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 25, 1994 Commission file number 1-6682
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Hasbro, Inc.
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(Name of registrant)
Rhode Island 05-0155090
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(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
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock American Stock Exchange
Preference Share Purchase Rights 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 16, 1995 was $2,519,054,620.
The number of shares of Common Stock outstanding as of March 16, 1995 was
87,600,293.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement for its 1995 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 25, 1994, is included as Exhibit 13, and
incorporated by reference into Parts I and II of this Report.
PART I
ITEM 1. BUSINESS
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(a) General Development of Business
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The Company designs, manufactures and markets a diverse line of toy products
and related items throughout the world. Included in its offerings are games and
puzzles, preschool, boys' action and girls' toys, dolls, plush products and
infant products, including infant apparel. 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's products are categorized for marketing purposes as follows:
(i) Hasbro Toy Group
----------------
During 1994, the Company established the Hasbro Toy Group, bringing all of
its domestic infant, preschool, activity, boys and girls products together
within one organization. Previously, the Company operated separate
organizations to develop and market its Playskool, Hasbro Toy and Kenner brand
products.
The infant and preschool items are principally marketed under the Playskool
brand and are specifically designed for preschool children, toddlers and
infants.
The preschool line includes such well known products as Lincoln Logs(R),
Tinkertoy(R), Mr. Potato Head(R), In-Line Skates, 1-2-3 Bike(TM) and the
"Busy(R)" line of toys; electronic items including Talking Alphie(R) and
Talking Barney(TM); various role play products including the Magic Tea
Party(TM) and the Magic Smoking Grill(TM) and toys utilizing the "Sesame
Street(R)" character motifs sold under licenses from Children's Television
Workshop. New items for 1995 include the Playskool(R) Playstore, the 1-2-3
Swing(TM), 1-2-3 Baseball(TM) and All-in-One Fun Learning Center.
Playskool's line of infant and juvenile items consists of products for very
young children, including the award winning 1-2-3 High Chair(TM), Musical Dream
Screen(TM), the Steady Steps(R) line of walkers, 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 and infant apparel including the Scootees(R) line of soft shoes for
babies. New products in 1995 include the Roll 'n Rattle Ball, Big 'n Bright
Quilt and First Wheels.
The Hasbro Toy Group also offers activity items for both girls and boys
including the Fantastic Sticker Maker(TM) and the Fantastic Flowers(TM) flower
making kit as well as such classics as Play-Doh(R), Easy-Bake(R) Oven and the
Spirograph(R) design toy. New offerings for 1995 include several innovative
toys based on The Magic School Bus(TM) television and book series, an
assortment of toys marketed under the Nickelodeon(R) name, the Power Spark(TM)
Welding Set and Techno Zoids(TM) action construction toys.
Its girls items include the Raggedy Ann(R) and Raggedy Andy(R) line of rag
dolls and the Littlest Pet Shop(R) figures and playsets along with the Baby
Check-Up(R) and Baby All Gone(R) dolls. Included in its new introductions for
1995 are Bride Surprise(TM), Princess Wishing Star(TM) and the Baby Buddies(TM)
line of collectible figures and playsets.
In boys' toys it offers a wide range of products, many of which are tied to
entertainment properties, including Batman(R), Mortal Kombat(TM) and Congo(TM)
action figures and accessories. It also offers such classic properties as G.I.
Joe(R), The Transformers(R), the Tonka(R) line of trucks and vehicles,
including the Electronic Talk'n Play(TM) Fire Truck, and the Nerf(R) line of
soft action play equipment. A sucessful entrant into the remote controlled
vehicle category in 1994 was the Ricochet(TM) radio-controlled vehicle which
will be joined by other vehicles in 1995, namely the Tirestorm(TM) and Stunt
Boss(TM). Other new introductions for 1995 include action figures based on the
upcoming movie Batman(TM) Forever and the television series Gargoyles and
Saban's VR Troopers(TM) and the Tonka(R) Farm Playset. In 1995, the Company
acquired the Super Soaker(TM) line of water products and certain other assets
from the Larami group of companies. These products will give the Company a core
franchise in an area in which it had not previously been represented.
(ii) Hasbro Games Group
------------------
Beginning in 1995, the Company's two game units, Milton Bradley and Parker
Brothers, are being managed as one organization, the Hasbro Games Group.
Milton Bradley markets 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 and puzzles for
the entire family, including such games as Yahtzee(R), Parcheesi(R),
Aggravation(R), Jenga(R) and Scattergories(R) and Puzz 3-D(TM), a series of
three dimensional jigsaw puzzles. Games added to the Milton Bradley line for
1995 include Chicken Limbo(TM), Channel Surfing(TM) and a refreshed version of
Pictionary(R).
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 which
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. Several well-known
games, including Balderdash(R), Hi! Ho! Cherry-O(R) and Outburst(R), were added
to its portfolio during 1994 through the acquisition of certain game and puzzle
assets from Western Publishing. New to the Parker Brothers' line in 1995 are
Peanut Panic(TM), Marble Dome(TM) and Puzzle Pursuit(TM), a new game from the
makers of Trivial Pursuit(R).
(iii) International
-------------
The Company conducts its international operations through subsidiaries in
more than 25 countries which sell a representative range of the products
marketed in the United States together with some items which are sold only
internationally.
Throughout the world, the Company markets products sourced by a Hong Kong
subsidiary working primarily through unrelated manufacturers in various Far
East countries, and in the Americas it markets products supplied by the
Company's Mexican and U.S. manufacturing operations. Additionally, subsidiaries
in Europe market products primarily manufactured by the Company in Ireland and
Spain; those in Australia and New Zealand, products manufactured by the Company
in New Zealand and in Canada, certain products which it assembles in Canada
from components supplied by the Company's U.S. and Mexican operations. The
Company has small investments in joint ventures in India and the Peoples
Republic of China which manufacture and sell products both to the Company and
unaffiliated customers. The Company also has Hong Kong units which market
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 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 3, 1995 and March 4, 1994 were
approximately $170,000,000 and $150,000,000, 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
1995 are not substantially different from those employed in 1994.
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
$1,400,000,000 including a $440,000,000 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 1994, 1993 and 1992, approximately
$135,406,000, $125,566,000 and $109,655,000, 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(TM) 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.
Marketing and Sales
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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. Although there has been significant consolidation at the retail
level over the last several years, in the United States and Canada, the Company
has more than 2,000 customers, most of which are wholesalers, distributors or
large chain stores. In other countries, the Company has in excess of 20,000
customers, many of which are individual retail stores. During 1994, sales to
the Company's two largest customers represented 21% and 12%, 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
showrooms 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 1994, the Company spent approximately $397,094,000 in advertising,
promotion and marketing programs compared to $383,918,000 in 1993 and
$377,219,000 in 1992.
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. 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. This closure was subsequently delayed until the
first quarter of 1995. During the fourth quarter of 1994, the Company announced
a consolidation of its domestic manufacturing facilities through the closure of
one facility and the reduction of the workforce at a second location. 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. While the
recently rescinded trade sanctions proposed by the United States against the
Peoples Republic of China did not affect any of the Company's products, the
imposition of same by the United States against a class of products imported by
the Company from China or 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. The Company anticipates that the implementation of
the new General Agreement on Tariffs and Trade will reduce or eliminate customs
duties on certain of the products imported by the Company.
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 and it competes with several
large and many small domestic and foreign manufacturers. The Company is a
worldwide leader in the design, manufacture and marketing of toys, games and
infant care products.
Employees
---------
The Company employs approximately 12,500 persons worldwide, approximately
7,000 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 CPSC 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.
(c) Financial Information About Foreign and Domestic Operations
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and Export Sales
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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
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Pawtucket Executive, Sales &
Marketing Offices &
Product Development 343,000 Owned --
Pawtucket Administrative Office 23,000 Owned --
Pawtucket Manufacturing 306,500 Owned --
Central Falls Manufacturing 261,500 Owned --
West Warwick Warehouse 402,000 Leased 1995
East Providence Administrative Office 120,000 Leased 1999
Massachusetts
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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 --
New Jersey
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Northvale Office & Manufacturing 75,000 Leased 2002
Wayne Manufacturing 65,000 Leased 1995
Lease
Square Type of Expiration
Location Use Feet Possession Dates
-------- --- ------ ---------- ----------
New York
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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
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Cincinnati Office 161,000 Leased 2007
Cincinnati Warehouse 33,000 Leased 1999
Pennsylvania
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Lancaster Warehouse 464,000 Owned (1) --
South Carolina
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Easley Manufacturing 31,500 Leased 1997
Easley Manufacturing 75,000 Owned --
Easley Manufacturing 29,000 Owned --
Texas
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El Paso Manufacturing
& Warehouse 373,000 Owned --
El Paso Manufacturing
& Warehouse 487,000 Leased 1998
El Paso Warehouse 97,200 Leased 1995
El Paso Warehouse 100,000 Leased 1995
Vermont
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Fairfax Manufacturing 43,000 Owned --
Washington
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Seattle Office & Warehouse 125,100 Leased(2) 1995
Australia
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Lidcombe Office & Warehouse 161,400 Leased 2002
Eastwood Office 16,900 Leased 1997
Austria
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Vienna Office 2,505 Leased 1997
Belgium
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Brussels Office & Showroom 16,700 Leased 1995
Lease
Square Type of Expiration
Location Use Feet Possession Dates
-------- --- ------ ---------- ----------
Canada
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Montreal Office, Manufacturing
& Showroom 133,900 Leased 1997
Montreal Warehouse 88,100 Leased 1997
Mississauga Sales Office & Showroom 16,300 Leased 1998
Peoples Republic of China
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Guangzhou Manufacturing 22,900 Leased 1995
Denmark
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Copenhagen Office 5,900 Leased 1999
England
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Uxbridge Office & Showroom 94,500 Leased 2013
Castlegate Office & Manufacturing 400,000 Leased 1997
Paddock Wood Office 30,000 Leased 1995
France
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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
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Fuerth Office & Warehouse 28,400 Owned --
Soest Warehouse 78,800 Owned --
Dietzenbach Office 30,400 Leased 1998
Soest Office & Warehouse 156,300 Owned --
Greece
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Athens Office & Warehouse 176,500 Leased 1996
Athens Office 26,900 Leased 1995
Hong Kong
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Kowloon Office 36,700 Leased 1995
Kowloon Office & Warehouse 14,900 Leased 1995
Kowloon Office 18,600 Leased 1996
Kowloon Office 16,100 Leased 1996
Harbour City Office 11,000 Leased 1996
Lease
Square Type of Expiration
Location Use Feet Possession Dates
-------- --- ------ ---------- ----------
Hungary
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Budapest Office 3,700 Leased 1996
Ireland
-------
Waterford Office, Manufacturing
& Warehouse 244,400 Owned --
Italy
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Milan Office & Showroom 12,100 Leased 1998
Japan
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Tokyo Office 10,800 Leased 1995
Malaysia
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Selangor
Darul Ehsan Office 6,800 Leased 1995
Mexico
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Tijuana Office & Manufacturing 144,000 Leased 1995
Tijuana Warehouse 45,000 Leased 1995
Tijuana Warehouse 117,300 Leased 1995
Reyna Office 61,000 Leased 1996
Espana Warehouse 53,700 Leased 1996
Venados Warehouse 59,100 Leased 1995
Juarez Manufacturing 169,500 Owned --
The Netherlands
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Ter Apel Office & Warehouse 139,300 Owned --
Utrecht Sales Office & Showroom 17,000 Leased 1996
Emmen Warehouse 40,800 Leased 1995
Emmen Warehouse 21,500 Leased 1995
New Zealand
-----------
Auckland Office, Manufacturing
& Warehouse 110,900 Leased 2005
Portugal
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Estoril-Lisboa Office 2,900 Leased 1995
Singapore
---------
Singapore Office & Warehouse 12,900 Leased 1995
Lease
Square Type of Expiration
Location Use Feet Possession Dates
-------- --- ------ ---------- ----------
Spain
-----
Valencia Office, Manufacturing
& Warehouse 115,100 Leased 1999
Valencia Manufacturing
& Warehouse 161,700 Leased 2002
Valencia Office 46,300 Leased 1995
Valencia Warehouse 21,500 Leased 1995
Valencia Warehouse 94,400 Owned --
Valencia Warehouse 43,000 Leased 1996
Switzerland
-----------
Mutschellen Office & Warehouse 23,400 Leased 1995
Taiwan
------
TPE County Warehouse 9,800 Leased 1996
Wales
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Newport Warehouse 76,000 Leased 2003
Newport Warehouse 52,000 Owned --
(1) See ITEM 3. Legal Proceedings.
(2) 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 Tonka Corporation units prior to its
acquisition by the Company.
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.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company has been proceeding with an environmental clean-up (the 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. Since 1992, the Company has been involved in a legal action against CBS
to recover all costs associated with the clean-up and, on August 10, 1994, the
U.S. District Court for the Eastern District of Pennsylvania entered a judgment
in favor of the Company, awarding the Company all of its past and future costs
associated with such clean-up. The Company and CBS subsequently negotiated and
concluded a resolution of the matter involving CBS' waiver of its rights to
appeal the judgment, a payment by CBS to the Company on account of costs to
date associated with environmental remediation together with interest and
certain litigation costs, CBS' undertaking responsibility for future
remediation of the site, the termination by the Pennsylvania Department of
Environmental Resources of the consent order directing the Company to undertake
such responsibility and the Company's agreement to sell the site to CBS on or
before April 15, 1995.
Preston Robert Tisch, a director of the Company, is also a director of CBS
and Co-Chairman 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.
