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 31, 1995 Commission file number 1-6682
----------------- ------
Hasbro, Inc.
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(Name of registrant)
Rhode Island 05-0155090
- - ------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1027 Newport Avenue, Pawtucket, Rhode Island 02861
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(Address of Principal Executive Offices)
(401) 431-8697
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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
------------------- ---------------------
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 15, 1996 was $2,783,064,909.
The number of shares of Common Stock outstanding as of March 15, 1996 was
87,182,186.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement for its 1996 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 31, 1995, 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
-------------------------------
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
----------------
The Hasbro Toy Group develops and markets infant, preschool, activity,
boys and girls products in the United States, primarily utilizing the
Playskool, Tonka and Kenner brands.
The infant and preschool items are principally marketed under the
Playskool brand and are specifically designed for preschool children,
toddlers and infants.
Playskool's line of infant and juvenile items consists of products for
very young children, including the 1-2-3 High Chair(TM), Musical Dream
Screen(TM), the Steady Steps(R) line of walkers, other infant accessories
such as bibs, 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 1996 include several items incorporating
the classic Weebles(R) figures, the Lights 'n Surprise Laptop(TM) and
Musical Moonbeam(TM).
The preschool line includes such well known products as Lincoln Logs(R),
Tinkertoy(R), Mr. Potato Head(R), 1-2-3 Bike(TM) and the "Busy(R)" line of
toys; electronic items including Talking Barney(R); various role play
products including Lovin' Sounds Nursery(TM), Magic Smoking Grill(R) and the
Playskool(R) Playstore; sports toys such as 1-2-3 Baseball(TM), and
woodboard puzzles utilizing various characters licensed from The Walt Disney
Company and others. New items for 1996 include a Woodland Junction(TM) line
of wooden train sets, Magic Touch(TM) Talking Books and the Cook 'n Play(R)
Kitchen Center.
The Hasbro Toy Group also offers activity items for both girls and boys
including Fantastic Fingernails(TM) and the Fantastic Sticker Maker(TM) as
well as such classics as Play-Doh(R), Easy-Bake(R) Oven and the
Spirograph(R) design toy. New offerings for 1996 include Pro-Doh(TM), a
modeling compound which air-hardens to make mini-sculptures, Fantastic
Crystal Creations(TM) and a line of Wonder World(TM) products.
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
Sip 'n Slurp(TM) and Baby All Gone(R) dolls. Included in its new
introductions for 1996 are My Magic Genies dolls and playsets, Fluffy, My
Come Here Puppy(TM) and Baby Go Bye Bye(TM).
In boys' toys it offers a wide range of products, many of which are tied
to entertainment properties, including Batman(R) and Star Wars(R) 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, and
the Nerf(R) line of soft action play equipment. Additionally, it markets
several radio-controlled vehicles, including the 6.0 volt and 9.6 volt
Ricochet(TM), and the Super Soaker(TM) line of water products. New
introductions for 1996 include both Action Man(TM) and Superman(R) action
figures and accessories, the Starting Lineup(R) Timeless Legends(TM)
collectible figurines, depicting some of history's great track stars and
gymnasts, the XRC Airdevil(TM) radio-controlled vehicle and several new
Nerf(R) products.
(ii) Hasbro Games Group
------------------
The Hasbro Games Group consists of the Company's two United States game
units, Milton Bradley and Parker Brothers.
Milton Bradley develops and 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), Trouble(R), Mousetrap(R),
Operation(R), Hungry Hungry Hippos(R), Connect Four(R), Twister(R) and Big
Ben(R) Puzzles. The Company also provides 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 1996
include Koo Koo Nauts(TM), Check+up Charlie(TM) and Disney's(R) Hunchback of
Notre Dame. Milton Bradley is also introducing several new fully dimensional
puzzles in its Puzz 3D(TM) series, including the Star Wars(R) Millennium
Falcon(TM) and The White House.
Parker Brothers develops and 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) and Rack-O(R) and games for adults such as Balderdash(R)
and Outburst(R). Its line of travel games includes travel editions of
Monopoly(R) Junior, Clue(R), Sorry!(R) and Boggle(R) Jr. During 1995, Parker
Brothers developed and marketed a CD-ROM version of Monopoly(R), which
allows interactive gameplay through the Internet. In 1996, this and other
new CD-ROM games will be the responsibility of a recently formed
organization, Hasbro Interactive, Inc. New to the Parker Brothers' line in
1996 are Goosebumps(TM) Shrieks and Spiders(TM), a game based on R.L.
Stine's books, Star Wars(TM) 3-D Board Game and Mystery Mansion(TM), an
electronic game.
(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 international markets where the
Company does not otherwise have a presence.
Working Capital Requirements
----------------------------
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 revenue pattern
of the Company continues to shift with the second half of the year growing
in significance to its overall business and, within that half, the fourth
quarter becoming more prominent. The Company expects that this trend will
continue. 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. Also, quick response
inventory management practices now being used results in fewer orders being
placed in advance of shipment and more orders, when placed, for immediate
delivery. The Company's unshipped orders at both March 3, 1996 and March 5,
1995 were approximately $170,000,000. 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 1996 are
not substantially different from those employed in 1995.
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 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 $1,500,000,000 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 1995, 1994 and 1993, approximately
$148,057,000, $135,406,000 and $125,566,000, 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 familiar movie, television and comic
strip characters. Licensing fees are generally 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
-------------------
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 the Company has more than 2,000 customers
in the United States and Canada, most of which are wholesalers, distributors
or large chain stores, there has been significant consolidation at the
retail level over the last several years. In other countries, the Company
has in excess of 20,000 customers, many of which are individual retail
stores. During 1995, sales to the Company's two largest customers
represented 21% and 12% 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 1995, the Company spent approximately $417,886,000 in advertising,
promotion and marketing programs compared to $397,094,000 in 1994 and
$383,918,000 in 1993.
Manufacturing and Importing
---------------------------
The Company manufactures its products in facilities within the United
States and various international countries (see "Properties"). Most of its
products are manufactured from basic raw materials such as plastic and
cardboard which are readily available. The Company's manufacturing process
includes injection molding, blow molding, metal stamping, printing, box
making, assembly and wood processing. The Company purchases certain
components and accessories used in its toys and some finished items from
United States manufacturers as well as from manufacturers in the Far East,
which is the largest manufacturing center of toys in the world, and other
countries. The implementation of the General Agreement on Tariffs and Trade
has reduced or eliminated customs duties on certain of these products
imported by the Company. 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 or other factors beyond its
control, the Company's operations would be disrupted while alternative
sources of product were
secured. The imposition of trade sanctions 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 makes its own tools and fixtures but purchases dies and molds
principally from independent United States and international sources.
Several of the Company's United States 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 United States and international 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 13,000 persons worldwide, approximately
6,500 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
countries place certain limitations on television commercials during
children's programming.
(c) Financial Information About International and United States
-----------------------------------------------------------
Operations and Export Sales
---------------------------
The information required by this item is included in note 16 of Notes to
Consolidated Financial Statements in Exhibit 13 to this Report and is
incorporated herein by reference.
ITEM 2. PROPERTIES
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Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
Rhode Island
- - ------------
Pawtucket Executive, Sales &
Marketing Offices &
Product Development 343,000 Owned --
Pawtucket Administrative Office 23,000 Owned --
Pawtucket Manufacturing 306,500 Owned --
East Providence Administrative Office 120,000 Leased 1999
Central Falls Manufacturing 261,500 Owned --
Massachusetts
- - -------------
East Longmeadow Office, Manufacturing
& Warehouse 1,147,500 Owned --
East Longmeadow Office, Manufacturing
& Warehouse 254,400 Owned --
East Longmeadow Warehouse 500,000 Leased 1998
Beverly Office 100,000 Owned --
New Jersey
- - ----------
Northvale Office & Manufacturing 75,000 Leased 2002
Mt. Laurel Office 11,000 Leased 1997
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
New York
- - --------
New York Office & Showroom 70,300 Leased 2000
New York Office & Showroom 32,300 Leased 1999
Arcade Manufacturing 15,000 Leased 1998
Amsterdam Manufacturing 297,400 Owned --
Ohio
- - ----
Cincinnati Office 161,000 Leased 2007
Cincinnati Warehouse 33,000 Leased 1999
Pennsylvania
- - ------------
Allentown Warehouse 71,800 Leased 1997
Allentown Warehouse 304,000 Leased 1997
Allentown Warehouse 198,700 Leased 1997
South Carolina
- - --------------
Easley Manufacturing 31,500 Leased 1997
Easley Manufacturing 75,000 Owned --
Easley Manufacturing 29,000 Owned --
Texas
- - -----
El Paso Manufacturing
& Warehouse 373,000 Owned --
El Paso Manufacturing
& Warehouse 487,000 Leased 1998
El Paso Warehouse 83,000 Leased 1996
El Paso Warehouse 56,000 Leased 1996
El Paso Warehouse 24,000 Leased 1996
El Paso Warehouse 102,000 Leased 1996
El Paso Warehouse 35,000 Leased 1996
El Paso Warehouse 50,000 Leased 1996
El Paso Warehouse 120,000 Leased 1996
El Paso Warehouse 111,000 Leased 1997
Vermont
- - -------
Fairfax Manufacturing 43,000 Owned --
Washington
- - ----------
Seattle Office & Warehouse 125,100 Leased(1) 1996
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
Australia
- - ---------
Lidcombe Office & Warehouse 161,400 Leased 2002
Eastwood Office 16,900 Leased 1997
Austria
- - -------
Vienna Office 2,505 Leased 1997
Belgium
- - -------
Brussels Office & Showroom 16,700 Leased 1996
Canada
- - ------
Montreal Office, Manufacturing
& Showroom 133,900 Leased 1997
Mississauga Sales Office & Showroom 16,300 Leased 1998
Montreal Warehouse 88,100 Leased 1997
Peoples Republic of China
- - -------------------------
Guangzhou Warehouse 9,600 Leased 1996
Denmark
- - -------
Glostrup Office 9,200 Leased 1999
England
- - -------
Uxbridge Office & Showroom 94,500 Leased 2013
Castlegate Office & Manufacturing 400,000 Leased 1997
Paddock Wood Office 30,000 Leased 1997
Finland
- - -------
Helsinki Office 3,000 Leased 1996
France
- - ------
Le Bourget
du Lac Office, Manufacturing
& Warehouse 108,300 Owned --
Savoie Technolac Office 33,500 Owned --
Creutzwald Warehouse 108,700 Owned --
Germany
- - -------
Dietzenbach Office 39,400 Leased 1998
Fuerth Office & Warehouse 28,400 Owned --
Soest Office & Warehouse 156,300 Owned --
Soest Warehouse 78,800 Owned --
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
Greece
- - ------
Athens Office & Warehouse 176,500 Leased 1996
Hong Kong
- - ---------
Kowloon Office 18,600 Leased 2000
Kowloon Office 16,100 Leased 2000
Harbour City Office 11,000 Leased 1996
Shatkin Office & Warehouse 17,800 Leased 1997
Hungary
- - -------
Budapest Office 3,700 Leased 1996
Ireland
- - -------
Waterford Office, Manufacturing
& Warehouse 244,400 Owned --
Israel
- - ------
Jerusalem Office 2,700 Leased 1998
Italy
- - -----
Milan Office & Showroom 12,100 Leased 1998
Japan
- - -----
Tokyo Office 7,200 Leased 1996
Malaysia
- - -------
Selangor
Darul Ehsan Office 6,800 Leased 1997
Mexico
- - ------
Tijuana Office & Manufacturing 144,000 Leased 1996
Tijuana Manufacturing 48,800 Leased 1996
Tijuana Warehouse 140,800 Leased 1996
Reyna Office 61,000 Leased 1996
Juarez Manufacturing 169,500 Owned --
Venados Warehouse 59,100 Leased 1996
Venados Warehouse 59,100 Leased 1996
The Netherlands
- - ---------------
Ter Apel Office & Warehouse 139,300 Owned --
Utrecht Sales Office & Showroom 17,000 Leased 1996
Veerdam Warehouse 59,200 Leased 1996
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
New Zealand
- - -----------
Auckland Office, Manufacturing
& Warehouse 110,900 Leased 2005
Norway
- - ------
Asker Office 4,900 Leased 1999
Poland
- - ------
Warsaw Office 5,000 Leased 1998
Portugal
- - --------
Estoril-Lisboa Office 2,900 Leased 1996
Singapore
- - ---------
Singapore Office & Warehouse 9,300 Leased 1997
Spain
- - -----
Valencia Office, Manufacturing
& Warehouse 115,100 Leased 1999
Valencia Office 46,300 Leased 1996
Valencia Manufacturing
& Warehouse 161,700 Leased 2002
Valencia Warehouse 21,500 Leased 1996
Valencia Warehouse 94,400 Owned --
Valencia Warehouse 43,000 Leased 1996
Sweden
- - ------
Vosby Office 7,400 Leased 1998
Switzerland
- - -----------
Mutschellen Office & Warehouse 23,400 Leased 1996
Taiwan
- - ------
TPE County Warehouse 9,800 Leased 1996
Wales
- - -----
Newport Warehouse 76,000 Leased 2003
Newport Warehouse 52,000 Owned --
(1) 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 130,000 square feet which are
utilized in its operations. The Company also either owns or leases an
aggregate of approximately 800,000 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 is party to certain legal proceedings, substantially 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 47 Chairman of the Board,
President and Chief Executive
Officer Since 1989
Harold P. Gordon (1) 58 Vice Chairman Since 1995
George R. Ditomassi, Jr. 61 Chief Operating Officer,
Games and International Since 1990
Alfred J. Verrecchia 53 Chief Operating Officer,
Domestic Toy Operations Since 1990
John T. O'Neill 51 Executive Vice President and
Chief Financial Officer Since 1989
Norman C. Walker 57 Executive Vice President and
President, International Since 1990
Dan D. Owen (2) 47 President, Hasbro Toy Group Since 1994
E. David Wilson (3) 58 President, Hasbro Games Group Since 1995
Richard B. Holt (4) 54 Senior Vice President
and Controller Since 1992
Cynthia S. Reed (5) 40 Senior Vice President and
General Counsel Since 1995
Phillip H. Waldoks (6) 43 Senior Vice President -
Corporate Legal Affairs
and Secretary Since 1995
Russell L. Denton 51 Vice President and Treasurer Since 1989
(1) Prior thereto, Partner, Stikeman, Elliott (law firm).
(2) Prior thereto, President, Playskool.
(3) Prior thereto, President, Milton Bradley.
(4) Prior thereto, Vice President and Controller.
