ------- ------- -------
Total $ 42,839 48,050 52,801 23,185 30,817
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges 8.59 7.08 3.76 7.58 6.09
======= ======= ======= ======= =======
<PAGE>
<PAGE>
EXHIBIT 13
HASBRO, INC. AND SUBSIDIARIES
Selected Information Contained in
Annual Report to Shareholders
for the Year Ended December 26, 1993
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -------------------------------------------------------------------------
The Company's Common Stock, Par Value $.50 per share (the "Common Stock"), is
traded on the American and London Stock Exchanges. The following table sets
forth the high and low sales prices as reported on the Composite Tape of the
American Stock Exchange and the cash dividends declared per share of Common
Stock for the periods listed.
Sales Prices
---------------- Cash Dividends
Period High Low Declared
- ------ ---- --- --------------
1992
1st Quarter $28 1/4 23 3/4 $.05
2nd Quarter 29 3/4 23 1/8 .05
3rd Quarter 34 3/8 26 1/2 .05
4th Quarter 35 7/8 31 1/2 .05
1993
1st Quarter $34 7/8 28 1/8 $.06
2nd Quarter 38 3/8 29 7/8 .06
3rd Quarter 39 5/8 34 .06
4th Quarter 40 1/8 35 1/8 .06
The approximate number of holders of record of the Company's Common Stock as of
March 18, 1994 was 6,000.
Dividends
---------
Declaration of dividends is at the discretion of the Company's Board of
Directors and will depend upon the earnings, financial condition of the Company
and such other factors as the Board of Directors deems appropriate. Payment of
dividends is further subject to restrictions contained in agreements relating
to the Company's outstanding long-term debt. At December 26, 1993, under the
most restrictive agreement the full amount of retained earnings is free of
restrictions.
On February 18, 1994 the Company's Board of Directors declared a quarterly cash
dividend on the Company's Common Stock of $.07 per share payable on May 20,
1994 to holders of record on May 6, 1994.
<PAGE>
SELECTED FINANCIAL DATA
- -----------------------
(Thousands of Dollars and Shares Except per share Data and Ratios)
Fiscal Year
------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Statement of
Earnings Data:
Net revenues $2,747,176 2,541,055 2,141,096 1,520,032 1,409,678
Net earnings $ 200,004 179,164 81,654 89,182 92,194
Per Common Share
Data:
Earnings $ 2.22 2.01 .94 1.02 1.04
Cash dividends
declared $ .24 .20 .16 .13 .11
Balance Sheet Data:
Working capital $ 552,821 415,586 431,441 504,001 422,825
Total assets $2,293,018 2,082,766 1,950,127 1,284,765 1,246,485
Long-term debt $ 200,510 206,189 380,304 56,912 57,633
Ratio of Earnings
to Fixed
Charges (1) 8.59 7.08 3.76 7.58 6.09
Weighted Average
Number of Common
Shares 90,031 89,086 86,983 87,119 88,603
(1) For purposes of calculating the ratio of earnings to fixed charges,
fixed charges include interest, amortization of debt expense and
one-third of rentals, and earnings available for fixed charges
represent earnings before fixed charges and income taxes.
<PAGE>
MANAGEMENT'S REVIEW
- -------------------
Summary
- -------
A percentage analysis of results of operations follows:
1993 1992 1991
---- ---- ----
Net revenues 100.0% 100.0% 100.0%
Cost of sales 43.0 43.1 45.2
----- ----- -----
Gross profit 57.0 56.9 54.8
Amortization 1.3 1.3 1.3
Royalties, research and development 10.2 9.8 9.0
Advertising 14.0 14.8 15.2
Selling, distribution and administrative 18.1 18.2 18.2
Restructuring .6 - 2.8
Interest expense 1.1 1.4 2.0
Other income, net (.1) (.1) (.5)
----- ----- -----
Earnings before income taxes 11.8 11.5 6.8
Income taxes 4.5 4.5 3.0
----- ----- -----
Net earnings 7.3% 7.0% 3.8%
===== ===== =====
(Thousands of Dollars Except Share Data)
Results of Operations
- ---------------------
Revenue growth continued to be very strong during 1993, up 8% from the 1992
level which had increased 19% over 1991. Net revenues for 1993 were $2,747,176
compared to $2,541,055 and $2,141,096 for 1992 and 1991, respectively.
Domestically, revenues grew by approximately 11%, with the growth relatively
evenly spread across the Company's three major product categories, promoted
brands, games and puzzles and infant and preschool. Within the promoted brands
area, Kenner's new Jurassic Park(TM) products based on the movie of the same
name were very well received by retailers and consumers alike while its
Batman(R) action figures, Littlest Pet Shop(R) items and many of the more
traditional products such as Nerf(R) and Easy Bake(R) Oven continued to be very
strong. Hasbro Toy, after a difficult period during the year, ended the year
positively, in part due to an up-turn in several products including Tonka's
Talking Fire Truck(TM) and The Real Power Tool Shop(TM). The revenue growth in
the games group occurred in both Milton Bradley and Parker Brothers. Again in
1993, both units had success with new products, including Forbidden Bridge(TM)
and Snardvark(TM), revived items such as Cootie(R) and Sorry(R), and their
classics like Monopoly(R) and Scrabble(R). The infant and preschool group were
led by the success of its new Barney(R) line, although many other items
including In-Line Skates, Playskool Dollhouse, Tinkertoy(R) and Play-Doh(R)
also were strong. Internationally, 1993 revenues increased approximately 4% to
$1,076,904 from $1,034,533 in 1992 and $867,599 in 1991. Absent the approximate
$107,000 negative effect of changed foreign currency rates during the year,
1993 international growth would have
<PAGE>
approached 15%. During 1992, the effect of changed foreign currency translation
rates marginally increased revenues. While we experienced solid growth in
Germany, the U.K., Canada and Mexico, our acquisitions in Southeast Asia and
the Pacific Rim will require more time to reach their full potential.
Also affecting 1992 growth was the 1991 acquisition of Tonka Corporation
(Tonka). This acquisition, which occured on May 7, 1991 and brought with it the
products marketed under the Tonka, Kenner and Parker Brothers names, was
accounted for as a purchase and as such, the results of the Tonka units are
included from that date.
The Company's gross profit margin remained stable at 57.0% after increasing to
56.9% in 1992 from 54.8% in 1991. The 1992 margin improvement was the result of
a combination of factors including the significant revenue increase within the
promoted brands group, whose products generally return a higher gross profit
percentage, and the positive impact resulting from the successful
restructuring and integration of the Tonka units into the Company's operations.
Amortization expense, which includes amortization of both intellectual property
rights and cost in excess of net assets acquired, of $35,366 compares with
$33,528 in 1992 and $29,330 in 1991. The increases in both the current year and
in 1992 are largely attributable to the acquisitions during 1991 and 1992.
Expenditures for royalties, research and development increased to $280,571 from
$249,851 in 1992 and $192,451 in 1991. Included in these amounts are
expenditures for research and development of $125,566 in 1993, $109,655 in 1992
and $78,983 in 1991. As percentages of net revenues, research and development
was 4.6% in 1993, 4.3% in 1992 and 3.7% in 1991. The significantly increased
percentage in 1992 was largely attributable to the efforts involved in
rejuvenating many of the products acquired in the Tonka acquisition, while the
current year's increase reflects the Company's efforts to remain competitive in
a changing technological environment. The revenue growth of the promotional
brands was a major cause of the increased royalties in both 1993 and 1992 as
these products generally have higher than average royalty rates.