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 46 Chairman of the Board,
President and Chief Executive
Officer Since 1989
Barry J. Alperin (1) 54 Vice Chairman Since 1990
Harold P. Gordon (2) 57 Vice Chairman Since 1995
George R. Ditomassi, Jr.(3) 60 Chief Operating Officer,
Games and International Since 1990
Alfred J. Verrecchia (4) 52 Chief Operating Officer,
Domestic Toy Operations Since 1990
John T. O'Neill 50 Executive Vice President and
Chief Financial Officer Since 1989
Norman C. Walker (5) 56 Executive Vice President and
President, International Since 1990
Dan D. Owen (6) 46 President, Hasbro Toy Group Since 1994
E. David Wilson (7) 57 President, Hasbro Games Group Since 1995
Richard B. Holt (8) 53 Senior Vice President
and Controller Since 1992
Donald M. Robbins (9) 59 Senior Vice President
General Counsel and
Corporate Secretary Since 1992
Phillip H. Waldoks (10) 42 Senior Vice President-
Corporate Legal Affairs Since 1992
Russell L. Denton 50 Vice President and Treasurer Since 1989
(1) Prior thereto, Co-Chief Operating Officer.
(2) Prior thereto, Partner, Stikeman, Elliott (law firm).
(3) Prior thereto, Group Vice President and President, Milton Bradley.
(4) Prior thereto, Co-Chief Operating Officer.
(5) Prior thereto, Senior Vice President and President - European
Operations.
(6) Prior thereto, President, Playskool.
(7) Prior thereto, President, Milton Bradley.
(8) Prior thereto, Vice President and Controller.
(9) Prior thereto, Vice President/General Counsel and Secretary.
(10) Prior thereto, Vice President - Corporate Legal Affairs.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
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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 1995 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.
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 25, 1994 and
December 26, 1993
Consolidated Statements of Earnings for the Three Fiscal
Years Ended in December 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity for the
Three Fiscal Years Ended in December 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the Three
Fiscal Years Ended in December 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
-----------------------------
Included in PART IV of this Report:
Report of Independent Certified Public Accountants
on Financial Statement Schedule
For the Three Fiscal Years Ended in December 1994, 1993
and 1992:
Schedule VIII - Valuation and Qualifying Accounts and
Reserves
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.
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.
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.)
(c) Amendment No. 1, dated as of April 1, 1994, to Revolving
Credit Agreement among the Company, the Banks and the Agent.
(Incorporated by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-Q for the Period Ended March 27,
1994, File No. 1-6682.)
10. Material Contracts
(a) 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.)
(b) 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
(c) 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.)
(d) 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.)
(e) 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.)
(f) 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.)
(g) 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.)
(h) 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.)
(i) 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.)
(j) 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.)
(k) 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.)
(l) 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.)
(m) 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.)
(n) 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.)
(o) 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.)
(p) 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.)
(q) 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.)
(r) Form of Employment Agreement, dated July 5, 1989, between
the Company and six 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.)
(s) 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.)
(t) 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.)
(u) Hasbro, Inc. Deferred Compensation Plan for Non-Employee
Directors.(Incorporated by reference to Exhibit 10(cc) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 26, 1993, File No. 1-6682.)
(v) 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.)
(w) Form of Stock Option Agreement for Non-Employee Directors
under the Hasbro, Inc. Stock Option Plan for Non-Employee
Directors.
(x) 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.)
(y) Hasbro, Inc. Stock Incentive Performance Plan. (Incorporated
by reference to Appendix A to the Company's definitive proxy
statement for its 1995 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 LLP
27. Financial data schedule
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 9, 1995 was filed to
announce the Company's results for the quarter and year ended
December 25, 1994. Consolidated statements of earnings (without
notes) for the quarter and year ended December 25, 1994 and
December 26, 1993 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
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
Under date of February 8, 1995, we reported on the consolidated balance
sheets of Hasbro, Inc. and subsidiaries as of December 25, 1994 and December
26, 1993 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 25, 1994, as contained in the 1994 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
1994. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement schedule
listed in Item 14 (a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
February 8, 1995
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 Taken(a) Year
------------ ---------- ------------ ----------- ---------
Valuation
accounts
deducted
from assets
to which
they apply -
for doubtful
accounts
receivable:
1994 $54,200 5,120 - (8,320) $51,000
====== ====== ====== ====== ======
1993 $52,200 13,078 - (11,078) $54,200
====== ====== ====== ====== ======
1992 $60,500 10,674 - (18,974) $52,200
====== ====== ====== ====== ======
(a) Includes write-offs, recoveries of previous write-offs and
translation adjustments.
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 24, 1995
------------------------- ---------------
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 24, 1995
Alan G. Hassenfeld President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ John T. 0'Neill
---------------------------- Executive Vice President March 24, 1995
John T. 0'Neill and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Barry J. Alperin
---------------------------- Director March 24, 1995
Barry J. Alperin
/s/ Alan R. Batkin
---------------------------- Director March 24, 1995
Alan R. Batkin
/s/ George R. Ditomassi, Jr.
---------------------------- Director March 24, 1995
George R. Ditomassi, Jr.
/s/ Harold P. Gordon
---------------------------- Director March 24, 1995
Harold P. Gordon
/s/ Alex Grass
---------------------------- Director March 24, 1995
Alex Grass
/s/ Sylvia K. Hassenfeld
---------------------------- Director March 24, 1995
Sylvia K. Hassenfeld
/s/ Claudine B. Malone
---------------------------- Director March 24, 1995
Claudine B. Malone
/s/ Norma T. Pace
---------------------------- Director March 24, 1995
Norma T. Pace
/s/ E. John Rosenwald, Jr.
---------------------------- Director March 24, 1995
E. John Rosenwald, Jr.
/s/ Carl Spielvogel
---------------------------- Director March 24, 1995
Carl Spielvogel
/s/ Henry Taub
---------------------------- Director March 24, 1995
Henry Taub
/s/ Preston Robert Tisch
---------------------------- Director March 24, 1995
Preston Robert Tisch
/s/ Alfred J. Verrecchia
---------------------------- Director March 24, 1995
Alfred J. Verrecchia
HASBRO, INC.
Annual Report on Form 10-K
for the Year Ended December 25, 1994
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.
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.)
(c) Amendment No. 1, dated as of April 1, 1994, to Revolving
Credit Agreement among the Company, the Banks and the Agent.
(Incorporated by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-Q for the Period Ended March 27,
1994, File No. 1-6682.)
10. Material Contracts
(a) 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.)
(b) 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
(c) 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.)
(d) 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.)
(e) 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.)
(f) 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.)
(g) 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.)
(h) 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.)
(i) 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.)
(j) 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.)
(k) 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.)
(l) 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.)
(m) 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.)
(n) 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.)
(o) 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.)
(p) 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.)
(q) 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.)
(r) Form of Employment Agreement, dated July 5, 1989, between
the Company and six 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.)
(s) 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.)
(t) 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.)
(u) Hasbro, Inc. Deferred Compensation Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10(cc) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 26, 1993, File No. 1-6682.)
(v) 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.)
(w) Form of Stock Option Agreement for Non-Employee Directors
under the Hasbro, Inc. Stock Option Plan for Non-Employee
Directors.
(x) 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.)
(y) Hasbro, Inc. Stock Incentive Performance Plan. (Incorporated
by reference to Appendix A to the Company's definitive proxy
statement for its 1995 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.
27. Financial data schedule
Exhibit 3(b)
AMENDED AND RESTATED
BY-LAWS of HASBRO, INC.
(as amended from time to time and restated by the Board of Directors as of
February 17, 1995)
ARTICLE I
OFFICES
Section 1.1. The office of Hasbro, Inc. (the "Corporation") within
the State of Rhode Island shall be located in the City of Pawtucket, County
of Providence.
Section 1.2. Other Offices. The Corporation may also have offices
and places of business at such other places within or without the State of
Rhode Island as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1. Place. All meetings of shareholders of the
Corporation shall be held at such place within or without the State of Rhode
Island as shall be stated in the notice of the meeting.
Section 2.2. Annual Meeting. Commencing with the year 1995, a
meeting of the shareholders of the Corporation shall be held annually on the
second Wednesday in the month of May of each year, if not a legal holiday,
and if a legal holiday, then on the next secular day following, or on such
other date and at such time and place as the Board of Directors shall
determine, and at such meeting, the shareholders shall transact such business
as may properly be brought before the meeting.
Section 2.3. Special Meetings. Special meetings of the
shareholders of the Corporation, for any purpose or purposes, unless
otherwise prescribed by statute or by the Restated Articles of Incorporation
(the "Articles of Incorporation"), may be called by the Chairman of the Board,
any Vice Chairman, any Chief Operating Officer, the President, or the Board
of Directors.
Section 2.4. Notice of Meetings. Written notice of each meeting
of shareholders of the Corporation stating the place, date and hour thereof,
and in the case of a special meeting of shareholders, specifying the purpose
or purposes thereof, and the person or persons by whom or at whose direction
such meeting has been called, shall be given to each shareholder entitled to
vote thereat, at his address as it appears on the records of the Corporation,
not less than ten (10) nor more than sixty (60) days prior to the meeting.
Section 2.5. Quorum. At each meeting of the share holders of the
Corporation, the holders of a majority of shares of the Corporation entitled
to vote thereat, present in person or by proxy, shall constitute a quorum,
except as may be otherwise provided by the Articles of Incorporation or these
By-Laws. If, however, a quorum shall not be present on the date specified in
the original notice of meeting, the shareholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present. At any such adjourned meeting, at which a quorum
shall be present, the shareholders, present in person or by proxy, may
transact any business which might have been transacted had a quorum been
present on the date specified in the original notice of meeting.
Section 2.6. Voting. At any meeting of the share holders of the
Corporation, each shareholder having the right to vote shall be entitled to
vote in person or by proxy appointed by an instrument in writing subscribed
by such shareholder. Except as may be otherwise provided by the Articles of
Incorporation, each holder of record of Common Stock shall be entitled to one
vote for every share of such stock standing in his name on the books of the
Corporation. All elections of directors by shareholders shall be determined
by a plurality vote and, except as otherwise provided by statute, the Articles
of Incorporation or Article XII of these By-Laws, all other matters shall be
decided by the vote of the holders of a majority of the stock having voting
power and represented in person or by proxy at such meeting.
Section 2.7. Proxies. Each proxy shall be executed in writing by
the shareholder or by his duly authorized attorney. No proxy shall be valid
after the expiration of eleven (11) months from the date of its execution
unless it shall have specified therein a longer duration. Each proxy shall be
revocable at the pleasure of the person executing it or of his personal
representatives, except in those cases where an irrevocable proxy is
permissible under applicable law.
Section 2.8. Consents. Action shall be taken by the shareholders
only by unanimous written consent or at annual or special meetings of
shareholders of the Corporation except that, if and with the percentage of
the outstanding Preference Stock or any series thereof (the "Required
Percentage") set forth in the resolution or resolutions adopted by the Board
of Directors with respect to the Preference Stock, action may be taken
without a meeting, without prior notice and without a vote, if consent in
writing setting forth the action so taken, shall be signed by the holders of
the Required Percentage of the outstanding Preference Stock or any series
thereof entitled to vote thereon.
Section 2.9. Shareholder Proposals. Any new business proposed by
any shareholder to be taken up at the annual meeting of shareholders shall be
stated in writing and filed with the Secretary of the Corporation at least
150 days before the date of the annual meeting, and all business so stated,
proposed and filed shall, if appropriate under applicable law, be considered
at the annual meeting, but no other proposal shall be acted upon at the annual
meeting. These provisions shall not prevent the consideration and approval or
disapproval at the annual meetings of reports of officers, directors and
committees, but in connection with such reports no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided. The
business to be taken up at a special meeting of shareholders shall be confined
to that set forth in the notice of special meeting.
ARTICLE III
DIRECTORS
Section 3.1. Board of Directors. The property and business of the
Corporation shall be managed by its Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not, by statute or by the Articles of Incorporation or by these By-Laws,
directed or required to be exercised or done by the shareholders. Directors
need not be shareholders.
Section 3.2. Number. The number of directors of the Corporation
(exclusive of directors that may be elected by the holders of any one or more
series of the Preference Stock voting separately as a class or classes) that
shall constitute the entire Board of Directors (the "Entire Board of
Directors") shall be 17, unless otherwise determined from time to time by
resolution adopted by the affirmative vote of a majority of the Entire Board
of Directors, except that if an Interested Person (as hereinafter defined in
Article XIII of these By-Laws) exists, such majority must include the
affirmative vote of at least a majority of the Continuing Directors (as
hereinafter defined in Article XIII of these By-Laws).
Section 3.3. Election. Directors shall be elected at the annual
meeting of shareholders, or as otherwise provided in the Articles of
Incorporation or in these By-Laws.
Section 3.4. Term of Office, Classes. Except with respect to any
directors elected by holders of any one or more series of Preference Stock
voting separately as a class or classes, the Board of Directors shall be
divided into three (3) classes in respect of term of office, designated Class
I, Class II and Class III. Each class shall contain one-third (1/3) of the
Entire Board of Directors, or such other number that will cause all three (3)
classes to be as nearly equal in number as possible, with the terms of office
of one class expiring each year. At the annual meeting of shareholders in
1985, directors of Class I shall be elected to serve until the annual meeting
of shareholders to be held in 1986; the directors of Class II shall be elected
to serve until the annual meeting of shareholders to be held in 1987; and the
directors of Class III shall be elected to serve until the annual meeting of
shareholders to be held in 1988; provided that in each case, directors shall
continue to serve until their successors shall be elected and shall qualify or
until their earlier death, resignation or removal. At each subsequent annual
meeting of shareholders, one (1) class of directors shall be elected to serve
until the annual meeting of shareholders held three (3) years next following
and until their successors shall be elected and shall qualify or until their
earlier death, resignation or removal. No decrease in the number of directors
shall have the effect of shortening the term of office of any incumbent
director. Any increase or decrease in the number of directors shall be
apportioned among the classes so as to make all classes as nearly equal in
number as possible.