(5) Prior thereto, Vice President - Legal from 1992 to 1995; prior
thereto, Associate Vice President - Legal.
(6) Prior thereto, Senior Vice President - Corporate Legal Affairs from
1992 to 1995; prior thereto, Vice President - Corporate Legal
Affairs.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
-----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
The information required by this item is included in Market for the
Registrant's Common Equity and Related Stockholder Matters in Exhibit 13 to
this Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The information required by this item is included in Selected Financial
Data in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The information required by this item is included in Management's Review
in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information required by this item is included in Financial Statements
and Supplementary Data in Exhibit 13 to this Report and is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
PART III
ITEMS 10, 11, 12 and 13.
The information required by these items is included in registrant's
definitive proxy statement for the 1996 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 31, 1995 and
December 25, 1994
Consolidated Statements of Earnings for the Three Fiscal
Years Ended in December 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the
Three Fiscal Years Ended in December 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Three
Fiscal Years Ended in December 1995, 1994 and 1993
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 1995, 1994
and 1993:
Schedule II - 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. (Incorporated by
reference to Exhibit (3) to the Company's Current Report on
Form 8-K, dated February 16, 1996, File No. 1-6682.)
4. Instruments defining the rights of security holders, including
indentures.
(a) Revolving Credit Agreement, dated as of June 22, 1992, among
the Company, certain banks (the "Banks"), and The First
National Bank of Boston, as agent for the Banks (the
"Agent"). (Incorporated by reference to Exhibit 4(a) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
(b) Subordination Agreement, dated as of June 22, 1992, among
the Company, certain subsidiaries of the Company, and the
Agent. (Incorporated by reference to Exhibit 4(b) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
(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.)
(d) Amendment No. 2, dated as of May 1, 1995, to the 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 April 2,
1995, 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.)
(c) Agreement between the Company and Bear, Stearns & Co. Inc.,
dated as of January 16, 1996.
Executive Compensation Plans and Arrangements
(d) 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.)
(e) 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.)
(f) 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.)
(g) 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.)
(h) 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.)
(i) 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.)
(j) 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.)
(k) Non Qualified Stock Option Plan. (Incorporated by reference
to Exhibit 10.10 to the Company's Registration Statement on
Form S-14, File No. 2-92550.)
(l) 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.)
(m) 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.)
(n) 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.)
(o) 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.)
(p) 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.)
(q) 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.)
(r) 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.)
(s) Form of Employment Agreement between the Company and eight
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.)
(t) 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.)
(u) 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.)
(v) 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.)
(w) 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.)
(x) Form of Stock Option Agreement for Non-Employee Directors
under the Hasbro, Inc. Stock Option Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10(w) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 25, 1994, File No. 1-6682.)
(y) 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.)
(z) 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.)
(aa) Employment Agreement, dated as of January 1, 1996, between
the Company and Harold P. Gordon.
(bb) Severance And Settlement Agreement And Release, dated as of
December 20, 1995, and addendum thereto, between the Company
and Dan D. Owen.
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 January 30, 1996 was filed to
announce the Company's rejection of an unsolicited business
combination proposal.
A Current Report on Form 8-K dated February 8, 1996 was filed to
announce the Company's results for the quarter and year ended
December 31, 1995. Consolidated statements of earnings (without
notes) for the quarter and year ended December 31, 1995 and
December 25, 1994 and consolidated condensed balance sheets
(without notes) as of said dates were also filed.
A Current Report on Form 8-K dated February 16, 1996 was filed
to file the Amended and Restated Bylaws of the Company.
(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 7, 1996, we reported on the consolidated
balance sheets of Hasbro, Inc. and subsidiaries as of December 31, 1995 and
December 25, 1994 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 31, 1995, as contained in the 1995 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 1995. 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 7, 1996
SCHEDULE II
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 And at End of
Year Expenses Additions Other (a) Year
------------ ---------- ------------ ----------- ---------
Valuation
accounts
deducted
from assets
to which
they apply -
for doubtful
accounts
receivable:
1995 $51,000 5,860 - (8,060) $48,800
====== ====== ====== ====== ======
1994 $54,200 5,120 - (8,320) $51,000
====== ====== ====== ====== ======
1993 $52,200 13,078 - (11,078) $54,200
====== ====== ====== ====== ======
(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 28, 1996
------------------------- ---------------
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 28, 1996
Alan G. Hassenfeld President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ John T. O'Neill
- - ---------------------------- Executive Vice President March 28, 1996
John T. O'Neill and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Barry J. Alperin
- - ---------------------------- Director March 28, 1996
Barry J. Alperin
/s/ Alan R. Batkin
- - ---------------------------- Director March 28, 1996
Alan R. Batkin
/s/ George R. Ditomassi, Jr.
- - ---------------------------- Director March 28, 1996
George R. Ditomassi, Jr.
/s/ Harold P. Gordon
- - ---------------------------- Director March 28, 1996
Harold P. Gordon
/s/ Alex Grass
- - ---------------------------- Director March 28, 1996
Alex Grass
/s/ Sylvia K. Hassenfeld
- - ---------------------------- Director March 28, 1996
Sylvia K. Hassenfeld
/s/ Marie-Josee Kravis
- - ---------------------------- Director March 28, 1996
Marie-Josee Kravis
- - ---------------------------- Director March , 1996
Claudine B. Malone
/s/ Morris W. Offit
- - ---------------------------- Director March 28, 1996
Morris W. Offit
/s/ Norma T. Pace
- - ---------------------------- Director March 28, 1996
Norma T. Pace
/s/ E. John Rosenwald, Jr.
- - ---------------------------- Director March 28, 1996
E. John Rosenwald, Jr.
/s/ Carl Spielvogel
- - ---------------------------- Director March 28, 1996
Carl Spielvogel
- - ---------------------------- Director March , 1996
Henry Taub
/s/ Preston Robert Tisch
- - ---------------------------- Director March 28, 1996
Preston Robert Tisch
/s/ Paul Wolfowitz
- - ---------------------------- Director March 28, 1996
Paul Wolfowitz
/s/ Alfred J. Verrecchia
- - ---------------------------- Director March 28, 1996
Alfred J. Verrecchia
HASBRO, INC.
Annual Report on Form 10-K
for the Year Ended December 31, 1995
Exhibit Index
Exhibit
- - -------
3. Articles of Incorporation and Bylaws
(a) Restated Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit (c)(2) to the
Company's Current Report on Form 8-K, dated July 15,
1993, File No. 1-6682.)
(b) Amended and Restated Bylaws of the Company. (Incorporated by
reference to Exhibit (3) to the Company's Current Report on
Form 8-K, dated February 16, 1996, File No. 1-6682.).
4. Instruments defining the rights of security holders, including
indentures
(a) Revolving Credit Agreement, dated as of June 22, 1992, among
the Company, certain banks (the "Banks"), and The First
National Bank of Boston, as agent for the Banks (the
"Agent"). (Incorporated by reference to Exhibit 4(a) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
(b) Subordination Agreement, dated as of June 22, 1992, among
the Company, certain subsidiaries of the Company, and the
Agent. (Incorporated by reference to Exhibit 4(b) to the
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 27, 1992, File No. 1-6682.)
(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.)
(d) Amendment No. 2, dated as of May 1, 1995, 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 April 2,
1995, 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.)
(c) Agreement between the Company and Bear, Stearns & Co. Inc.,
dated as of January 16, 1996.
Executive Compensation Plans and Arrangements
(d) 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.)
(e) 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.)
(f) 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.)
(g) 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.)
(h) 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.)
(i) 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.)
(j) 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.)
(k) Non Qualified Stock Option Plan. (Incorporated by reference
to Exhibit 10.10 to the Company's Registration Statement on
Form S-14, File No. 2-92550.)
(l) 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.)
(m) 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.)
(n) 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.)
(o) 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.)
(p) 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.)
(q) 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.)
(r) 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.)
(s) Form of Employment Agreement between the Company and eight
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.)
(t) 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.)
(u) 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.)
(v) 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.)
(w) 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.)
(x) Form of Stock Option Agreement for Non-Employee Directors
under the Hasbro, Inc. Stock Option Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10(w) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 25, 1994, File No. 1-6682.)
(y) 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.)
(z) 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.)
(aa) Employment Agreement, dated as of January 1, 1996, between
the Company and Harold P. Gordon.
(bb) Severance And Settlement Agreement And Release, dated as of
December 20, 1995, and addendum thereto, between the Company
and Dan D. Owen.
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
EXHIBIT 10(c)
As of January 16, 1996
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, Rhode Island 02861
Gentlemen:
We are pleased to set forth the terms of the retention of Bear,
Stearns & Co. Inc. ("Bear Stearns") by Hasbro, Inc. (collectively with
its affiliates, the "Company").
1. We are advised that the Company has received an offer from a
third party (the "Bidder") to acquire the Company (the "Offer"). Bear
Stearns will assist the Company as its co-exclusive financial advisor
and agent with Donaldson, Lufkin & Jenrette ("DLJ") in (i) evaluating
the Offer and any other indications of interest or offers (both
solicited and unsolicited) received by the Company with respect to any
Transaction (as such term is defined below), (ii) evaluating various
plans, strategies or transactions for maximizing the Company's value
to its shareholders and (iii) in the event the Board determines to
undertake a course of action, in implementing any such course of
action. In this regard, Bear Stearns shall be the Company's co-
exclusive financial advisor and agent with DLJ in connection with any
Transaction. As used in this Agreement, the term "Transaction" shall
mean any Acquisition Transaction or Restructuring (as such terms are
defined below). As used in this Agreement, the term "Acquisition
Transaction" shall mean (a) any merger, consolidation, reorganization,
recapitalization, business combination or other transaction pursuant
to which the Company is acquired by, or combined with, any person or
group of persons (which may include the Company's management),
corporation, partnership or other entity, including, without
limitation, the Bidder (an "Acquiror") or (b) the acquisition,
directly or indirectly, by an Acquiror, in a single transaction or a
series of transactions, of (i) a substantial portion of the assets or
operations of the Company or (ii) a substantial portion of outstanding
or newly-issued shares of the Company's capital stock (or any
securities convertible into, or options, warrants or other rights to
acquire such capital stock) (such capital stock and such other
securities, options, warrants and other rights being collectively
referred to as "Company Securities") (whether by way of tender or
exchange offer, open market purchases, negotiated purchases or
otherwise). As used in this Agreement, the term "Restructuring" shall
include, but is not limited to, (i) any extraordinary dividend or
distribution (of either cash, securities or other property) paid by
the Company to its shareholders, (ii) a purchase by the Company of 5%
or more of its outstanding common or preferred stock or its
outstanding debt securities (whether by way of tender or exchange
offer, open market purchases, negotiated purchases from one or more
shareholders or otherwise but not including the redemption of the
Company's 6% Convertible Subordinated Notes Due 1998), (iii) a sale or
spin-off of all or substantially all the assets of, or 5% or more of
the capital stock of, any subsidiary or division of the Company, or
(iv) any transaction or series of transactions which has the effect of
significantly altering the capitalization of the Company. Bear
Stearns will advise the Company as to structure and valuation of any
Transaction, and will assist the Company in negotiations with any
Acquiror. If requested, Bear Stearns will provide an opinion (an
"Opinion") with respect to the fairness, from a financial point of
view, to the public shareholders of the Company of any Transaction.
2. If requested by the Company, Bear Stearns will assist the
Company as its co-exclusive agent with DLJ in identifying and seeking
out an Acquiror who would be interested in entering into a Transaction
with the Company. Bear Stearns will review and analyze all
indications of interest and proposals, both preliminary and firm, that
are received from any Acquiror, will advise the Company as to
structure and valuation and the ability of prospective Acquirors to
finance a Transaction, and will assist the Company in negotiations
with any Acquiror. In connection with Bear Stearns' activities on the
Company's behalf, Bear Stearns will assist the Company's management in
(a) developing a list of prospective Acquirors and strategies for
possible transactions that enhance shareholder value, (b) preparing a
descriptive memorandum that describes the Company's operations,
management, and financial condition and incorporates current financial
data and other appropriate information furnished by the Company (the
"Offering Memorandum"), (c) contacting and eliciting interest from
prospective Acquirors and (d) structuring such transactions as may be
appropriate to this assignment.
3. In connection with Bear Stearns' activities on the Company's
behalf, the Company agrees to cooperate with Bear Stearns and will
furnish to, or cause to be furnished to, Bear Stearns any and all
information and data concerning the Company, the Offer, any
Transaction, and to the extent available to the Company, any
prospective Acquiror (the "Information") which Bear Stearns deems
appropriate and will provide Bear Stearns with access to the Company's
officers, directors, employees, appraisers, independent accountants,
legal counsel and other consultants and advisors. To the extent that
the Company has access to the officers, directors, employees,
appraisers, independent accountants, legal counsel and other
consultants and advisors of any Acquiror, it will provide such access
to Bear Stearns. The Company represents and warrants that all
Information (a) made available to Bear Stearns or any Acquiror by the
Company or (b) contained in the Offering Memorandum or in any filing
by the Company with the Securities and Exchange Commission and any
court or governmental or regulatory agency, commission or
instrumentality (each an "Agency") with respect to the Offer or any
Transaction, will be complete and correct in all material respects and
will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances under which
such statements are made. The Company further represents and warrants
that any projections and other Information provided by it to Bear
Stearns, or any Acquiror or contained in the Offering Memorandum will
have been prepared in good faith and will be based upon assumptions
which, in light of the circumstances under which they are made, are
reasonable. The Company acknowledges and agrees that, in rendering
its services hereunder, Bear Stearns will be using and relying on the
Information (and information available from public sources and other
sources deemed reliable by Bear Stearns) without independent
verification thereof by Bear Stearns or independent appraisal by Bear
Stearns of any of the Company or any Acquiror's assets. Bear Stearns
does not assume responsibility for the accuracy or completeness of the
Information or any other information regarding the Company, any
Acquiror or any Transaction. Any advice tendered by Bear Stearns
pursuant to this Agreement may not be disclosed publicly without our
prior written consent.
4. The nature and scope of Bear Stearns' study for purpose
of delivering any Opinion shall be such as it considers appropriate.
The form of any Opinion shall be such as Bear Stearns considers
appropriate and may state in substance, among other things, that it is
given in reliance on the accuracy and completeness of the information
furnished to Bear Stearns. It is understood that any Opinion may be
included in its entirety in any proxy statement or other document
distributed to shareholders of the Company in connection with a
Transaction. However, no summary of or excerpt from any such Opinion
may be used, and no public reference (other than as provided in the
preceding sentence) to such Opinion may be made except with Bear
Stearns' prior written approval, which approval shall not be
unreasonably withheld.