Advertising, which also includes promotion and programming costs, was $383,918
in 1993 compared with $377,219 in 1992 and $325,282 in 1991. As a percentage of
net revenues in 1993, 1992 and 1991, however, it was 14.0%, 14.8% and 15.2%,
respectively. The lower sales volume of the Tonka product lines and the need to
re-establish them in the marketplace following their acquisition by the Company
were the primary reasons for the higher 1991 percentage. The subsequent year's
decreases also reflect the strength of several of the Company's promoted
product lines which have not required the traditional level of advertising
support.
Selling, distribution and administrative expense of $498,066 in 1993 compares
with $461,888 and $389,301 in 1992 and 1991, respectively. While increasing in
dollars, as a percentage of net revenues it has decreased to 18.1% in 1993 from
18.2% in each of 1992 and 1991.
<PAGE>
In early 1994, after an intensive study and analysis of its European
manufacturing capacity, the Company announced that, subject to negotiations
with local trade unions and authorities, it would close its Netherlands
manufacturing facility and transfer its production to the Company's larger
manufacturing facilities in Ireland and Spain. The cost of this closure and
other non-recurring reorganization expenses, classified as restructuring
charges, including facility costs, severance and other related costs have been
estimated at $15,500.
Interest expense was $29,814 during 1993 compared to $35,891 during 1992 and
$42,597 in 1991. The decrease in 1993 is largely reflective of the lower
interest rates experienced during the year while the 1992 decrease results from
lower interest rates partially offset by the increased working capital needs
during the year.
The restructuring charge of $59,000 in 1991 included facility costs, severance
and other items related to the integration of the Tonka units with those of the
Company following its acquisition in mid-1991.
Income tax expense as a percentage of pretax earnings in 1993 decreased to
38.5% from 38.7% in 1992, which had decreased from 43.9% in 1991. The current
year decrease is primarily attributable to two factors; an increase resulting
from the U.S. federal rate changing from 34% to 35%, partially offset by the
impact of this change on domestic net deferred tax assets, and a decrease
resulting from lower effective state tax rates. The 1992 percentage decrease
was primarily attributable to the increased earnings in 1992 which reduced the
impact of non-deductible amortization.
Liquidity and Capital Resources
- -------------------------------
Working capital increased to $552,821 at the end of 1993 from $415,586 at the
end of 1992. The current ratio also increased to 1.74 from 1.59. The 1992
amounts were adversely affected by the Company's repayment of $150,000 of
short-term borrowings, classified as long-term, incurred to finance the Tonka
acquisition. This repayment reduced 1992 working capital by $150,000 and also
negatively affected the current ratio.
Receivables, at $720,442 were approximately $82,000 higher at the end of 1993
than at the end of 1992. This increase is primarily attributable to the
approximate $100,000 of increased sales made during the fourth quarter of 1993.
Property, plant and equipment increased approximately $28,000 to $279,803. The
Company had no material capital commitments at December 26, 1993. Other assets
decreased by approximately $2,000. This net decrease includes the current year
amortization expense, partially offset by the Company's $25,000 investment for
approximately 15% of Virgin Interactive Entertainment, plc, a video game and
software company, and several smaller acquisitions.
Substantially all of the short-term borrowings, which at the end of 1993 and
1992 amounted to $62,242 and $64,174, respectively, represented bank borrowings
of the Company's foreign subsidiaries. As part of the traditional marketing
strategies of the toy industry, many sales made early in the year are not due
for payment until the fourth quarter or early in the first quarter of the
subsequent year, thus making it
<PAGE>
necessary for the Company to borrow significant amounts pending these
collections. During the year the Company borrowed through the issuance of
commercial paper and short-term lines of credit to fund its seasonal working
capital requirements in excess of funds available from operations. During 1994,
the Company expects to fund these needs in a similar manner and believes that
the funds available to it are adequate to meet its needs. At February 27, 1994,
the Company's unused committed and uncommitted lines of credit, including a
$500,000 revolving credit agreement, were in excess of $1,000,000. Trade
payables and other accrued liabilities increased to $594,021 at December 26,
1993 from $551,211 at the end of 1992. A significant portion of this increase
results from timing differences in the payment of fourth quarter advertising
costs and the provision for restructuring costs previously discussed.
During August 1990, the Board of Directors authorized a program to purchase up
to 4,500,000 shares of the Company's common stock. Through the end of 1993,
2,445,300 shares remained under this authorization. The shares acquired under
this program were issued in the exercise of stock options and warrants.
Foreign Currency Activity
- -------------------------
The Company manages its foreign exchange exposure in various ways including
forward exchange contracts, currency options, agreements with vendors for rate
protection and the netting of foreign exchange exposure. In addition, where
possible, the Company minimizes its foreign asset exposure by borrowing in
foreign currencies.
Cumulative translation adjustments decreased to $15,006 at December 26, 1993
from $32,568 at December 27, 1992. This decrease was principally due to the
relationship of the U.S. dollar relative to currencies in foreign countries in
which the Company operates.
The Economy and Inflation
- -------------------------
The strong year experienced by the Company occurred in spite of the difficult
economic environment throughout most of the world. The principal market for the
Company's products is the retail sector where certain customers have
experienced economic difficulty. The Company closely monitors the credit
worthiness of its customers and adjusts credit policies and limits as it deems
appropriate.
The effect of inflation on the Company's operations during 1993 was not
significant and the Company will continue its policy of monitoring costs and
adjusting prices accordingly.
Other Information
- -----------------
During 1993, the Company continued to experience a gradual shift in its revenue
pattern so that the second half of the year has grown in significance to its
overall business and within that half the fourth quarter has become more
prominent. The Company believes that this trend will continue in 1994.
<PAGE>
The Company is currently proceeding with an environmental clean-up at its
former manufacturing facility in Lancaster, Pennsylvania. This facility, a
portion of which is being utilized for limited warehousing operations in 1994,
was acquired in 1986 from the CBS Toys Division of CBS Inc. (CBS) in
conjunction with the purchase of rights to selected products formerly marketed
by CBS. CBS has acknowledged its responsibility with respect to some areas of
contamination and some of the remedial actions needed to facilitate this clean-
up, but has not yet funded any of these obligations. The Company believes that
CBS has full responsibility and is engaged in legal action against CBS to
recover all of the costs associated with the environmental clean-up. While it
is impossible to assure the outcome of the court action, the Company believes
that it will prevail. The Consolidated Financial Statements reflect, pursuant
to Statement of Financial Accounting Standards No. 5, Accounting for
Contingencies, certain costs that the Company expects to ultimately recover
from CBS.
During November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits (SFAS 112). The Company must adopt the provisions of
SFAS 112 in 1994, but believes that the adoption will not have a material
effect on its financial statements.