Section 3.5. Removal. Except as otherwise required by law and
subject to the terms of any one or more classes or series of outstanding
capital stock of the Corporation, any director may be removed; provided,
however, such removal must be for cause and must be approved by at least a
majority vote of the Entire Board of Directors or by at least a majority of
the votes held by the holders of shares of the Corporation then entitled to
be voted at an election for that director, except that if an Interested
Person exists, such removal must be approved (1) by at least a majority vote
of the Entire Board of Directors, including a majority of the Continuing
Directors, or (2) by at least 80% of the votes held by the holders of shares
of the Corporation then entitled to be voted at an election for that director,
including a majority of the votes held by holders of shares of the Corporation
then entitled to vote at an election for that director that are not
beneficially owned or controlled, directly or indirectly, by any Interested
Person. For purposes of this Section 3.5, the Entire Board of Directors will
not include the director who is the subject of the removal determination, nor
will such director be entitled to vote thereon. However, nothing in the
preceding sentence shall be construed as preventing a director who is the
subject of removal determination (but who has not yet actually been removed in
accordance with this Section 3.5) from voting on any other matters brought
before the Board of Directors, including, without limitation, any removal
determination with respect to any other director or directors.
Section 3.6. Vacancies. Except as otherwise provided by the terms
of any one or more classes or series of outstanding capital stock of the
Corporation, any vacancy occurring on the Board of Directors, including any
vacancy created by reason of any increase in the number of directors, shall be
filled by the affirmative vote of at least a majority of the remaining
directors, whether or not such remaining directors constitute a quorum,
except that if an Interested Person exists, such majority of the remaining
directors must include a majority of the Continuing Directors. A director
elected to fill a vacancy shall serve for the unexpired term of his or her
predecessor in office.
ARTICLE IV
MEETINGS OF THE BOARD
Section 4.1. Time and Place. Meetings of the Board of Directors
may be held either within or without the State of Rhode Island. Regular
meetings of the Board of Directors may be held without notice at such time
and place as shall from time to time be determined by the Board. Each
special meeting of the Board of Directors shall be held at such time and
place as shall be stated in the notice of the meeting.
Section 4.2. First Meeting. The first meeting of each newly
elected Board of Directors shall be held within ten (10) days following each
annual meeting of the shareholders, at such time and place either within or
without the State of Rhode Island, as shall be announced at the annual meeting
of share holders, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided
a quorum shall be present.
Section 4.3. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, any Vice Chairman, any
Chief Operating Officer, the President, or the Secretary, and at the written
request of any two (2) directors, shall be called by the Secretary. Written
notice of each special meeting of directors, stating the time and place
thereof, shall be served upon each director, personally, by mail or by tele-
graph, at least two (2) days before such meeting.
Section 4.4. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Articles of Incorporation or by these
By-Laws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without further notice other than announcement at the meeting, until a
quorum shall be present.
Section 4.5. Telephone Conference Meetings. Meetings of the
directors may be held by means of a telephone or similar communications
equipment, by means of which all persons participating in the meeting can hear
each other at the same time and participation by such means shall constitute
presence in person at a meeting.
Section 4.6. Consents. Any action allowed or required to be taken
at a meeting of the Board of Directors or by any committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed before or after such action by all of the directors, or all
of the members of the committee, as the case may be.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1. Designation; Powers. The Board of Directors may, by
resolution or resolutions adopted by a majority of the Entire Board of
Directors, designate from among its members an Executive Committee, or other
Committees, each consisting of three (3) or more directors, and each of which,
to the extent provided in any such resolution, shall have all the authority of
the Board, except as provided by law, the Articles of Incorporation or these
By-Laws. The Board of Directors may designate one or more directors as
alternate members of any such Committee who may replace any absent member or
members at any meeting of such Committee.
Section 5.2. Tenure and Reports. Each such Committee shall serve
at the pleasure of the Board of Directors. It shall keep minutes of its
meetings and report the same to the Board.
ARTICLE VI
NOTICES
Section 6.1. Delivery of Notices. Notices to directors and
shareholders shall be in writing and may be delivered personally or by mail.
Notice by mail shall be deemed to be given at the time when the same shall be
deposited in the post office or a letter box, in a postpaid, sealed wrapper,
and shall be addressed to directors or shareholders at their addresses
appearing on the books of the Corporation. Notice to directors may also be
given by telecopy.
Section 6.2. Waiver of Notice. Whenever any notice is required to
be given by any statute, the Articles of Incorporation or these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed equi-
valent thereto. Any shareholder attending a meeting of shareholders in person
or by proxy, or any director attending a meeting of the Board of Directors or
any committee thereof, without protesting such lack of notice prior to the
meeting or at its commencement, shall be deemed conclusively to have waived
notice of such meeting. Any shareholder signing a unanimous or other written
consent pursuant to Section 2.8 hereof or any director signing a unanimous
written consent pursuant to Section 4.6 hereof shall be deemed conclusively to
have waived notice of the action taken by such consent.
ARTICLE VII
OFFICERS
Section 7.1. Officers. The officers of the Corporation shall be a
Chairman of the Board, one or more Vice Chairmen, a Chief Operating Officer--
Domestic Toy Operations, a Chief Operating Officer--Games and International
(each of said Chief Operating Officers being sometimes referred to in these
By-Laws as a "Chief Operating Officer" and both of said officers being
sometimes referred to as "Chief Operating Officers"), a President, one or
more Vice Presidents, a Treasurer, a Controller and a Secretary, each of whom
shall be elected annually by the directors at their annual meeting, and shall
hold office at the pleasure of the Board of Directors. Any person may hold
two or more such offices.
Section 7.2. Additional Officers. The Board of Directors may
appoint such other officers and agents, including, without limitation,
Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and
Assistant Controllers with such powers and duties as it shall deem necessary
or appropriate. All such officers or agents shall hold office at the
pleasure of the Board of Directors.
Section 7.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided in these
By-Laws, or, to the extent not so provided, as may be prescribed by the Board
of Directors.
Section 7.4. Salaries. The salaries or other com- pensation of all
officers of the Corporation shall be fixed by the Board of Directors. The
salaries or other compensation of all other employees and agents of the
Corporation may be fixed by the Board of Directors. However, the Board of
Directors may delegate to one or more officers or employees authority to
employ and to fix the salaries or other compensation of any such employees or
agents.
Section 7.5. The Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Board of Directors and shall have such
powers and perform such duties as may from time to time be assigned to him by
the Board of Directors.
Section 7.6. The Vice Chairman. In the absence of the Chairman of
the Board, the Vice Chairman (and if there is more than one Vice Chairman, the
Vice Chairmen in order of their seniority or as otherwise determined by the
Board) shall preside at all meetings of the Board of Directors and shall have
such powers and perform such duties as may from time to time be assigned to
him by the Board of Directors.
Section 7.7. The Chief Operating Officers. In the absence of the
Chairman of the Board and any Vice Chairman, any Chief Operating Officer (and
if there is more than one Chief Operating Officer, in order of their seniority
or as otherwise determined by the Board) shall preside at all meetings of the
Board of Directors and shall have such powers and perform such duties as may
from time to time be assigned to him by the Board of Directors.
Section 7.8. The President. In the absence of the Chairman of the
Board, any Vice Chairman and the Chief Operating Officers, the President
shall preside at all meetings of the Board of Directors and shall have such
powers and perform such duties as may from time to time be assigned to him by
the Board of Directors.
Section 7.9. The Vice Presidents. The Vice Presidents in the order
of their seniority, as indicated by their titles (Executive, Senior, etc.) or
as otherwise determined by the Board of Directors, shall, in the absence of
the Chairman of the Board, any Vice Chairman, the Chief Operating Officers and
the President, perform the duties and exercise the powers of the Chairman of
the Board, the Vice Chairmen, the Chief Operating Officers and the President,
shall perform such other duties as the Board of Directors shall prescribe and
shall generally assist the Chairman of the Board, the Vice Chairmen, the
Chief Operating Officers and the President.
Section 7.10. The Secretary. The Secretary shall attend meetings
of the Board of Directors and shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the standing committees of the Board of Directors
when required. He shall give, or cause to be given, notice of meetings of
the shareholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors, the
Chairman of the Board, the Vice Chairmen, the Chief Operating Officers and
the President, under whose collective supervision he shall be. He shall keep
in safe custody the seal of the Corporation and, when authorized by the Board
of Directors, affix the same to any instrument requiring it and, when so
affixed, it shall be attested by his signature or by the signature of the
Treasurer or an Assistant Secretary or Treasurer. He shall keep in safe
custody the certificate books and stock books and such other books and papers
as the Board of Directors may direct and shall perform all other duties
incident to the office of Secretary.
Section 7.11. Assistant Secretaries. The Assistant Secretaries
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other duties as
the Board of Directors shall prescribe.
Section 7.12. The Treasurer. The Treasurer shall have the care and
custody of the corporate funds, and other valuable effects, including
securities, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board, the Vice Chairmen, the Chief
Operating Officers, the President and the Board of Directors, at the regular
meetings of the Board, or whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the Corpora-
tion a bond for such term, in such sum and with such surety or sureties as
shall be satisfactory to the Board for the faithful performance of the duties
of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 7.13. Assistant Treasurers. The Assistant Treasurer
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties as
the Board of Directors may prescribe.
Section 7.14. Execution of Instruments. Each of the Chairman of
the Board, the Vice Chairmen, the Chief Operating Officers, the President and
the Executive Vice Presidents shall have the power to sign on behalf of the
Corporation bonds, notes, deeds, mortgages, guarantees and any and all
contracts, agreements and instruments of a contractual nature pertaining to
matters which arise in the normal conduct and ordinary course of the business
of the Corporation, except in cases in which the signing and execution
thereof shall have been expressly delegated by the Board of Directors of the
Corporation to some other officer or agent of the Corporation.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1. Form. The certificates of stock of the Corporation
shall be in such form as shall be determined by the Board of Directors and
shall be numbered consecutively and entered in the books of the Corporation as
they are issued. Each certificate shall exhibit the registered holder's name
and the number and class of shares, and shall be signed by the Chairman of
the Board, any Vice Chairman, any Chief Operating Officer, the President, any
Executive Vice President, Senior Vice President, or Vice President and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, and shall bear the seal of the Corporation or an engraved or
printed facsimile thereof. Where any such certificate is signed by a transfer
agent or by a registrar, the signature of the Chairman of the Board, any Vice
Chairman, any Chief Operating Officer, the President, Executive Vice
President, Senior Vice President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary may be a facsimile. In case any
officer, transfer agent or registrar, who has signed, or whose facsimile
signature or signatures have been used on, any such certificate or
certificates, shall cease to be such officer, transfer agent or registrar of
the Corporation, whether because of death, resignation or otherwise, before
such certificate or certificates have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer, transfer agent or registrar of the Corporation.
Section 8.2. Registered Shareholders. The Corporation shall be
entitled to (1) recognize the exclusive right of a person registered on its
books as the owner of shares as entitled to receive dividends and notices of
meetings of shareholders and to vote as such owner; and (2) hold liable for
calls and assessments a person registered on its books as the owner of shares;
and the Corporation shall not be bound to recognize any equitable or other
claim to or interest in such shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
required by law.
Section 8.3. Lost Certificates. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed, and
upon such other terms as the Board of Directors may prescribe; and the Board
of Directors may, in its discretion and as a condition precedent to the
issuance of a new certificate or certificates, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to give the Corporation a bond in such sum and with such surety or sureties as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or destroyed.
Section 8.4. Record Date.
(a) For the purpose of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment
thereof, or to express consent to or dissent from any proposal without a
meeting, or for the purpose of determining shareholders entitled to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action, the Board may fix, in advance, a date as the record date for
any such determination of shareholders. Such date shall not be more than
sixty (60) nor less than ten (10) days before the date of such meeting, nor
more than sixty (60) days prior to any other action.
(b) If no record date is fixed:
(1) The record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if no notice is given, the day on which the meeting is held.
(2) The record date for determining shareholders for any
purpose other than that specified in subparagraph (1) shall be at the close of
business on the day on which the resolution of the Board relating thereto is
adopted.
(c) When a determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders has been made as provided
in this section, such determination
shall apply to any adjournment thereof, unless the Board fixes a new record
date under this section for the adjourned meeting.
Section 8.5. Fractional Shares. The Corporation may (1) issue
fractions of a share, (2) arrange for the disposition of fractional interests
by those entitled thereto, (3) pay in cash the fair value of fractions of a
share as of the time when those entitled to receive such fractions are
determined, or (4) issue scrip in registered or bearer form which shall
entitle the holder to receive a certificate for a full share upon the
surrender of such scrip aggregating a full share. A certificate for a
fractional share shall, but scrip shall not, unless otherwise provided
therein, entitle the holder to exercise voting rights, to receive dividends
thereon, and to participate in any of the assets of the Corporation in the
event of liquidation. The Board of Directors may cause scrip to be issued
subject to the condition that it shall become void if not exchanged for
certificates representing full shares before a specified date, or subject to
the condition that the shares for which scrip is exchangeable may be sold by
the Corporation and the proceeds thereof distributed to the holders of scrip,
or subject to any other conditions which the Board of Directors may deem
advisable.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Dividends. Subject always to the provisions of the
law and the Articles of Incorporation, the Board of Directors shall have full
power to determine whether any, and if any, what part of any, funds legally
available for the payment of dividends shall be declared in dividends and
paid to share holders; the division of the whole or any part of such funds of
the Corporation shall rest wholly within the lawful discretion of the Board
of Directors, and it shall not be required at any time, against such
discretion, to divide or pay any part of such funds among or to the
shareholders as dividends or otherwise; and the Board of Directors may fix a
sum which may be set aside or reserved over and above the capital paid in of
the Corporation as working capital for the Corporation or as a reserve for any
proper purpose, and from time to time may increase, diminish, and vary the
same in its absolute judgment and discretion.