5. In consideration of our services pursuant to this
Agreement, Bear Stearns shall be entitled to receive, and the Company
agrees to pay Bear Stearns, the following compensation:
(a) Upon execution of this Agreement, the Company shall pay
to Bear Stearns an initial cash fee in the amount of
$200,000.
(b) Upon the earlier of (i) the execution by the Company of
a letter of intent, agreement in principle or definitive
agreement with respect to any Transaction or (ii) the
public announcement of any Transaction of the Offer, the
Company shall pay to Bear Stearns an additional cash fee
of $200,000.
(c) If Bear Stearns renders an Opinion, then the Company
shall pay to Bear Stearns an additional cash fee of
$1,800,000, of which shall be payable at the time Bear
Stearns render such Opinion. If (i) a Transaction is
not consummated within six months of the date of this
Agreement or (ii) the form of consideration offered in a
pending Transaction is changed, Bear Stearns shall be
entitled to such additional compensation as may be
agreed upon in good faith between the Company and Bear
Stearns.
(d) If an Acquisition Transaction is consummated, then the
Company shall pay to Bear Stearns, immediately upon
consummation of such Acquisition Transaction, an
additional cash fee (against which all fees previously
paid shall be credited) equal to 0.21% of the value of
the total consideration paid to the Company or its
shareholders in such Acquisition Transaction in respect
of (i) assets or operations of the Company, (ii) Company
Securities and (iii) the assumption, directly or
indirectly (by operation of law or otherwise), or
repayment of indebtedness (including, without
limitation, indebtedness secured by assets of the
Company) and other liabilities of the Company. In the
event an Acquisition Transaction is consummated in one
or more steps, including, without limitation, by way of
a second-step merger, any additional consideration paid
or to be paid in any subsequent step in the Acquisition
Transaction in respect of (x) assets or operations of
the Company, (y) Company Securities and (z) the
assumption, directly or indirectly (by operation of law
or otherwise), or repayment of indebtedness and other
liabilities of the Company, shall be included for
purposes of calculating Bear Stearns' fee pursuant to
this subparagraph 5(d) If all or a portion of the
consideration paid in the Acquisition Transaction
consists of securities for which a public trading market
existed prior to consummation of the Acquisition
Transaction, then the value of such securities shall be
determined by the closing or last sales price thereof on
the date two business days prior to the date of the
consummation of the Acquisition Transaction. If all or
a portion of the consideration paid in the Acquisition
Transaction is other than cash or securities for which a
public trading market existed prior to consummation of
the Acquisition Transaction, then the value of such
non-cash consideration shall be the fair market value
thereof on the date the Acquisition Transaction is
consummated as mutually agreed upon in good faith by the
Company's Board of Directors and Bear Stearns.
(e) If a Restructuring is consummated, then the Company and
Bear Stearns, shall agree to negotiate in good faith an
amendment providing for compensation to be paid to Bear
Stearns in connection with such Restructuring.
(f) Bear Stearns shall be entitled to the fees enumerated
in any preceding subparagraph of this paragraph 5 (i)
upon the occurrence, during the term, or within one
year after the date of termination, of this Agreement,
of any event specified in any such subparagraph or (ii)
upon the occurrence of any event specified in any such
subparagraph with respect to which an agreement was
executed by the Company during the term or within one
year after the date of termination of the Agreement.
6. If the Company requires financing (the "Financing") to
consummate a Transaction, then Bear Stearns shall have the right to
act as the Company's co-lead managing underwriter or co-exclusive
agent with DLJ, as the case may be, in connection with raising such
Financing, subject to approval of Bear Stearns' Commitment Committee
and the good faith negotiation and execution of a mutually acceptable
agency agreement; provided, however, that this paragraph shall not
apply to the Company arranging senior bank financing without an
investment banker or other agent.
7. If a Transaction is consummated and the Company
determines to refinance (through either a public or private offering
of debt or equity securities) all or any portion of any indebtedness
of the Company incurred in connection with such Transaction) within
two years of such consummation, then Bear Stearns shall have the right
to act as the Company's co-lead managing underwriter or co-exclusive
agent with DLJ, as the case may be, in connection with raising the
funds necessary to complete such refinancing, subject to the approval
of Bear Stearns' Commitment Committee and the good faith negotiation
of customary and mutually acceptable terms and conditions. The terms
"financing" (as used in paragraph 6 above) and "refinancing" (as used
in this paragraph 7) expressly include the negotiation of and entering
into letters of credit, standby letters of credit and other types of
Acquiror guarantees used to secure indebtedness or otherwise
(regardless of whether any underlying indebtedness is repaid as part
of the Transaction).
8. If a Restructuring is consummated is consummated and the
Company determines to dispose of any of its subsidiaries, divisions,
businesses or assets within two years of the date of this Agreement,
then Bear Stearns shall have the right to act as the Company's co-
exclusive agent with DLJ in connection with such dispositions, subject
to the good faith negotiation of customary and mutually acceptable
terms and conditions.
9. In addition to the fees described in paragraph 5 above,
the Company agrees to promptly reimburse Bear Stearns, upon request
from time to time, for all reasonable out-of-pocket expenses incurred
by Bear Stearns (including, without limitation, reasonable fees and
disbursements of counsel, and of other consultants and advisors
retained by Bear Stearns) in connection with the matters contemplated
by this Agreement.
10. The Company agrees to indemnify Bear Stearns in
accordance with the indemnification provisions (the "Indemnification
Provisions") attached to this Agreement, which Indemnification
Provisions are incorporated herein and made a part hereof and which
shall survive the termination, expiration or supersession of this
Agreement.
11. Either party hereto may terminate this Agreement at any
time upon written notice, without liability or continuing obligation
except as set forth in the following sentence. Neither termination of
this Agreement nor completion of the assignment contemplated hereby
shall affect: (i) any compensation earned by Bear Stearns up to the
date of termination or completion, as the case may be, (ii) any
compensation to be earned by Bear Stearns after termination pursuant
to paragraphs 5 - 8 hereof, (iii) the reimbursement of expenses
incurred by Bear Stearns up to the date of termination or completion,
as the case may be, (iv) the provisions of paragraphs 5 - 8 hereof,
inclusive, of this Agreement and (v) the attached Indemnification
Provisions which are incorporated herein, all of which shall remain
operative and in full force and effect.
12. The validity and interpretation of this Agreement shall
be governed by, and construed and enforced in accordance with, the
laws of the State of New York applicable to agreements made and to be
fully performed therein excluding the conflicts of laws rules). The
Company irrevocably submits to the jurisdiction of any court located
in the county of New York in the State of New York including the
United States District Court for the Southern District of the State of
New York for the purpose of any suit, action or other proceeding
arising out of this Agreement, or any of the agreements or
transactions contemplated hereby, which is brought by or against the
Company and (i) hereby irrevocably agrees that all claims in respect
of any such suit, action or proceeding may be heard and determined in
any such court, (ii) to the extent that the Company has acquired, or
hereafter may acquire, any immunity from jurisdiction of any such
court or from any legal process therein, the Company hereby waives, to
the fullest extent permitted by law, such immunity and (iii) agrees
not to commence any action, suit or proceeding relating to this
Agreement other than in such Courts. The Company hereby waives, and
agrees not to assert in any such suit, action or proceeding, in each
case, to the fullest extent permitted by applicable law, any claim
that (a) the Company is not personally subject to the jurisdiction of
any such court, (b) the Company is immune from any legal process
(whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect
to the Company or its property or (c) any such suit, action or
proceeding is brought in an inconvenient forum.
13. The benefits of this Agreement shall inure to the
parties hereto, their respective successors and assigns and to the
indemnified parties hereunder and their respective successors and
assigns and representatives, and the obligations and liabilities
assumed in this Agreement by the parties hereto shall be binding upon
their respective successors and assigns.
14. Each of the Company and Bear Stearns (and, to the extent
permitted by law, on behalf of their respective equity holders and
creditors) hereby knowingly, voluntarily and irrevocably waives any
right it may have to a trial by jury in respect of any claim based
upon, arising out of or in connection with this Agreement, any
Transaction, Opinion or Financing. Each of the Company and Bear
Stearns hereby certifies that no representative or agent of the other
party has represented expressly or otherwise that such party would not
seek to enforce the provisions of this waiver. Further each of the
Company and Bear Stearns acknowledges that each party has been induced
to enter this Agreement by, inter, alia, the provisions of this
paragraph.
15. If it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) that any term
or provision hereof is invalid or unenforceable, (i) the remaining
terms and provisions hereof shall be unimpaired and shall remain in
full force and effect and (ii) the invalid or unenforceable provision
or term shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of such
invalid or unenforceable term or provision.
16. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior
agreements, arrangements and understanding relating to the matters
provided for herein. No alteration, waiver, amendment, change or
supplement hereto shall be binding or effective unless the same is set
forth in writing signed by a duly authorized representative of each
party.
17. The Company has all requisite corporate power and
authority to enter into this Agreement and the transactions
contemplated hereby (including, without limitation, any Transaction or
Financing). This Agreement has been duly and validly authorized by
all necessary corporate action on the part of the Company and has duly
executed and delivered by the Company and constitutes a legal, valid
and binding agreement of the Company, enforceable in accordance with
its terms.
18. This Agreement does not create, and shall not be
construed as creating, rights enforceable by any person or entity not
a party hereto, except those entitled thereto by virtue of paragraph
11 and the Indemnification Provisions hereof. The Company
acknowledges and agrees that Bear Stearns is not and shall not be
construed as a fiduciary of the Company and shall have no duties or
liabilities to the equity holders or creditors of the Company or any
other person by virtue of this Agreement or the retention of Bear
Stearns hereunder, all of which are hereby expressly waived. The
Company also agrees that Bear Stearns shall not have any liability
(including without limitation, liability for losses, claims, damages,
obligations, penalties, judgments, awards, costs, liabilities,
expenses or disbursements resulting from any negligent act or omission
of Bear Stearns) (whether direct or indirect, in contract, tort or
otherwise) to the Company or to any person (including, without
limitation, equity holders and creditors of the Company) claiming
through the Company for or in connection with the engagement of Bear
Stearns, this Agreement and the transactions contemplated hereby
(including, without limitation, any Transaction, Financing or
Opinion). The Company acknowledges that Bear Stearns was induced to
enter into this Agreement by inter, alia, the provisions of this
paragraph.
19. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto.
Each such counterpart shall be, and shall be deemed to be, an original
instrument, but all such counterparts taken together shall constitute
one and the same Agreement.
If the foregoing correctly sets forth our Agreement, please
sign the enclosed copy of this letter in the space provided and return
it to us.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ David H. Glaser
--------------------
Managing Director
Confirmed and Agreed to
this 23rd day of January 1996
HASBRO, INC.
By: /s/ Harold P. Gordon
---------------------
Name: Harold P. Gordon
Title: Vice Chairman
INDEMNIFICATION PROVISIONS
The Company (as such term is defined in the Agreement (as
such term is defined below)) agrees to indemnify and hold harmless
Bear Stearns to the fullest extent permitted by law, from and against
any and all losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements (and
any and all actions, suits, proceedings and investigations in respect
thereof and any and all legal and other out-of-pocket costs, expenses
and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitations,
the costs, expenses and disbursements, as and when incurred, of
investigating, preparing or defending any such action, suit,
proceeding or investigation (whether or not in connection with
litigation in which Bear Stearns is a party), directly or indirectly,
caused by, relating to, based upon, arising out of or in connection
with (a) Bear Stearns' acting for the Company, including, without
limitation, any act or omission by Bear Stearns in connection with its
acceptance of or the performance or non-performance of its obligations
under the agreement dated As of January 16, 1996 between Bear Stearns
and Hasbro, Inc., as it may be amended from time to time (the
"Agreement"), (b) the Offer (as such terms is defined in the
Agreement), (c) any Transaction (as such term is defined in the
Agreement), (d) any Opinion (as such term is defined in the
Agreement), (e) any Financing (as such term is defined in the
Agreement) or (f) any untrue statement or alleged untrue statement of
a material fact contained in, or omissions or alleged omissions from,
any filing with any Agency (as such terms is defined in the Agreement)
or similar statements or omissions in or from any information
furnished to Bear Stearns, the shareholders of the Company or any
Acquiror (as such term is defined in the Agreement) by the Company;
provided, however, such indemnity agreement shall not apply to any
portion of any such loss, claim, damage, obligation, penalty,
judgment, award, liability, cost, expense or disbursement to the
extent it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful misconduct
of Bear Stearns.
These Indemnification Provisions shall be in addition to any
liability which the Company may otherwise have to Bear Stearns or the
persons indemnified below in this sentence and shall extend to the
following: The Bear Stearns Companies Inc., Bear, Stearns & Co. Inc.,
their respective affiliated entities, directors, officers, employees,
legal counsel, agents and controlling persons of Bear Stearns within
the meaning of the federal securities laws. All references to Bear
Stearns in these Indemnification Provision shall be understood to
include any and all of the foregoing.
If any action, suit, proceeding or investigation is
commenced, as to which Bear Stearns proposes to demand
indemnification, it shall notify the Company with reasonable
promptness; provided, however, that any failure by Bear Stearns to
notify the Company shall not relieve the Company from its obligations
hereunder unless the Company is materially prejudiced by the failure
of Bear Stearns to give such notice. Bear Stearns shall have the
right to retain counsel of its own choice to represent it after
consultation with the Company and such counsel being reasonably
acceptable to the Company, and the Company shall pay the reasonable
fees, expenses and disbursements of such counsel; and such counsel
shall, to the extent consistent with its professional
responsibilities, cooperate with the Company and any counsel
designated by the Company. The Company shall be liable for any
settlement of any claim against Bear Stearns made with the Company's
written consent, which consent shall not be unreasonably withheld.
The Company shall not, without the prior written consent of Bear
Stearns, settle or compromise any claim, or permit a default or
compromise or consent includes, as an unconditional term thereof, the
giving by claimant to Bear Stearns of an unconditional and irrevocable
release from all liability in respect of such claim.
In order to provide for just and equitable contribution, if
a claim for indemnification pursuant to these Indemnification
Provisions is made but it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) that such
indemnification may not be enforced in such case, even though the
express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and Bear Stearns, on the other
hand, shall contribute to the losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs and expenses to which
the indemnified persons may be subject in accordance with the relative
benefits received by the Company, on the one hand, and Bear Stearns,
on the other hand, and also the relative fault of the Company, on the
one hand, and Bear Stearns, on the other hand, in connection with the
statements, acts or omissions which resulted in such losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs
and expenses and the relevant equitable considerations shall also be
considered. No person found liable for a fraudulent misrepresentation
shall be entitled to contribution from any person who is not also
found liable for such fraudulent misrepresentation. Notwithstanding
the foregoing, Bear Stearns shall not be obligated to contribute any
amount hereunder that exceeds the amount of fees previously received
by Bear Stearns pursuant to the Agreement.