On February 18, 1994, the Company announced a 17% increase in its quarterly
cash dividend from that previously in effect. The first dividend at the
increased rate of $.07 per share is payable on May 20, 1994 to shareholders of
record on May 6, 1994.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------------------------------------------
See attached pages.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
We have audited the accompanying consolidated balance sheets of Hasbro,
Inc. and subsidiaries as of December 26, 1993 and December 27, 1992 and the
related consolidated statements of earnings, shareholders' equity and cash
flows for each of the fiscal years in the three-year period ended December 26,
1993. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hasbro,
Inc. and subsidiaries at December 26, 1993 and December 27, 1992 and the
results of their operations and their cash flows for each of the fiscal years
in the three-year period ended December 26, 1993 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick
Providence, Rhode Island
February 8, 1994
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 26, 1993 and December 27, 1992
(Thousands of Dollars Except Share Data)
Assets 1993 1992
------ ---- ----
Current assets
Cash and cash equivalents $ 186,254 125,953
Accounts receivable, less allowance for
doubtful accounts of $54,200 in 1993
and $52,200 in 1992 720,442 638,282
Inventories 250,067 217,918
Prepaid expenses and other current assets 144,372 134,776
--------- ---------
Total current assets 1,301,135 1,116,929
Property, plant and equipment, net 279,803 251,340
--------- ---------
Other assets
Cost in excess of acquired net assets, less
accumulated amortization of $68,122 in 1993
and $53,514 in 1992 475,607 484,278
Other intangibles, less accumulated amortization
of $85,290 in 1993 and $65,497 in 1992 185,953 206,628
Other 50,520 23,591
--------- ---------
Total other assets 712,080 714,497
--------- ---------
Total assets $2,293,018 2,082,766
========= =========
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 26, 1993 and December 27, 1992
(Thousands of Dollars Except Share Data)
Liabilities and Shareholders' Equity 1993 1992
------------------------------------ ---- ----
Current liabilities
Short-term borrowings $ 62,242 64,174
Trade payables 173,545 183,545
Accrued liabilities 420,476 367,666
Income taxes 92,051 85,958
--------- ---------
Total current liabilities 748,314 701,343
Long-term debt, excluding current installments 200,510 206,189
Deferred liabilities 67,511 69,613
--------- ---------
Total liabilities 1,016,335 977,145
--------- ---------
Shareholders' equity
Preference stock of $2.50 par value.
Authorized 5,000,000 shares; none issued - -
Common stock of $.50 par value. Authorized
300,000,000 shares; issued 87,795,251 shares
in 1993 and 87,176,079 shares in 1992 43,898 43,588
Additional paid-in capital 296,823 287,478
Retained earnings 920,956 741,987
Cumulative translation adjustments 15,006 32,568
--------- ---------
Total shareholders' equity 1,276,683 1,105,621
--------- ---------
Total liabilities and shareholders' equity $2,293,018 2,082,766
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Fiscal Years Ended in December
(Thousands of Dollars Except Share Data)
1993 1992 1991
---- ---- ----
Net revenues $2,747,176 2,541,055 2,141,096
Cost of sales 1,182,567 1,094,031 967,359
--------- --------- ---------
Gross profit 1,564,609 1,447,024 1,173,737
--------- --------- ---------
Expenses
Amortization 35,366 33,528 29,330
Royalties, research and development 280,571 249,851 192,451
Advertising 383,918 377,219 325,282
Selling, distribution and administrative 498,066 461,888 389,301
Restructuring charges 15,500 - -
--------- --------- ---------
Total expenses 1,213,421 1,122,486 936,364
--------- --------- ---------
Operating profit 351,188 324,538 237,373
--------- --------- ---------
Nonoperating (income) expense
Interest expense 29,814 35,891 42,597
Acquisition restructuring costs - - 59,000
Other (income), net (3,836) (3,729) (9,775)
--------- --------- ---------
Total nonoperating expense 25,978 32,162 91,822
--------- --------- ---------
Earnings before income taxes 325,210 292,376 145,551
Income taxes 125,206 113,212 63,897
--------- --------- ---------
Net earnings $ 200,004 179,164 81,654
========= ========= =========
Per common share
Earnings $ 2.22 2.01 .94
========= ========= =========
Cash dividends declared $ .24 .20 .16
========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Fiscal Years Ended in December
(Thousands of Dollars)
1993 1992 1991
---- ---- ----
Common stock
Balance at beginning of year $ 43,588 43,397 28,931
Stock option and warrant transactions 310 191 -
Three-for-two stock split - - 14,466
--------- --------- ---------
Balance at end of year 43,898 43,588 43,397
--------- --------- ---------
Additional paid-in capital
Balance at beginning of year 287,478 276,725 286,433
Stock option and warrant transactions 9,345 10,753 4,758
Three-for-two common stock split - - (14,466)
--------- --------- ---------
Balance at end of year 296,823 287,478 276,725
--------- --------- ---------
Retained earnings
Balance at beginning of year 741,987 580,211 512,291
Net earnings 200,004 179,164 81,654
Dividends declared (21,035) (17,388) (13,734)
--------- --------- ---------
Balance at end of year 920,956 741,987 580,211
--------- --------- ---------
Cumulative translation adjustments
Balance at beginning of year 32,568 60,297 58,233
Equity adjustments from foreign
currency translation (17,562) (27,729) 2,064
--------- --------- ---------
Balance at end of year 15,006 32,568 60,297
--------- --------- ---------
Treasury stock
Balance at beginning of year - (5,361) (18,061)
Stock option and warrant transactions - 5,361 12,700
--------- --------- ---------
Balance at end of year - - (5,361)
--------- --------- ---------
Total shareholders' equity $1,276,683 1,105,621 955,269
========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended in December
(Thousands of Dollars)
1993 1992 1991
---- ---- ----
Cash flows from operating activities
Net earnings $200,004 179,164 81,654
Adjustments to reconcile net earnings
to net cash provided (utilized) by
operating activities:
Depreciation and amortization of plant
and equipment 65,282 62,087 52,524
Other amortization 35,366 33,528 29,330
Deferred income taxes 2,281 2,228 (20,148)
Change in current assets and liabilities
(other than cash and cash equivalents):
(Increase) in accounts receivable (90,833) (132,935) (53,564)
(Increase) decrease in inventories (34,088) (15,182) 23,773
(Increase) decrease in prepaid expenses
and other current assets (8,434) 9,555 (8,135)
Increase in trade payables and accrued
liabilities 52,761 94,820 15,242
Other (5,102) (3,455) (622)
------- ------- -------
Net cash provided by operating
activities 217,237 229,810 120,054
------- ------- -------
Cash flows from investing activities
Additions to property, plant
and equipment (99,792) (90,431) (56,004)
Acquisitions, net of cash acquired (32,171) (13,516) (343,392)
Purchase of marketable securities (141,411) (144,000) -
Sale of marketable securities 141,839 144,000 -
Other 5,534 9,953 (5,004)
------- ------- -------
Net cash utilized by investing
activities (126,001) (93,994) (404,400)
------- ------- -------
Cash flows from financing activities
Net (payments) proceeds of short-term
borrowing (9,054) 38,397 (67,609)
Proceeds from long-term debt - - 300,000
Repayment of long-term debt (11,705) (161,413) (112,513)
Stock option and warrant transactions 9,655 16,305 17,458
Dividends paid (20,125) (16,476) (13,104)
Other - - (2,646)
------- ------- -------
Net cash provided (utilized) by
financing activities (31,229) (123,187) 121,586
------- ------- -------
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Fiscal Years Ended in December
(Thousands of Dollars)
1993 1992 1991
---- ---- ----
Effect of exchange rate changes on cash 294 (7,290) (5,923)
------- ------- -------
Increase (decrease) in cash and cash
equivalents 60,301 5,339 (168,683)
Cash and cash equivalents at beginning of
year 125,953 120,614 289,297
------- ------- -------
Cash and cash equivalents at end
of year $186,254 125,953 120,614
======= ======= =======
Supplemental information
Cash paid during the year for
Interest $ 31,842 41,665 43,743
Income taxes $107,716 83,160 91,562
See accompanying notes to consolidated financial statements.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Thousands of Dollars Except Share Data)
(1) Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Hasbro, Inc.
and all significant majority-owned subsidiaries (the Company). Investments
in affiliates representing 20% to 50% ownership interest are accounted for
using the equity method. All significant intercompany balances and
transactions have been eliminated.