Section 9.2. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 9.3. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the
words "Incorporated, Rhode Island". Said seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 9.4. Instruments for the Payment of Money. All checks or
other instruments for the payment of money and notes of the Corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
ARTICLE X
INDEMNIFICATION
Section 10.1. Without limiting the provisions of Section 10.2 ,
each person who at any time serves or shall have served as a director or
officer of the Corporation or who, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a member
of any committee of the Board of Directors or as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan
shall be indemnified to the full extent permitted by Title 7-1.1-4.1 of the
Rhode Island Business Corporation Act, as the same may be amended from time to
time.
Section 10.2. Nothing contained in this ARTICLE X shall affect any
rights to indemnification to which directors and officers may be entitled by
agreement, vote of shareholders or disinterested directors or otherwise.
ARTICLE XI
AMENDMENTS
Section 11.1. Power to Amend. The Board of Directors is
authorized to adopt, repeal, alter, amend or rescind these By- Laws by the
affirmative vote of at least a majority of the Entire Board of Directors,
except that if an Interested Person exists, such Board action must be taken
by the affirmative vote of at least a majority of the Entire Board of Direc-
tors, including a majority of the Continuing Directors. The shareholders may
adopt, repeal, alter, amend or rescind the By-Laws of the Corporation by the
vote of at least 66-2/3% of the votes held by holders of shares of Voting
Stock (as hereinafter defined) except that if an Interested Person exists,
such shareholder action must be taken by the vote of at least 80% of the votes
held by holders of shares of Voting Stock, including an Independent Majority
of Shareholders (as hereinafter defined in Article XIII of these By-Laws).
ARTICLE XII
BUSINESS COMBINATIONS
Section 12.1. Subject to Section 12.2 of this Article XII, but
notwithstanding any other provisions of these By-Laws or of the Articles of
Incorporation or the fact that no vote for such a transaction may be required
by law or that approval by some lesser percentage of shareholders may be
permitted by law, neither the Corporation nor any Subsidiary shall be party to
a Business Combination (as hereinafter defined in Article XIII of these
By-Laws) unless all of the following conditions are met:
(1) After becoming an Interested Person and prior to the
consummation of such Business Combination:
(a) such Interested Person shall not have acquired any newly
issued shares of capital stock, directly or indirectly, from the
Corporation or a Subsidiary (except upon exercise or conversion of
warrants or other rights, including preemptive rights, or converti-
ble securities acquired by an Interested Person prior to becoming
an Interested Person or upon compliance with the provisions of this
Article XII or as a result of a pro rata stock dividend or stock
split);
(b) such Interested Person shall not have received the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other
financial assistance or tax credits provided by the Corporation or a
Subsidiary, or have made any major changes in the Corporation's
business or equity capital structure;
(c) except as approved by a majority of the Continuing
Directors, there shall have been (i) no reduction in the annual rate
of dividends paid on Voting Stock (except as necessary to reflect a
pro rata stock dividend or stock split) and (ii) an increase in such
annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split), recapi-
talization, reorganization or any similar transaction which has the
effect of reducing the number of outstanding shares of Voting Stock;
and
(d) such Interested Person shall have taken steps to insure
that the Board of Directors of the Corporation included at all times
representation by Continuing Directors proportionate to the ratio
that the number of shares of Voting Stock (as hereinafter defined in
Article XIII of these By-Laws) from time to time owned by share-
holders who are not Interested Persons bears to all shares of Voting
Stock outstanding at the time in question (with a Continuing
Director to occupy any resulting fractional position among the
directors); and
(2) The Business Combination shall have been approved by at least
a majority of the Entire Board of Directors of the Corporation, including a
majority of the Continuing Directors; and
(3) A shareholder's meeting shall have been called for the purpose
of approving the Business Combination and a proxy statement complying with
the requirements of the Exchange Act, as amended, or any successor statute or
rule, whether or not the Corporation is then subject to such requirements,
shall be mailed to all shareholders of the Corporation not less than thirty
(30) days prior to the date of such meeting for the purpose of soliciting
shareholder approval of such Business Combination and shall contain at the
front thereof, in a prominent place, (a) any recommendations as to the
advisability (or inadvisability) of the Business Combination which the Con-
tinuing Directors may choose to state, and (b) the opinion of a reputable
national investment banking firm as to the fairness (or lack thereof) of the
terms of such Business Combination, from the point of view of the remaining
shareholders of the Corporation (such investment banking firm to be engaged by
a majority of the Continuing Directors solely on behalf of the remaining
shareholders and paid a reasonable fee for their services, which fee shall not
be contingent upon the consummation of the transaction); and
(4) The Business Combination shall have been approved by at least
80% of the votes held by the holders of the outstanding Voting Stock,
including an Independent Majority of Shareholders.
Section 12.2. The approval requirements of Section 12.1 shall not
apply to any particular Business Combination, and such Business Combination
shall require only such affirmative shareholder vote as is required by law,
any other provision of the Articles of Incorporation or of these By-Laws, the
terms of any outstanding classes or series of capital stock of the
Corporation or any agreement with any national securities exchange, if the
Business Combination is approved by a majority of the Entire Board of
Directors, including the affirmative vote of at least 66-2/3% of the
Continuing Directors.
Section 12.3. The Board of Directors of the Corporation, when
evaluating any offer of another Person (the "Offering Person") (i) to make a
tender or exchange offer for any equity security of the Corporation or (ii)
to effect any Business Combination (as defined in Article XIII of these
By-Laws, except that for purposes of this Section 12.3 the term "Person"
shall be substituted for the term "Interested Person"), shall, in connection
with the exercise of the Board's judgment in determining what is in the best
interests of the Corporation as a whole, be authorized to give due con-
sideration to such factors as the Board of Directors determines to be
relevant, including, without limitation:
(a) the relationships between the consideration offered by
the Offering Person and (x) the market price of the Voting Stock
over a period of years, (y) the current and future value of the
Corporation as an independent entity and (z) political, economic and
other factors bearing on securities prices and the Corporation's
financial condition and future prospects;
(b) the interests of all of the Corporation's shareholders,
including minority shareholders;
(c) whether the proposed transaction might violate federal,
state, local or foreign laws;
(d) the competence, experience and integrity of the Offering
Person and its management; and
(e) the social, legal and economic effects upon employees,
suppliers, customers, licensors, licensees and other constituents
of the Corporation and its Subsidiaries and on the communities in
which the Corporation and its Subsidiaries operate or are located.
In connection with any such evaluation, the Board of Directors is
authorized to conduct such investigations and to engage in such legal
proceedings as the Board of Directors may determine.
Section 12.4. As to any particular transaction, the Continuing
Directors shall have the power and duty to determine, on the basis of
information known to them:
(a) The amount of Voting Stock beneficially owned by any
Person (as hereinafter defined in Article XIII of these By-Laws);
(b) Whether a Person is an Affiliate (as herein after defined
in Article XIII of these By-Laws) or Associate (as hereinafter
defined in Article XIII of these By-Laws) of another;
(c) Whether a Person has an agreement, arrangement or
understanding with, or is acting in concert with, another;
(d) Whether the assets subject to any Business Combination
constitute a Substantial Part (as hereinafter defined in Article
XIII of these By-Laws);
(e) Whether a proposed transaction is proposed, directly or
indirectly, by or on behalf of any Person;
(f) Whether a proposed amendment of any Article of the
Articles of Incorporation would have the effect of modifying or
permitting circumvention of the provisions of Article Eighth
through Twelfth of the Articles of Incorporation; and
(g) Such other matters with respect to which a determination
is required under Articles Eighth through Twelfth of the Articles of
Incorporation.
Any such determination shall be conclusive and binding for all
purposes of the Articles of Incorporation and of these By-Laws.
Section 12.5. The affirmative votes required by this Article XII
is in addition to the vote of the holders of any class or series of capital
stock of the Corporation otherwise required by law, the Articles of
Incorporation or these By-Laws, any resolution which has been adopted by the
Board of Directors providing for the issuance of a class or series of capital
stock or any agreement between the Corporation and any national securities
exchange.
Section 12.6. Nothing contained in this Article XII shall be con-
strued to relieve any Interested Person from any fiduciary or other
obligation imposed by law.
ARTICLE XIII
DEFINITIONS
For the purposes of these By-Laws:
(1) The term "beneficial owner" and correlative terms shall have
the meaning as set forth in Rule 13d-3 of the General Rules and Regulations
(the "General Rules") promulgated by the Securities and Exchange Commission
(the "Commission") under the Securities Exchange Act of 1934 (the "Exchange
Act"), as in effect on June 5, 1985, except that the words "within sixty days"
in Rule 13d-3(d)(1)(i) shall be omitted.
(2) The term "Business Combination" shall mean:
(a) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) (i) with an Interested Person, any
Affiliate (as hereinafter defined) or Associate (as hereinafter defined) of an
Interested Person or any Person (as hereinafter defined) acting in concert
with an Interested Person (including, without limitation, any Person, which
after such merger or consolidation, would be an Affiliate or Associate of an
Interested Person), in each case irrespective of which Person is the surviving
entity in such merger or consolidation, or (ii) proposed, directly or
indirectly, by or on behalf of an Interested Person;
(b) any sale, lease, exchange, transfer, distribution to
shareholders or other disposition, including, without limitation, a mortgage,
pledge or other security device, by the Corporation or any Subsidiary (in a
single transaction or a series of separate or related transactions) of all,
substantially all or any Substantial Part (as hereinafter defined) of the
assets or business of the Corporation or a Subsidiary (including, without
limitation, any securities of a Subsidiary) (i) to or with an Interested
Person, or (ii) proposed, directly or indirectly, by or on behalf of an
Interested Person;
(c) the purchase, exchange, lease or other acquisition,
including, without limitation, a mortgage, pledge or other security device, by
the Corporation or any Subsidiary (in a single transaction or a series of
separate or related transactions) of all, substantially all or any Substantial
Part of the assets or business of (i) an Interested Person, or (ii) any
Person, if such purchase, exchange, lease or other acquisition is proposed,
directly or indirectly, by or on behalf of an Interested Person;
(d) the issuance of any securities, or of any rights,
warrants or options to acquire any securities, by the Corporation or a
Subsidiary to an Interested Person (except (i) as a result of a pro rata
stock dividend or stock split, (ii) upon the exercise or conversion of
warrants or other rights, including preemptive rights, or convertible
securities acquired by an Interested Person prior to or simultaneously with
becoming an Interested Person or (iii) upon conversion of publicly traded
convertible securities of the Corporation) or the acquisition by the
Corporation or a Subsidiary of any securities, or of any rights, warrants or
options to acquire any securities, issued by an Interested Person;
(e) any plan or proposal for, or which has the effect of,
the partial or complete liquidation, dissolution, spin off, split off or split
up of the Corporation or any Subsidiary proposed, directly or indirectly, by
or on behalf of an Interested Person;
(f) any of the following which has the effect, directly or
indirectly, of increasing the proportionate amount of Voting Stock or capital
stock of any Subsidiary thereof which is beneficially owned by an Interested
Person: any reclassification of securities (including, without limitation,
any reverse stock split) of the Corporation, any issuance of any Voting Stock
or other securities of the Corporation, any recapitalization of the Corpora-
tion or any merger, consolidation or other transaction (whether or not with
or into or otherwise involving an Interested Person); and
(g) any agreement, contract, understanding or other
arrangement providing for any of the transactions described in this subsection
(2) of this Article XIII.
(3) The term "Continuing Director" shall mean (i) a director
serving continuously as a director of the Corporation from and including June
5, 1985; (ii) a person who was a member of the Board of Directors of the
Corporation immediately prior to the time that any then existing Interested
Person became an Interested Person, (iii) a person not affiliated with any
Interested Person and designated (before or simultaneously with initially be-
coming a director) as a Continuing Director by at least a majority of the then
Continuing Directors and (iv) a director deemed to be a Continuing Director in
accordance with the last sentence of this subsection (3) of this Article XIII.
All references to action by a specified percentage of the Continuing Directors
shall mean a vote of such specified percentage of the total number of Con-
tinuing Directors of the Corporation at a meeting at which at least such
specified percentage of the total number of Continuing Directors shall have
been in attendance. Whenever a condition requires the act of a specified
percentage of Continuing Directors, such condition shall not be capable of
fulfillment unless there is at least one Continuing Director. If all of the
capital stock of the Corporation is beneficially owned by one Person
continuously for at least three consecutive years during which period at least
three annual meetings of shareholders shall have taken place, at which
meetings all of the Continuing Directors as defined in clauses (i)-(iii)
above shall not have been reelected, all directors elected from and after
such third consecutive year shall be deemed Continuing Directors.
(4) The term "Independent Majority of Shareholders" shall mean the
majority of the votes held by holders of shares of the outstanding Voting
Stock that are not beneficially owned or controlled, directly or indirectly,
by any Interested Person.
(5) The term "Interested Person" shall mean (i) any Person, which,
together with its "Affiliates" and "Associates" (as defined in Rule 12b-2 of
the General Rules promulgated by the Commission under the Exchange Act, as in
effect on June 5, 1985) and any Person acting in concert therewith, is the
beneficial owner, directly or indirectly, of ten percent (10%) or more of the
votes held by the holders of shares of Voting Stock, (ii) any Affiliate or
Associate of an Interested Person, including, without limitation, a Person
acting in concert therewith, (iii) any Person that at any time within the two
year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of ten percent (10%) or more of the votes held
by the holders of shares of Voting Stock, or (iv) an assignee of, or successor
to, any shares of Voting Stock which were at any time within the two-year
period prior to the date in question beneficially owned by any Interested
Person, if such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public offering within
the meaning of the Securities Act of 1933, as amended. For purposes of deter-
mining the percentage of votes held by a Person, any Voting Stock not
outstanding which is subject to any option, warrant, convertible security,
preemptive or other right held by such Person (whether or not such option,
warrant, convertible security, preemptive or other right is currently
exercisable) shall be deemed to be outstanding for the purpose of computing
the percentage of votes held by such Person.