Neither termination nor completion of the engagement of Bear
Stearns referred to above shall affect these Indemnification
Provisions which shall then remain operative and in full force and
effect.
EXHIBIT 10(aa)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of this 1st day of
January, 1996 is entered into by Hasbro, Inc., a corporation with its
principal place of business at Pawtucket, Rhode Island (the "Company"), and
Harold P. Gordon (the "Employee").
The Company and the Employee desire to set forth the terms and conditions
governing the Company's employment of the Employee. In consideration of
the mutual covenants and promises contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties agree as follows:
1. Titles; Capacities. The Employee is serving and continues to serve
as Vice Chairman of the Company and in such senior executive positions with
the Company and with domestic and foreign subsidiaries of the Company as
the Company's Board of Directors (the "Board") and the Chairman and Chief
Executive Officer of the Company may reasonably determine from time to
time. The Employee shall be based at the Company's headquarters in
Pawtucket, Rhode Island and shall undertake such domestic and foreign
business travel as shall be reasonably required to fulfill his duties. The
Employee shall be subject to the supervision of, and shall have such
authority as is delegated to him by, the Chairman and Chief Executive
Officer of the Company and the Board.
The Employee shall continue to serve as a Director of the Company. The
Company agrees to use its best efforts to cause the Employee to be
nominated for re-election as a Director upon the expiration of his current
or any future term as a Director and to recommend his election.
The Employee hereby agrees to undertake the duties and responsibilities
inherent in his positions and such other duties and responsibilities as the
Chairman and Chief Executive Officer of the Company or the Board shall from
time to time reasonably assign to him. It is contemplated that a
significant portion of Executive's duties and responsibilities will involve
the Company's foreign operations. The Employee agrees to devote
substantially his entire business time, attention and energies to the
business and interests of the Company during the Employment Period. The
Employee now is a director of several other corporations and renders
consulting services to various clients. The Employee may serve on the
boards of directors of other businesses, trade associations and charitable
organizations, render consulting services, engage in charitable activities
and community affairs and manage his personal investments and affairs as
long as these activities present no conflict of interest and do not
materially interfere with the performance of his duties hereunder.
The Employee agrees to abide in all material respects with the policies
of the Company applicable to senior executives, officers and members of the
Board and any changes therein which may be adopted from time to time by the
Company.
2. Compensation and Benefits.
2.1 Salary and Bonus. Effective February 1, 1996, the Company shall
pay the Employee, in weekly installments, an annual base salary of
$526,000. Such salary shall be subject to upward adjustment thereafter as
determined by the Chairman and Chief Executive Officer, the Board and/or
the Compensation and Stock Option Committee of the Board. In addition, the
Employee shall be eligible to participate in the Company's management
incentive bonus arrangement with a target bonus of 45% of base salary, a
threshold of 10% and a maximum of 90%.
2.2 Stock Retention. The Company and the Employee confirm that
under the current stock retention guidelines adopted by the Compensation
and Stock Option Committee of the Board of Directors, future grants of
premium priced options to Employee will be conditioned upon the Employee's
ownership of 10,000 shares of the Common Stock of the Company, provided,
that in accordance with such policy, Employee will have until February 17,
2000 to establish said ownership level.
2.3 Change in Control. The Company and the Employee are parties to
an Employment Agreement dated as of May 10, 1995 to provide the Employee
with certain additional benefits upon the occurrence of a Change in Control
of the Company (as defined therein) (the "Change in Control Agreement").
The Change in Control Agreement is hereby amended as follows (and, as so
amended, is hereinafter referred to as the "Amended Change in Control
Agreement"):
(a) The following definition is added to Section 1:
"(c) 'Employment Agreement' shall mean the Employment
Agreement, dated as of January 1, 1996, between the
Executive and the Company."
(b) Section 4(a)(i)(B) is amended by inserting "U.S." before the
first occurrence of the word "location".
(c) Section 4(a)(ii) is amended by inserting the following sentence
before the last sentence thereof:
"In addition, it shall not be a violation of this
Agreement for Executive to engage in any activity
permitted by Section 2 of the Employment Agreement."
(d) Section 4(b) is amended by adding a new paragraph (x) at the end
thereof to read in its entirety as follows:
"(x) For purposes of paragraph (ii), the Recent Average
Bonus shall be determined with reference to the actual
number of fiscal years during which the Employee was
employed, if the Employee had been employed during fewer
than three fiscal years. For purposes of paragraph (iii)
the Average Annual Bonus shall be determined with
reference to the actual number of fiscal years during
which the Employee was employed, if the Employee had been
employed during fewer than five fiscal years. Paragraphs
(iv) through (ix) shall be applied by taking into
consideration any plan, procedure, policy or arrangement
referred to in said paragraphs in effect under the
Employment Agreement or otherwise."
(e) Section 6(i) is hereby amended by inserting the following phrase
after the phrase ("the 'Special Termination Amount')":
"(provided, however, that the Executive may elect to defer
payment of all or any part of the Special Termination
Amount until a date within the first two calendar weeks of
January in the year following the year in which the Date
of Termination occurs)."
(f) Section 6(a)(i)(C) is amended by inserting the phrase,
"excluding the plan described in Section 2.4(b) of the Employment
Agreement" after the first occurrence of the word "Executive".
(g) A new Section 6(a)(i)(D) is added to read in its entirety as
follows:
"D. a separate lump-sum benefit equal to the lump-sum
amount payable pursuant to Section 2.4(b) of the
Employment Agreement which the Executive would receive if
the Executive's employment continued at the compensation
level provided for in Section 4(b)(i) and 4(b)(ii) of this
Agreement for the remainder of the Employment Period; and"
(h) Section 12(f) is amended by deleting the first word of the
second sentence thereof and by capitalizing the first remaining word of the
second sentence.
(i) A new Section 12(g) is hereby added to read in its entirety as
follows:
"Any reference to this Agreement in Sections 8 through 12,
above, shall be deemed to refer to the Employment
Agreement as well unless a specific section reference is
made."
Except as amended hereby, the Change in Control Agreement shall remain
unamended and in full force and effect. Any benefits payable under this
Agreement are not intended to replace or supplant any benefits payable
under the Amended Change in Control Agreement.
2.4 Retirement Benefits.
(a) The Employee shall be a participant in the Hasbro, Inc. Pension
Plan (the "Pension Plan") and the Hasbro, Inc. Supplemental Retirement
Benefit Plan (the "Supplemental Plan") on the same basis as other senior
executives of the Company.
(b) In addition, after the Employee's employment terminates for any
reason, the Employee shall receive an annuity payable in monthly
installments, the first such installment being paid on the first day of the
month following the month in which the employee attains age 65 or his
employment terminates, whichever occurs later (subject to earlier
commencement, as referred to below), and the last such installment being
paid on the first day of the month in which the Employee dies, in which the
annual amount is 3.33% of the Employee's Final Average Pay multiplied by
the number of full years the Employee had been employed by the Company at
termination of employment. The amount payable under the preceding sentence
shall be reduced by the sum of the benefits payable to the Employee in the
form of a life annuity commencing at age 65 (or such later date), under (a)
the Pension Plan, (b) the Supplemental Plan and (c) U.S. Social Security.
For purposes of this supplemental retirement benefit the Employee's Final
Average Pay shall be one-fifth of the total salaries and bonuses received
by the Employee in the five highest consecutive years during the Employees'
period of employment. If the Employee had been employed by the Company for
fewer than five years the Employee's Final Average Pay shall be the
annualized average of the Employee's total salary and bonuses during the
period of employment.
At the Employee's option, the benefit described above shall be payable in
any actuarially equivalent annuity form of benefit provided under the
Pension Plan or an actuarially equivalent lump sum, determined using the
actuarial conversion factors used for the Pension Plan. If the benefit
commences prior to age 65, it shall be reduced by the early retirement
reduction factor set forth in the Pension Plan. Any lump sum payment shall
be made during the first two calendar weeks of January in the year
following termination of employment.
The benefits provided under this Section 2.4 shall be unfunded and shall
be paid from the general assets of the Company. The Employee shall have a
right to the benefit hereunder no greater than the right of an unsecured
general creditor of the Company. The benefits are not assignable by the
Employee prior to receipt.
2.5 Life Insurance. The Company shall maintain a key executive life
insurance policy in an amount sufficient to pay the Employee a life annuity
benefit of $225,000 per year payable in equal monthly installments on the
first day of each calender month, the first such payment to be made on the
first day of the month following the month in which occurs the Employee's
65th birthday (or termination of employment, if later) and the last such
payment to be the payment for the month in which the Employee dies. If the
underlying value of such insurance policy is ever insufficient to pay such
annuity payments, then the Company shall pay such annuity payments from its
general assets. If the Employee had been employed for fewer than seven
years upon termination of employment the amount payable shall be determined
as set forth in the following table:
Annual Benefit
Commencing at Age
Full Years of Employment 65, if Retired
------------------------ -----------------
At least 1 but less than 2 $ 32,143
At least 2 but less than 3 $ 64,286
At least 3 but less than 4 $ 96,429
At least 4 but less than 5 $128,571
At least 5 but less than 6 $160,714
At least 6 but less than 7 $192,857
7 or more $225,000
If the Employee's employment is terminated prior to February 1, 2000 by
mutual consent, by constructive termination (as defined in Section 2.6,
below) or involuntarily by the Company without Cause, the Employee shall be
deemed to have completed 5 years of employment and may acquire additional
years of vested benefits at a cost of $216,480 per year, such cost to be
deducted from the severance pay provided under Section 2.6, below. If the
Employee dies prior to the commencement of the annuity payments under this
Section 2.5, the Employee's beneficiary shall be eligible to receive a lump
sum death benefit of $1,500,000 and none of the other amounts set forth in
this Section 2.5 shall be payable. If Employee dies after the commencement
of the annuity payments under this Section 2.5 and before the receipt of
240 monthly annuity payments, monthly annuity payments shall be paid to the
beneficiary of the Employee on their scheduled due dates until the number
of monthly annuity payments made to the Employee and his beneficiary
reaches 240. For purposes of this Agreement, "Cause" shall mean (i)
repeated violations by the Employee of the Employee's obligations under
Section 1 of this Agreement (other than as a result of incapacity due to
physical or mental illness) which are demonstrably willful and deliberate
on the Employee's part, which are committed in bad faith or without
reasonable belief that such violations are in the best interests of the
Company and which are not remedied in a reasonable period of time after
receipt of written notice from the Board specifying such violations or (ii)
the conviction of the Employee of a felony involving moral turpitude.
2.6 Severance Pay. If the Employee's employment is terminated during
the first five years of employment by mutual consent, by constructive
termination or involuntarily by the Company without Cause, the Employee's
base salary payable at the time of such termination shall be continued for
the period set forth in the following table opposite the employment period
in which such termination of employment occurred. If the Company's
severance policy for senior executives would pay a larger benefit, the
Employee shall receive such larger benefit.
Employment Period Period of
During which Termination Occurs Base Pay Continuation
------------------------------- ---------------------
From To
---- --
January 1, 1996 January 31, 1997 3 years
February 1, 1997 January 31, 1998 3 years
February 1, 1998 April 30, 1998 2 years 9 months
May 1, 1998 July 31, 1998 2 years 6 months
August 1, 1998 October 31, 1998 2 years 3 months
November 1, 1998 January 31, 1999 2 years
February 1, 1999 April 30, 1999 1 year 9 months
May 1, 1999 July 31, 1999 1 year 6 months
August 1, 1999 January 31, 2000 1 year 3 months
For purposes of this agreement a constructive termination of the
Employee's employment shall occur if the Employee terminates employment
pursuant to Section 5(c) of the Amended Change in Control Agreement or
within one year after the occurrence of any of the following without the
explicit written consent of the Employee: (a) diminution of
responsibilities, (b) removal from or failure to be reelected to the Board
of Directors of the Company, (c) a change in work location beyond a 50 mile
radius from the Employee's current location of employment (it being
understood that foreign business travel shall not constitute a "change in
work location" for these purposes unless it averages more than one calendar
week per month outside North America), or (d) any breach of Section 2 of
this Agreement or any other material breach of this Agreement by the
Company. The payment of benefits hereunder upon the occurrence of a
constructive termination shall be in addition to, and not in lieu of, any
benefits pursuant to the Amended Change in Control Agreement.
Notwithstanding the preceding provisions of this Section 2.6, if a
constructive termination occurs after the occurrence of a Change in
Control, the Employee shall only be entitled to the greater of the benefits
provided under this Section 2.6 or under Section 6(a)(i)(B) of the Amended
Change in Control Agreement.
2.7 Additional Benefits and Perquisites.
(a) Financial Planning. The Company shall provide the Employee at
its expense with financial planning assistance, such assistance as may be
reasonably required to prepare any income tax returns that the Employee may
be required to file and such assistance as may be reasonably required to
prepare an appropriate estate plan.
(b) Automobile. The Company shall make available to the Employee a
Company automobile allowance or leased automobile suitable to the
Employee's position in accordance with the Company's automobile policy.
(c) Financing. The Company agrees to provide short term financing
to the Employee at rates equivalent to the Company's cost of money during
the Employee's transition to the Company to enable the Employee to meet
Canadian tax obligations or to take advantage of Canadian tax planning
opportunities. In addition, the Company agrees to pay all costs of the
issuance of any letter of credit that may be required by Canadian tax
authorities for exit purposes. If any other issues arise with respect to
differences between the Canadian and U.S. tax systems which would have a
negative effect on the Employee, the Company shall use its best efforts to
provide the necessary financial and legal assistance to eliminate such
negative effect to the extent reasonably practicable.
(d) Relocation. Employee shall be eligible for relocation benefits
under the Company's policy concerning relocation expenses for senior
executives, except that the real estate assistance provided under such
policy shall be made available for both of the Employee's Canadian
residences when these residences are actually offered for sale.
For purposes of computing any real estate market value shortfall payable
to the employee upon sale of each of the Canadian residences, the Company
shall rely on the objective real estate appraisals conducted upon the
employee's commencement of employment.
If the Employee purchases a primary residence in the U.S. and the
Employee's employment is terminated within the first 7 years of employment
by mutual consent, by retirement, or is constructively terminated or
involuntarily terminated without Cause by the Company, the Company shall
provide relocation assistance as may be required to sell the employee's
primary U.S. residence including a guarantee of the original purchase price
of the primary residence plus the fair market value of any capital
improvements.