During 1992, the Company reported a net $214 of income from the cumulative
effect of changes in accounting principles. For current year presentation,
this amount has been reclassified to other (income), net. Certain other
prior year data have also been reclassified to conform with current
presentation.
Fiscal Year
-----------
The Company's fiscal year ends on the last Sunday in December. Each of the
three fiscal years reported are fifty-two week periods.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include all cash balances and highly liquid
investments purchased with a maturity to the Company of three months or
less.
Inventories
-----------
Inventories are valued at the lower of cost (first-in, first-out) or
market.
Cost in Excess of Net Assets Acquired and Other Intangibles
-----------------------------------------------------------
The Company continually monitors its cost in excess of net assets acquired
(goodwill) and its other intangibles to determine whether any impairment
of these assets has occurred. In making such determination with respect to
goodwill, the Company evaluates the performance of the underlying entities
which gave rise to such amount. With respect to other intangibles, which
include the cost of license agreements, trademarks and copyrights and cost
in excess of net assets acquired through the purchase of product rights
and licenses, the Company bases its determination on the performance of
the related products or product lines. In excess of 90% of the Company's
goodwill and other intangibles result from the 1984 acquisition of Milton
Bradley Company, including its Playskool and international subsidiaries,
and the 1991 acquisition of Tonka Corporation, including its Kenner,
Parker Brothers and international units. The assets acquired in these
transactions continue to contribute a significant portion of the Company's
net revenues and earnings.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Substantially all costs in excess of net assets (goodwill) of subsidiaries
acquired are being amortized on the straight-line method over forty years.
Other intangibles, which include the cost of license agreements,
trademarks and copyrights and cost in excess of net assets acquired
through the purchase of product rights and licenses, are being amortized
over five to twenty years using the straight-line method.
Depreciation and Amortization
-----------------------------
Depreciation and amortization are computed using accelerated and straight-
line methods to amortize the cost of property, plant and equipment over
their estimated useful lives. The principal lives, in years, used in
determining depreciation rates of various assets are: land improvements 15
to 19, buildings and improvements 15 to 25 and machinery and equipment 3
to 12.
Tools, dies and molds are amortized over a three year period or their
useful lives, whichever is less, using an accelerated method. Amortization
is credited directly against the cost of the assets.
Income Taxes
------------
At the beginning of 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109),
which required the asset and liability approach for financial accounting
and reporting for income taxes, a change from the deferred method
previously used.
Prior to 1992, deferred income taxes were recorded for timing differences
between tax and financial statement accounting, pursuant to the gross
change method under Opinion 11 of the Accounting Principles Board.
Deferred income taxes have not been provided on undistributed earnings of
foreign subsidiaries as substantially all of such earnings are
indefinitely reinvested by the Company.
Foreign Currency Translation
----------------------------
Foreign currency assets and liabilities are translated into dollars at
current rates, and revenues, costs and expenses are translated at average
rates during each reporting period. Gains or losses resulting from foreign
currency transactions are included in earnings currently, while those
resulting from translation of financial statements are shown as a separate
component of shareholders' equity.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Pension Plans and Postretirement Benefits
-----------------------------------------
The Company, except for certain foreign subsidiaries, has pension plans
covering substantially all of its full-time employees. Pension expense is
based on actuarial computations of current and future benefits. The
Company's policy is to fund amounts which are required by applicable
regulations and which are tax deductible. The estimated amounts of future
payments to be made under other retirement programs are being accrued
currently over the period of active employment and are also included in
pension expense.
The Company has a contributory postretirement health and life insurance
plan covering substantially all employees who retire under any of the
Company's domestic defined benefit pension plans and meet certain age and
length of service requirements. At the beginning of 1992, the Company
adopted Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions (SFAS 106),
which required that the cost of such benefits be accrued over the employee
service period, a change from the Company's prior practice of recording
those costs when incurred.
Research and Development
------------------------
Research and product development costs for 1993, 1992 and 1991 were
$125,566, $109,655 and $78,983, respectively.
Advertising
-----------
Production costs of commercials and programming are charged to operations
in the year first aired. The costs of other advertising, promotion and
marketing programs are charged to operations in the year incurred.
Earnings Per Common Share
-------------------------
Earnings per common share are based on the weighted average number of
shares of common stock and dilutive common stock equivalents outstanding
during each period. Common stock equivalents include stock options and
warrants for the period prior to their exercise. Under the treasury stock
method, the unexercised options and warrants were assumed to be exercised
at the beginning of the period or at issuance, if later. The assumed
proceeds were then used to purchase common stock at the average market
price during the period.
The weighted average number of shares outstanding used in the computation
of earnings per common share was 90,030,568, 89,085,751 and 86,983,019 in
1993, 1992 and 1991, respectively.
The difference between primary and fully diluted earnings per share was
not significant in any year.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(2) Investment and Acquisition
--------------------------
Investment
----------
On September 3, 1993, the Company acquired approximately 15% of Virgin
Interactive Entertainment, plc (VIE), a video game and software company,
for approximately $25,000. The Company and VIE also agreed to establish a
joint operation within VIE to develop and market software based on the
Company's existing product lines and other jointly selected properties.
Beginning in 1994, the Company will be required to account for this
investment under Statement of Financial Accounting Standards No. 115,
Accounting for Investments in Certain Debt and Equity Securities (SFAS
115), if VIE proceeds with its announced plans to have its shares,
represented by American Depository Receipts, admitted for quotation on the
NASDAQ National Market System. SFAS 115 will require that the investment
be reported at fair value with the unrealized gain or loss shown as a
separate component of shareholders' equity.
Acquisition
-----------
Pursuant to tender offers in 1991, the Company acquired Tonka Corporation
(Tonka). The net purchase price of $343,392 was comprised of $283,261 for
its debentures and $64,360 for its common shares, reduced by $4,229 of
cash acquired.
Accounting for this acquisition using the purchase method, the Company
allocated the purchase price to assets and liabilities based on fair
values at the date of acquisition. These fair values, adjusted for the
1992 adoption of SFAS 109, were comprised of intellectual property rights
of $147,447, net tangible liabilities assumed of $145,752 and goodwill of
$341,697.
The intellectual property rights are being amortized over twenty years and
the goodwill is being amortized over forty years, both using the straight-
line method. The Consolidated Statements of Earnings include the results
of Tonka from the acquisition date, May 7, 1991.