Notwithstanding anything contained in the immediately preceding
paragraph, the term "Interested Person" shall not include (A) a Subsidiary of
the Corporation or (B) a Continuing Director who beneficially owned, on June
5, 1985, ten percent (10%) or more of the votes held by the holders of shares
of Voting Stock and any Affiliate or Associate of one or more of such
Continuing Directors. For purposes of Articles III and XI of these By-Laws,
the term "Interested Person" shall not include any Person which shall have
deposited all of its Voting Stock in a voting trust (only and for so long as
the voting trust shall be continuing and all of such Person's Voting Stock
shall remain deposited in the Voting Trust) pursuant to an agreement with the
Corporation providing the Corporation with the power to appoint a majority of
the voting trustees of the voting trust who, in turn, shall have the power to
vote all of the shares of Voting Stock in the voting trust, in their discre-
tion, for the election of directors of the Corporation and the amendment of
the Articles of Incorporation and/or these By-Laws. The agreement by the
Corporation with any Person described in the immediately preceding sentence
to use its best efforts to elect one designee of such Person as a director
and to cause the voting trustees appointed by the Corporation to vote for such
designee shall not cause such Person to be deemed an Interested Person for
purposes of Articles III and XI of these By-Laws.
A Person who is an Interested Person as of (x) the time any
definitive agreement, or amendment thereto, relating to a Business
Combination is entered into, (y) the record date for the determination of
shareholders entitled to notice of and to vote on a Business Combination, or
(z) immediately prior to the consummation of a Business Combination shall be
deemed an Interested Person for purposes of this definition.
(6) The term "Person" shall mean any individual, corporation,
partnership or other person, group or entity (other than the Corporation, any
Subsidiary or a trustee holding stock for the benefit of employees of the
Corporation or its Subsidiaries, or any one of them, pursuant to one or more
employee benefit plans or arrangements). When two or more Persons act as a
partnership, limited partnership, syndicate, association or other group for
the purpose of acquiring, holding or disposing of securities, such partner-
ship, syndicate, association or group will be deemed a "Person".
(7) The term "Subsidiary" shall mean any corporation or other
entity fifty percent (50%) or more of the equity of which is beneficially
owned by the Corporation; provided, however, that for purposes of the
definition of Interested Person set forth in subsection (5) of this Article
XIII and the definition of Person set forth in subsection (6) of this Article
XIII, the term "Subsidiary" shall mean only a corporation of which a majority
of each class of equity security is beneficially owned by the Corporation.
(8) The term "Substantial Part", as used in reference to the
assets or business of any Person means assets or business having a value of
more than ten percent (10%) of the total consolidated assets of the
Corporation and its Subsidiaries as of the end of the Corporation's most
recent fiscal year ending prior to the time the determination is made.
(9) For the purposes of determining the number of "votes held by
holders" of shares, including Voting Stock, of the Corporation, each share
shall have the number of votes granted to it pursuant to Article Fifth of the
Articles of Incorporation of the Corporation.
(10) The term "Voting Stock" shall mean stock or other securities
of the Corporation entitled to vote generally in the election of directors.
-1-
Exhibit 10(w)
HASBRO, INC.
STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
STOCK OPTION AGREEMENT
AGREEMENT, made as of [date of grant], by and between HASBRO, INC., a
Rhode Island Corporation (the "Company") and [name of non-employee director],
an individual residing at [address] ("Optionee").
WHEREAS, Optionee is a non-employee director of the Company and is
eligible to participate in the Company's Stock Option Plan for Non-Employee
Directors (the "Plan") and
WHEREAS, the Company acting in accordance with the provisions of the
Plan automatically granted to Optionee a stock option to purchase 5,000 shares
of Common Stock of the Company, par value $.50 per share (the "Common Stock"),
at a price of [ ] per Share, which is ten percent (10%) above the Fair
Market Value (as defined in the Plan) of such Common Stock on the date of said
grant, subject to and upon the terms and conditions set forth in the Plan and
as hereinafter set forth
.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
W I T N E S S E T H:
1. The Company confirms the grant by the Company to the Optionee on
[date of grant], pursuant to the Plan, a copy of which is annexed hereto as
Exhibit A and the provisions of which are incorporated herein as if set forth
in full, of a stock option to purchase all or any part of the number of shares
of Common Stock, par value $.50 per share, of the Company (the "Shares"),
described in paragraph 2 below (the "Option"), subject to and upon the terms
and conditions set forth in the Plan and the additional terms and conditions
hereinafter set forth. The Option is evidenced by this Agreement. In the
event of any inconsistency between the provisions of this Agreement and the
provisions of the Plan, the provisions of the Plan shall govern.
2. This Agreement relates to an Option to purchase 5,000 shares at
an exercise price of [ ] per share (the "Exercise Price Per Share").
(Hereinafter, the term "Exercise Price" shall mean the Exercise Price Per Share
multiplied by the number of shares being exercised.) Subject to the provisions
of the Plan and of this Agreement, the Optionee shall be entitled to exercise
the Option on a cumulative basis until the day preceding the tenth anniversary
of the date of the grant in accordance with the following schedule:
Percent of Option
Period Exercisable
------ -----------------
[Date of Grant] to [Day before 1st anniversary of Grant] 0%
[1st Anniversary of Grant] to [Day before 2nd Anniversary of Grant] 20%
[2nd Anniversary of Grant] to [Day before 3rd Anniversary of Grant] 40%
[3rd Anniversary of Grant] to [Day before 4th Anniversary of Grant] 60%
[4th Anniversary of Grant] to [Day before 5th Anniversary of Grant] 80%
[5th Anniversary of Grant] to [Day before 6th Anniversary of Grant] 100%
In determining the number of shares exercisable in accordance with the above
table, fractional shares shall be disregarded.
3. In the event that Optionee wishes to purchase any of the shares
then purchasable under the Option as provided in Paragraph 2 hereof, Optionee
shall deliver or shall transmit by registered or certified mail to the
Secretary of the Company (the "Secretary"), at its then principal office, a
written notice, substantially in the form attached hereto as Exhibit B, as the
same may be amended from time to time by the Committee, signed by Optionee,
together with a check payable to Hasbro, Inc., in United States dollars, in the
aggregate amount of the Exercise Price, or shares of Common Stock (duly
endorsed to the Company or accompanied by an executed stock power, in each case
with signatures guaranteed by a bank or broker) having a Fair Market Value (as
defined in the Plan) equal to the Exercise Price, or a combination of such
shares having a Fair Market Value less than the Exercise Price and a check in
United States dollars for the balance of the Exercise Price, all as more fully
described in said Exhibit B, provided, however, that there shall be no such
exercise at any one time as to fewer than one hundred (100) shares other than
all remaining shares then purchasable by the Optionee, if fewer than one
hundred(100) shares. In addition, unless an Optionee shall have made advance
alternative arrangements satisfactory to the Secretary, each Optionee shall
deliver to the Secretary, together with the written notice of exercise and
payment of the Exercise Price as aforesaid, a check payable to Hasbro, Inc., in
United States dollars, in the amount of any and all withholding taxes payable
as a result of such exercise. Each Optionee shall consult with the Secretary
of the Company or his designee in advance of exercise so as to determine the
amount of withholding taxes due.
(a) Subject to the provision of subsection (b) hereof, an Optionee
may elect to satisfy any withholding taxes payable as a result of such exercise
(the "Taxes"), in whole or in part, either (i) by having the Company withhold
from the shares of Common Stock to be issued upon exercise of the Option or
(ii) delivering to the Company shares of Common Stock already owned by the
Optionee (represented by stock certificates duly endorsed to the Company or
accompanied by an executed stock power in each case with signatures guaranteed
by a bank or broker), in each case in an amount whose Fair Market Value on the
date of exercise is either equal to the Taxes or less than the Taxes, provided
that a check payable to Hasbro, Inc. in United States dollars for the balance
of the Taxes is also delivered to the Secretary at the time of exercise, all as
more fully described in said Exhibit B. As soon as practicable after receipt
of such notice and payment, the Company shall deliver or cause to be delivered
to an Optionee a certificate or certificates for the shares in respect of which
the Option was so exercised (less any shares deducted to pay Taxes in
accordance with Optionee's election).
(b) Subject to the consent of the Compensation and Stock Option
Committee (the "Committee") of the Board of Directors of the Company, an
Optionee may irrevocably elect, by written notice, substantially in the form
attached hereto as Exhibit C, as the same may be amended from time to time by
the Committee, to pay Taxes with shares of Common Stock in accordance with
subsection (a), provided that (i) no such election may be made earlier than six
months after the date of grant of the Option or later than the date of exercise
(the "Exercise Date"), and (ii) that the election is made either (x) within the
ten business day period beginning on the third business day following the
public release of the Company's quarterly or annual results of operations (the
"window period") or (y) not less than six months prior to the Exercise Date.
Exercises of Options need not take place during a window period, provided that
elections to pay Taxes with shares take place within the time periods described
in (x) or (y) above.
4. Optionee hereby represents and agrees that, unless the shares to
be acquired upon any exercise of the Option may, at the time of such
acquisition, be lawfully resold in accordance with a then currently effective
registration statement or post-effective amendment to a registration statement
under the Securities Act of 1993 as amended (the "Act"): (a) Optionee will
acquire such shares for investment and not with a view to the distribution or
public offering of all or any portion thereof, or any interest therein; (b)
Optionee will make no sale or other disposition of such shares unless and until
(i) the Company shall have received an opinion of legal counsel, which opinion
is satisfactory to the Company's legal counsel in form and substance, that such
sale or other disposition may be made without registration under the then
applicable provisions of the Act and the rules and regulations of the
Securities and Exchange Commission thereunder, or (ii) such shares shall
thereafter be included in a then currently effective registration statement or
post-effective amendment to a registration statement under the Act; and (c) the
certificate or certificates delivered to evidence such shares shall bear an
appropriate legend summarizing the foregoing representations and agreements.
If so requested by the Company at the time of any exercise of the Option, the
Optionee shall execute and deliver to the Company a written instrument
confirming the foregoing representations and agreements, and acknowledging that
Optionee understands the full implications under the Act and the various rules,
regulations and published statements thereunder of a representation that the
shares are being acquired for "investment," including, without limitation, the
fact that there can be no assurance that Optionee will be able to transfer such
shares in the future or that any such proposed transfer may be limited to
specific numbers of shares or to specific time periods and may involve expense,
delay, and the filing of certain information with the Securities and Exchange
Commission, together with such other terms or conditions as shall be requisite
in the judgment of the Company to comply with the applicable provisions of the
Act.
5. Subject to the applicable provisions of the Plan, and
particularly to Section 7.6 of the Plan, this Agreement shall be binding upon
and shall inure to the benefit of Optionee, Optionee's successors and permitted
assigns, and the Company and its successors and assigns.
6. This Agreement shall be construed and enforced in accordance with
the internal laws of the State of Rhode Island and Providence Plantations and
applicable Federal law.
IN WITNESS WHEREOF, the Company and the Optionee have fully executed
this agreement as of the day and year first above written.
ATTEST: HASBRO, INC.
By:
-------------------- ---------------------
------------------------
Optionee
EXHIBIT 11
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(Thousands of Dollars and Shares Except Per Share Data)
1994 1993 1992
--------------- --------------- ---------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
Net earnings before
cumulative effect of
change in accounting
principles $179,315 179,315 200,004 200,004 179,164 179,164
Interest and amortization
on convertible notes,
net of taxes - 5,764 - 5,745 - 5,826
------- ------- ------- ------- ------- -------
Net earnings before
cumulative effect of
change in accounting
principles applicable
to common shares 179,315 185,079 200,004 205,749 179,164 184,990
Cumulative effect of
change in accounting
principles (4,282) (4,282) - - - -
------- ------- ------- ------- ------- -------
Net earnings applicable
to common shares $175,033 180,797 200,004 205,749 179,164 184,990
======= ======= ======= ======= ======= =======
Weighted average number
of shares outstanding:
Outstanding at
beginning of period 87,795 87,795 87,176 87,176 86,184 86,184
Exercise of stock
options and warrants:
Actual 305 305 304 304 530 530
Assumed 1,529 1,529 2,551 2,647 2,372 2,790
Assumed conversion
of convertible notes - 5,114 - 5,114 - 5,114
Purchase of common stock (298) (298) - - - -
------- ------- ------- ------- ------- -------
Total 89,331 94,445 90,031 95,241 89,086 94,618
======= ======= ======= ======= ======= =======
Per common share:
Earnings before
cumulative effect of
change in accounting
principles $ 2.01 1.96 2.22 2.16 2.01 1.96
Cumulative effect of
change in accounting
principles (.05) (.05) - - - -
------- ------- ------- ------- ------- -------
Net earnings $ 1.96 1.91 2.22 2.16 2.01 1.96
======= ======= ======= ======= ======= =======
EXHIBIT 12
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Fiscal Years Ended in December
(Thousands of Dollars)
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Earnings available for
fixed charges:
Net earnings $175,033 200,004 179,164 81,654 89,182
Add:
Cumulative effect of
change in accounting
principles 4,282 - - - -
Fixed charges 44,280 42,839 48,050 52,801 23,185
Taxes on income 112,254 125,206 113,212 63,897 63,266
------- ------- ------- ------- -------
Total $335,849 368,049 340,426 198,352 175,633
======= ======= ======= ======= =======
Fixed charges:
Interest on long-term
debt $ 11,179 10,178 16,932 22,913 6,856
Other interest charges 19,610 19,636 18,959 19,417 9,620
Amortization of debt
expense 429 386 623 267 47
Rental expense representa-
tive of interest factor 13,062 12,639 11,536 10,204 6,662
------- ------- ------- ------- -------
Total $ 44,280 42,839 48,050 52,801 23,185
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges 7.58 8.59 7.08 3.76 7.58
======= ======= ======= ======= =======
EXHIBIT 13
HASBRO, INC. AND SUBSIDIARIES
Selected Information Contained in
Annual Report to Shareholders
for the Year Ended December 25, 1994
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
------ ---- --- --------------
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
1994
1st Quarter $36 5/8 33 3/8 $.07
2nd Quarter 36 1/8 28 1/8 .07
3rd Quarter 32 1/8 28 1/8 .07
4th Quarter 33 1/2 27 7/8 .07
The approximate number of holders of record of the Company's Common Stock as of
March 3, 1995 was 5,000.
