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 29, 1996 Commission file number 1-6682
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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. [ ]
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 21, 1997 was $3,256,098,356.
The number of shares of Common Stock outstanding as of March 21, 1997 was
128,553,801.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement for its 1997 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 29, 1996, is included as
Exhibit 13, and incorporated by reference into Parts I and II of this Report.
PART I
ITEM 1. BUSINESS
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(a) General Development of Business
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The Company designs, manufactures and markets a diverse line of toy
products and related items throughout the world. Included in its offerings
are games and puzzles, preschool, boys' action and girls' toys, dolls, plush
products and infant products, including infant apparel. The Company also
licenses various tradenames, characters and other property rights for use in
connection with the sale by others of noncompeting toys and non-toy products.
Except as expressly indicated or unless the context otherwise requires, as
used herein, the "Company" means Hasbro, Inc., a Rhode Island corporation
organized on January 8, 1926, and its subsidiaries.
During 1996, the Company began to take steps to become more brands driven
and globally focused. The new focus is designed to allow the development of
brands globally, which will provide greater coordination of key brands from a
world-wide perspective, while still recognizing regional differences. It also
will allow for the development of a blueprint for the global coordination of
production and sourcing requirements.
During 1997 the Company will continue to operate through its three primary
units, Games, Toys and International while at the same time determining
additional steps necessary to implement this focus and have a new
organizational structure in place and operational in 1998.
(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(R), Tonka(R) and Kenner(R) brands.
The infant and preschool items are principally marketed under the Playskool
brand and are specifically designed for preschool children, toddlers and
infants.
<PAGE>
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),
Soft Walkin' Wheels(R), the Steady Steps(R) line of walkers and other infant
accessories such as bibs, training cups and feeding items, soft toys and
rattles. New products in 1997 include Snuzzles(TM) stuffed animals, blanket
and bedtime book as well as Busy Shake, Rattle 'n Roll(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(R), Magic Tea Party(R) and the
Playskool(R) Playstore; sports toys such as 1-2-3 Baseball(TM) and My First
In-Line Skates(TM), and woodboard puzzles utilizing various licensed and
proprietary characters. New items for 1997 include Huff'n Puff Vacuum(TM), an
expanded line of Magic Touch(TM) Talking Books and a line of products based
on the new television series, Arthur(TM).
The Hasbro Toy Group also offers activity items for both girls and boys
including Wonder World(TM) and the Fantastic Sticker Factory(TM) as well as
such classic lines as Play-Doh(R), Easy-Bake(R) Oven and the Spirograph(R)
design toy. New offerings for 1997 include Nerf(R) Orf(TM), a lightweight
compound which can be molded and also bounces, several products which can be
used to make colorful paper creations, and Fantastic Cel Painter(TM).
Its girls' items include the Raggedy Ann(R) and Raggedy Andy(R) line of rag
dolls along with a large doll line which includes the Baby Go Bye Bye(TM),
Juice 'n Cookies Baby Alive(R) and Baby All Gone(R). Included in its new
introductions for 1997 are Baby Did It(TM) and Newborn Baby Check-Up(R) large
dolls, several fashion dolls and accessories based on Sabrina, the Teenage
Witch(TM) and Crystal's Secrets(TM) playsets.
In boys' toys it offers a wide range of products, many of which are tied to
entertainment properties, including Star Wars(R), and Batman(R) action
figures and accessories. It also offers such classic properties as G.I.
Joe(R), Starting Line-Up(R), The Transformers(R), the Tonka(R) line of trucks
and vehicles, including the XRC(R) radio-controlled vehicles, the Nerf(R)
line of soft action play equipment and the Larami(R) Super Soaker(TM) line of
water products. New introductions for 1997 include action figures and
accessories tied to the re-release of the Star Wars trilogy and the new
Batman and Jurassic Park(R) movies, several collectible figurines of NASCAR
drivers, as part of Starting Lineup, a Winner's Circle(TM) line of die cast
vehicle assortments, including stock cars and dragsters, MicroVerse(TM), a
series of miniature playsets, and several Classic Tonka Edition vehicles,
celebrating the 50th anniversary of Tonka trucks.
(ii) Hasbro Games Group
------------------
The Hasbro Games Group develops and markets games and puzzles under the
Milton Bradley(R) and Parker Brothers(R) brands. Milton Bradley maintains a
line of board, strategy and word games, skill and action games and travel
games with 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),
<PAGE>
Jenga(R) and Scattergories(R) and Puzz 3-D(R), a series of three dimensional
jigsaw puzzles. Items added to the Milton Bradley line for 1997 include
Chicken Croquet(TM), Planet Hollywood(TM), The Game and a series of 3-D
Sculpture Puzzles(TM).
The Parker Brothers brand 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), games for adults such as Outburst(R) and
Catch Phrase(R), a line of Playskool(R) Games for children, including Kanga-
Banga Roo(TM) and Mr. Potato Head Pals(TM), as well as a line of puzzles. New
to the Parker Brothers' line in 1997 are the Pooh Musical Hide 'N Seek Game,
a Star Wars Limited Collectors Edition of Monopoly(R), a hand-held electronic
version of Sorry! and a series of children's and adult puzzles using
photographs and illustrations licensed from the National Geographic
Society(TM).
(iii) Hasbro Interactive
------------------
During 1995, Parker Brothers developed and marketed a CD-ROM version of
Monopoly(R), allowing interactive gameplay on a computer as well as through
the Internet. In 1996, this product was transferred to a newly formed
subsidiary, Hasbro Interactive, Inc. which also developed and marketed, both
within the United States and internationally, additional interactive CD-ROM
games during 1996, including Risk, Battleship and, for younger children,
Tonka Construction(TM). During 1997, it plans to introduce additional
interactive products including Sorry!, Outburst and several existing titles
in a format to allow play on the Sony(R) Playstation(TM). Hasbro Interactive
also recently announced an agreement in principle with Microsoft Corporation
under which many of its game players using Hasbro Interactive CD-ROM products
will be able to participate in multi-player games free of charge via the
Microsoft(R) Internet Gaming Zone.
(iv) International
-------------
The Company conducts its international operations through subsidiaries in
more than 25 countries which sell a representative range of the global brands
and 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 also 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.
<PAGE>
In addition, certain toy products are licensed to other toy companies to
manufacture and sell product in certain 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 March 2, 1997 and March 3, 1996
were approximately $215,000,000 and $170,000,000, respectively. Also, it is a
general industry practice that orders are subject to amendment or
cancellation by customers prior to shipment. The backlog at any date in a
given year can be affected by programs the Company may employ to induce its
customers to place orders and accept shipments early in the year. This method
is a general industry practice. The programs the Company is employing to
promote sales in 1997 are not substantially different from those employed in
1996.
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
$1,340,000,000 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 1996, 1995 and 1994, approximately
$152,487,000, $148,057,000 and $135,406,000, 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.
<PAGE>
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 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, for whose rights the Company competes with other toy
manufacturers. 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 1996, sales to the Company's two largest customers represented 22% and
13% of consolidated net revenues.
The Company advertises many of 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 1996, the Company spent approximately $418,003,000 in advertising,
promotion and marketing programs compared to $417,886,000 in 1995 and
$397,094,000 in 1994.
Manufacturing and Importing
---------------------------
The Company manufactures its products in facilities within the United
States and various other countries (see "Properties"). Most of its products
are manufactured from basic raw materials such as plastic and cardboard which
are readily available but which may be subject to significant fluctuations in
price. The Company's manufacturing process includes injection molding, blow
molding, metal stamping, printing, box making, assembly and wood processing.
<PAGE>
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 1996 implementation of the
General Agreement on Tariffs and Trade reduced or eliminated customs duties
on many 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, or
the loss of "most favored nation" trading status by the People's Republic of
China 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 and in as many
countries as practical, 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
<PAGE>
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 within the United States and in Canada,
Australia and Europe. The Company maintains laboratories which have 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 United States Federal Communications Commission as well as the laws of
certain countries place certain limitations on television commercials during
children's programming.
The Company maintains programs to comply with various United States
federal, state, local and international requirements relating to the
environment, plant safety and other matters.