Following the acquisition, the Company integrated the Tonka operations
through the restructuring and consolidation of certain operations. The
cost of this restructuring, including facility costs, severance and other
related items, was recorded as a nonrecurring charge of $59,000 during the
second quarter of 1991. The amount was classified as nonoperating as it
related to facilities and operations which had not previously been
included as part of the Company's operations.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
On a pro-forma basis, reflecting this acquisition as if it had taken place
at the beginning of fiscal 1991, net revenues, net earnings and earnings
per common share for the year ended December 29, 1991, would have been
$2,282,776, $30,593 and $.35, respectively. These pro-forma results are
not indicative of either future financial performance or actual results
which would have occurred had the acquisition taken place at that time.
(3) Inventories
-----------
1993 1992
---- ----
Finished products $183,899 161,192
Work in process 22,486 16,315
Raw materials 43,682 40,411
------- -------
$250,067 217,918
======= =======
(4) Property, Plant and Equipment
-----------------------------
1993 1992
---- ----
Land and improvements $ 12,010 13,585
Buildings and improvements 188,713 170,220
Machinery and equipment 173,050 150,851
-------- -------
373,773 334,656
Less accumulated depreciation 133,182 111,801
-------- -------
240,591 222,855
Tools, dies and molds, less accumulated
amortization 39,212 28,485
-------- -------
$279,803 251,340
======== =======
Expenditures for maintenance and repairs which do not materially extend
the life of the assets are charged to operations.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(5) Short-Term Borrowings
---------------------
The Company has available unsecured committed and uncommitted lines of
credit from various banks approximating $525,000 and $1,025,000,
respectively. Substantially all of the short-term borrowings outstanding
at the end of 1993 and 1992 represent bank borrowings of foreign units
made under these lines of credit. The Company's working capital needs were
fulfilled by borrowing under these lines of credit and through the
issuance of commercial paper, both of which were on terms and at interest
rates generally extended to companies of comparable credit worthiness.
Included as part of the committed line is $500,000 available from a
revolving credit agreement. This agreement contains certain restrictive
covenants with which the Company is in compliance. Compensating balances
and facility fees were not material.
(6) Accrued Liabilities
-------------------
1993 1992
---- ----
Royalties $ 83,820 73,982
Advertising 116,243 99,550
Payroll and management incentives 37,438 36,814
Other 182,975 157,320
-------- -------
$420,476 367,666
======== =======
(7) Long-Term Debt
--------------
1993 1992
---- ----
6% Convertible Subordinated Notes Due 1998.
Interest is paid semi-annually.(a) $150,000 150,000
Subordinated variable rate notes (4.5% rate
at December 26, 1993) due 1995. Interest
is paid quarterly. (b) 50,000 50,000
Other (excluding current installments). 510 6,189
-------- -------
$200,510 206,189
======== =======
(a) These notes are convertible into common stock at a conversion price
of $29.33 per share and are not redeemable by the Company prior to
November 21, 1994.
(b) This borrowing agreement contains certain restrictions on the
payment of cash dividends. Under the agreement, the full amount of
retained earnings is free of restrictions.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Current installments aggregated $3,236 and $11,821 at December 26, 1993
and December 27, 1992, respectively, and are included in trade payables.
The aggregate maturities of long-term debt in 1995 and in the succeeding
three years are $50,093, $83, $83 and $150,083, respectively.
(8) Income Taxes
- ------------
The adoption of SFAS 109 resulted in a change in accounting principles.
The cumulative effect of this change, for years prior to 1992, increased
1992 net earnings by $12,349. Information prior to 1992 was not restated.
Certain tax benefits are not reflected in income taxes on the Consolidated
Statements of Earnings. Such benefits include; $4,235 in 1993 and $4,546
in 1992 which were allocated to shareholders' equity, $2,064 in 1993 and
$715 in 1992 which were allocated to goodwill, and $7,322 in 1992 which
was allocated to cumulative effect of changes in accounting principles.
Income taxes attributable to earnings before income taxes are:
1993 1992 1991
---- ---- ----
Current
Federal $ 81,770 64,825 24,673
Foreign 28,614 33,147 40,370
State and local 12,541 13,012 5,543
------- ------- -------
122,925 110,984 70,586
------- ------- -------
Deferred
Federal 315 2,612 (6,855)
Foreign 1,817 (663) (168)
State and local 149 279 334
------- ------- -------
2,281 2,228 (6,689)
------- ------- -------
$125,206 113,212 63,897
======= ======= =======
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
A reconciliation of the statutory United States federal income tax rate to
the Company's effective income tax rate is as follows:
1993 1992 1991
---- ---- ----
Statutory income tax rate 35.0% 34.0% 34.0%
State and local income taxes, net
of federal income tax effect 2.6 3.0 2.7
Amortization of goodwill (1991
also includes amortization of
other intangibles) 1.4 1.4 5.0
Foreign earnings taxed at rates other
than the United States statutory rate - ( .6) ( .5)
Other, net (.5) .9 2.7
---- ---- ----
38.5% 38.7% 43.9%
==== ==== ====
The components of earnings before income taxes are as follows:
1993 1992 1991
---- ---- ----
Domestic $243,820 190,268 48,821
Foreign 81,390 102,108 96,730
------- ------- -------
$325,210 292,376 145,551
======= ======= =======
The components of deferred income tax expense in 1993 and 1992 arise from
various temporary differences which are all attributable to earnings
before income taxes. Domestic deferred tax assets and liabilities were
adjusted for the effect of legislation enacted during 1993 increasing the
United States federal tax rate from 34% to 35%. The adjustment decreased
deferred tax expense by $1,266. In 1991, the deferred income tax benefits
resulted from timing differences between tax and financial statement
accounting. These timing differences originated from various income and
expense items and depreciation of tangible and intangible property.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 26, 1993
and December 27, 1992 are:
1993 1992
---- ----
Deferred tax assets:
Accounts receivable $ 30,049 29,644
Inventories 12,090 10,379
Net operating loss and other loss
carryovers 11,073 4,712
Operating expenses 32,393 36,626
Postretirement benefits 8,675 8,140
Other 39,554 41,569
------- -------
Total gross deferred tax assets 133,834 131,070
Valuation allowance (10,376) (4,712)
------- -------
Net deferred tax assets 123,458 126,358
------- -------
Deferred tax liabilities:
Property rights and property, plant and
equipment 68,614 71,078
Other 6,468 3,731
------- -------
Total gross deferred tax liabilities 75,082 74,809
------- -------
Net deferred income taxes $ 48,376 51,549
======= =======
The Company has a valuation allowance for deferred tax assets at December
26, 1993 of $10,376, which is an increase of $5,664 from the $4,712 at
December 27, 1992. These allowances pertain to certain foreign and state
operating loss carryforwards, all of which will expire over various
periods of time. If fully realized, $1,142 will reduce goodwill and the
balance will reduce income tax expense.
Based on the Company's history of taxable income and the anticipation of
sufficient taxable income in years when the temporary differences are
expected to become tax deductions, the Company believes that it will
realize the benefit of the deferred tax assets, net of the existing
valuation allowance. More than 70% of the deferred tax assets are expected
to be realized during the next two years.
Deferred income taxes of $78,413 and $76,093 at the end of 1993 and 1992,
respectively, are included as a component of prepaid expenses and other
current assets.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The cumulative amounts of undistributed earnings of the Company's foreign
subsidiaries (after considering distributions made subsequent to year end)
amounted to approximately $271,000 and $239,000 at December 26, 1993 and
December 27, 1992, respectively.