In addition, the Employee shall receive such additional relocation
benefits as may be agreed upon by the Chairman & Chief Executive Officer of
the Company and the Employee.
2.8 Fringe Benefits. During the employment period, the Employee shall
be entitled to participate in all bonus and benefit plans and programs that
the Company establishes and makes available to its senior executives or
employees generally, as they may be in effect from time to time, if any, to
the extent that Employee's position, tenure, salary, age, health and other
qualifications make him eligible to participate, including, but not limited
to, the programs indicated in the Hasbro Benefits Summary previously
delivered to Employee. The Employee shall be entitled to paid vacation at
the level made available to senior officers generally.
2.9 Reimbursement of Expenses. The Company shall reimburse the
Employee for business expenses pursuant to the Company's Business Expense
Policy that applies to senior executives of the Company.
2.10 Calculation of Years of Employment. For purposes of determining
the Employee's years or period of employment for this Agreement or the
Amended Change in Control Agreement, the Employee shall be deemed to have
worked full time for the Company, without interruption, from February 1,
1995 through the date of determination.
3. Employment Termination. The employment of the Employee by the
Company pursuant to this Agreement shall terminate upon the occurrence of
any of the following:
3.1 At the election of the Company, with or without Cause, immediately
upon written notice by the Company to the Employee;
3.2 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of
the Employee, due to a physical or mental disability, for a continuous
period of 180 days to substantially perform the services contemplated under
this Agreement. A determination of disability shall be made by a physician
satisfactory to both the Employee and the Company, provided that if the
Employee and the Company do not agree on a physician, the Employee and the
Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on
all parties;
3.3 At the election of the Employee upon constructive termination of
employment or otherwise, upon five business days' prior written notice of
termination; or
3.4 By mutual consent of the Employee and the Company.
4. Effect of Termination. In the event the Employee's employment shall
have terminated pursuant to Section 3, the Company shall pay or provide to
the Employee the compensation and benefits otherwise payable or to be
provided to him under Section 2 and the Employee shall be under no
obligation to seek other employment, and there shall be no offset against
amounts due the Employee under this Agreement or the Amended Change in
Control Agreement on account of any remuneration attributable to any
subsequent employment he may obtain.
5. Proprietary Information and Developments. The Employee agrees to
execute the Company's standard Invention Assignment and Proprietary
Information Agreement.
6. Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or
upon deposit in the United States Post Office, by registered or certified
mail, postage prepaid, addressed to the other party at the address shown
above, or at such other address or addresses as either party shall
designate to the other in accordance with this Section 6.
7. Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular forms of nouns and pronouns shall include
the plural, and vice versa.
8. Entire Agreement. This Agreement, together with the agreements
referred to in Sections 2.3 and 4, constitutes the entire agreement between
the parties and supersedes all prior agreements and understandings, whether
written or oral, relating to the subject matter of this Agreement.
9. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
10. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Rhode Island.
11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may
be merged or which may succeed to its assets or business, provided,
however, that the obligations of the Employee are personal and shall not be
assigned by him. Notwithstanding the foregoing, the Company may, with the
Employee's consent, assign an appropriate portion of its obligations
hereunder to one or more of its foreign subsidiaries.
12. Miscellaneous.
12.1 No delay or omission by the Company or the Employee in exercising
any right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or the Employee on
any one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
12.2 The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
12.3 The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
12.4 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
HASBRO, INC.
By: /s/ Alan G. Hassenfeld
--------------------------------
Title: Chairman and CEO
-----------------------------
EMPLOYEE
/s/ Harold P. Gordon
-----------------------------------
Harold P. Gordon
EXHIBIT 10(bb)
SEVERANCE AND SETTLEMENT AGREEMENT AND RELEASE
AGREEMENT made as of the 20th day of December, 1995, by and between
Hasbro, Inc. (the "Company") and Dan D. Owen ("the Employee").
WHEREAS, the parties wish to establish the terms of the Employee's
severance arrangement and to provide severance compensation to the Employee
in consideration for restricting his right to compete with the Company;
NOW, THEREFORE, in consideration of the promises and conditions set
forth herein, the sufficiency of which is hereby acknowledged, the Company
and the Employee agree as follows:
1. Monetary Consideration. In the event of the involuntary
termination without cause of the Employee's employment by the Company or
the Employee's constructive termination, the Company agrees to continue to
pay the Employee an amount equal to the equivalent of two years' base
salary in effect on the date of termination, plus any applicable bonuses,
less all applicable state and federal taxes as severance pay ("severance
pay"). The severance pay will be paid to the Employee in equal periodic
payments which correspond to the payment periods then in effect at the time
of his termination. In addition to severance pay, in the event of any such
termination, the Employee will also receive for the period of one year, in
accordance with the Company's policies then in effect, (a) use of a leased
car and (b) health insurance. In addition, the Employee shall have the
right to exercise all stock options for the Company's stock in accordance
with the terms of the applicable stock option plans. In the event the
Employee obtains employment during the first year following his
termination, his use of a leased car and health insurance shall immediately
terminate.
A termination shall be deemed to be "for cause" if based upon a
good faith finding by the Company of a material failure of the Employee to
perform his assigned duties for the Company, dishonesty, gross negligence
or misconduct. For the purposes of this Agreement, a constructive
termination of the Employee's employment shall occur if the Employee
terminates employment within one year after the occurrence of any of the
following without the explicit written consent of the Employee:
(a) substantial diminution of responsibilities or compensation or (b) a
change in work location beyond a 100 mile radius from the Employee's
current location of employment. In the event the Employee's employment
terminates due to death, the Employee or his estate shall receive an amount
equivalent to four months' salary and any applicable bonus, on a prorated
basis, less all applicable state and federal taxes, as severance pay.
In the event the Employee's employment is terminated by either
the Company or the Employee due to disability, the Employee shall be
entitled to receive severance pay in the same amount, on the same terms and
paid on the same basis, as if he had been involuntarily terminated without
cause; provided, however, that the amount of the Employee's severance pay
shall be reduced by any amounts he is eligible to receive under the
Company's long-term disability plan or any other similar insurance plans of
the Company in which the Employee participates. As used in this Agreement,
the term disability shall mean the inability of the Employee to perform his
assigned duties, due to a physical or mental disability, for a period of
120 days, whether or not consecutive, during any 360-day period. A
determination of disability shall be made by a physician satisfactory to
both the Employee and the Company, provided that if the Employee and the
Company do not agree on a physician, the Employee and the Company shall
each select a physician and these two together shall select a third
physician, whose determination as to disability shall be binding on all
parties. In the event the Employee is terminated without cause or is
constructively terminated, the Company shall be obligated to pay what would
otherwise be the Employee's obligation to make payments for medical
insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA).
2. Release. Immediately following his termination without cause or
constructive termination, the Employee agrees to sign a release and
covenant not to sue (the "Release") in the form appended hereto as
Exhibit A or in such other form as may be requested by the Company. The
Company shall not be obligated to make any payments pursuant to paragraph 1
of this agreement unless and until it receives a release in a form
satisfactory to the Company. The other provisions of this Agreement,
including but not limited to paragraphs 3 and 4, shall be in force and
effect even if the Employee does not sign the Release and covenant not to
sue as required by this paragraph.
3. Non-Compete.
(a) During the period of the severance agreement, the Employee
will not directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other
capacity whatsoever (other than as the holder of not more than one percent
(1%) of the total outstanding stock of a publicly held company), engage in
directly or indirectly the marketing, distribution or sale of toys, or any
enterprise whose business, in whole or in substantial part, is the
development, manufacture or sale of toys in competition with Hasbro, Inc.
or any of its subsidiaries or affiliates; or
(ii) recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company to terminate their employment with, or
otherwise cease their relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or active prospects, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
(b) If any restriction set forth in this Section is found by any
court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which
it may be enforceable.
(c) The restrictions contained in this Section are necessary for
the protection of the business and goodwill of the Company and are
considered by the Employee to be reasonable for such purpose. The Employee
agrees that any material breach of this Section will cause the Company
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the
Company shall have the right to seek specific performance and injunctive
relief.
4. Proprietary Information.
(a) Employee agrees that all information and know-how, whether or
not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company. By
way of illustration, but not limitation, Proprietary Information may
include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data,
clinical data, financial data, personnel data, computer programs, and
customer and supplier lists. Employee will not disclose any Proprietary
Information to others outside the Company or use the same for any
unauthorized purposes without written approval by an officer of the
Company, either during or after his employment, unless and until such
Proprietary Information has become public knowledge without fault by the
Employee.
(b) Employee agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings,
or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Employee or others, which
shall come into his custody or possession, shall be and are the exclusive
property of the Company to be used by the Employee only in the performance
of his duties for the Company.
(c) Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a)
and (b) above, also extends to such types of information, know-how, records
and tangible property of customers of the Company or suppliers to the
Company or other third parties who may have disclosed or entrusted the same
to the Company or to the Employee in the course of the Company's business.
5. No Reinstatement. The Employee understands and agrees that, as a
condition for payment to him of the above-described sums, he shall not be
entitled to any employment with the Company or with any of its corporate
affiliates at any time in the future, and that he will not apply for
employment with the Company or with any of its corporate affiliates unless
the Company requests in writing that he apply for such employment.
6. Nature of Agreement. The Employee understands and agrees that
this Agreement is a severance and settlement agreement and does not
constitute an admission of liability or wrongdoing on the part of the
Company.
7. Amendment. This Agreement shall be binding upon the parties and
may not be abandoned, supplemented, changed or modified in any manner,
orally or otherwise, except by an instrument in writing of concurrent or
subsequent date signed by a duly authorized representative of the parties
hereto. This Agreement is binding upon and shall inure to the benefit of
the parties and their respective agents, assigns, heirs, executors,
successors and administrators.
8. Validity. Should any provision of this Agreement be declared or
be determined by any court of competent jurisdiction to be illegal or
invalid, the validity of the remaining parts, terms, or provisions shall
not be affected thereby and said illegal and invalid part, term or
provision shall be deemed not to be a part of this Agreement.
9. Confidentiality. The Employee understands and agrees that the
terms and contents of this Agreement, and the contents of the negotiations
and discussions resulting in this Agreement, shall be maintained as
confidential by the Employee, his agents and representatives, and the
dispute resolved by this Agreement shall also remain confidential, and none
of the above shall be disclosed except to the extent required by federal or
state law or as otherwise agreed to in writing by the authorized agent of
each party.
10. Entire Agreement. This Agreement contains and constitutes the
entire understanding and agreement between the parties hereto with respect
to the severance and settlement and cancels all previous oral and written
negotiations, agreements, commitments, and writings in connection
therewith.
11. References. In the event of any termination of the Employee's
employment, for any reason whatsoever, the Company will respond to all
inquiries for recommendations, references, or other information about the
Employee with the specific dates of his employ, position, title, and
responsibilities, and will provide no evaluation, assessment, reference, or
other information without the prior written consent of the Employee.
12. Applicable Law. This Agreement shall be governed by the laws of
the State of Rhode Island.
13. Acknowledgments. The Employee acknowledges that he has been
given twenty-one (21) days to consider this Agreement and that the Company
advised him to consult with an attorney of his own choosing prior to
signing this Agreement. The Employee may revoke this Agreement for a
period of seven (7) days after the execution of this Agreement, and the
Agreement shall not be effective or enforceable until the expiration of
this seven (7) day revocation period.
14. Voluntary Assent. The Employee affirms that no other promises or
agreements of any kind have been made to or with him by any person or
entity whatsoever to cause him to sign this Agreement, and that he fully
understands the meaning and intent of this Agreement. The Employee states
and represents that he has had an opportunity to fully discuss and review
the terms of this Agreement with an attorney. The Employee further states
and represents that he has carefully read this Agreement, understands the
contents herein, freely and voluntarily assents to all of the terms and
conditions hereof, and signs his name of his own free act.
IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written above.
By: /s/ Dan D. Owen Date: December 14, 1995
-------------------------
By: /s/ Alfred J. Verrecchia Date: December 20, 1995
-------------------------
Exhibit A
Release. The Employee hereby fully, forever, irrevocably and
unconditionally releases, remises and discharges the Company, its officers,
directors, stockholders, corporate affiliates, agents and employees from
any and all claims, charges, complaints, demands, actions, causes of
action, suits, rights, debts, sums of money, costs, accounts, reckonings,
covenants, contracts, agreements, promises, doings, omissions, damages,
executions, obligations, liabilities, and expenses (including attorneys'
fees and costs), of every kind and nature which he ever had or now has
against the Company, its officers, directors, stockholders, corporate
affiliates, agents and employees, including, but not limited to, all claims
arising out of his employment, all employment discrimination claims under
Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000e et seq.,
the Age Discrimination in Employment Act, 29 U.S.C. Section 621 et seq.,
and M.G.L. c.151B, Section 1 et seq., the Americans With Disabilities Act,
29 U.S.C. Section 706 et seq., damages arising out of all employment
discrimination claims, wrongful discharge claims or other statutory or
common law claims and damages. This paragraph shall not release the
Employee's right to enforce the terms of the Agreement by and between
Hasbro, Inc. and Dan D. Owen dated December 20, 1995.
Covenant Not To Sue. The Employee further represents and warrants
that he has not filed any complaints, charges, or claims for relief against
the Company, its officers, directors, stockholders, corporate affiliates,
agents or employees with any local, state or federal court or
administrative agency which currently are outstanding. If he has done so,
he will forthwith dismiss all such complaints, charges, or claims for
relief with prejudice. The Employee further agrees and covenants not to
bring any complaints, charges or claims against the Company, its officers,
directors, stockholders, corporate affiliates, agents or employees with
respect to any matters arising out of his employment with or termination by
the Company. This paragraph shall not release the Employee's right to
enforce the terms of the Agreement by and between Hasbro, Inc. and Dan D.
Owen dated December 20, 1995.
By: Date:
-------------------------
March 28, 1996
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, RI 02862
Attention Alfred J. Verrecchia
Chief Operating Officer
Domestic Toy Operations
Dear Al:
I refer to my employment agreement (the "Change of Control Agreement"),
dated as of August 3, 1995 and my Severance and Settlement Agreement and
Release dated as of December 20, 1995 (the "Severance Agreement"). This
will confirm that upon the "Effective Date" of the Change of Control
Agreement, as defined in the Change of Control Agreement, the Change of
Control Agreement shall supersede my Severance Agreement and the Severance
Agreement shall, as of the Effective Date, no longer be in effect.
Very truly yours,
/s/ Dan D. Owen
- - ----------------
Dan D. Owen
ACCEPTED AND AGREED:
HASBRO, INC.