Forward-Looking Information
---------------------------
From time to time, Hasbro may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. Forward-looking statements are inherently subject to
risks and uncertainties, many of which are known by, or self-evident to, the
investing public. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of
factors could cause its actual results and experience to differ materially
from the anticipated results or other expectations expressed in its forward-
looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of Hasbro's business include
the following:
1) Hasbro's dependence on its timely development and introduction of new
products and the acceptance, by both the customer and consumer, of new and
continuing products;
2) The impact of competition on revenue and margins;
3) The impact of differing economic conditions in Hasbro's various
international markets as well as the effect of currency fluctuations on
reportable income;
4) The continuing trend of increased concentration of Hasbro's revenues
in the second half and fourth quarter of the year, together with the
increased reliance by retailers on quick response inventory management
practices, increases the risk of the Company's underproduction of popular
items, overproduction of less popular items and failure to achieve tight and
compressed shipping schedules; and
<PAGE>
5) Other risks and uncertainties as are or may be detailed from time to
time in Hasbro's public announcements and filings with the Securities and
Exchange Commission.
(c) Financial Information About International and United States
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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 --
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 Warehouse 75,000 Leased 2002
Mt. Laurel Office 11,000 Leased 1997
New York
- - --------
New York Office & Showroom 70,300 Leased 2000
New York Offices & Showrooms 32,300 Leased 1999
Ohio
- - ----
Cincinnati Office 161,000 Leased 2007
Cincinnati Warehouse 33,000 Leased 1999
Pennsylvania
- - ------------
Allentown Warehouses 574,500 Leased 1997
<PAGE>
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
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 696,100 Leased 1998
El Paso Warehouses 455,000 Leased 1997
Vermont
- - -------
Fairfax Manufacturing 43,000 Owned --
Washington
- - ----------
Seattle Office & Warehouse 125,100 Leased(1) 1997
Australia
- - ---------
Lidcombe Office & Warehouse 161,400 Leased 2002
Eastwood Office 16,900 Leased 1997
Austria
- - -------
Vienna Office 2,500 Leased 1997
Belgium
- - -------
Brussels Office & Showroom 20,700 Leased 1997
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 1997
Denmark
- - -------
Glostrup Office 9,200 Leased 1999
<PAGE>
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
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 8,000 Leased 1998
France
- - ------
Le Bourget
du Lac Office, Manufacturing
& Warehouse 108,300 Owned --
Savoie Technolac Office 33,500 Owned --
Creutzwald Warehouse 108,700 Owned --
Gresy Warehouse 265,000 Leased 1997
Germany
- - -------
Dietzenbach Office 39,400 Leased 1998
Soest Office & Warehouse 156,300 Owned --
Greece
- - ------
Athens Office & Warehouse 176,500 Leased 1997
Hong Kong
- - ---------
Kowloon Office 18,600 Leased 2000
Kowloon Office 16,100 Leased 2000
Shatkin Office & Warehouse 17,800 Leased 1997
Hungary
- - -------
Budapest Office 6,300 Leased 1997
Ireland
- - -------
Waterford Office, Manufacturing
& Warehouse 244,400 Owned --
Israel
- - ------
Jerusalem Office 2,700 Leased 1998
Italy
- - -----
Milan Office & Showroom 12,100 Leased 2002
<PAGE>
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
Japan
- - -----
Tokyo Office 7,200 Leased 1998
Malaysia
- - -------
Selangor
Darul Ehsan Office 6,800 Leased 1997
Mexico
- - ------
Tijuana Office & Manufacturing 143,800 Leased 1998
Tijuana Manufacturing 205,000 Leased 1998
Tijuana Warehouse 143,800 Leased 1998
Reyna Office 16,100 Leased 2001
Juarez Manufacturing 169,500 Owned --
Venados Warehouses 118,100 Leased 1999
The Netherlands
- - ---------------
Ter Apel Office & Warehouse 139,300 Owned --
Ter Apel Warehouse 39,700 Leased 1997
New Zealand
- - -----------
Auckland Office, Manufacturing
& Warehouse 110,900 Leased 2005
Norway
- - ------
Asker Office 6,500 Leased 1999
Poland
- - ------
Warsaw Office 5,000 Leased 1998
Portugal
- - --------
Estoril-Lisboa Office 2,900 Leased 1997
Singapore
- - ---------
Singapore Office & Warehouse 9,300 Leased 1997
Spain
- - -----
Valencia Office, Manufacturing
& Warehouse 115,100 Leased 1999
Valencia Office 27,600 Leased 2011
Valencia Manufacturing
& Warehouse 201,900 Leased 2011
Valencia Warehouse 48,100 Leased 1997
<PAGE>
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - -------- --- ------ ---------- ----------
Sweden
- - ------
Vosby Office 7,400 Leased 1998
Switzerland
- - -----------
Mutschellen Office & Warehouse 23,400 Leased 1997
Taiwan
- - ------
TPE County Warehouse 14,400 Leased 1998
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 150,000 square feet which are
utilized in its operations. The Company also either owns or leases an
aggregate of approximately 1,000,000 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.
<PAGE>
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 48 Chairman of the Board,
President and Chief Executive
Officer Since 1989
Harold P. Gordon (1) 59 Vice Chairman Since 1995
George R. Ditomassi, Jr. (2) 62 Executive Vice President and
President, Global Innovation Since 1996
Adam Klein (3) 45 Executive Vice President,
Global Strategy and
Development Since 1996
John T. O'Neill 52 Executive Vice President and
Chief Financial Officer Since 1989
Alfred J. Verrecchia(4) 54 Executive Vice President and
President, Global Operations Since 1996
Virginia H. Kent (5) 42 President, Global Brands and
Product Development Since 1996
E. David Wilson (6) 59 President, Hasbro Americas Since 1996
Dan D. Owen (7) 48 President, Hasbro, USA Since 1996
Richard B. Holt 55 Senior Vice President
and Controller Since 1992
Cynthia S. Reed (8) 41 Senior Vice President and
General Counsel Since 1995
Phillip H. Waldoks (9) 44 Senior Vice President -
Corporate Legal Affairs
and Secretary Since 1995
Russell L. Denton 52 Vice President and Treasurer Since 1989
(1) Prior thereto, Partner, Stikeman, Elliott (law firm).
(2) Prior thereto, Chief Operating Officer, Games and International.
<PAGE>
(3) Prior thereto, President, Klein & Co. (consulting firm specializing
in managing strategic change); Chief Executive Officer of Bowmat Ltd.
(a South African manufacturer and distributor of construction related
materials) from 1992 through 1993.
(4) Prior thereto, Chief Operating Officer, Domestic Toy Operations.
(5) Prior thereto, General Manager, Girls/Boys/Nerf, from 1994 to 1996;
prior thereto, Senior Vice President, Marketing, Kenner, from 1993
to 1994; prior thereto, Vice President, Marketing, Kenner.
(6) Prior thereto, President Hasbro Games Group, from 1995 to 1996; prior
thereto, President, Milton Bradley.
(7) Prior thereto, President, Hasbro Toy Group, from 1994 to 1996; prior
thereto, President, Playskool.
(8) Prior thereto, Vice President - Legal.
(9) Prior thereto, Senior 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.
<PAGE>
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 1997 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 29, 1996 and
December 31, 1995
Consolidated Statements of Earnings for the Three Fiscal
Years Ended in December 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for the
Three Fiscal Years Ended in December 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Three
Fiscal Years Ended in December 1996, 1995 and 1994
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 1996, 1995
and 1994:
Schedule II - Valuation and Qualifying Accounts and
Reserves
<PAGE>
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.)
(e) Amendment No. 3, dated as of May 10, 1996, 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 March 31,
1996, File No. 1-6682.)
<PAGE>
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.(Incorporated by reference to
Exhibit 10(c) to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1995, File No. 1-6682.)
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.)
<PAGE>
(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 and the Stock Incentive Performance
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
and the Stock Incentive Performance 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 nine
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.)
<PAGE>
(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. (Incorporated by reference
to Exhibit 10(aa) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1995, File No. 1-6682.)
(bb) Severance And Settlement Agreement And Release, dated as of
December 20, 1995, and addendum thereto, between the Company
and Dan D. Owen. (Incorporated by reference to Exhibit 10(bb)
to the Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 1995, File No. 1-6682.)