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 25, 1994, under the
most restrictive agreement the full amount of retained earnings is free of
restrictions.
On February 17, 1995 the Company's Board of Directors declared a quarterly cash
dividend on the Company's Common Stock of $.08 per share payable on May 19,
1995 to holders of record on May 5, 1995.
SELECTED FINANCIAL DATA
-----------------------
(Thousands of Dollars and Shares Except per share Data and Ratios)
Fiscal Year
------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Statement of
Earnings Data:
Net revenues $2,670,262 2,747,176 2,541,055 2,141,096 1,520,032
Net earnings
before cumulative
effect of change
in accounting
principles $ 179,315 200,004 179,164 81,654 89,182
Net earnings $ 175,033 200,004 179,164 81,654 89,182
Per Common Share
Data:
Net earnings
before cumulative
effect of change
in accounting
principles $ 2.01 2.22 2.01 .94 1.02
Net earnings $ 1.96 2.22 2.01 .94 1.02
Cash dividends
declared $ .28 .24 .20 .16 .13
Balance Sheet Data:
Total assets $2,378,375 2,293,018 2,082,766 1,950,127 1,284,765
Long-term debt $ 150,000 200,510 206,189 380,304 56,912
Ratio of Earnings
to Fixed Charges (1) 7.58 8.59 7.08 3.76 7.58
Weighted Average
Number of Common
Shares 89,331 90,031 89,086 86,983 87,119
(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.
MANAGEMENT'S REVIEW
-------------------
Summary
-------
A percentage analysis of results of operations follows:
1994 1993 1992
---- ---- ----
Net revenues 100.0% 100.0% 100.0%
Cost of sales 43.5 43.0 43.1
----- ----- -----
Gross profit 56.5 57.0 56.9
Amortization 1.4 1.3 1.3
Royalties, research and development 10.2 10.2 9.8
Advertising 14.9 14.0 14.8
Selling, distribution and administration 18.5 18.1 18.2
Restructuring .5 .6 -
Interest expense 1.1 1.1 1.4
Other income, net (1.0) (.1) (.1)
----- ----- -----
Earnings before income taxes and cumulative
effect of change in accounting principles 10.9 11.8 11.5
Income taxes 4.2 4.5 4.5
----- ----- -----
Earnings before cumulative effect of change
in accounting principles 6.7 7.3 7.0
Cumulative effect of change in accounting
principles (.1) - -
----- ----- -----
Net earnings 6.6% 7.3% 7.0%
===== ===== =====
(Thousands of Dollars Except Share Data)
Results of Operations
---------------------
Net revenues for 1994 were $2,670,262 compared to $2,747,176 and $2,541,055
for 1993 and 1992, respectively. Decreased consumer demand for two lines of
licensed products, Barney(TM) and Jurassic Park(TM), which provided
approximately $220,000 of revenues during 1993, was a major contributor to the
decrease, with these items contributing less than $50,000 of revenues in 1994.
Domestically, the games group, helped by the products acquired from Western
Publishing, enjoyed another year of record revenues. New products, including
Elefun(TM) and Gator Golf(R) received very favorable consumer acceptance,
while the classics, such as Monopoly(R) and Scrabble(R) again demonstrated
their staying power. Within the toy group, boy's toys were led by the
continued strength of the Batman(R) action figures and the new Ricochet(TM)
remote-controlled vehicle. In the girl's/activity area, the Fantastic Sticker
Maker(TM) enjoyed a successful first year while the Littlest Pet Shop(R) items
continued to be strong and the redesigned Easy Bake(R) Oven was well accepted.
In the infant and preschool arena, Playskool's In-Line Skates had a good
second year and its new 4-in-1 Busy(R) Center was very well received. The
Company's growth in the international marketplace approximated 10% in 1994
following a marginal decrease experienced in 1993. European growth was led by
the U.K., France, Italy and Spain while elsewhere Mexico was the most
significant, in local currency up more than 60%. During 1994, changed foreign
currency rates had a positive impact of approximately $19,000 while in 1993
they negatively affected revenues by approximately $107,000.
The Company's gross profit margin decreased marginally to 56.5% from 57.0% in
1993 and 56.9% in 1992. The decrease in 1994 results from a combination of
factors including increased tooling charges and a lower volume of promotional
products.
Amortization expense, which includes amortization of both intellectual
property rights and cost in excess of net assets acquired, of $36,903 compares
with $35,366 in 1993 and $33,528 in 1992. These increases were attributable to
the acquisitions during 1994 and 1993.
Expenditures for royalties, research and development decreased to $273,039
from $280,571 in 1993 while in 1992, they were $249,851. Included in these
amounts are expenditures for research and development of $135,406 in 1994,
$125,566 in 1993 and $109,655 in 1992. As percentages of net revenues,
research and development was 5.1% in 1994, 4.6% in 1993 and 4.3% in 1992. The
increased percentages in both 1994 and 1993 were largely attributable to the
Company's efforts to remain competitive in a changing technological
environment. The decreased royalties in 1994, both in amount and as a
percentage of net revenues, were primarily attributable to the reduced
revenues from promotional products, which generally have higher royalty rates.
The 1993 increase over 1992 was largely due to the higher revenues from those
same products.
During 1994, the Company completed a restructuring of its Domestic Toy group,
merging its Hasbro Toy, Playskool, Playskool Baby, Kenner and Kid Dimension
units into one organization, the Hasbro Toy Group, and also announced a
consolidation of its domestic manufacturing facilities. To provide for these
and other immaterial restructuring costs, the Company recorded a $12,500
pretax charge during the third quarter. In January 1994, the Company announced
the planned closure of its Netherlands manufacturing facility. During the
fourth quarter of 1993, the Company recorded a $15,500 charge related to this
planned closure and other non-recurring reorganization expenses classified as
restructuring charges. Both amounts include facility costs, severance and
other related costs.
Interest expense was $30,789 during 1994 compared to $29,814 during 1993 and
$35,891 in 1992. The increase during the current year reflected the effect of
increased interest rates partially offset by the availability of funds
generated from operations during 1993. The decrease in 1993 from 1992 was
largely reflective of the lower average borrowings outstanding and the lower
interest rates experienced during 1993.
Other income of $26,681 in 1994 compares with $3,836 and $3,729 in 1993 and
1992, respectively. During 1994, the Company liquidated its investment in J.W.
Spear & Sons PLC (Spear) and sold its investment in Virgin Interactive
Entertainment plc (Virgin). The gains on these two transactions were the
primary cause of the change from 1993.
Income tax expense as a percentage of pretax earnings in 1994 remained
constant at 38.5% after decreasing from 38.7% in 1992. The 1993 decrease was
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.
Liquidity and Capital Resources
-------------------------------
The Company continued to have a strong and highly liquid balance sheet with
cash and cash equivalents of $137,028 at December 25, 1994. Cash and cash
equivalents were $186,254 and $125,953 at December 26, 1993 and December 27,
1992, respectively.
During 1994, the Company generated $283,785 of net cash from its operating
activities compared with $217,237 in 1993 and $229,810 in 1992. Included in
this amount in 1994 was $13,176 from changes in operating assets and
liabilities, primarily inventories, reflecting the Company's efforts to more
closely coordinate supply and demand. In both 1993 and 1992 the change in
operating assets and liabilities was negative, largely due to increased levels
of fourth quarter sales in those years, significant portions of which did not
become due until after the end of the Company's fiscal year.
Cash flows from investing activities were a net use of funds during all three
reported years; $244,178, $126,001 and $93,994 in 1994, 1993 and 1992,
respectively. During each of the three years, the Company expended an average
of approximately $100,000 in additions to its property, plant and equipment.
Of these amounts, 43% in 1994, 44% in 1993 and 36% in 1992 were for purchases
of tools, dies and molds related to the Company's products. During those same
three years, depreciation and amortization expenses were $85,368, $65,282 and
$62,087, respectively. During 1994, the Company purchased certain game and
puzzle assets of Western Publishing Company, Inc. and the Games Division of
John Waddington PLC for an aggregate purchase price of $177,379 and made
several other investments. During 1993 and 1992, the Company made several
small acquisitions and investments, none of which were material. The $59,322
of proceeds from sale of investments in 1994 relates to the Spear and Virgin
transactions previously discussed.
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 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 1995, 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 March 3, 1995, the
Company's unused committed and uncommitted lines of credit, including a
$440,000 revolving credit agreement, were in excess of $1,000,000.
During the three reported years, the Company's activities resulted in the
utilization of funds from financing activities. In 1994 the Company repaid
more than $53,000 of long-term debt, including the early redemption of its
$50,000 subordinated variable rate notes due in 1995. Several equity
transactions also required the utilization of funds during 1994. These
included the repurchase of more than $26,000 of the Company's common stock on
the open market and approximately $16,000 in payments to exercising
warrantholders in lieu of issuing shares of common stock. The $11,705 and
$161,413 repayment of long-term debt in 1993 and 1992, respectively, was
primarily related to debt acquired in the 1991 acquisition of Tonka
Corporation.
During August 1990, the Board of Directors authorized a program to purchase up
to 4,500,000 shares of the Company's common stock. On June 22, 1994, the
Executive Committee of the Board of Directors authorized the purchase of up to
an additional 5,000,000 shares. Through the end of 1994, 6,564,100 shares
remained under these authorizations. The shares acquired under these programs
are being issued upon the exercise of stock options.
Foreign Currency Activity
-------------------------
The Company manages its foreign exchange exposure in various ways including
forward exchange contracts, 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. Its policy is not to enter into derivative financial instruments
for speculative purposes. It does, however, enter into certain foreign
currency forward exchange contracts to protect itself from adverse currency
rate fluctuations on identifiable foreign currency commitments, primarily for
future purchases of inventory. Such contracts are denominated in currencies of
major industrial countries and entered into with creditworthy banks for terms
of not more than twelve months. At both December 25, 1994 and December 26,
1993, outstanding contracts related to purchases of either U.S. dollars or
Hong Kong dollars. The Company does not anticipate any material adverse impact
on its results of operations or financial position from these contracts.
Cumulative translation adjustments decreased to $14,526 at December 25, 1994
from $15,006 at December 26, 1993. 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 Company continued to experience a difficult economic environment
throughout much of the world during 1994. 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 1994 was not
significant and the Company will continue its policy of monitoring costs and
adjusting prices accordingly.
Other Information
-----------------
As previously discussed, during both 1994 and 1993, the Company incurred
certain restructuring costs. The 1994 actions, when completed in the first
quarter of 1995, will have resulted in the termination of approximately 600
employees, of which approximately 100 were management positions. The closure
of the Company's Netherlands manufacturing facility, which was the major
portion of the 1993 charge, originally planned for the second quarter of 1994
was delayed due to the time necessary to comply with local requirements. When
completed, again in the first quarter of 1995, this will have resulted in the
severance of approximately 200 additional employees. The Company expects to
experience the financial benefits from these actions beginning in 1995.
During 1994, 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 1995.
As discussed here a year ago, the Company was engaged in legal action against
CBS Inc. (CBS) to recover all costs associated with the environmental clean-up
of the Company's former manufacturing facility in Lancaster, Pennsylvania. On
August 10, 1994, the U.S. District Court for the Eastern District of
Pennsylvania entered judgment in favor of the Company, awarding the Company
all of its past and future costs associated with such environmental
remediation. The Company and CBS subsequently negotiated and concluded a
resolution of the matter involving CBS' waiver of its rights to appeal the
judgment, a payment by CBS to the Company on account of costs to date
associated with environmental remediation together with interest and certain
litigation costs, CBS' undertaking responsibility for future remediation of
the site, the termination by the Pennsylvania Department of Environmental
Resources of the consent order directing the Company to undertake such
responsibility and the Company's agreement to sell the site to CBS on or
before April 15, 1995. The Company is not aware of any material amounts of
potential exposure relating to environmental matters and does not believe its
compliance costs or liabilities to be material to its operating results or
financial position.
On February 17, 1995, the Company announced a 14% increase in its quarterly
cash dividend from that previously in effect. The first dividend at the
increased rate of $.08 per share is payable on May 19, 1995 to shareholders of
record on May 5, 1995.
On February 23, 1995, the Company announced that it had acquired the Super
Soaker(R) line of products and certain other assets from the Larami Group of
companies. This acquisition brings to the Company a core franchise in an area
in which it had not previously been represented.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See attached pages.