By: /s/ Alfred J. Verrecchia
-------------------------
EXHIBIT 11
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(Thousands of Dollars and Shares Except Per Share Data)
1995 1994 1993
--------------- --------------- ---------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
Net earnings before
cumulative effect of
change in accounting
principles $155,571 155,571 179,315 179,315 200,004 200,004
Interest and amortization
on convertible notes,
net of taxes - 5,763 - 5,764 - 5,745
------- ------- ------- ------- ------- -------
Net earnings before
cumulative effect of
change in accounting
principles applicable
to common shares 155,571 161,334 179,315 185,079 200,004 205,749
Cumulative effect of
change in accounting
principles - - (4,282) (4,282) - -
------- ------- ------- ------- ------- -------
Net earnings applicable
to common shares $155,571 161,334 175,033 180,797 200,004 205,749
======= ======= ======= ======= ======= =======
Weighted average number
of shares outstanding:
Outstanding at
beginning of period 87,528 87,528 87,795 87,795 87,176 87,176
Exercise of stock
options and warrants:
Actual 204 204 305 305 304 304
Assumed 577 664 1,529 1,529 2,551 2,647
Assumed conversion
of convertible notes - 5,114 - 5,114 - 5,114
Purchase of common stock (56) (56) (298) (298) - -
------- ------- ------- ------- ------- -------
Total 88,253 93,454 89,331 94,445 90,031 95,241
======= ======= ======= ======= ======= =======
Per common share:
Earnings before
cumulative effect of
change in accounting
principles $ 1.76 1.73 2.01 1.96 2.22 2.16
Cumulative effect of
change in accounting
principles - - (.05) (.05) - -
------- ------- ------- ------- ------- -------
Net earnings $ 1.76 1.73 1.96 1.91 2.22 2.16
======= ======= ======= ======= ======= ======
EXHIBIT 12
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Fiscal Years Ended in December
(Thousands of Dollars)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Earnings available for
fixed charges:
Net earnings $155,571 175,033 200,004 179,164 81,654
Add:
Cumulative effect of
change in accounting
principles - 4,282 - - -
Fixed charges 52,422 44,280 42,839 48,050 52,801
Taxes on income 96,979 112,254 125,206 113,212 63,897
------- ------- ------- ------- -------
Total $304,972 335,849 368,049 340,426 198,352
======= ======= ======= ======= =======
Fixed charges:
Interest on long-term
debt $ 9,267 11,179 10,178 16,932 22,913
Other interest charges 28,321 19,610 19,636 18,959 19,417
Amortization of debt
expense 339 429 386 623 267
Rental expense representa-
tive of interest factor 14,495 13,062 12,639 11,536 10,204
------- ------- ------- ------- -------
Total $ 52,422 44,280 42,839 48,050 52,801
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges 5.82 7.58 8.59 7.08 3.76
======= ======= ======= ======= =======
EXHIBIT 13
HASBRO, INC. AND SUBSIDIARIES
Selected Information Contained in
Annual Report to Shareholders
for the Year Ended December 31, 1995
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
- - ------ ---- --- --------------
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
1995
1st Quarter $33 7/8 28 3/8 $.08
2nd Quarter 35 1/4 31 3/8 .08
3rd Quarter 33 1/2 29 3/4 .08
4th Quarter 32 5/8 28 1/2 .08
The approximate number of holders of record of the Company's Common Stock as
of March 1, 1996 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
31, 1995, under the most restrictive agreement the full amount of retained
earnings is free of restrictions.
On February 16, 1996 the Company's Board of Directors declared a quarterly
cash dividend on the Company's Common Stock of $.10 per share payable on May
17, 1996 to holders of record on May 3, 1996.
SELECTED FINANCIAL DATA
- - -----------------------
(Thousands of Dollars and Shares Except per share Data and Ratios)
Fiscal Year
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Statement of
Earnings Data:
Net revenues $2,858,210 2,670,262 2,747,176 2,541,055 2,141,096
Net earnings
before cumulative
effect of change
in accounting
principles $ 155,571 179,315 200,004 179,164 81,654
Net earnings $ 155,571 175,033 200,004 179,164 81,654
Per Common Share
Data:
Net earnings
before cumulative
effect of change
in accounting
principles $ 1.76 2.01 2.22 2.01 .94
Net earnings $ 1.76 1.96 2.22 2.01 .94
Cash dividends
declared $ .32 .28 .24 .20 .16
Balance Sheet Data:
Total assets $2,616,388 2,378,375 2,293,018 2,082,766 1,950,127
Long-term debt $ 149,991 150,000 200,510 206,189 380,304
Ratio of Earnings
to Fixed Charges (1) 5.82 7.58 8.59 7.08 3.76
Weighted Average
Number of Common
Shares 88,253 89,331 90,031 89,086 86,983
(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:
1995 1994 1993
---- ---- ----
Net revenues 100.0% 100.0% 100.0%
Cost of sales 43.3 43.5 43.0
----- ----- -----
Gross profit 56.7 56.5 57.0
Amortization 1.4 1.4 1.3
Royalties, research and development 10.7 10.2 10.2
Discontinued development project 1.1 - -
Advertising 14.6 14.9 14.0
Selling, distribution and administration 19.4 18.5 18.1
Restructuring - .5 .6
Interest expense 1.3 1.1 1.1
Other income, net (.6) (1.0) (.1)
----- ----- -----
Earnings before income taxes and cumulative
effect of change in accounting principles 8.8 10.9 11.8
Income taxes 3.4 4.2 4.5
----- ----- -----
Earnings before cumulative effect of change
in accounting principles 5.4 6.7 7.3
Cumulative effect of change in accounting
principles - (.1) -
----- ----- -----
Net earnings 5.4% 6.6% 7.3%
===== ===== =====
(Thousands of Dollars Except Share Data)
Results of Operations
- - ---------------------
Net revenues for 1995 were $2,858,210 compared to $2,670,262 and $2,747,176
for 1994 and 1993, respectively. Within the United States, the games group
enjoyed another year of record revenues, up almost 15% over 1994. Their
classics, such as Monopoly(R) and Scrabble(R) continued to show their
staying power while new products, including Lucky Ducks(TM) and Chicken
Limbo(TM) received very favorable consumer acceptance. During 1995, the
Company introduced its first interactive game, a CD-ROM version of Monopoly,
which had an excellent sell-through. Within the toy group, boys' toys were
led by the Batman(R) and Star Wars(R) action figures. Radio-controlled
vehicles, the 9.6 volt version of Ricochet(TM) in its second year and its
new 6.0 volt version, also performed well. Activities, with its perennial
favorites such as Play Doh(R) and Easy Bake(R) Oven, had a good year. The
girls' area, however, proved to be the Company's biggest disappointment,
experiencing a significant decline in revenues from those of the prior year.
In the infant and preschool arena, the newly introduced Playskool(R)
Playstore had a good first year as did Cool Tools(TM), now in its second
year. The Company's growth in the international marketplace approximated 13%
in 1995 following approximately 10% in 1994. European growth was led by the
U.K., benefiting from the late 1994 acquisition of the Games Division of
John Waddington PLC, France and new operations in Scandinavia, all partially
offset by a difficult year in Germany. Elsewhere, the Asian units, Canada
and Mexico also showed growth in local currency. The impact of the continued
weakening of the Mexican currency was such, however, that, when translated
into U.S. dollars, Mexican revenues were significantly less than those of a
year ago. In the aggregate, however, changed foreign currency rates had a
positive impact of approximately $30,000 in 1995 and $19,000 in 1994. Lower
consumer demand for two lines of licensed products during 1994, Barney(TM)
and Jurassic Park(TM), which provided approximately $220,000 of revenues
during 1993, was the major contributor to the Company's decrease in revenues
between 1993 and 1994, with these items contributing less than $50,000 of
revenues in 1994.
The Company's gross profit margin increased slightly to 56.7% from 56.5% in
1994 which had decreased from 57.0% in 1993. The improvement in 1995 results
from a combination of factors including a more favorable mix of products
sold, the initial efficiencies from recent plant consolidations and the
effect of GATT, all partially offset by increased material costs,
specifically paper board and plastic resin.
Amortization expense, which includes amortization of both property rights
and cost in excess of net assets acquired, of $38,471 compares with $36,903
in 1994 and $35,366 in 1993. These increases were attributable to the
acquisitions during the respective years.
Expenditures for royalties, research and development increased to $304,704
from $273,039 in 1994, while in 1993 they were $280,571. Included in these
amounts are expenditures for research and development of $148,057 in 1995,
$135,406 in 1994 and $125,566 in 1993. As percentages of net revenues,
research and development was 5.2% in 1995, up marginally from 5.1% in 1994
and 4.6% in 1993. The increase in 1995 results from the Company's expanded
product line, including its interactive CD-ROM games, partially offset by
the decrease in costs associated with the now discontinued efforts to
develop a mass-market virtual reality game system (see below). The increased
percentage in 1994 was largely attributable to this game system. The
increased royalties in 1995, both in amount and as a percentage of net
revenues, were primarily attributable to the higher proportion of the
Company's revenues arising from licensed products. The 1994 decrease from
1993 was largely due to the previously mentioned Barney and Jurassic Park
products.
During the second quarter of 1995, the Company discontinued its efforts,
begun in 1992, related to the development of a mass-market virtual reality
game system. These efforts produced such a game system, but at a price
judged to be too expensive for the mass-market. The impact of this decision
on the quarter was a charge of $31,100, the estimated costs associated with
such action. Approximately half of the charge resulted from the expensing of
software development costs related to both the operating system and games
for the system. These costs were previously capitalized under the provisions
of Statement of Financial Accounting Standards No. 86. The remaining amount
represented provisions for costs associated with discontinuing this project,
including the termination of contractual agreements relating to the
development of the system and games, the write-off of certain fixed assets
and various other cancellation/termination costs.
During 1995, selling, distribution and administration costs increased to
19.4% of revenues from 18.5% in 1994 and 18.1% in 1993. The 1995 increase
resulted from investment spending in certain newly organized and acquired
operations, an overall rise in the Company's costs associated with
distributing its products and the impact of general increases in expense
levels, including costs associated with the 53rd week of operations included
in the current fiscal year.
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 United States manufacturing facilities. To
provide for these and other immaterial restructuring costs, the Company
recorded a $12,500 pretax charge during the third quarter. During the fourth
quarter of 1993, the Company recorded a $15,500 charge related to the
planned closure of its Netherlands manufacturing facility and other non-
recurring reorganization expenses classified as restructuring charges. The
amounts in both years include facility costs, severance and other related
costs.
Interest expense was $37,588 during 1995 compared to $30,789 during 1994 and
$29,814 in 1993. The increase during the current year reflected the impact
of higher interest rates and the Company's increased use of funds for
acquisitions during the latter part of 1994 and in 1995. The increase in
1994 from 1993 reflected the effect of increased interest rates partially
offset by the availability of funds generated from operations during 1993.
Other income of $16,566 in 1995 compares with $26,681 and $3,836 in 1994 and
1993, respectively. During 1994, the Company disposed of its minority
investments in J.W. Spear & Sons PLC and Virgin Interactive Entertainment
plc, realizing an aggregate pretax gain of approximately $23,000. Absent the
impact of this gain, other income in 1995 increased approximately $13,000,
largely the result of increased earnings from available funds. These funds,
principally in the international units, are invested on a short-term basis
locally.
Liquidity and Capital Resources
- - -------------------------------
The Company continued to have a strong and highly liquid balance sheet with
cash and cash equivalents of $161,030 at December 31, 1995. Cash and cash
equivalents were $137,028 and $186,254 at December 25, 1994 and December
26, 1993, respectively.
During 1995, the Company generated $227,400 of net cash from its operating
activities compared with $283,785 in 1994 and $217,237 in 1993. Included in
this amount in 1995 was a net utilization of $67,117 for changes in
operating assets and liabilities, primarily accounts receivable and
inventories. The Company's accounts receivable were approximately 10%
greater in 1995 than in 1994, reflecting both the increased level of fourth
quarter sales, significant portions of which did not become due until after
the end of the Company's fiscal year, and the impact of its new operations.
Inventories, up more than 25%, also reflected the impact of new operations
and expanded product lines as well as a planned increase to allow the
Company to provide faster and more complete shipment of customer orders.
Partially offsetting these utilizations was the increase in trade payables
and other accrued liabilities reflecting the Company's increased and
expanded levels of operations. The net change in operating assets and
liabilities provided a relatively small amount of cash to the Company in
1994 while in 1993 utilized $80,594, principally due to higher receivables
resulting from the increased fourth quarter sales.
Cash flows from investing activities were a net utilization of funds during
all three reported years; $209,331, $244,178 and $126,001 in 1995, 1994 and
1993, 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, 56% in 1995, 43% in 1994 and 44% in 1993 were
for purchases of tools, dies and molds related to the Company's products.
During those three years, depreciation and amortization expenses were
$91,437, $85,368 and $65,282, respectively. In 1995, the Company purchased
certain products, primarily the Super Soaker(TM) line, and other assets from
the Larami Group of companies for $88,135 and made several other smaller
investments. 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 $176,194 and made several
other investments. During 1993 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 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
1996, 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, 1996, the Company's unused committed and uncommitted lines of
credit, including a $440,000 revolving credit agreement, were in excess of
$1,300,000.
During 1995, net financing activities provided a small amount of funds to
the Company while during 1994 and 1993 they resulted in a larger utilization
of funds. During 1995, the Company met its seasonal working capital
requirements through short-term borrowings as in prior years. Unlike prior
years, however, significant amounts were obtained through borrowings with
maturities of three to nine months. During the year, the Company also
repurchased more than $15,000 of its common stock. 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.
Under prior authorizations of the Board of Directors (the Board) and the
Executive Committee of the Board, the Company repurchased 496,400 shares of
its common stock during 1995 and may repurchase up to an additional
6,067,700 shares. The Company anticipates that it will continue such
purchases in the future when it deems conditions to be favorable. The shares
acquired under these programs are being used for corporate purposes
including issuance upon the exercise of stock options.
Foreign Currency Activity
- - -------------------------
The Company manages its foreign exchange exposure in various ways including
forward exchange contracts 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 31, 1995 and December 25, 1994, 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 increased to $23,450 at December 31, 1995
from $14,526 at December 25, 1994. This increase was due to the relationship
of the U.S. dollar relative to currencies in other 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 1995. 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 1995 was not
significant and the Company will continue its policy of monitoring costs and
adjusting prices accordingly.