(cc) Amendment, effective as of January 1, 1997 to Severance and
Settlement Agreement and Release between the Company and
Dan D. Owen.
(dd) Employee Non-Qualified Stock Plan.
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
<PAGE>
The Company agrees to furnish the Securities and Exchange Commission, upon
request, a copy of each agreement with respect to long-term debt of the
Company, the authorized principal amount of which does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
-------------------
A Current Report on Form 8-K dated February 6, 1997 was filed to
announce the Company's results for the quarter and year ended
December 29, 1996. Consolidated statements of earnings (without
notes) for the quarter and year ended December 29, 1996 and
December 31, 1995 and consolidated condensed balance sheets
(without notes) as of said dates were also filed.
(c) Exhibits
--------
See (a)(3) above
(d) Financial Statement Schedules
-----------------------------
See (a)(2) above
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
Under date of February 5, 1997, we reported on the consolidated
balance sheets of Hasbro, Inc. and subsidiaries as of December 29, 1996 and
December 31, 1995 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 29, 1996, as contained in the 1996 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 1996. 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 5, 1997
<PAGE>
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:
1996 $48,800 5,834 - (8,034) $46,600
====== ====== ====== ====== ======
1995 $51,000 5,860 - (8,060) $48,800
====== ====== ====== ====== ======
1994 $54,200 5,120 - (8,320) $51,000
====== ====== ====== ====== ======
(a) Includes write-offs, recoveries of previous write-offs and
translation adjustments.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HASBRO, INC. (Registrant)
By: /s/ Alan G. Hassenfeld Date: March 28, 1997
------------------------- ---------------
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, 1997
Alan G. Hassenfeld President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ John T. O'Neill
- - ---------------------------- Executive Vice President March 28, 1997
John T. O'Neill and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Alan R. Batkin
- - ---------------------------- Director March 28, 1997
Alan R. Batkin
/s/ George R. Ditomassi, Jr.
- - ---------------------------- Director March 28, 1997
George R. Ditomassi, Jr.
/s/ Harold P. Gordon
- - ---------------------------- Director March 28, 1997
Harold P. Gordon
<PAGE>
/s/ Alex Grass
- - ---------------------------- Director March 28, 1997
Alex Grass
/s/ Sylvia K. Hassenfeld
- - ---------------------------- Director March 28, 1997
Sylvia K. Hassenfeld
/s/ Marie-Josee Kravis
- - ---------------------------- Director March 28, 1997
Marie-Josee Kravis
- - ---------------------------- Director March , 1997
Claudine B. Malone
- - ---------------------------- Director March , 1997
Morris W. Offit
/s/ Norma T. Pace
- - ---------------------------- Director March 28, 1997
Norma T. Pace
/s/ E. John Rosenwald, Jr.
- - ---------------------------- Director March 28, 1997
E. John Rosenwald, Jr.
/s/ Carl Spielvogel
- - ---------------------------- Director March 28, 1997
Carl Spielvogel
/s/ Henry Taub
- - ---------------------------- Director March 28, 1997
Henry Taub
/s/ Preston Robert Tisch
- - ---------------------------- Director March 28, 1997
Preston Robert Tisch
<PAGE>
- - ---------------------------- Director March , 1997
Paul Wolfowitz
/s/ Alfred J. Verrecchia
- - ---------------------------- Director March 28, 1997
Alfred J. Verrecchia
<PAGE>
HASBRO, INC.
Annual Report on Form 10-K
for the Year Ended December 29, 1996
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.)
(e) Amendment No. 3, dated as of May 10, 1996, 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 31,
1996, File No. 1-6682.)
<PAGE>
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. Incorporated by reference to
Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1996, File No. 1-6682.)
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.)
<PAGE>
(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 and the Stock Incentive Performance
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
and the Stock Incentive Performance 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 nine
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.)
<PAGE>
(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. (Incorporated by reference
to Exhibit 10(aa) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1995, File No. 1-6682.)
(bb) Severance And Settlement Agreement And Release, dated as of
December 20, 1995, and addendum thereto, between the Company
and Dan D. Owen. (Incorporated by reference to Exhibit 10(bb)
to the Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 1995, File No. 1-6682.)
(cc) Amendment, effective as of January 1, 1997 to Severance and
Settlement agreement and Release between the Company and
Dan D. Owen.
(dd) Employee Non-Qualified Stock Plan.
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 (cc)
Amendment, Effective as of January 1, 1997, to
Severance and Settlement Agreement and Release,
dated December 20, 1995
Amendment, effective as of the 1st day of January, 1997, to Severance
and Settlement Agreement and Release, dated December 20, 1995, as clarified
by letter agreement dated March 28, 1996 (collectively, the "Agreement")
between Hasbro, Inc. (the "Company") and Dan D. Owen (the "Employee").
WHEREAS, in light of certain organizational changes at the Company
affecting the Employee, the Company and the Employee wish to amend the terms
of the Employee's severance arrangements as set forth in the Agreement;
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 to amend the Agreement as follows:
1. The fourth sentence of paragraph 1 of the Agreement is hereby
replaced in its entirety with the following two sentences:
"In addition, all stock options exercisable on the date of (a) the
involuntary termination by the Company without cause of the Employee's
employment or (b) the constructive termination of the Employee's employment
shall be exercisable for a period of six months from the date of such
termination, notwithstanding anything to the contrary in the Employee's stock
option agreements with the Company. Notwithstanding anything to the contrary
in Employee's stock option agreements with the Company, all stock options
(other than premium-priced stock options granted under the Company's long
term incentive program) that would become vested within six months of (a) the
involuntary termination by the Company without cause of the Employee's
employment or (b) the constructive termination of the Employee's employment
shall continue to vest as if Employee were employed for a period of six
months after such termination (the "Post-Termination Vested Options"), such
Post-Termination Vested Options to be exercisable by the Employee for three
months after such vesting in accordance with the terms of this sentence."
2. The seventh sentence of paragraph 1 of the Agreement is amended to
read in its entirety as follows:
"For purposes of this Agreement, a constructive termination of the
Employee's employment shall occur if the Employee voluntarily terminates
employment on or prior to June 30, 1998."
3. The following shall be added as a new paragraph 15 to the Agreement:
15. "Termination". This Agreement and the obligations of the Company and
the Employee under this Agreement (other than the obligations of the Employee
under paragraph 4 of this Agreement, which shall survive the termination of
this Agreement) shall terminate if an involuntary termination by the Company
without cause of the Employee's employment or a constructive termination of
the Employee's employment shall not have occurred by June 30, 1998."
4. The Employee acknowledges that he has been given twenty-one (21)
days to consider this Amendment and that the Company advised him to consult
with an attorney of his own choosing prior to signing this Amendment. The
Employee may revoke this Amendment for a period of seven (7) days after the
execution of this Amendment, and the Amendment shall not be effective or
enforceable until the expiration of this seven (7) day revocation period.
5. 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 Amendment
with an attorney. The Employee further states and represents that he has
carefully read this Amendment; 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, the parties have executed this Amendment on the
dates written below.
HASBRO, INC.
By: /s/ Harold P. Gordon Date: 2-4-97
--------------------- ------
Vice Chairman
By: /s/ Dan D. Owen Date: 2-3-97
--------------------- ------
Employee
EXHIBIT 10 (dd)
HASBRO, INC.
EMPLOYEE NON-QUALIFIED STOCK PLAN
1. Purpose
-------
The purpose of the Employee Non-Qualified Stock Plan (the "Plan") is to
advance the interests of Hasbro, Inc. ("Hasbro") and to increase shareholder
value by providing Employees with a proprietary interest in the growth and
performance of Hasbro and with incentives for continued service with Hasbro,
its subsidiaries and affiliates.
2. Term
----
The Plan shall be effective upon approval thereof by the Compensation
and Stock Option Committee (the "Committee") of the Board of Directors of
Hasbro (the "Board") on February 13, 1997 and shall remain in effect until
December 31, 2002 unless extended or sooner terminated by the Committee or
the Board. After termination of the Plan, no future awards may be granted
but previously made awards shall remain outstanding in accordance with their
applicable terms and conditions and the terms and conditions of the Plan.