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 25, 1994 and December 26, 1993
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 25, 1994. 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 25, 1994 and December 26, 1993 and
the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended December 25, 1994 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
February 8, 1995
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 25, 1994 and December 26, 1993
(Thousands of Dollars Except Share Data)
Assets 1994 1993
------ ---- ----
Current assets
Cash and cash equivalents $ 137,028 186,254
Accounts receivable, less allowance for
doubtful accounts of $51,000 in 1994
and $54,200 in 1993 717,890 720,442
Inventories 244,407 250,067
Prepaid expenses and other current assets 153,138 144,372
--------- ---------
Total current assets 1,252,463 1,301,135
Property, plant and equipment, net 308,879 279,803
--------- ---------
Other assets
Cost in excess of acquired net assets, less
accumulated amortization of $82,949 in 1994
and $68,122 in 1993 479,960 475,607
Other intangibles, less accumulated amortization
of $58,178 in 1994 and $85,290 in 1993 295,333 185,953
Other 41,740 50,520
--------- ---------
Total other assets 817,033 712,080
--------- ---------
Total assets $2,378,375 2,293,018
========= =========
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 25, 1994 and December 26, 1993
(Thousands of Dollars Except Share Data)
Liabilities and Shareholders' Equity 1994 1993
------------------------------------ ---- ----
Current liabilities
Short-term borrowings $ 81,805 62,242
Trade payables 165,378 173,545
Accrued liabilities 417,763 420,476
Income taxes 98,786 92,051
--------- ---------
Total current liabilities 763,732 748,314
Long-term debt, excluding current installments 150,000 200,510
Deferred liabilities 69,226 67,511
--------- ---------
Total liabilities 982,958 1,016,335
--------- ---------
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 88,085,802 shares
in 1994 and 87,795,251 shares in 1993 44,043 43,898
Additional paid-in capital 282,151 296,823
Retained earnings 1,071,416 920,956
Cumulative translation adjustments 14,526 15,006
Treasury stock, at cost, 557,455 shares in 1994 (16,719) -
--------- ---------
Total shareholders' equity 1,395,417 1,276,683
--------- ---------
Total liabilities and shareholders' equity $2,378,375 2,293,018
========= =========
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Fiscal Years Ended in December
(Thousands of Dollars Except Share Data)
1994 1993 1992
---- ---- ----
Net revenues $2,670,262 2,747,176 2,541,055
Cost of sales 1,161,479 1,182,567 1,094,031
--------- --------- ---------
Gross profit 1,508,783 1,564,609 1,447,024
--------- --------- ---------
Expenses
Amortization 36,903 35,366 33,528
Royalties, research and development 273,039 280,571 249,851
Advertising 397,094 383,918 377,219
Selling, distribution and administration 493,570 498,066 461,888
Restructuring charges 12,500 15,500 -
--------- --------- ---------
Total expenses 1,213,106 1,213,421 1,122,486
--------- --------- ---------
Operating profit 295,677 351,188 324,538
--------- --------- ---------
Nonoperating (income) expense
Interest expense 30,789 29,814 35,891
Other (income), net (26,681) (3,836) (3,729)
--------- --------- ---------
Total nonoperating expense 4,108 25,978 32,162
--------- --------- ---------
Earnings before income taxes and
cumulative effect of change in
accounting principles 291,569 325,210 292,376
Income taxes 112,254 125,206 113,212
--------- --------- ---------
Earnings before cumulative
effect of change in accounting
principles 179,315 200,004 179,164
Cumulative effect of change in
accounting principles (4,282) - -
--------- --------- ---------
Net earnings $ 175,033 200,004 179,164
========= ========= =========
Per common share
Earnings before cumulative effect
of change in accounting principles $ 2.01 2.22 2.01
========= ========= =========
Net earnings $ 1.96 2.22 2.01
========= ========= =========
Cash dividends declared $ .28 .24 .20
========= ========= =========
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Fiscal Years Ended in December
(Thousands of Dollars)
1994 1993 1992
---- ---- ----
Common stock
Balance at beginning of year $ 43,898 43,588 43,397
Stock option and warrant transactions 145 310 191
--------- --------- ---------
Balance at end of year 44,043 43,898 43,588
--------- --------- ---------
Additional paid-in capital
Balance at beginning of year 296,823 287,478 276,725
Stock option and warrant transactions (14,672) 9,345 10,753
--------- --------- ---------
Balance at end of year 282,151 296,823 287,478
--------- --------- ---------
Retained earnings
Balance at beginning of year 920,956 741,987 580,211
Net earnings 175,033 200,004 179,164
Dividends declared (24,573) (21,035) (17,388)
--------- --------- ---------
Balance at end of year 1,071,416 920,956 741,987
--------- --------- ---------
Cumulative translation adjustments
Balance at beginning of year 15,006 32,568 60,297
Equity adjustments from foreign
currency translation (480) (17,562) (27,729)
--------- --------- ---------
Balance at end of year 14,526 15,006 32,568
--------- --------- ---------
Treasury stock
Balance at beginning of year - - (5,361)
Purchases (26,140) - -
Stock option and warrant transactions 9,421 - 5,361
--------- --------- ---------
Balance at end of year (16,719) - -
--------- --------- ---------
Total shareholders' equity $1,395,417 1,276,683 1,105,621
========= ========= =========
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended in December
(Thousands of Dollars)
1994 1993 1992
---- ---- ----
Cash flows from operating activities
Net earnings $175,033 200,004 179,164
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization of plant
and equipment 85,368 65,282 62,087
Other amortization 36,903 35,366 33,528
Deferred income taxes (1,245) 2,281 2,228
Gain on investments (25,284) - -
Change in operating assets and liabilities
(other than cash and cash equivalents):
(Increase) decrease in accounts
receivable 9,871 (90,833) (132,935)
(Increase) decrease in inventories 28,678 (34,088) (15,182)
(Increase) decrease in prepaid expenses
and other current assets (3,142) (8,434) 9,555
(Decrease) increase in trade payables
and accrued liabilities (22,231) 52,761 94,820
Other (166) (5,102) (3,455)
------- ------- -------
Net cash provided by operating
activities 283,785 217,237 229,810
------- ------- -------
Cash flows from investing activities
Additions to property, plant and
equipment (110,944) (99,792) (90,431)
Investments and acquisitions, net of
cash acquired (192,379) (32,171) (13,516)
Purchase of marketable securities - (141,411) (144,000)
Sale of investments 59,322 141,839 144,000
Other (177) 5,534 9,953
------- ------- -------
Net cash utilized by investing
activities (244,178) (126,001) (93,994)
------- ------- -------
Cash flows from financing activities
Net (payments) proceeds of short-term
borrowing 18,938 (9,054) 38,397
Repayment of long-term debt (53,736) (11,705) (161,413)
Purchase of common stock (26,140) - -
Stock option and warrant transactions (5,106) 9,655 16,305
Dividends paid (23,711) (20,125) (16,476)
------- ------- -------
Net cash utilized by financing
activities (89,755) (31,229) (123,187)
------- ------- -------
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Fiscal Years Ended in December
(Thousands of Dollars)
1994 1993 1992
---- ---- ----
Effect of exchange rate changes on cash 922 294 (7,290)
------- ------- -------
Increase (decrease) in cash and
cash equivalents (49,226) 60,301 5,339
Cash and cash equivalents at beginning
of year 186,254 125,953 120,614
------- ------- -------
Cash and cash equivalents at end
of year $137,028 186,254 125,953
======= ======= =======
Supplemental information
Cash paid during the year for
Interest $ 33,471 31,842 41,665
Income taxes $ 99,601 107,716 83,160
See accompanying notes to consolidated financial statements.
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.
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, on an undiscounted basis,
of the underlying businesses 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, on an undiscounted basis, of the related
products or product lines. Approximately 75% 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. A further 19% is attributable to the Company's two
acquisitions during 1994 (see note 2).
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-five 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.
Income Taxes
------------
The Company uses the asset and liability approach for financial accounting
and reporting for income taxes. 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.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Pension Plans, Postretirement and Postemployment 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. It also has several plans covering certain
groups of employees which may provide benefits to such employees following
their period of employment but prior to their retirement. At the beginning
of 1994, the Company adopted Statement of Financial Accounting Standards
No. 112, Employers' Accounting for Postemployment Benefits (SFAS 112) and
at the beginning of 1992, adopted Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions (SFAS 106). Both SFAS 112 and SFAS 106 require 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 1994, 1993 and 1992 were
$135,406, $125,566 and $109,655, respectively.
Advertising
-----------
Production costs of commercials and programming are charged to operations
in the fiscal year first aired. The costs of other advertising, promotion
and marketing programs are charged to operations in the fiscal 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.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The weighted average number of shares outstanding used in the computation
of earnings per common share was 89,330,752, 90,030,568 and 89,085,751 in
1994, 1993 and 1992, respectively.
The difference between primary and fully diluted earnings per share was not
significant for any year.
(2) Acquisitions and Investments
----------------------------
On August 4, 1994, the Company purchased certain game and puzzle assets of
Western Publishing Company, Inc. and on November 30, 1994 purchased the
Games Division of John Waddington PLC. The total consideration for these
purchases is estimated by the Company to be $177,379. Accounting for these
acquisitions using the purchase method, the Company allocated the purchase
price based on estimates of fair market value which included $28,890 of net
tangible assets, $132,022 of product rights and licenses and $16,467 of
cost in excess of net assets acquired.
During the third quarter of 1994, the Company liquidated its minority
investments in J.W. Spear & Sons PLC and Virgin Interactive Entertainment
plc, acquired in 1990 and 1993, respectively. While these investments had
initially been made for the long-term, the 1994 disposition of their
interests by the majority shareholders of each entity resulted in the
Company's decision to do likewise.
(3) Inventories
-----------
1994 1993
---- ----
Finished products $181,202 183,899
Work in process 19,342 22,486
Raw materials 43,863 43,682
------- -------
$244,407 250,067
======= =======
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(4) Property, Plant and Equipment
-----------------------------
1994 1993
---- ----
Land and improvements $ 15,655 12,010
Buildings and improvements 206,523 188,713
Machinery and equipment 209,794 173,050
------- -------
431,972 373,773
Less accumulated depreciation 163,358 133,182
------- -------
268,614 240,591
Tools, dies and molds, less accumulated
amortization 40,265 39,212
------- -------
$308,879 279,803
======= =======
Expenditures for maintenance and repairs which do not materially extend the
life of the assets are charged to operations.
(5) Short-Term Borrowings
---------------------
The Company has available unsecured committed and uncommitted lines of
credit from various banks approximating $450,000 and $900,000,
respectively. All of the short-term borrowings outstanding at the end of
1994 and 1993 represent bank borrowings of foreign units made under these
lines of credit at weighted average interest rates of 9.6% and 9.0%,
respectively. 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 $440,000 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
-------------------
1994 1993
---- ----
Royalties $ 76,602 83,820
Advertising 119,334 116,243
Payroll and management incentives 30,880 37,438
Other 190,947 182,975
------- -------
$417,763 420,476
======= =======
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(7) Long-Term Debt
--------------
1994 1993
---- ----
6% Convertible Subordinated Notes Due 1998.
Interest is paid semi-annually.(a) $150,000 150,000
Subordinated variable rate notes due 1995.(b) - 50,000
Other (excluding current installments). - 510
------- -------
$150,000 200,510
======= =======
(a) These notes are convertible into common stock at a conversion price
of $29.33 per share and are redeemable, at a premium, by the Company.
(b) These notes were redeemed on September 22, 1994.
Current installments aggregated $3,236 at December 26, 1993 and were
included in trade payables. All of the long-term debt outstanding at
December 25, 1994 matures in 1998.
(8) Income Taxes
------------
Income taxes attributable to earnings before income taxes are:
1994 1993 1992
---- ---- ----
Current
Federal $ 60,539 81,770 64,825
Foreign 42,543 28,614 33,147
State and local 10,417 12,541 13,012
------- ------- -------
113,499 122,925 110,984
------- ------- -------
Deferred
Federal 1,924 315 2,612
Foreign (3,349) 1,817 (663)
State and local 180 149 279
------- ------- -------
(1,245) 2,281 2,228
------- ------- -------
$112,254 125,206 113,212
======= ======= =======
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The cumulative effect of the change in accounting principles resulting from
the adoption of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, increased 1992 net earnings by $12,349.
Certain tax benefits are not reflected in income taxes on the Consolidated
Statements of Earnings. Such benefits of $9,800 in 1994, $6,299 in 1993 and
$12,583 in 1992, relate primarily to stock options and cumulative effect of
changes in accounting principles.
A reconciliation of the statutory United States federal income tax rate to
the Company's effective income tax rate is as follows:
1994 1993 1992
---- ---- ----
Statutory income tax rate 35.0% 35.0% 34.0%
State and local income taxes, net
of federal income tax effect 2.4 2.6 3.0
Amortization of goodwill 1.6 1.4 1.4
Foreign earnings taxed at rates other
than the United States statutory rate (.7) - (.6)
Other, net .2 (.5) .9
---- ---- ----
38.5% 38.5% 38.7%
==== ==== ====
The components of earnings before income taxes are as follows:
1994 1993 1992
---- ---- ----
Domestic $177,672 243,820 190,268
Foreign 113,897 81,390 102,108
------- ------- -------
$291,569 325,210 292,376
======= ======= =======
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The components of deferred income tax expense arise from various temporary
differences and relate to items included in the statements of earnings.
During 1993, domestic deferred tax assets and liabilities were adjusted for
the effect of legislation enacted that year increasing the United States
federal tax rate from 34% to 35%. The adjustment decreased the 1993
deferred tax expense by $1,266.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 25, 1994
and December 26, 1993 are:
1994 1993
---- ----
Deferred tax assets:
Accounts receivable $ 27,782 30,049
Inventories 12,600 12,090
Net operating loss and other loss
carryovers 16,923 11,073
Operating expenses 33,948 32,393
Postretirement benefits 11,487 8,675
Other 41,223 39,554
------- -------
Total gross deferred tax assets 143,963 133,834
Valuation allowance (11,829) (10,376)
------- -------
Net deferred tax assets 132,134 123,458
------- -------
Deferred tax liabilities:
Property rights and property, plant
and equipment 64,743 68,614
Other 7,786 6,468
------- -------
Total gross deferred tax liabilities 72,529 75,082
------- -------
Net deferred income taxes $ 59,605 48,376
======= =======
The Company has a valuation allowance for deferred tax assets at December
25, 1994 of $11,829, which is an increase of $1,453 from the $10,376 at
December 26, 1993. These allowances pertain to certain foreign operating
loss carryforwards, some of which have no expiration and others that will
expire beginning in 1997. If fully realized, future income tax expense will
be reduced by $11,829.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
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 $83,730 and $78,413 at the end of 1994 and 1993,
respectively, are included as a component of prepaid expenses and other
current assets.