Other Information
- - -----------------
During the fourth quarter of 1993, the Company recorded a restructuring
charge of $15,500, primarily relating to the planned closure of the
Company's manufacturing facility in The Netherlands. The Company had
initially planned to cease production at this facility during the second
quarter of 1994 but was unable to do so. The actions necessary to comply
with local regulations relating to such a closure took longer than
anticipated and the Company did not cease production at this facility until
the first quarter of 1995. A majority of the liability established for this
closure has now been satisfied and the Company has begun to experience the
positive results from this action including both the elimination of costs
associated with the previously existing excess production capacity and the
transfer of production to lower-cost manufacturing facilities. The remaining
amount provided in 1993 related to several items, none of which were
significant, either in cost or anticipated benefits. All of the liabilities
established for such items have been satisfied and the expected benefits are
being obtained.
During the third quarter of 1994 the Company recorded a restructuring charge
of $12,500, primarily to cover costs associated with the restructuring of
certain of its domestic operations. Included in such amount was a provision
of approximately $4,400 for the costs associated with the termination of
approximately 100 management employees. Substantially all of these employees
have been terminated and a majority of the liability has been satisfied.
Also part of this charge was a provision of approximately $3,400 for the
costs associated with the termination of approximately 485 domestic
manufacturing employees. Substantially all of these employees have also been
terminated and a majority of the liability has been satisfied. The Company
believes that the reorganized units are operating more efficiently and thus
the anticipated savings, although impractical to quantify, are being
experienced.
The Company's revenue pattern continues to show the second half of the year
more significant to its overall business and within that half, the fourth
quarter most prominent. The Company believes that this will continue in
1996.
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 October 23, 1995, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation (SFAS 123). SFAS 123 encourages, but does not require,
companies to adopt a new accounting method, recording the estimated fair
value of employee stock options as compensation expense. If such new method
is not adopted, proforma disclosure must be provided in a note to the
financial statements. As the Company plans to provide the required proforma
disclosure only, the adoption of SFAS 123 in 1996 will not have an impact on
either its operating results or financial condition.
During 1996, the Company will also adopt Statement of Financial Accounting
Standards No. 121, Accounting for Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of (SFAS 121). The Company does not believe that the
adoption of SFAS 121 will have a material impact on either its operating
results or financial condition.
On February 19, 1996, the Company announced a 25% increase in its quarterly
cash dividend from that previously in effect. The first dividend at the
increased rate of $.10 per share is payable on May 17, 1996 to shareholders
of record on May 3, 1996.
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 31, 1995 and December 25, 1994
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 31, 1995. 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 as of December 31, 1995 and December 25, 1994
and the results of their operations and their cash flows for each of the
fiscal years in the three-year period ended December 31, 1995 in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
February 7, 1996
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and December 25, 1994
(Thousands of Dollars Except Share Data)
Assets 1995 1994
------ ---- ----
Current assets
Cash and cash equivalents $ 161,030 137,028
Accounts receivable, less allowance for
doubtful accounts of $48,800 in 1995
and $51,000 in 1994 791,111 717,890
Inventories 315,620 244,407
Prepaid expenses and other current assets 157,737 153,138
--------- ---------
Total current assets 1,425,498 1,252,463
Property, plant and equipment, net 313,240 308,879
--------- ---------
Other assets
Cost in excess of acquired net assets, less
accumulated amortization of $99,404 in 1995
and $82,949 in 1994 473,388 479,960
Other intangibles, less accumulated amortization
of $79,648 in 1995 and $58,178 in 1994 343,624 295,333
Other 60,638 41,740
--------- ---------
Total other assets 877,650 817,033
--------- ---------
Total assets $2,616,388 2,378,375
========= =========
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1995 and December 25, 1994
(Thousands of Dollars Except Share Data)
Liabilities and Shareholders' Equity 1995 1994
------------------------------------ ---- ----
Current liabilities
Short-term borrowings $ 119,987 81,805
Trade payables 198,328 165,378
Accrued liabilities 433,567 417,763
Income taxes 117,982 98,786
--------- ---------
Total current liabilities 869,864 763,732
Long-term debt 149,991 150,000
Deferred liabilities 70,921 69,226
--------- ---------
Total liabilities 1,090,776 982,958
--------- ---------
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 88,086,108 shares
in 1995 and 88,085,802 shares in 1994 44,043 44,043
Additional paid-in capital 279,288 282,151
Retained earnings 1,201,242 1,071,416
Cumulative translation adjustments 23,450 14,526
Treasury stock, at cost, 741,237 shares in 1995
and 557,455 shares in 1994 (22,411) (16,719)
--------- ---------
Total shareholders' equity 1,525,612 1,395,417
--------- ---------
Total liabilities and shareholders' equity $2,616,388 2,378,375
========= =========
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)
1995 1994 1993
---- ---- ----
Net revenues $2,858,210 2,670,262 2,747,176
Cost of sales 1,237,197 1,161,479 1,182,567
--------- --------- ---------
Gross profit 1,621,013 1,508,783 1,564,609
--------- --------- ---------
Expenses
Amortization 38,471 36,903 35,366
Royalties, research and development 304,704 273,039 280,571
Discontinued development project 31,100 - -
Advertising 417,886 397,094 383,918
Selling, distribution and administration 555,280 493,570 498,066
Restructuring charges - 12,500 15,500
--------- --------- ---------
Total expenses 1,347,441 1,213,106 1,213,421
--------- --------- ---------
Operating profit 273,572 295,677 351,188
--------- --------- ---------
Nonoperating (income) expense
Interest expense 37,588 30,789 29,814
Other (income), net (16,566) (26,681) (3,836)
--------- --------- ---------
Total nonoperating expense 21,022 4,108 25,978
--------- --------- ---------
Earnings before income taxes and
cumulative effect of change in
accounting principles 252,550 291,569 325,210
Income taxes 96,979 112,254 125,206
--------- --------- ---------
Earnings before cumulative
effect of change in accounting
principles 155,571 179,315 200,004
Cumulative effect of change in
accounting principles - (4,282) -
--------- --------- ---------
Net earnings $ 155,571 175,033 200,004
========= ========= =========
Per common share
Earnings before cumulative effect
of change in accounting principles $ 1.76 2.01 2.22
========= ========= =========
Net earnings $ 1.76 1.96 2.22
========= ========= =========
Cash dividends declared $ .32 .28 .24
========= ========= =========
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Fiscal Years Ended in December
(Thousands of Dollars)
1995 1994 1993
---- ---- ----
Common stock
Balance at beginning of year $ 44,043 43,898 43,588
Stock option and warrant transactions - 145 310
--------- --------- ---------
Balance at end of year 44,043 44,043 43,898
--------- --------- ---------
Additional paid-in capital
Balance at beginning of year 282,151 296,823 287,478
Stock option and warrant transactions (2,872) (14,672) 9,345
Other 9 - -
--------- --------- ---------
Balance at end of year 279,288 282,151 296,823
--------- --------- ---------
Retained earnings
Balance at beginning of year 1,071,416 920,956 741,987
Net earnings 155,571 175,033 200,004
Dividends declared (28,050) (24,573) (21,035)
Other 2,305 - -
--------- --------- ---------
Balance at end of year 1,201,242 1,071,416 920,956
--------- --------- ---------
Cumulative translation adjustments
Balance at beginning of year 14,526 15,006 32,568
Equity adjustments from foreign
currency translation 8,924 (480) (17,562)
--------- --------- ---------
Balance at end of year 23,450 14,526 15,006
--------- --------- ---------
Treasury stock
Balance at beginning of year (16,719) - -
Purchases (15,228) (26,140) -
Stock option and warrant transactions 9,536 9,421 -
--------- --------- ---------
Balance at end of year (22,411) (16,719) -
--------- --------- ---------
Total shareholders' equity $1,525,612 1,395,417 1,276,683
========= ========= =========
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended in December
(Thousands of Dollars)
1995 1994 1993
---- ---- ----
Cash flows from operating activities
Net earnings $155,571 175,033 200,004
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization of plant
and equipment 91,437 85,368 65,282
Other amortization 38,471 36,903 35,366
Deferred income taxes (9,149) (1,245) 2,281
Gain on investments (474) (25,284) -
Discontinued development costs 13,256 - -
Change in operating assets and liabilities
(other than cash and cash equivalents):
(Increase) decrease in accounts
receivable (66,658) 9,871 (90,833)
(Increase) decrease in inventories (64,686) 28,678 (34,088)
(Increase) in prepaid expenses and
other current assets (1,633) (3,142) (8,434)
(Decrease) increase in trade payables
and other current liabilities 65,860 (22,231) 52,761
Other 5,405 (166) (5,102)
------- ------- -------
Net cash provided by operating
activities 227,400 283,785 217,237
------- ------- -------
Cash flows from investing activities
Additions to property, plant and
equipment (100,639) (110,944) (99,792)
Investments and acquisitions, net of
cash acquired (117,406) (192,379) (32,171)
Purchase of marketable securities - - (141,411)
Sale of investments 1,715 59,322 141,839
Other 6,999 (177) 5,534
------- ------- -------
Net cash utilized by investing
activities (209,331) (244,178) (126,001)
------- ------- -------
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Fiscal Years Ended in December
(Thousands of Dollars)
1995 1994 1993
---- ---- ----
Cash flows from financing activities
Proceeds from borrowings with original
maturities of more than three months 433,646 - -
Repayments of borrowings with original
maturities of more than three months (416,515) (53,736) (11,705)
Net (payments) proceeds of other
short-term borrowings 20,997 18,938 (9,054)
Purchase of common stock (15,228) (26,140) -
Stock option and warrant transactions 6,664 (5,106) 9,655
Dividends paid (27,190) (23,711) (20,125)
------- ------- -------
Net cash provided (utilized) by
financing activities 2,374 (89,755) (31,229)
------- ------- -------
Effect of exchange rate changes on cash 3,559 922 294
------- ------- -------
Increase (decrease) in cash and
cash equivalents 24,002 (49,226) 60,301
Cash and cash equivalents at beginning
of year 137,028 186,254 125,953
------- ------- -------
Cash and cash equivalents at end
of year $161,030 137,028 186,254
======= ======= =======
Supplemental information
Cash paid during the year for
Interest $ 39,050 33,471 31,842
Income taxes $ 81,179 99,601 107,716
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.
Preparation of Financial Statements
-----------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Fiscal Year
-----------
The Company's fiscal year ends on the last Sunday in December. The
fiscal year ended December 31, 1995 was a fifty-three week period while
the previous two fiscal years were 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.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
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,
the Company evaluates the cash flow, on an undiscounted basis, of the
underlying businesses and or products and product lines which gave rise
to such amounts.
Approximately 90% of the Company's goodwill results from the 1984
acquisition of Milton Bradley Company (Milton Bradley), including its
Playskool and international units, and the 1991 acquisition of Tonka
Corporation (Tonka), including its Kenner, Parker Brothers and
international units, and is being amortized on the straight-line method
over forty years. The assets acquired in these transactions continue to
contribute a significant portion of the Company's net revenues,
earnings and cash flow.
Substantially all of the other intangibles consist of the cost of
acquired product rights. These rights, which were valued at their
acquisition based on the anticipated future cash flows from the
underlying product lines, are being amortized over five to twenty-five
years using the straight-line method. In establishing the value of such
rights, the Company considers, but does not individually value,
existing copyrights, trademarks, patents, license agreements and any
other product-related rights. Approximately 39% of these intangibles
relate to the acquisition of Milton Bradley and Tonka and an additional
55% relates to the Company's acquisitions during 1995 and 1994. (See
note 2)
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.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
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 international
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. Current earnings include
gains or losses resulting from foreign currency transactions other than
those relating to intercompany transactions of a long-term investment
nature. Those gains and losses, as well as those resulting from
translation of financial statements, are shown as a separate component
of shareholders' equity.
Pension Plans, Postretirement and Postemployment Benefits
---------------------------------------------------------
The Company, except for certain international 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 United States 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). SFAS 112 requires 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 1995, 1994 and 1993 were
$148,057, $135,406 and $125,566, respectively.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Advertising
-----------
Production costs of commercials and programming are charged to
operations in the fiscal year during which the production is 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 are assumed
to be exercised at the beginning of the period or at issuance, if
later. The assumed proceeds are then used to purchase common stock at
the average market price during the period.
The weighted average number of shares outstanding used in the
computation of earnings per common share was 88,252,706, 89,330,752 and
90,030,568 in 1995, 1994 and 1993, respectively.
The difference between primary and fully diluted earnings per share was
not significant for any year.
(2) Acquisitions and Investments
----------------------------
During February 1995, the Company purchased certain products and other
assets from the Larami Group of companies for $88,135. Accounting for
this acquisition using the purchase method, the Company allocated the
purchase price based on estimates of fair market value which included
$9,053 of net tangible assets, $76,100 of product rights and $2,982 of
goodwill. The terms of this purchase include a provision for additional
payments contingent upon the purchased products achieving certain
profit results during any of the Company's fiscal years 1995 through
1999. These contingent payments, if any, would increase goodwill. There
were no such payments earned in 1995.
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 was $176,194. 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, $125,872 of product rights and $21,432 of goodwill.
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.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(3) Inventories
-----------
1995 1994
---- ----
Finished products $240,126 181,202
Work in process 22,093 19,342
Raw materials 53,401 43,863
------- -------
$315,620 244,407
======= =======
(4) Property, Plant and Equipment
-----------------------------
1995 1994
---- ----
Land and improvements $ 14,845 15,655
Buildings and improvements 207,129 206,523
Machinery and equipment 229,882 209,794
------- -------
451,856 431,972
Less accumulated depreciation 187,650 163,358
------- -------
264,206 268,614
Tools, dies and molds, net of
amortization 49,034 40,265
------- -------
$313,240 308,879
======= =======
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 $600,000 and $900,000,
respectively. Substantially, all of the short-term borrowings
outstanding at the end of 1995 and 1994 represent bank borrowings of
international units made under these lines of credit. The weighted
average interest rates of the outstanding borrowings were 6.2% and
9.6%, 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.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(6) Accrued Liabilities
-------------------
1995 1994
---- ----
Royalties $ 77,752 76,602
Advertising 111,853 119,334
Payroll and management incentives 36,205 30,880
Other 207,757 190,947
------- -------
$433,567 417,763
======= =======
(7) Long-Term Debt
--------------
Long-term debt of $149,991 and $150,000 at December 31, 1995 and
December 25, 1994, respectively, consists of the Company's 6%
Convertible Subordinated Notes Due 1998. These notes are convertible
into common stock at a conversion price of $29.33 per share, are
redeemable, at a premium, by the Company and interest on them is paid
semi-annually.