3. Plan Administration
-------------------
The Committee shall be responsible for administering the Plan. The
Committee shall be comprised of two or more members of the Board who qualify
to administer this Plan as contemplated by Rule 16b-3 or any successor rule
("Rule 16b-3") under the Securities Exchange Act of 1934 (the "1934 Act").
The Committee shall have full and exclusive power to interpret, construe and
implement the Plan and any rules, regulations, guidelines or agreements
adopted hereunder and to adopt, alter and repeal such rules, regulations and
guidelines for carrying out the Plan as it may deem necessary or proper.
These powers shall include, but not be limited to, (i) determination of the
type or types of awards to be granted under the Plan; (ii) determination of
the terms and conditions of any awards under the Plan (including, but not
limited to, the option or award price, any vesting restrictions or forfeiture
provisions (including, but not limited to, the power to accelerate any
vesting restrictions and waive, in whole or in part, any forfeiture
provisions) and the term of the award (including, but not limited to, the
power to extend the term of any award)); (iii) determination of whether to
adjust other terms and conditions, at any time or from time to time, of any
award, including with respect to performance goals and measurements
applicable to performance-based awards pursuant to the terms of the Plan;
(iv) determination of to what extent and under what circumstances shares and
other amounts payable with respect to an award shall be deferred; (v)
determination of whether, to what extent and under what circumstances awards
may be settled, paid or exercised in cash, shares, other securities, or other
awards, or other property, or canceled, forfeited or suspended; (vi) adoption
of modifications, amendments, procedures, subplans and the like as are
necessary to comply with provisions of the laws of other countries in which
the Company may operate in order to assure the viability of awards granted
under the Plan and to enable participants employed in such other countries to
receive advantages and benefits under the Plan and such laws; (vii) subject
to the rights of participants, modification, change, amendment or
cancellation of any award to correct an administrative error; and (viii)
taking any other action the Committee deems necessary or desirable for the
administration of the Plan. In making any determination under the Plan, the
Committee shall be entitled to rely on reports, opinions or statements of
officers or employees of the Company as well as those of counsel, public
accountants and other professional or expert persons. All determinations,
interpretations, and other decisions under or with respect to the Plan or any
award by the Committee shall be final, conclusive and binding upon all
parties, including without limitation, the Company, any Employee and any
other person with rights to any award under the Plan and no member of the
Committee shall be subject to individual liability with respect to the Plan.
The Committee shall act only by a majority of its members then in office,
except the Committee may delegate to any one or more directors of the Company
who are also officers of the Company any or all of its duties, powers and
authority under the Plan pursuant to such conditions or limitations as the
Committee may establish, except that only the Committee may make any
determinations regarding Employees who are subject to Section 16 of the 1934
Act.
4. Eligibility
-----------
Any Employee of the Company shall be eligible to receive an award under
the Plan, as the Committee in its sole discretion shall determine from time
to time, except that no director who is not employed by the Company shall be
eligible to receive any awards under the Plan. In this Plan, the term
"Employee" shall have the same definition as that set forth in General
Instruction A to Form S-8 promulgated under the Securities Act of 1933, as
amended, and the term "Company" shall mean Hasbro and any entity that is
directly or indirectly controlled by Hasbro.
5. Shares of Stock Subject to the Plan
-----------------------------------
The aggregate number and class of shares which may be made the subject
of awards granted pursuant to the Plan is Four Million (4,000,000) shares of
common stock of Hasbro, par value $.50 per share (the "Common Stock"),
subject in each case to adjustment as provided in Section 6, provided,
however, that the number of shares which may be made the subject of awards
granted (a) in any one year may not exceed more than 5% of the outstanding
Common Stock and (b) in any five year period may not exceed 10% of the
outstanding Common Stock. Such shares may be made available from authorized
and unissued shares of Common Stock or shares of Common Stock held in
Hasbro's treasury. If any shares subject to an award are forfeited,
cancelled or reacquired by the Company (including, but not limited to, any
stock option or stock appreciation right ("SAR") which is not exercised in
full) and the participant did not receive any benefits of ownership in such
shares (other than voting rights or dividends that may have accumulated but
due to forfeiture, cancellation or reacquisition were never realized by the
participant), shares subject to such award shall again be available for
distribution in connection with awards under the Plan. In addition, where an
SAR or other award is settled in cash or any form other than shares, then the
shares covered by these settlements shall not be deemed issued and shall
remain available for issuance under the Plan. Notwithstanding anything in
this Plan to the contrary, any shares that are issued by the Company, and any
awards that are granted by, or become obligations of, the Company, through
the assumption by the Company of, or in substitution for, outstanding awards
previously granted by an acquired company shall not be counted against the
shares available for issuance under the Plan and the terms and conditions of
any such awards shall be the original terms and conditions thereof as
adjusted by or pursuant to the acquisition agreement.
6. Adjustments and Reorganizations
-------------------------------
The Committee may make such adjustments as it deems appropriate to meet
the intent of the Plan in the event of changes that impact the Company's
share price or share status, provided that any such actions are consistently
and equitably applicable to all affected participants.
In the event of any stock dividend, stock split, combination or exchange
of shares, merger, consolidation, spin-off or other distribution (other than
normal cash dividends) of Company assets to shareholders, or any other change
affecting shares, such adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change shall be made with
respect to (i) the aggregate number of shares that may be issued under the
Plan; (ii) the number of shares subject to awards under the Plan; and/or
(iii) the price per share for any outstanding stock options, SARs and other
awards under the Plan.
7. Awards
------
The Committee shall determine the type or types of award(s) to be made
to each participant under the Plan and shall approve the terms and conditions
governing these awards in accordance with Section 12. Awards may include but
are not limited to those listed in this Section 7. Awards may be granted
singly, in combination or in tandem (i.e. so that the settlement or payment
of one automatically reduces or cancels the other). Awards may also be made
in combination or in tandem with, in replacement of, as alternatives to, or
as the payment form for, grants or rights under any other employee or
compensation plan of the Company, including the plan of any acquired entity.
(a) "Stock Option" is a grant of a right to purchase a specified number
of shares of Common Stock during a specified period at a specified or
determinable price. The purchase price of each option shall be not less than
the Fair Market Value of the Common Stock subject to the stock option on the
date of grant. A stock option may be exercised in whole or in installments,
which may be cumulative. All stock options shall be non-qualified options.
The price at which shares of Common Stock may be purchased under a stock
option shall be paid in full at the time of the exercise in cash or such
other method as provided by the Committee at the time of grant in the award
agreement, including, but not limited to, tendering Common Stock or
surrendering a stock award, valued in each case, at Fair Market Value on the
date of tender or surrender, surrendering a cash award, or any combination
thereof.
(b) "Stock Appreciation Right" is a right to receive a payment, in cash
and/or Common Stock, as determined by the Committee, equal to all or part of
the excess of the Fair Market Value of a specified number of shares of Common
Stock on the date the SAR is exercised over the exercise or designated price
of the SAR as set forth in the applicable award agreement, which shall not be
less than the Fair Market Value of the Common Stock subject to the stock
appreciation right on the date of grant. The Committee, in its discretion,
may grant a participant the right to receive from the Company all or a
portion of the tax liability incurred or to be incurred by a participant as a
result of awards made to or settled by him or her hereunder on such terms and
conditions as the Committee may determine.
(c) "Stock Award' is an award made in shares of Common Stock or
denominated in units of shares of Common Stock. All or part of any stock
award may be subject to conditions established by the Committee, and set
forth in the award agreement, which may include, but are not limited to,
continuous service with the Company, achievement of specific business
objectives, and other measurements of individual, business unit or Company
performance.
(d) "Cash Award" is an award denominated in cash that would constitute a
"derivative security", for purposes of Rule 16b-3, if not awarded pursuant to
a plan satisfying the provisions of Rule 16b-3. The payment of a cash award
may be subject to such restrictions and conditions as may be established by
the Committee, and as set forth in the award agreement, including, but not
limited to, continuous service with the Company, achievement of specific
business objectives, and other measurement of individual, business unit or
Company performance. A cash award may be made by the Committee, in its
discretion, in respect of all or a portion of the tax liability incurred or
to be incurred by a participant as a result of awards made to or settled by
him or her under the Plan.