(9) Capital Stock
-------------
Preference Share Purchase Rights
--------------------------------
The Company maintains a Preference Share Purchase Right plan (the Rights
Plan). Under the terms of the Rights Plan, each share of common stock is
accompanied by a Preference Share Purchase Right. Each Right is only
exercisable under certain circumstances and, until exercisable, the Rights
are not transferable apart from the Company's common stock. When
exercisable, each Right will entitle its holder to purchase until June 30,
1999, in certain merger or other business combination or recapitalization
transactions, at the Right's then current exercise price, a number of the
acquiring company's or the Company's, as the case may be, common shares
having a market value at that time of twice the Right's exercise price.
Under certain circumstances, the rightholder may, at the option of the
Board of Directors of the Company (the Board), receive shares of the
Company's stock in exchange for Rights.
Prior to the acquisition by the person or group of beneficial ownership of
a certain percentage of the Company's common stock, the Rights are
redeemable for two-thirds of a cent per Right. The Rights Plan contains
certain exceptions with respect to the Hassenfeld family and related
entities.
Common Stock
------------
At the Company's Annual Meeting of Shareholders held on May 12, 1993, the
Company's shareholders approved an amendment of the Company's corporate
charter to increase the total number of shares of common stock which the
Company is authorized to issue from 150,000,000 to 300,000,000.
In August 1990, the Board authorized the purchase of up to 4,500,000
shares of the Company's common stock. At December 26, 1993, a balance of
2,445,300 shares remained under this authorization.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(10) Employee Stock Options and Warrants
-----------------------------------
The Company has a Non-Qualified Stock Option Plan, an Incentive Stock
Option Plan and a 1992 Stock Incentive Plan (the plans).
The Company has reserved 7,579,423 shares of its common stock for issuance
upon exercise of options granted or to be granted under the plans. These
options generally vest in equal annual amounts over three to five years
beginning one year after grant. The plans provide that options be granted
at exercise prices not less than market value on the date the option is
granted and options are adjusted for such changes as stock splits and
stock dividends. No options are exercisable for periods of more than ten
years after date of grant. Although the plans may permit the granting of
awards in the form of stock options, stock appreciation rights, stock
awards and cash awards, to date, only stock options have been granted.
Additionally, the Company has reserved 1,461,112 shares of its common
stock for issuance upon exercise of 5,844,448 outstanding warrants. The
warrants expire on July 12, 1994 and carry an exercise price of $18.92 per
share. The Company, at its option, may pay the exercising warrantholder an
amount in cash equal to the closing price of the common stock on the date
prior to exercise in lieu of issuing any shares of common stock.
The changes in outstanding options and warrants for the three years ended
December 26, 1993 follow:
Shares Exercise Price
(In Thousands) Per Share
------------ --------------
Outstanding at December 30, 1990 6,704 $ 1.48 - 18.92
Granted (a) 103 19.00 - 53.88
Exercised (1,616) 1.48 - 18.92
Expired and cancelled (247) 7.58 - 43.49
-----
Outstanding at December 29, 1991 4,944 1.48 - 53.88
Granted 1,333 25.00 - 31.88
Exercised (1,012) 1.48 - 25.00
Expired and cancelled (61) 7.58 - 53.88
-----
Outstanding at December 27, 1992 5,204 7.58 - 43.49
Granted 2,712 31.62 - 37.44
Exercised (730) 7.58 - 31.62
Expired and cancelled (63) 10.25 - 38.29
-----
Outstanding at December 26, 1993 7,123 $ 7.58 - 43.49
=====
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(a) 1991 grants principally represent conversion of Tonka options into
those of the Company, computed at the date of merger in accordance with
the merger agreement.
The number of shares exercisable at the end of 1993, 1992 and 1991 were
2,919,654, 2,831,801 and 3,073,824, respectively. The prices at which
these shares may be exercised are those shown for outstanding options and
warrants in the preceding table.
(11) Pension, Postretirement and Postemployment Benefits
---------------------------------------------------
Pension Benefits
----------------
Domestic Plans
--------------
Substantially all of the Company's domestic employees are members of one
of three non-contributory defined benefit plans. In addition, the Company
has a supplementary unfunded pension plan providing benefits otherwise due
employees under the benefit formula but which are in excess of those
permitted for such plan under the Internal Revenue Code. Benefits under
the major plan, covering non-union employees, are based primarily on
salary and years of service. Benefits under plans covering members of
collective bargaining units are based primarily on fixed amounts for
specified years of service. The Company also has an unfunded plan covering
those members of its Board who are not covered by employee plans. Benefits
for this plan are based on the annual retainer paid to Board members.
The net periodic pension cost of these plans included the following
components:
1993 1992 1991
Benefits earned during the year $ 5,630 5,248 3,816
Interest cost on projected benefits 7,243 5,438 4,674
Actual return on plan assets (10,834) (5,183) (22,260)
Net amortization and deferral 3,190 (1,099) 16,894
------ ------ ------
$ 5,229 4,404 3,124
====== ====== ======
The funded status and the amounts recognized in the Company's balance
sheets relating to these plans are:
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
1993 1992
----------------------- -----------------------
Plans With Plans With Plans With Plans With
Assets Accumulated Assets Accumulated
Exceeding Benefits Exceeding Benefits
Accumulated Exceeding Accumulated Exceeding
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
Actuarial present value of:
Vested benefits $14,144 58,581 56,934 2,109
Nonvested benefits 409 1,447 951 275
------ ------ ------ ------
Accumulated benefit
obligation 14,553 60,028 57,885 2,384
Effect of assumed
increase in
compensation level - 30,301 17,941 2,509
------ ------ ------ ------
Projected benefit
obligation 14,553 90,329 75,826 4,893
Net assets available
for benefits 23,159 80,413 95,271 508
------ ------ ------ ------
Plan assets in excess of
(less than) projected
benefits $ 8,606 (9,916) 19,445 (4,385)
====== ====== ====== ======
Consisting of:
Unrecognized net
asset $ 782 1,618 2,742 -
Unrecognized prior
service cost (841) (2,204) (1,168) (2,251)
Unrecognized net gain 5,864 2,146 19,092 161
Prepaid (accrued)
pension recognized
in the balance sheet 2,801 (11,476) (1,221) (2,295)
------ ------ ------ ------
$ 8,606 (9,916) 19,445 (4,385)
====== ====== ====== ======
The assets of the funded plans are managed by investment advisors and
consist primarily of pooled indexed and actively managed bond and stock
funds. The projected benefits have been determined using assumed discount
rates of 7.2% for 1993 and 8% for 1992 and 1991, assumed long-term rates
of compensation increase of 5% for 1993 and 5.5% for 1992 and 1991 and an
assumed long-term rate of return on plan assets of 9% for all years.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The Company also has a profit sharing plan covering substantially all of
its domestic non-union employees. The plan provides for an annual
discretionary contribution by the Company which for 1993, 1992 and 1991
was approximately $6,100, $5,400 and $3,800, respectively.
Foreign Plans
-------------
Pension coverage for employees of the Company's foreign subsidiaries is
provided, through separate plans, to the extent deemed appropriate. These
plans are not significant either individually or in the aggregate.
Consolidated
------------
On a consolidated basis, net pension and profit sharing cost for 1993,
1992 and 1991 was approximately $12,900, $11,400 and $9,400, respectively.