(8) Income Taxes
------------
Income taxes attributable to earnings before income taxes are:
1995 1994 1993
---- ---- ----
Current
United States $ 54,979 60,539 81,770
State and local 9,309 10,417 12,541
International 41,840 42,543 28,614
------- ------- -------
106,128 113,499 122,925
------- ------- -------
Deferred
United States (5,122) 1,924 315
State and local (483) 180 149
International (3,544) (3,349) 1,817
------- ------- -------
(9,149) (1,245) 2,281
------- ------- -------
$ 96,979 112,254 125,206
======= ======= =======
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Certain tax benefits are not reflected in income taxes on the
Consolidated Statements of Earnings. Such benefits of $6,532 in 1995,
$9,800 in 1994 and $6,299 in 1993, relate primarily to stock options
and cumulative translation adjustments.
A reconciliation of the statutory United States federal income tax rate
to the Company's effective income tax rate is as follows:
1995 1994 1993
---- ---- ----
Statutory income tax rate 35.0% 35.0% 35.0%
State and local income taxes, net
of federal income tax effect 2.3 2.4 2.6
Amortization of goodwill 1.9 1.6 1.4
International earnings taxed at
rates other than the United States
statutory rate (.3) (.7) -
Other, net (.5) .2 (.5)
---- ---- ----
38.4% 38.5% 38.5%
==== ==== ====
The components of earnings before income taxes are as follows:
1995 1994 1993
---- ---- ----
United States $151,094 177,672 243,820
International 101,456 113,897 81,390
------- ------- -------
$252,550 291,569 325,210
======= ======= =======
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, United States 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 31,
1995 and December 25, 1994 are:
1995 1994
---- ----
Deferred tax assets:
Accounts receivable $ 28,433 27,782
Inventories 14,671 12,600
Net operating loss carryovers 18,677 16,923
Operating expenses 36,024 33,948
Postretirement benefits 11,834 11,487
Other 39,281 41,223
------- -------
Total gross deferred tax assets 148,920 143,963
Valuation allowance (15,869) (11,829)
------- -------
Net deferred tax assets 133,051 132,134
------- -------
Deferred tax liabilities:
Property rights and property, plant
and equipment 59,760 64,743
Other 6,787 7,786
------- -------
Total gross deferred tax liabilities 66,547 72,529
------- -------
Net deferred income taxes $ 66,504 59,605
======= =======
The Company has a valuation allowance for deferred tax assets at
December 31, 1995 of $15,869, which is an increase of $4,040 from the
$11,829 at December 25, 1994. This allowance pertains to certain
international 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 $15,869.
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. Of the deferred tax assets, approximately
70% are expected to be realized during the next two fiscal years.
Deferred income taxes of $85,849 and $83,730 at the end of 1995 and
1994, respectively, are included as a component of prepaid expenses and
other current assets. At the same dates, deferred income taxes of
$22,198 and $24,640, respectively, are included as a component of
deferred liabilities.
The cumulative amounts of undistributed earnings of the Company's
international subsidiaries held for reinvestment amounted to
approximately $289,000 at December 31, 1995 and December 25, 1994.
(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 31, 1995, a balance of 6,067,700 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, a Stock Incentive Performance
Plan (the new plan) adopted in 1995, and a Stock Option Plan for Non-
Employee Directors (collectively, the plans).
The Company has reserved 10,793,783 shares of its common stock,
including 4,300,000 shares under the new plan, 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. 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 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. No
awards have been granted under the new plan as of December 31, 1995.
On July 12, 1994, the Company's outstanding warrants expired. The
Company elected to pay exercising warrantholders cash rather than issue
shares of its stock.
The changes in outstanding options and warrants for the three years
ended December 31, 1995 follow:
Shares Exercise Price
(In Thousands) Per Share
------------ --------------
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
Granted 739 29.31 - 34.99
Exercised (317) 7.58 - 31.62
Expired and canceled (374) 10.25 - 42.54
-----
Outstanding at December 31, 1995 5,918 $ 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 1995, 1994 and 1993 were
3,151,508, 2,176,568 and 2,919,654, 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 1995, 1994 and
1993 was approximately $12,200, $12,500 and $12,900, respectively.
United States Plans
-------------------
Substantially all United States employees are covered under at least
one of several non-contributory defined benefit plans maintained by the
Company. Benefits under the major plans, covering non-union employees,
are based primarily on salary and years of service. Benefits under
other plans are based primarily on fixed amounts for specified years of
service.
The net periodic pension cost of these plans included the following
components:
1995 1994 1993
---- ---- ----
Benefits earned during the year $ 6,304 7,029 5,630
Interest cost on projected benefits 9,492 8,219 7,243
Actual return on plan assets (31,154) (521) (10,834)
Net amortization and deferral 21,153 (8,429) 3,190
------ ------ ------
$ 5,795 6,298 5,229
====== ====== ======
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)
1995 1994
----------------------- -----------------------
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 $ 98,149 8,303 76,761 4,626
Nonvested benefits 3,162 199 1,403 719
------- ------ ------- ------
Accumulated benefit
obligation 101,311 8,502 78,164 5,345
Effect of assumed
increase in
compensation level 27,972 5,997 21,937 6,024
------- ------ ------- ------
Projected benefit
obligation 129,283 14,499 100,101 11,369
Net assets available
for benefits 137,292 919 108,990 630
------- ------ ------- ------
Plan assets in excess
of (less than)
projected benefits $ 8,009 (13,580) 8,889 (10,739)
======= ====== ======= ======
Consisting of:
Unrecognized net
asset $ 1,715 - 2,059 -
Unrecognized prior
service cost (815) (4,310) (897) (4,850)
Unrecognized net gain
(loss) 9,407 (1,984) 8,313 (425)
Accrued pension
recognized in the
balance sheet (2,298) (7,286) (586) (5,464)
------- ------ ------- ------
$ 8,009 (13,580) 8,889 (10,739)
======= ====== ======= ======
The assets of the funded plans are managed by investment advisors and
consist primarily of pooled indexed and actively managed bond and stock
funds. The projected benefits have been determined using assumed
discount rates of 7.25% for 1995, 8.5% for 1994 and 7.2% for 1993 and,
for all years, an assumed long-term rate of compensation increase of 5%
and an assumed long-term rate of return on plan assets of 9%.
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 United States non-union employees. The plan provides for an
annual discretionary contribution by the Company which for 1995, 1994
and 1993 was approximately $4,800, $5,100 and $6,100, respectively.
International Plans
-------------------
Pension coverage for employees of the Company's international
subsidiaries is provided, to the extent deemed appropriate, through
separate defined benefit and defined contribution plans. 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 United States 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 accumulated benefit obligation relating to this plan at December
31, 1995 and December 25, 1994 consists of:
1995 1994
---- ----
Retired employees $17,873 16,148
Fully eligible active employees 952 1,267
Other active employees 5,322 7,086
------ ------
$24,147 24,501
====== ======
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:
1995 1994 1993
---- ---- ----
Benefits earned during the period $ 267 403 338
Interest cost on projected benefits 1,822 1,709 1,783
------ ------ ------
$ 2,089 2,112 2,121
====== ====== ======
For measuring the expected postretirement benefit obligation, a 9.2%,
9.2% and 10.4% annual rate of increase in the per capita cost of
covered health care benefits was assumed for 1995, 1994 and 1993,
respectively. These rates were further assumed to decrease gradually to
6%, 6% and 5%, respectively, in 2012 and remain level thereafter. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% in 1995, 8.5% in 1994 and
7.2% in 1993.
If the health care cost trend rate were increased one percentage point
in each year, the accumulated postretirement benefit obligation at
December 31, 1995 would have increased by approximately 10% and the
aggregate of the benefits earned during the period and the interest
cost would have each increased by approximately 11%.
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 was 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, was recorded as the cumulative effect of change
in accounting principles.
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 1995, 1994 and 1993 amounted to $43,486, $39,186
and $37,917, respectively.
Minimum rentals, net of minimum sublease income which is not material,
under long-term operating leases for the five years subsequent to 1995
and in the aggregate are as follows:
1996 $ 31,990
1997 23,852
1998 17,085
1999 12,008
2000 10,396
Later years 63,940
-------
$159,271
=======
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 1995.
In addition, the Company leases certain facilities which, as a result
of prior year restructurings, 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) Nonrecurring Charges
--------------------
During the second quarter of 1995, the Company discontinued its
efforts, begun in 1992, to develop a mass-market virtual reality game
system. These efforts produced such a game system, but at a price
judged to be too expensive for the mass-market. The impact of this
decision was a charge of $31,100 for the estimated costs associated
with such action. Approximately half of the charge resulted from the
expensing of software development costs, previously capitalized under
the provisions of Statement of Financial Accounting Standards No. 86,
related to both the operating system and games for the system. The
remaining amount represented provisions for costs associated with
discontinuance of this project, including the termination of
contractual agreements relating to the development of the system and
games, the write-off of certain fixed assets and various other
cancellation/termination costs. More than 80% of the liabilities
established for this action have been paid.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
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 and during the third quarter
of 1994, it recorded a restructuring charge of $12,500, primarily
related to the reorganization of its Domestic Toy Group and the
consolidation of its United States manufacturing operations.
Substantially all of the liabilities established for these actions,
which included provisions for severance payments, outplacement services
and the continuation of certain fringe benefits, primarily medical and
dental, has been paid.
(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 31, 1995, the carrying value of these instruments approximated
their fair value based on current market prices and rates. As estimates
of these fair values 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. (See note 15)
(15) Commitments and Contingencies
-----------------------------
The Company had unused open letters of credit of approximately $18,000
and $15,000 at December 31, 1995 and December 25, 1994, respectively.
The Company had the equivalent of approximately $42,000 and $80,000 of
forward exchange contracts outstanding at December 31, 1995 and
December 25, 1994, respectively. These contracts have been entered into
to hedge firm commitments for the purchase of products, principally
from the Far East. Gains and losses deferred under hedge accounting
provisions are subsequently included in the measurement of the related
foreign currency transaction. The aggregate amount of gains and losses
resulting from foreign currency transactions was not material.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The Company is involved in various claims and legal actions
substantially 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.
(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.
As the Company operates internationally, it is exposed to the risk of
changes in social, political and economic conditions inherent in such
operations.
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 1995
follows. The Company's primary operations in areas outside of the
United States include Western Europe, Canada, Mexico, Australia and New
Zealand and Hong Kong. As the international areas have similar business
environments and the Company's operations in those areas are similar,
they are presented as one category.
1995 1994 1993
---- ---- ----
Net revenues:
United States $1,578,058 1,530,928 1,670,272
International 1,280,152 1,139,334 1,076,904
--------- --------- ---------
$2,858,210 2,670,262 2,747,176
========= ========= =========
Operating profit:
United States $ 146,841 169,782 242,038
International 126,731 125,895 109,150
--------- --------- ---------
$ 273,572 295,677 351,188
========= ========= =========
Identifiable assets:
United States $1,782,276 1,612,982 1,540,887
International 834,112 765,393 752,131
--------- --------- ---------
$2,616,388 2,378,375 2,293,018
========= ========= =========
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 each of 1995 and 1994 and 20% and 11%,
respectively, in 1993.
The Company purchases certain components and accessories used in its
manufacturing process and certain finished products from manufacturers
in the Far East. 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 were 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.
(17) Quarterly Financial Data (Unaudited)
------------------------------------
Quarter
------------------------------------
First Second Third Fourth Full Year
1995 ----- ------ ----- ------ ---------
----
Net revenues $526,503 481,854 826,165 1,023,688 2,858,210
Gross profit $293,931 267,769 465,313 594,000 1,621,013
Earnings (loss)
before income
taxes $ 35,257 (24,217)(a) 103,370 138,140 252,550
Net earnings
(loss) $ 21,683 (14,893) 63,572 85,209 155,571
======= ======= ======= ========= =========
Per common share
Earnings (loss) $ .25 (.17) .72 .97 1.76
Market price
High $ 33 7/8 35 1/4 33 1/2 32 5/8 35 1/4
Low $ 28 3/8 31 3/8 29 3/4 28 1/2 28 3/8
Cash dividends
declared $ .08 .08 .08 .08 .32
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
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 change
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 ef-
fect 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(a) 325,210
Net earnings $ 26,580 27,150 75,548 70,726 200,004
======= ======= ======= ========= =========
Per common share
Earnings $ .30 .30 .84 .78 2.22
Market price
High $ 34 7/8 38 3/8 39 5/8 40 1/8 40 1/8
Low $ 28 1/8 29 7/8 34 35 1/8 28 1/8
Cash dividends
declared $ .06 .06 .06 .06 .24
(a) Includes the effect of nonrecurring charges in 1995 of $31,100
relating to a discontinued development project and in 1994 and 1993,
$12,500 and $15,500, respectively, 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 Interactive, Inc. Delaware
Hasbro International, Inc. Delaware
Hasbro Asia-Pacific Marketing Ltd. Hong Kong
Hasbro Australia 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 Italy S.r.l. Italy
Hasbro Japan Limited Japan
Hasbro New Zealand Limited New Zealand
Hasbro Osterreich Ges.m.b.H Austria
Hasbro Schweiz AG Switzerland
Hasbro U.K. Limited United Kingdom
HMS Juquetes S.A. de C.V. Mexico
Juguetrenes S.A. de C.V. Mexico
K'NEX France S.N.C. France
K'NEX G.m.b.H. Germany
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
e de Jogos e Brinquedos Lds Portugal
Hasbro Israel Ltd. Israel
Hasbro Magyarorszag Kft Hungary
Hasbro Poland SpZoo Poland
Hasbro Scandinavia AS Denmark
MB Espana, S.A. Spain
S.A. Hasbro N.V. Belgium
MB Ireland Limited Ireland
Palmyra Holdings Pte Ltd. Singapore
Hasbro Hong Kong Limited Hong Kong
Hasbro Singapore Pte Ltd. Singapore
Hasbro Toy (Malaysia) Sdn Bhd Malaysia
Hasbro Managerial Services, Inc. Rhode Island
Larami Limited Delaware
(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, 33-57344 and 33-59583 on Form S-8 and No. 33-41548 on
Form S-3 of Hasbro, Inc. of our reports dated February 7, 1996 relating to
the consolidated balance sheets of Hasbro, Inc. and subsidiaries as of
December 31, 1995 and December 25, 1994 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 31, 1995, which report on the consolidated financial statements is
incorporated by reference and which report on the related schedule is
included in the Annual Report on Form 10-K of Hasbro, Inc. for the fiscal
year ended December 31, 1995.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
March 28, 1996
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 161,030
<SECURITIES> 0
<RECEIVABLES> 839,911
<ALLOWANCES> 48,800
<INVENTORY> 315,620
<CURRENT-ASSETS> 1,425,498
<PP&E> 500,890
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0
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