8. Dividends and Dividend Equivalents
----------------------------------
The Committee may provide that awards denominated in stock earn
dividends or dividend equivalents. Such dividend equivalents may be paid
currently or may be credited to an account established by the Committee under
the Plan in the name of the participant. In addition, dividends or dividend
equivalents paid on outstanding awards or issued shares may be credited to
such account rather than paid currently. Any crediting of dividends or
dividend equivalents may be subject to such restrictions and conditions as
the Committee may establish, including, but not limited to, reinvestment in
additional shares or share equivalents.
9. Deferrals and Settlements
-------------------------
Payment of awards may be in the form of cash, shares, other awards, or
in combinations thereof as the Committee shall determine at the time of
grant, and with such restrictions as it may impose. The Committee may also
require or permit participants to elect to defer the issuance of shares or
the settlement of awards in cash under such rules and procedures as it may
establish under the Plan. It may also provide that deferred settlements
include the payment or crediting of interest on the deferral amounts or the
payment or crediting of dividend equivalents on deferred settlements
denominated in shares.
10. Fair Market Value
-----------------
Fair Market Value for purposes of the Plan shall mean the average of the
high and low sales prices of the Common Stock as reported in The Wall Street
Journal for the American Exchange Composite Transactions or similar successor
consolidated transactions reports for the relevant date (or the comparable
consolidated transaction reports for any other national securities exchange
or NASDAQ National Market Issues, if Hasbro Common Stock is admitted for
trading or quotation on said exchange or market), or, if no sales of Common
Stock were made on said exchange or market on that date, the average of the
high and low prices of Common Stock as reported in said composite
transactions report for the preceding day on which sales of Common Stock were
made on said exchange or market. If Hasbro's Common Stock is not then
trading on an exchange or quoted in NASDAQ National Market Issues, then Fair
Market Value shall be the mean between the bid and asked prices for the
relevant over-the counter transaction on such date, or if there are not such
transactions, then Fair Market Value shall be determined in good faith by the
Committee. Notwithstanding the foregoing, for purposes of valuing shares
delivered to the Company by a participant in payment of the exercise price of
an option pursuant to Section 7 hereof and shares delivered or withheld in
payment of applicable tax withholding pursuant to Section 14 hereof, if the
participant sells, on a national securities exchange, or on NASDAQ or over-
the-counter, the shares acquired on the same day as the date of exercise, the
"Fair Market Value" of the shares so delivered or withheld to be the actual
sales price of the shares so sold. Under no circumstances shall Fair Market
Value be less than the par value of the Common Stock.
11. Transferability and Exercisability
----------------------------------
Except as the Committee may in its sole discretion authorize all awards
under the Plan will be nontransferable and shall not be assignable,
alienable, saleable or otherwise transferable by the participant other than
by will, the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder, unless otherwise
determined by the Committee in its sole discretion during the life of the
participant, awards under the Plan shall be exercisable only by him or her or
by his or her guardian or legal representative.
12. Award Agreements
----------------
Awards under the Plan shall be evidenced by an agreement as shall be
approved by the Committee that sets forth the terms, conditions and
limitations of an award. The Committee may amend agreements theretofore
entered into, either prospectively or retroactively, including, but not
limited to, the acceleration of vesting of an award, and the extension of
time to exercise an award, except that, no such amendment shall affect the
award in a materially adverse manner without the consent of the participant.
13. Plan Amendment
--------------
The Committee may amend, alter, extend the term of, increase or decrease
the number of shares of stock subject to or discontinue the Plan at any time,
except that no such amendment shall affect any outstanding awards in a
materially adverse manner under the Plan without the consent of the holders
thereof.
14. Tax Withholding
---------------
The Company shall have the right to deduct from any settlement of an
award made under the Plan, including the delivery or vesting of shares, an
amount sufficient to cover withholding required by law for any federal,
state, local or foreign taxes or to take such other action as may be
necessary to satisfy any such withholding obligations including, but not
limited to, requiring the payment by the participant to the Company of any
such amounts. Any participant may deliver shares or direct the Company that
shares be withheld to satisfy required tax withholding and such shares shall
be valued at the Fair Market Value as of the settlement date of the
applicable award in accordance with the terms and conditions of the award
agreement.
15. Financial Assistance
--------------------
If the Committee determines that such action is advisable, the Company
may assist any person to whom an award has been granted in obtaining
financing from the Company or from a bank or other third party, on such terms
as are determined by the Committee, and in such amount as is required to
accomplish the purposes of the Plan, including, without limitation, to permit
the exercise of an award and/or the payment of any taxes in respect thereof.
Such assistance may take any form that the Committee deems appropriate,
including, but not limited to, a direct loan from the Company, a guarantee of
the obligation by the Company, or the maintenance by the Company of deposits
with such bank or third party.
16. Change in Control
-----------------
Notwithstanding anything to the contrary in the Plan, the following
shall apply to all outstanding awards granted under the Plan:
(a) Definitions: The following definitions shall apply to this Section:
A "Change in Control", unless otherwise defined by the Committee,
shall mean:
A. The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act)
of 20% or more of either (i) the then outstanding shares of Common Stock of
Hasbro (the "Outstanding Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of Hasbro entitled to vote generally
in the election of directors (the "Outstanding Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from Hasbro or any of its subsidiaries,
(ii) any acquisition by Hasbro or any of its subsidiaries, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by Hasbro or any of its subsidiaries, (iv) any acquisition by Alan
or Sylvia Hassenfeld, members of their respective immediate families, or
heirs of Alan or Sylvia Hassenfeld or of any member of their respective
immediate families, the Sylvia Hassenfeld Trust, the Merrill Hassenfeld
Trust, the Alan Hassenfeld Trust, the Hassenfeld Foundation, any trust or
foundation established by or for the primary benefit of any of the foregoing
or controlled by one or more of any of the foregoing, or any affiliates or
associates (as such terms are defined in Rule 12b-2 promulgated under the
1934 Act) of any of the foregoing or (v) any acquisition by any corporation
with respect to which, following such acquisition, more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Common Stock and the Outstanding Voting Securities
immediately prior to such acquisition in substantially the same proportions
as their ownership, immediately prior to such acquisition, of the Outstanding
Common Stock and Outstanding Voting Securities, as the case may be; or
B. Individuals who, as the effective date of the Plan constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided, however, that any individual becoming a
director subsequent to the effective date of the Plan whose election, or
nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the 1934 Act) or other actual or threatened solicitation of
proxies or consents; or
C. Approval by the shareholders of Hasbro of a reorganization,
merger or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such reorganization, merger or consolidation
do not, following such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same proportions
as their ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be; or
D. Approval by the shareholders of Hasbro of (i) a complete
liquidation or dissolution of Hasbro or (ii) the sale or other disposition of
all or substantially all of the assets of Hasbro, other than to a
corporation, with respect to which following such sale or other disposition,
more than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Common Stock and
Outstanding Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Common Stock and Outstanding Voting Securities, as the case may be.
"CIC Price" shall mean the higher of (1) the highest price paid for a
share of Common Stock in the transaction or series of transactions pursuant
to which a Change in Control of the Company shall have occurred, or (2) the
highest reported sales price of a share of Common Stock during the 60 day
period immediately preceding the date upon which the event constituting a
Change in Control shall have occurred. To the extent that the consideration
paid in any transaction or series of transactions described in (1) above
consists in whole or in part of non-cash consideration, the value of such
non-cash consideration shall be determined in the sole discretion of the
Board.
(b) Acceleration of Vesting and Treatment of Stock Awards, Stock
Options, SARs and Cash Awards
(1) Upon the occurrence of an event constituting a Change in
Control, all stock awards (and related dividends or dividend equivalents, if
any), stock options, SARs and cash awards outstanding on such date shall
become 100% vested.