The cumulative amounts of undistributed earnings of the Company's foreign
subsidiaries held for reinvestment amounted to approximately $289,000 and
$271,000 at December 25, 1994 and December 26, 1993, 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
------------
In August 1990, the Board authorized the purchase of up to 4,500,000 shares
of the Company's common stock and in June 1994, the Executive Committee of
the Board authorized the purchase of up to an additional 5,000,000 shares.
At December 25, 1994, a balance of 6,564,100 shares remained under these
authorizations.
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, a 1992 Stock Incentive Plan and a Stock Option Plan for Non-
Employee Directors (the plans).
The Company has reserved 7,105,011 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 certain of 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.
On July 12, 1994, the Company's outstanding warrants expired. The Company
elected to pay exercising warrantholders in cash rather than issue shares
of its stock.
The changes in outstanding options and warrants for the three years ended
December 25, 1994 follow:
Shares Exercise Price
(In Thousands) Per Share
------------ --------------
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 canceled (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 canceled (63) 10.25 - 38.29
-----
Outstanding at December 26, 1993 7,123 7.58 - 43.49
Granted 1,246 29.56 - 36.58
Exercised (1,994) 7.58 - 31.88
Expired and canceled (505) 10.25 - 38.29
-----
Outstanding at December 25, 1994 5,870 $ 7.58 - $43.49
=====
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The number of shares exercisable at the end of 1994, 1993 and 1992 were
2,176,568, 2,919,654 and 2,831,801, 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
----------------
The Company's net pension and profit sharing cost for 1994, 1993 and 1992
was approximately $12,500, $12,900 and $11,400, respectively.
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:
1994 1993 1992
---- ---- ----
Benefits earned during the year $ 7,029 5,630 5,248
Interest cost on projected benefits 8,219 7,243 5,438
Actual return on plan assets (521) (10,834) (5,183)
Net amortization and deferral (8,429) 3,190 (1,099)
------ ------ ------
$ 6,298 5,229 4,404
====== ====== ======
The funded status and the amounts recognized in the Company's balance
sheets relating to these plans are:
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
1994 1993
----------------------- -----------------------
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 $ 76,761 4,626 14,144 58,581
Nonvested benefits 1,403 719 409 1,447
------- ------ ------ ------
Accumulated benefit
obligation 78,164 5,345 14,553 60,028
Effect of assumed
increase in
compensation level 21,937 6,024 - 30,301
------- ------ ------ ------
Projected benefit
obligation 100,101 11,369 14,553 90,329
Net assets available
for benefits 108,990 630 23,159 80,413
------- ------ ------ ------
Plan assets in excess
of (less than)
projected benefits $ 8,889 (10,739) 8,606 (9,916)
======= ====== ====== ======
Consisting of:
Unrecognized net
asset $ 2,059 - 782 1,618
Unrecognized prior
service cost (897) (4,850) (841) (2,204)
Unrecognized net gain
(loss) 8,313 (425) 5,864 2,146
Prepaid (accrued)
pension recognized
in the balance sheet (586) (5,464) 2,801 (11,476)
------- ------ ------ ------
$ 8,889 (10,739) 8,606 (9,916)
======= ====== ====== ======
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 8.5% for 1994, 7.2% for 1993 and 8% for 1992, assumed long-term
rates of compensation increase of 5% for 1994 and 1993 and 5.5% for 1992
and an assumed long-term rate of return on plan assets of 9% for all years.
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 1994, 1993 and 1992 was
approximately $5,100, $6,100 and $5,400, 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 were neither significant individually nor in the aggregate.
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.
The cumulative effect of the change in accounting principles resulting from
the adoption of SFAS 106 reduced 1992 earnings by $19,457 ($12,135 after
tax).
The accumulated benefit obligation relating to this plan at December 25,
1994 and December 26, 1993 consists of:
1994 1993
---- ----
Retired employees $16,148 16,265
Fully eligible active employees 1,267 1,329
Other active employees 7,086 5,898
------ ------
$24,501 23,492
====== ======
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:
1994 1993 1992
---- ---- ----
Benefits earned during the period $ 403 338 290
Interest cost on projected benefits 1,709 1,783 1,640
------ ------ ------
2,112 2,121 1,930
Recognition of transition obligation - - 19,457
------ ------ ------
$ 2,112 2,121 21,387
====== ====== ======
For measuring the expected postretirement benefit obligation, a 9.2%,
10.4% and 12.0% annual rate of increase in the per capita cost of covered
health care benefits was assumed for 1994, 1993 and 1992, respectively.
These rates were further assumed to decrease gradually to 6%, 5% and 6%,
respectively, in 2012 and remain level thereafter. The weighted average
discount rate used in determining the accumulated postretirement benefit
obligation was 8.5% in 1994, 7.2% in 1993 and 8.0% in 1992.
If the health care cost trend rate were increased one percentage point in
each year, the accumulated postretirement benefit obligation at December
25, 1994 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 12%.
Postemployment Benefits
-----------------------
The Company has several plans covering certain groups of employees which
may provide benefits to such employees following their period of active
employment but prior to their retirement. These plans include certain
severance plans which provide benefits to employees involuntarily
terminated and certain plans which continue the Company's health and life
insurance contributions for employees who have left the Company's employ
under terms of its long-term disability plan.
The Company adopted the provisions of SFAS 112 as of the beginning of
1994. SFAS 112 requires that the cost of certain postemployment benefits
be accrued over the employee service period which is a change from the
Company's prior practice of recording such benefits when incurred. The
effect of initially applying SFAS 112, net of a deferred tax benefit of
$2,513, has been recorded as the cumulative effect of a change in
accounting principles. Other than this, the adoption of SFAS 112 has
neither had a significant effect on the Company's earnings or its
financial condition nor is it expected to in the future.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(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 1994, 1993 and 1992 amounted to $39,186, $37,917 and $34,609,
respectively.
Minimum rentals, net of minimum sublease income which is not material,
under long-term operating leases for the five years subsequent to 1994 and
in the aggregate are as follows:
1995 $ 30,695
1996 21,762
1997 17,697
1998 14,621
1999 12,061
Later years 66,792
-------
$163,628
=======
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 1994.
In addition, the Company leases certain facilities which, as a result of
the restructuring of operations, are no longer in use. Future costs
relating to such facilities were included as a component of the
restructuring charge and thus are not included in the table above.
(13) Restructuring
-------------
During the fourth quarter of 1993, the Company recorded a restructuring
charge of $15,500, primarily related to the closure of its manufacturing
facility in The Netherlands. This closure was initially planned for the
second quarter of 1994, however, the actions necessary to comply with local
regulations relating to such closure took longer than anticipated and the
closure will not be completed until the first quarter of 1995. As a result,
the major portion of the liability established for this action remains to
be paid.
During the third quarter of 1994, the Company recorded a restructuring
charge of $12,500, primarily related to the reorganization of its Domestic
Toy Group and the consolidation of its domestic manufacturing operations.
While these actions have been substantially completed, due to timing of the
pay-outs, a majority of the liability remains to be
paid.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(14) Financial Instruments
---------------------
The Company's financial instruments include cash and cash equivalents,
accounts receivable, short- and long-term borrowings, accounts payable,
accrued liabilities and foreign currency forward exchange contracts. At
December 25, 1994, the carrying value of these instruments approximated
their fair value based on current market prices and rates and there were no
material unrealized gains or losses on foreign currency forward exchange
contracts.
As estimates of the fair values of financial instruments are subjective and
involve uncertainties and judgments, they cannot be determined with
precision. Any changes in assumptions would affect these estimates.
The Company's policy is not to enter into derivative financial instruments
for speculative purposes. It does enter into certain foreign currency
forward exchange contracts to protect itself from adverse currency rate
fluctuations on identifiable foreign currency commitments made in the
ordinary course of business. These contracts, which relate to future
purchases of inventory, are denominated in currencies of major industrial
countries and entered into with creditworthy banks for terms of not more
than twelve months. The Company does not anticipate any material adverse
effect on its results of operations or financial position from these
contracts.
(15) Commitments and Contingencies
-----------------------------
The Company had unused open letters of credit of approximately $15,000 and
$19,000 at December 25, 1994 and December 26, 1993, respectively.
The Company had the equivalent of approximately $80,000 and $65,000 of
forward exchange contracts outstanding at December 25, 1994 and December
26, 1993, 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.
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.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(16) Segment Reporting
-----------------
Industry and Geographic Information
-----------------------------------
The Company operates primarily in one industry segment which includes the
development, manufacture and marketing of toy products and related items
and the licensing of certain related properties.
Information about the Company's operations in different geographic areas,
determined by the location of the subsidiary or unit, for each of the
fiscal years in the three-year period ended December 1994 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.
1994 1993 1992
---- ---- ----
Net revenues:
United States $1,530,928 1,670,272 1,506,522
Foreign 1,139,334 1,076,904 1,034,533
--------- --------- ---------
$2,670,262 2,747,176 2,541,055
========= ========= =========
Operating profit:
United States $ 169,782 242,038 193,466
Foreign 125,895 109,150 131,072
--------- --------- ---------
$ 295,677 351,188 324,538
========= ========= =========
Identifiable assets:
United States $1,612,982 1,540,887 1,451,951
Foreign 765,393 752,131 630,815
--------- --------- ---------
$2,378,375 2,293,018 2,082,766
========= ========= =========
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
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 21% and 12%, respectively, of consolidated net
revenues during 1994, 20% and 11%, respectively, in 1993 and 17% and 9%,
respectively, in 1992.
(17) Quarterly Financial Data (Unaudited)
------------------------------------
Quarter
----------------------------------
First Second Third Fourth Full Year
1994 ----- ------ ----- ------ ---------
----
Net revenues $489,133 444,324 796,222 940,583 2,670,262
Gross profit $280,933 241,146 444,093 542,611 1,508,783
Earnings before
income taxes and
cumulative ef-
fect of changes
in accounting
principles $ 43,443 2,657 122,196(a) 123,273 291,569
Net earnings $ 22,435 1,634 75,151 75,813 175,033
======= ======= ======= ======= =========
Per common share
Earnings before
cumulative
effect of
change in
accounting
principles $ .30 .02 .85 .86 2.01
Earnings $ .25 .02 .85 .86 1.96
Market price
High $ 36 5/8 36 1/8 32 1/8 33 1/2 36 5/8
Low $ 33 3/8 28 1/8 28 1/8 27 7/8 27 7/8
Cash dividends
declared $ .07 .07 .07 .07 .28
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
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(b) 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
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
(a) Includes the effect of a nonrecurring charge of $12,500 relating
to restructuring of operations. (See note 13)
(b) Includes the effect of a nonrecurring charge of $15,500 relating
to restructuring of operations. (See note 13)
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 International, Inc. Delaware
Hasbro Asia-Pacific Marketing Ltd. Hong Kong
Hasbro Australia Pty. Limited Australia
Hasbro Canada, Inc. Canada
Hasbro de Mexico S.A. de C.V. Mexico
Hasbro Deutschland GmbH Germany
Hasbro Far East LTD Hong Kong
Hasbro Israel Ltd. Israel
Hasbro New Zealand Limited New Zealand
Hasbro Schweiz AG Switzerland
Hasbro U.K. Limited United Kingdom
HMS Juquetes S.A. de C.V. Mexico
K'NEX International U.K. United Kingdom
MB France S.A. France
MB International B.V. The Netherlands
Hasbro B.V. The Netherlands
Hasbro Hellas S.A. Greece
Hasbro Importacao e Exportacao de
Jogos e Brinquedos Lds Portugal
Hasbro Magyarorszag Kft Hungary
Hasbro Scandinavia AS Denmark
MB Nederland B.V. The Netherlands
MB Espana, S.A. Spain
S.A. Hasbro N.V. Belgium
MB Ireland Limited Ireland
Nomura Toys Limited Japan
Palmyra Holding Pte. Ltd. Singapore
Palmyra (Hong Kong) Limited Hong Kong
Palmyra (Malaysia) Sdn. Bhd. Malaysia
Palmyra (Singapore) Pte. Ltd. Singapore
3D Licensing Limited United Kingdom
Hasbro Managerial Services, Inc. Rhode Island
Larami Limited Delaware
Tonka Corporation Minnesota
Hasbro Italy S.r.l. Italy
Hasbro Osterreich Ges.m.b.H Austria
Juguetrenes S.A. de C.V. Mexico
(a) Inactive subsidiaries and subsidiaries with minimal operations have
been omitted. Such subsidiaries, if taken as a whole, would not
constitute a significant subsidiary.
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, 1995 relating to the
consolidated balance sheets of Hasbro, Inc. and subsidiaries as of December 25,
1994 and December 26, 1993 and the related consolidated statements of earnings,
shareholders' equity and cash flows and related schedule for each of the fiscal
years in the three-year period ended December 25, 1994, which report on the
consolidated financial statements is 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 25, 1994.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
March 24, 1995
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<ARTICLE> 5
<CIK> 0000046080
<NAME> HASBRO, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1994
<PERIOD-END> DEC-25-1994
<CASH> 137,028
<SECURITIES> 0
<RECEIVABLES> 768,890
<ALLOWANCES> 51,000
<INVENTORY> 244,407
<CURRENT-ASSETS> 1,252,463
<PP&E> 472,237
<DEPRECIATION> 163,358
<TOTAL-ASSETS> 2,378,375
<CURRENT-LIABILITIES> 763,732
<BONDS> 150,000
<COMMON> 44,043
0
0
<OTHER-SE> 1,351,374
<TOTAL-LIABILITY-AND-EQUITY> 2,378,375
<SALES> 2,670,262
<TOTAL-REVENUES> 2,670,262
<CGS> 1,161,479
<TOTAL-COSTS> 1,207,986
<OTHER-EXPENSES> (26,681)
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<INTEREST-EXPENSE> 30,789
<INCOME-PRETAX> 291,569
<INCOME-TAX> 112,254
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<CHANGES> (4,282)
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