Postretirement Benefits
-----------------------
The Company provides certain postretirement health care and life insurance
benefits to eligible domestic employees who retire and have either
attained age 65 with 5 years of service or age 55 with 10 years of
service. The cost of providing these benefits on behalf of employees who
retired prior to 1993 is and will continue to be substantially borne by
the Company. The cost of providing benefits on behalf of employees who
retire after 1992 is shared, with the employee contributing an increasing
percentage of the cost, resulting in an employee-paid plan after the year
2002. The plan is not funded.
Upon adoption of SFAS 106, the Company recognized the accumulated
liability for such benefits measured at that date (transition obligation).
The cumulative effect of this change in accounting principles, for years
prior to 1992, reduced 1992 earnings by $19,457 ($12,135 after tax).
The accrued postretirement benefits (actuarial present value of
accumulated benefit obligation) recognized in the Company's balance sheets
relating to this plan consist of:
1993 1992
---- ----
Retired employees $16,265 15,121
Fully eligible active employees 1,329 3,064
Other active employees 5,898 3,446
------ ------
$23,492 21,631
====== ======
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The net periodic postretirement benefit cost included the following
components:
1993 1992
---- ----
Benefits earned during the period $ 338 290
Interest cost on projected benefits 1,783 1,640
------ ------
2,121 1,930
Recognition of transition obligation - 19,457
------ ------
$ 2,121 21,387
====== ======
For measuring the expected postretirement benefit obligation, a 10.4% and
12% annual rate of increase in the per capita cost of covered health care
benefits was assumed for 1993 and 1992, respectively. These rates were
further assumed to decrease gradually to 5% and 6%, respectively, in 2012
and remain level thereafter. The weighted average discount rate used in
determining the accumulated postretirement benefit obligation was 7.2% in
1993 and 8% in 1992.
If the health care cost trend rate were increased one percentage point in
each year, the accumulated postretirement benefit obligation at December
28, 1992 would have increased by approximately 11% and the aggregate of
the benefits earned during the period and the interest cost would have
each increased by approximately 9%.
Prior to 1992, the Company recognized the expense in the year the benefits
were provided. On that basis, the cost of postretirement health care and
life insurance benefits in 1991 was $1,100.
Postemployment Benefits
-----------------------
During November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, Employers' Accounting
for Postemployment Benefits (SFAS 112), which requires that the cost of
such benefits be accrued over the employee service period. The Company
has reviewed its policies and practices to determine the applicability of
SFAS 112 and believes that the adoption of SFAS 112 in 1994 will not have
a material effect on its financial statements.
(12) Leases
------
The Company occupies certain manufacturing facilities and sales offices
and uses certain equipment under various operating lease arrangements. The
rent expense under such arrangements, net of sublease income which is not
material, for 1993, 1992 and 1991 amounted to $37,917, $34,609 and
$30,611, respectively.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Minimum rentals, net of minimum sublease income which is not material,
under long-term operating leases for the five years subsequent to 1993 and
in the aggregate are as follows:
1994 $ 30,721
1995 22,541
1996 15,976
1997 13,789
1998 10,584
Later years 67,655
--------
$161,266
========
All leases expire prior to 2014. Real estate taxes, insurance and
maintenance expenses are generally obligations of the Company. It is
expected that in the normal course of business, leases that expire will be
renewed or replaced by leases on other properties; thus, it is anticipated
that future minimum lease commitments will not be less than the amounts
shown for 1993.
In addition, the Company leases certain facilities which, as a result of
the 1991 restructuring of operations, are no longer in use. Future costs
relating to these facilities were included as a component of the
restructuring charge and thus are not included in the table above.
(13) Restructuring
-------------
In January 1994, after a study and analysis of its European manufacturing
capacity, the Company announced that, subject to negotiations with local
trade unions and authorities, it will close its Netherlands manufacturing
facility. Production at the facility, which employs approximately 160
people, will be transferred to the Company's larger manufacturing
facilities in Ireland and Spain. The cost of this closure and other non-
recurring restructuring expenses, including facility, severance and other
related costs approximates $15,500.
(14) Commitments and Contingencies
-----------------------------
The Company had unused open letters of credit of approximately $19,000 and
$13,900 at December 26, 1993 and December 27, 1992, respectively.
The Company uses forward exchange contracts to purchase various currencies
and had the equivalent of approximately $65,000 and $50,000 outstanding at
December 26, 1993 and December 27, 1992, respectively. Such contracts have
been determined to be hedges of foreign currency commitments and as such
any gain or loss has been deferred and will be included in the measurement
of the related transaction. The aggregate amount of gains and losses
resulting from foreign currency transactions was not material.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
the Company's future results of operations or liquidity.
(15) Fair Value of Financial Instruments
-----------------------------------
The fair value of cash and cash equivalents, accounts receivable, short-
term borrowings, accounts payable and accrued liabilities are estimated to
approximate their carrying cost because of the short maturity of these
instruments.
The fair value of the Company's convertible notes, based on the year-end
market price, approximates $198,000 compared to a carrying value of
$150,000. The fair value of the remaining long-term debt approximates its
carrying value of $50,510 as substantially all is variable rate and is
repriced quarterly. The estimated fair value of the Company's foreign
exchange contracts, based on dealer quotations, is approximately $65,000,
substantially the same as the notional value.
Estimates of the fair values of financial instruments are subjective in
nature and involve uncertainties and judgments and, as such, cannot be
determined with precision. Any changes in assumptions would affect these
estimates.
(16) Segment Reporting
-----------------
Industry and Geographic Information
-----------------------------------
The Company operates primarily in one industry segment which includes the
development, manufacture and marketing of toys and related items and the
licensing of certain related properties.
Information about the Company's operations in different geographic
locations for each of the fiscal years in the three-year period ended
December 1993 follows. The Company's primary operations in areas outside
of the United States include Europe, Canada, Mexico, Australia and New
Zealand and Hong Kong. As the foreign areas have similar business
environments and the Company's operations in those areas are similar, they
are presented as one category. Revenues from unaffiliated customers
represent total net revenues from the respective geographic areas after
elimination of intercompany transactions. Operating profit is net revenues
less operating costs and expenses pertaining to specific geographic areas.
Identifiable assets are those assets used in the geographic areas and are
reflected after elimination of intercompany balances.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
1993 1992 1991
---- ---- ----
Revenues from unaffiliated customers:
United States $1,670,272 1,506,522 1,273,497
Foreign 1,076,904 1,034,533 867,599
--------- --------- ---------
$2,747,176 2,541,055 2,141,096
========= ========= =========
Operating profit:
United States $ 242,038 193,466 120,242
Foreign 109,150 131,072 117,131
--------- --------- ---------
$ 351,188 324,538 237,373
========= ========= =========
Identifiable assets:
United States $1,540,887 1,451,951 1,374,126
Foreign 752,131 630,815 576,001
--------- --------- ---------
$2,293,018 2,082,766 1,950,127
========= ========= =========
Capital expenditures:
United States $ 55,666 64,203 31,279
Foreign 44,126 26,228 24,725
--------- --------- ---------
$ 99,792 90,431 56,004
========= ========= =========
Depreciation and amortization:
United States $ 73,264 74,814 64,253
Foreign 27,384 20,801 17,601
--------- --------- ---------
$ 100,648 95,615 81,854
========= ========= =========
Other Information
-----------------
The Company markets its products primarily to customers in the retail
sector. Although the Company closely monitors the credit worthiness of its
customers, adjusting credit policies and limits as deemed appropriate, a
substantial portion of its customers' ability to discharge amounts owed is
dependent upon the retail economic environment.