(2) In the event of a merger or consolidation in which the Company
is not the surviving corporation, as well as a merger or consolidation which
would constitute a Change of Control under Section 16.C. above (whether or
not the Company is the surviving corporation), the agreement of merger or
consolidation may provide (i) that the stock awards, stock options, SARs or
cash awards are unaffected by the merger or consolidation, (ii) for
substituted stock awards, stock options, SARs or cash awards by the surviving
corporation for those stock awards, stock options, SARs or cash awards
granted hereunder or (iii) for the assumption of such awards, options or SARs
by the surviving corporation, in which case the Committee in its sole
discretion, may provide for such substitution or assumption with such
adjustments to the awards, options and SARs granted hereunder as the
Committee shall in its sole discretion determine.
Alternatively, the Committee may, at its sole discretion, cancel all
awards, options and SARs granted hereunder upon payment by the Company to the
participants in cash. The amount of cash to be paid shall be determined by
multiplying the number of such awards, as the case may be, by (i) in the case
of stock awards, the CIC Price, (ii) in the case of stock options, the
difference between the exercise price per share and the CIC Price, if higher,
(iii) in the case of SARs, the difference between the exercise or designated
price per share and the CIC Price, if higher; (iv) in the case of cash awards
where the performance period, if any, has not been completed upon the
occurrence of a Change in Control, the maximum value of such awards as
determined by the Committee at the time of grant, without regard to the
performance criteria, if any, applicable to such award; and (v) in the case
of cash awards where the performance period, if any, has been completed on or
prior to the occurrence of a Change in Control, the value of such award as
determined in accordance with the award agreement. In addition, all accrued
dividends and dividend equivalents or interest accrued on deferred
settlements shall be paid.
17. Options With Respect to Shares Surrendered to Exercise Options
--------------------------------------------------------------
The Committee, in its discretion, may provide at the time of the award
or subsequent thereto, in the award agreement granting an option pursuant to
Section 12 hereunder, or in a separate agreement, that in the event a
participant exercises an option, making payment of the option price by an
exchange of shares of Common Stock previously owned by the participant for at
least six months, in the manner permitted by the Committee pursuant to
Section 7 hereof, such participant shall automatically be issued a new option
to purchase additional shares equal to the number of shares of previously
owned Common Stock so exchanged. Such new option shall have an option price
equal to not less than the Fair Market Value of the Common Stock on the date
such new option is granted, and shall have an exercise period which commences
one year from the date of grant of the new option and expires on the same
date as did that of the original option exercised pursuant to the exchange.
18. Unfunded Plan
-------------
Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or a separate fund
or funds. The Plan shall not establish any fiduciary relationship between
the Company and any participant or other person. To the extent any person
holds any rights by virtue of a grant awarded under the Plan, such right
(unless otherwise determined by the Committee) shall be no greater than the
right of an unsecured general creditor of the Company.
19. Right of First Refusal
----------------------
At the time of grant of any award or acceleration of any vesting term,
the Committee may provide that shares received as a result of such grant or
accelerated vesting shall be subject to a right of first refusal pursuant to
which the participant shall be required to offer to the Company any shares
that the participant wishes to sell at a price no greater than the then Fair
Market Value of the shares, subject to such other terms and conditions as the
Committee may specify.
20. Miscellaneous
-------------
No person shall have any claim or right to be granted an award under the
Plan, and no participant shall have any right by reason of the grant of any
award under the Plan to continued employment by the Company. Determinations
made by the Committee under the Plan need not be uniform and may be made
selectively among eligible individuals under the Plan, whether or not such
eligible individuals are similarly situated. No participant shall have any
right with respect to the Plan, or in any award, contingent or otherwise,
until written evidence of the award shall have been delivered to the
recipient and all the terms, conditions and provisions of the Plan and the
award applicable to such recipient have been met. A participant shall have
no rights as a shareholder until he or she becomes the holder of record.
21. General Restriction
-------------------
Each award shall be subject to the requirement that, if at any time the
Committee shall determine, in its sole discretion, that the listing,
registration or qualification of any award under the Plan upon any securities
exchange or under any state, federal or foreign law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such award or the
exercise or settlement thereof, no such award may be exercised or settled in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee. The Committee may require each participant
purchasing or receiving shares pursuant to an award to represent to and agree
with the Company in writing that such participant is acquiring the shares
without a view to the distribution thereof. All certificates for shares, or
other securities delivered under the Plan shall be subject to such stock
transfer stop orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed and any applicable state, federal, or foreign law, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
22. Governing Law
-------------
The validity, construction and effect of the Plan and any actions taken
or relating to the Plan shall be determined in accordance with the laws of
the state of Rhode Island and applicable federal law.
23. Successors and Assigns
----------------------
The Plan shall be binding on all successors and permitted assigns of a
participant, including, but not limited to, the estate of such participant
and the executor, administrator or trustee of such estate, the guardian or
legal representative of the participant.
24. Effect on the Company's 1992 Stock Incentive Plan, Stock Incentive
------------------------------------------------------------------
Performance Plan and Other Compensation Arrangements
----------------------------------------------------
The adoption of the Plan shall have no effect on awards made or to be
made pursuant to the Company's existing 1992 Stock Incentive Plan, Stock
Incentive Performance Plan and other compensation arrangements. Nothing
contained in the Plan shall prevent the Company from adopting other or
additional compensation plans or arrangements for its employees.
EXHIBIT 11
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(Thousands of Dollars and Shares Except Per Share Data)
1996 1995 1994
--------------- --------------- ---------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
Net earnings before
cumulative effect of
change in accounting
principles $199,912 199,912 155,571 155,571 179,315 179,315
Interest and amortization
on convertible notes,
net of taxes - 5,757 - 5,763 - 5,764
------- ------- ------- ------- ------- -------
Net earnings before
cumulative effect of
change in accounting
principles applicable
to common shares 199,912 205,669 155,571 161,334 179,315 185,079
Cumulative effect of
change in accounting
principles - - - - (4,282) (4,282)
------- ------- ------- ------- ------- -------
Net earnings applicable
to common shares $199,912 205,669 155,571 161,334 175,033 180,797
======= ======= ======= ======= ======= =======
Weighted average number
of shares outstanding: (a)
Outstanding at
beginning of period 131,017 131,017 131,293 131,293 131,693 131,693
Exercise of stock
options and warrants:
Actual 502 502 306 306 458 458
Assumed 1,816 2,152 864 995 2,292 2,292
Conversion of convertible
notes:
Actual 6 6 - - - -
Assumed - 7,666 - 7,671 - 7,671
Purchase of common stock (1,485) (1,485) (84) (84) (447) (447)
------- ------- ------- ------- ------- -------
Total 131,856 139,858 132,379 140,181 133,996 141,667
======= ======= ======= ======= ======= =======
Per common share: (a)
Earnings before
cumulative effect of
change in accounting
principles $ 1.52 1.47 1.18 1.15 1.34 1.31
Cumulative effect of
change in accounting
principles - - - - (.03) (.03)
------- ------- ------- ------- ------- -------
Net earnings $ 1.52 1.47 1.18 1.15 1.31 1.28
======= ======= ======= ======= ======= =======
(a) Adjusted to reflect the three-for-two stock split declared on
February 19, 1997 for payment on March 21, 1997.
EXHIBIT 12
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Fiscal Years Ended in December
(Thousands of Dollars)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Earnings available for
fixed charges:
Net earnings $199,912 155,571 175,033 200,004 179,164
Add:
Cumulative effect of
change in accounting
principles - - 4,282 - -
Fixed charges 47,174 52,422 44,280 42,839 48,050
Taxes on income 106,981 96,979 112,254 125,206 113,212
------- ------- ------- ------- -------
Total $354,067 304,972 335,849 368,049 340,426
======= ======= ======= ======= =======
Fixed charges:
Interest on long-term
debt $ 9,258 9,267 11,179 10,178 16,932
Other interest charges 22,207 28,321 19,610 19,636 18,959
Amortization of debt
expense 339 339 429 386 623
Rental expense representa-
tive of interest factor 15,370 14,495 13,062 12,639 11,536
------- ------- ------- ------- -------
Total $ 47,174 52,422 44,280 42,839 48,050
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges 7.51 5.82 7.58 8.59 7.08
======= ======= ======= ======= =======
EXHIBIT 13
HASBRO, INC. AND SUBSIDIARIES
Selected Information Contained in
Annual Report to Shareholders
for the Year Ended December 29, 1996
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, each as adjusted to reflect the three-for-two stock split declared on
February 19, 1997 for payment on March 21, 1997, for the periods listed.
Sales Prices
---------------- Cash Dividends
Period High Low Declared
- - ------ ---- --- --------------
1995
1st Quarter $22 1/2 18 7/8 $.05
2nd Quarter 23 1/2 20 7/8 .05
3rd Quarter 22 1/4 19 3/4 .05
4th Quarter 21 3/4 19 .05
1996
1st Quarter $31 1/4 19 1/4 $.07
2nd Quarter 25 3/4 23 1/2 .07
3rd Quarter 25 1/2 21 1/4 .07
4th Quarter 29 3/8 24 5/8 .07
The approximate number of holders of record of the Company's Common Stock as
of February 28, 1997 was 4,200.
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
29, 1996, under the most restrictive agreement the full amount of retained
earnings is free of restrictions.
On February 20, 1997, the Company announced both a three-for-two stock split,
payable in the form of a 50% stock dividend, and a quarterly cash dividend of
$.08 per share, which represents a 20% increase from that previously in
effect. The stock split was paid on March 21, 1997 to shareholders of record
on March 7, 1997, and the dividend is payable on May 15, 1997 to shareholders
of record on May 1, 1997.
<PAGE>
SELECTED FINANCIAL DATA
- - -----------------------
(Thousands of Dollars and Shares Except per share Data and Ratios)
Fiscal Year
------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Statement of
Earnings Data:
Net revenues $3,002,370 2,858,210 2,670,262 2,747,176 2,541,055
Net earnings
before cumulative
effect of change
in accounting
principles $ 199,912 155,571 179,315 200,004 179,164
Net earnings $ 199,912 155,571 175,033 200,004 179,164
Per Common Share
Data: (1)
Net earnings
before cumulative
effect of change
in accounting
principles $ 1.52 1.18 1.34 1.48 1.34
Net earnings $ 1.52 1.18 1.31 1.48 1.34
Cash dividends
declared $ .27 .21 .19 .16 .13
Balance Sheet Data:
Total assets $2,701,509 2,616,388 2,378,375 2,293,018 2,082,766
Long-term debt $ 149,382 149,991 150,000 200,510 206,189
Ratio of Earnings
to Fixed Charges (2) 7.51 5.82 7.58 8.59 7.08
Weighted Average
Number of Common
Shares (1) 131,856 132,379 133,996 135,046 133,629
(1) Adjusted to reflect the three-for-two stock split paid March 21, 1997.
(2) For purposes of calculating the ratio of earnings to fixed charges,
fixed charges include interest, amortization of debt expense and
one-third of rentals, and earnings available for fixed charges
represent earnings before fixed charges and income taxes.
<PAGE>
MANAGEMENT'S REVIEW
- - -------------------
Summary
- - -------
A percentage analysis of results of operations follows:
1996 1995 1994
---- ---- ----
Net revenues 100.0% 100.0% 100.0%
Cost of sales 44.3 43.3 43.5
----- ----- -----
Gross profit 55.7 56.7 56.5
Amortization 1.3 1.4 1.4
Royalties, research and development 10.6 10.7 10.2
Advertising 13.9 14.6 14.9
Selling, distribution and administration 18.8 19.4 18.5
Discontinued development project and
restructuring charges - 1.1 .5
Interest expense 1.1 1.3 1.1
Other income, net (.2) (.6) (1.0)
----- ----- -----
Earnings before income taxes and cumulative
effect of change in accounting principles 10.2 8.8 10.9
Income taxes 3.5 3.4 4.2
----- ----- -----
Earnings before cumulative effect of change
in accounting principles 6.7 5.4 6.7
Cumulative effect of change in accounting
principles - - (.1)
----- ----- -----
Net earnings 6.7% 5.4% 6.6%
===== ===== =====
(Thousands of Dollars Except Share Data)
Results of Operations
- - ---------------------
Net revenues for 1996 were $3,002,370 compared to $2,858,210 and $2,670,262
for 1995 and 1994, respectively. Within the United States market, games and
puzzles enjoyed another year of record revenues. The classic brands, such as
Monopoly(R) and Scrabble(R), continued to appeal to consumers. The refreshed
Trivial Pursuit(R) and Yahtzee(R) lines and newer products, including Puzz 3-
D(TM), Jumanji(TM) and Goosebumps(TM), also received very favorable consumer
acceptance. In Hasbro's first full year in the CD-ROM interactive game
market, seven of its thirteen products in this line, including Monopoly, now
in its second-year, exceeded 100,000 units in sales. Within the toy area,
boys' toys again were led by action figures, with both Star Wars(R) and
Batman(R) proving to be popular, even in a year with limited entertainment
support. Hasbro's line of Nerf(R) sports products also grew significantly, up
almost 25%. Both the activities range, with such favorites as Play Doh(R),
completing its 40th year, and Easy Bake(R) Oven, and new Wonder World(TM)
products, and the girls' area, due to a strong large doll segment, had
increased volume. The preschool arena, however, was disappointing,
experiencing a significant decline in revenues from those of the prior year.
<PAGE>
In the international market, both in their local currencies and in dollars,
revenues were essentially flat with those of a year ago. Within Europe,
Germany continued to be a difficult market for the Company, as was Spain.
Elsewhere, the Asian units, Canada and Mexico all showed growth both in their
local currencies and in U.S. dollars. The growth in 1995 from 1994 was
primarily attributable to the United States game and puzzle lines and the
overall international market. In the aggregate, changed foreign currency
rates had a negative impact of approximately $29,000 in 1996 and a favorable
impact of approximately $30,000 in 1995.
The Company's gross profit margin decreased to 55.7% from 56.7% in 1995 which
had improved slightly from 56.5% in 1994. The change in 1996 results from a
combination of factors including a greater volume of products sold at less
than normal margins, higher tooling costs, unfavorable foreign exchange
rates, increased unabsorbed overheads in the Company's European manufacturing
facilities resulting from reduced production levels, all partially offset by
reduced raw material commodity 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 $40,064 compares with $38,471 in
1995 and $36,903 in 1994. These increases were attributable to the
acquisitions during the respective years.
Expenditures for royalties, research and development increased to $319,494
from $304,704 in 1995, while in 1994 they were $273,039. Included in these
amounts are expenditures for research and development of $152,487 in 1996,
$148,057 in 1995 and $135,406 in 1994. As percentages of net revenues,
research and development was 5.1% in 1996, which is not materially different
than the 5.2% in 1995 and 5.1% in 1994. The added development efforts in 1996
related to the Company's interactive game products substantially offset the
reduction in expenses related to its virtual reality efforts in 1995 and 1994
(see below). The increased royalties in 1996 and 1995, both in amount and as
a percentage of net revenues, when compared with 1994, were primarily
attributable to the higher proportion of the Company's revenues arising from
licensed products.
Advertising expenses, after remaining relatively constant at 14.6% and 14.9%
of net revenues in 1995 and 1994, respectively, decreased in 1996 to 13.9%.
This decrease reflects both the reduced proportion of the Company's revenues
attributable to its international units, which traditionally have higher
advertising to sales ratios than do the United States units, and the reduced
overall level of advertising expenditures.
During 1996, selling, distribution and administration costs decreased to
18.8% of revenues from 19.4% in 1995 and 18.5% in 1994. The 1996 percentage
reflects a return to a level more closely approximating that experienced in
years prior to 1995. The increase in 1995 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 that fiscal year.
<PAGE>
During the second quarter of 1995, Hasbro 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 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 of that year. This amount
included facility costs, severance and other related costs.
Interest expense was $31,465 during 1996 compared to $37,588 during 1995 and
$30,789 in 1994. The decrease during the current year reflected the impact of
lower interest rates and the availability of funds generated from operations
during 1995. The increase in 1995 from 1994 reflected the effect of increased
interest rates as well as the Company's increased use of funds for
acquisitions.
Other income of $6,091 in 1996 compares with $16,566 and $26,681 in 1995 and
1994, respectively. The decrease of approximately $10,000 in 1996 is largely
the result of decreased earnings from available funds. These funds,
principally in the international units, are invested on a short-term basis
locally. 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.