Sales to the Company's two largest customers, Toys R Us, Inc. and Wal-Mart
Stores, Inc., amounted to 20% and 11%, respectively, of consolidated net
revenues during 1993, 17% and 9%, respectively, in 1992 and 17% and 8%,
respectively, in 1991.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(17) Quarterly Financial Data (Unaudited)
------------------------------------
Quarter
----------------------------------
First Second Third Fourth Full Year
1993 ----- ------ ----- ------ ---------
----
Net revenues $487,036 515,551 812,393 932,196 2,747,176
Gross profit $279,015 294,031 461,329 530,234 1,564,609
Earnings before
income taxes $ 42,871 43,791 122,865 115,683(a) 325,210
Net earnings $ 26,580 27,150 75,548 70,726 200,004
======== ======= ======= ======= =========
Per common share
Earnings $ .30 .30 .84 .78 2.22
Market price
High $ 34 7/8 38 3/8 39 5/8 40 1/8 40 1/8
Low $ 28 1/8 29 7/8 34 35 1/8 28 1/8
Cash dividends
declared $ .06 .06 .06 .06 .24
(a) Includes the effect of a nonrecurring charge of $15,500 relating to
restructuring of operations. (See note 13)
Quarter
----------------------------------
First Second Third Fourth Full Year
1992 ----- ------ ----- ------ ---------
----
Net revenues $452,569 485,958 771,192 831,336 2,541,055
Gross profit $256,609 276,545 437,373 476,497 1,447,024
Earnings before
income taxes $ 38,552 37,540 111,415 104,869 292,376
Net earnings $ 23,408 22,712 67,406 65,638 179,164
======== ======= ======= ======= =========
Per common share
Earnings $ .26 .26 .75 .73 2.01
Market price
High $ 28 1/4 29 3/4 34 3/8 35 7/8 35 7/8
Low $ 23 3/4 23 1/8 26 1/2 31 1/2 23 1/8
Cash dividends
declared $ .05 .05 .05 .05 .20
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Quarter
----------------------------------
First Second Third Fourth Full Year
1991 ----- ------ ----- ------ ---------
----
Net revenues $306,557 368,501 704,833 761,205 2,141,096
Gross profit $173,800 197,738 382,349 419,850 1,173,737
Earnings (loss)
before income
taxes $ 34,094 (41,726)(a) 80,071 73,112 145,551
Net earnings
(loss) $ 20,456 (31,149) 47,501 44,846 81,654
======== ======= ======= ======= =========
Per common share
Earnings (loss)$ .24 (.36) .55 .51 .94
Market price
High $ 16 5/8 20 5/8 20 25 5/8 25 5/8
Low $ 10 15 3/4 16 1/4 19 10
Cash dividends
declared $ .04 .04 .04 .04 .16
(a) Includes the effect of a nonrecurring acquisition restructuring
charge of $59,000 relating to Tonka. (See note 2)
<PAGE>
<PAGE>
EXHIBIT 22
HASBRO, INC. AND SUBSIDIARIES
Subsidiaries of the Registrant (a)
Name Under Which Subsidiary State or Other Jurisdiction of
Does Business Incorporation or Organization
- --------------------------- ------------------------------
Claster Television, Inc. Maryland
Hasbro Foreign Sales Corp. U.S. Virgin Islands
Hasbro International, Inc. Massachusetts
Hasbro Australia Pty. Limited Australia
Hasbro Far East Limited Hong Kong
Hasbro Canada Inc. Canada
Hasbro Sales Inc./Les Ventes Hasbro Inc. Canada
Hasbro de Mexico S.A. de C.V. Mexico
Hasbro Deutschland GmbH Germany
Hasbro S.A. France
Hasbro U.K. Limited United Kingdom
Hasbro Industries (U.K.) Limited United Kingdom
Milton Bradley Limited United Kingdom
Milton Bradley Storage Limited United Kingdom
MB France S.A. France
Hasbro Asia-Pacific Marketing Ltd Hong Kong
HMS Juquetes S.A. de C.V. Mexico
MB International B.V. The Netherlands
Hasbro B.V. The Netherlands
MB Nederland B.V. The Netherlands
S.A. Hasbro N.V. Belgium
Hasbro Magyarorszag Kft Hungary
MB Espana, S.A. Spain
Hasbro Hellas S.A. Greece
Hasbro Importacao e Exportacao de Jogos
Brinquedos Lds Portugal
Hasbro Israel Ltd. Israel
MB Ireland Limited Ireland
Hasbro Italy S.r.l.(b) Italy
M.B.(New Zealand) Limited New Zealand
Hasbro New Zealand Limited New Zealand
Hasbro Schweiz AG (c) Switzerland
Nomura Toys Limited Japan
Palmyra Holding Pte. Ltd. Singapore
Palmyra (Hong Kong) Limited Hong Kong
Palson Toys (Hong Kong) Limited Hong Kong
Palmyra (Malaysia) Sdn. Bhd. Malaysia
Palmyra (Singapore) Pte. Ltd. Singapore
Hasbro Managerial Services, Inc. Rhode Island
Hasbro Promotions and Direct, Inc. Delaware
Kid Dimension, Inc. Delaware
Kid Dimension Far East Ltd Hong Kong
Milton Bradley Wood Products Co., Inc. Delaware
Playskool, Inc. Delaware
Playskool Baby, Inc. New Jersey
Pant-Ease Infant Wear Company, Inc. New York
<PAGE>
Name Under Which Subsidiary State or Other Jurisdiction of
Does Business Incorporation or Organization
- --------------------------- ------------------------------
Tonka Corporation Minnesota
Hasbro Osterreich Ges.m.b.H Austria
Juguetrenes S.A. de C.V. Mexico
Kenner Parker Australia Limited Australia
Kenner Parker Tonka Products Limited Delaware
Kenner Parker France S.A. France
(a) Inactive subsidiaries and subsidiaries with minimal operations have
been omitted. Such subsidiaries, if taken as a whole, would not
constitute a significant subsidiary.
(b) Formerly named MB Italy S.r.l.
(c) Formerly named MB (Switzerland) AG
<PAGE>
<PAGE>
EXHIBIT 24(a)
ACCOUNTANTS' CONSENT
The Board of Directors
Hasbro, Inc.:
We consent to incorporation by reference in the Registration Statements
Nos. 2-78018, 2-93483 and 33-57344 on Form S-8 and No. 33-41548 on Form
S-3 of Hasbro, Inc. of our reports dated February 8, 1994 relating to the
consolidated balance sheets of Hasbro, Inc. and subsidiaries as of December 26,
1993 and December 27, 1992 and the related consolidated statements of earnings,
shareholders' equity and cash flows and related schedules for each of the
fiscal years in the three-year period ended December 26, 1993, which report on
the consolidated financial statements incorporated by reference and which
report on the related schedules is included in the Annual Report on Form 10-K
of Hasbro, Inc. for the fiscal year ended December 26, 1993.
/s/ KPMG Peat Marwick
Providence, Rhode Island
March 25, 1994
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