Income tax expense as a percentage of pretax earnings in 1996 decreased to
34.9% from 38.4% and 38.5% in 1995 and 1994, respectively. This decrease
resulted from changes in Hasbro's operations as well as the impact of
strategies implemented during 1996. These strategies realized tax benefits
for certain current and prior year international operating losses, allowed a
reduction in the deferred tax asset valuation allowance and reduced state
income taxes. In addition, the impact of nondeductible amortization was less
due to the higher level of earnings.
Liquidity and Capital Resources
- - -------------------------------
The Company continued to have a strong and highly liquid balance sheet with
cash and cash equivalents of $218,971 at December 29, 1996. Cash and cash
equivalents were $161,030 and $137,028 at December 31, 1995 and December 25,
1994, respectively.
<PAGE>
Hasbro generated in excess of $225,000 of net cash from its operating
activities in each of 1996, 1995 and 1994. Included in the 1996 amount was a
net utilization of $52,347 for changes in operating assets and liabilities.
Contributing to this utilization were accounts receivable, which were
approximately 2% greater than in 1995. This reflects the approximate $83,000
increase in fourth quarter sales, much of which, under Hasbro's normal
trading terms, becomes due after the end of the Company's fiscal year,
partially reduced by the non-recourse sale of certain receivables totaling
$65,000. Inventories decreased by more than 13% in the current year, also
impacted by the higher level of fourth quarter shipments. Also utilizing
funds were prepaid expenses and other current assets, which increased and
accounts payable and accrued liabilities, which decreased. Both of these
changes were largely due to the timing of certain payments. During 1995
operating assets and liabilities utilized $67,117, primarily in accounts
receivable and inventories. Receivables were approximately 10% greater in
1995 than in 1994, reflecting both the increased level of fourth quarter
sales and the impact of 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 faster and more complete shipment of customer
orders. Partially offsetting these utilizations was the increase in trade
payables and other accrued liabilities which reflected the 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.
Cash flows from investing activities were a net utilization of funds during
all three reported years; $127,286, $209,331 and $244,178 in 1996, 1995 and
1994, 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, 57% in 1996, 56% in 1995 and 43% in 1994 were
for purchases of tools, dies and molds related to the Company's products.
During those three years, depreciation and amortization expenses were
$98,201, $91,437 and $85,368, respectively. During 1996, Hasbro made several
small acquisitions and investments, none of which were significant. 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. 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
1997, 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 2, 1997, the Company's unused committed and uncommitted lines of
credit, including a $440,000 revolving credit agreement, were in excess of
$1,100,000.
<PAGE>
During 1996 and 1994, net financing activities utilized approximately $90,000
of Hasbro's funds, while in 1995 it provided a small amount. Throughout 1996,
the Company met its seasonal working capital requirements through short-term
borrowings, as in prior years. During the year, the Company also repurchased
in excess of $80,000 of its common stock in the open market. 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. 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 in
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 3,415,800 shares of
its common stock during 1996 and may repurchase up to an additional 5,685,750
shares (both amounts expressed in post-split 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 less than twelve months. At both December 29,
1996 and December 31, 1995, 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.
The Economy and Inflation
- - -------------------------
The Company continued to experience a difficult economic environment
throughout much of the world during 1996. The principal market for the
Company's products is the retail sector where certain customers have
experienced economic difficulty. The Company closely monitors the
creditworthiness of its customers and adjusts credit policies and limits as
it deems appropriate.
The effect of inflation on the Company's operations during 1996 was not
significant and the Company will continue its policy of monitoring costs and
adjusting prices accordingly.
<PAGE>
Other Information
- - -----------------
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 1997.
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.
Hasbro will be adopting Statement of Financial Accounting Standards No. 125,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (SFAS 125), in 1997. The adoption of SFAS 125
is not expected to have any material impact on Hasbro's results of
operations, financial condition or cash flows.
Statements of Financial Accounting Standards No. 128, Earnings per Share
(SFAS 128), and No. 129, Disclosure of Information about Capital Structure
(SFAS 129), were issued by the Financial Accounting Standards Board in
February 1997. Hasbro will adopt both SFAS 128 and SFAS 129 in 1997 and is
currently reviewing the provisions of each to determine their impact, if any,
on its operating results or financial position.
On February 10, 1997, Hasbro and Russ Berrie and Company, Inc. (Russ Berrie)
announced an agreement in principle for Hasbro to acquire the assets of Russ
Berrie subsidiaries Cap Toys, Inc. and Oddzon Products, Inc. for $166,000,
subject to adjustment based on the net tangible value of assets sold. The
agreement in principle is subject to the execution and delivery of a
definitive contract and the satisfaction of the conditions to be contained
therein, including, without limitation, the receipt of regulatory and other
consents and approvals. It is anticipated that the transaction will be
consummated in the second quarter of 1997.
On February 20, 1997, Hasbro announced both a three-for-two stock split and a
quarterly cash dividend of $.08 per share, which represents a 20% increase
from that previously in effect. The stock split, in the form of a 50% stock
dividend, was paid on March 21, 1997 to shareholders of record on March 7,
1997, and the dividend is payable on May 15, 1997 to shareholders of record
on May 1, 1997. On February 14, the Company announced the establishment of a
dividend reinvestment and cash stock purchase program for its shareholders of
record and employees.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - -------------------------------------------
See attached pages.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
We have audited the accompanying consolidated balance sheets of
Hasbro, Inc. and subsidiaries as of December 29, 1996 and December 31, 1995
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 29, 1996. 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 29, 1996 and December 31, 1995
and the results of their operations and their cash flows for each of the
fiscal years in the three-year period ended December 29, 1996 in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
February 5, 1997
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 29, 1996 and December 31, 1995
(Thousands of Dollars Except Share Data)
Assets 1996 1995
------ ---- ----
Current assets
Cash and cash equivalents $ 218,971 161,030
Accounts receivable, less allowance for
doubtful accounts of $46,600 in 1996
and $48,800 in 1995 807,149 791,111
Inventories 273,247 315,620
Prepaid expenses and other current assets 187,222 157,737
--------- ---------
Total current assets 1,486,589 1,425,498
Property, plant and equipment, net 313,545 313,240
--------- ---------
Other assets
Cost in excess of acquired net assets, less
accumulated amortization of $115,312 in 1996
and $99,404 in 1995 460,467 473,388
Other intangibles, less accumulated amortization
of $102,387 in 1996 and $79,648 in 1995 364,987 343,624
Other 75,921 60,638
--------- ---------
Total other assets 901,375 877,650
--------- ---------
Total assets $2,701,509 2,616,388
========= =========
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 29, 1996 and December 31, 1995
(Thousands of Dollars Except Share Data)
Liabilities and Shareholders' Equity 1996 1995
------------------------------------ ---- ----
Current liabilities
Short-term borrowings $ 120,736 119,987
Trade payables 174,337 198,328
Accrued liabilities 399,896 433,567
Income taxes 135,849 117,982
--------- ---------
Total current liabilities 830,818 869,864
Long-term debt 149,382 149,991
Deferred liabilities 69,263 70,921
--------- ---------
Total liabilities 1,049,463 1,090,776
--------- ---------
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 132,160,293 shares
in 1996 and 88,086,108 shares in 1995 66,080 44,043
Additional paid-in capital 282,922 279,288
Retained earnings 1,362,791 1,201,242
Foreign currency translation 21,487 23,450
Treasury stock, at cost, 3,297,628 shares in
1996 and 741,237 shares in 1995 (81,234) (22,411)
--------- ---------
Total shareholders' equity 1,652,046 1,525,612
--------- ---------
Total liabilities and shareholders' equity $2,701,509 2,616,388
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Fiscal Years Ended in December
(Thousands of Dollars Except Share Data)
1996 1995 1994
---- ---- ----
Net revenues $3,002,370 2,858,210 2,670,262
Cost of sales 1,328,897 1,237,197 1,161,479
--------- --------- ---------
Gross profit 1,673,473 1,621,013 1,508,783
--------- --------- ---------
Expenses
Amortization 40,064 38,471 36,903
Royalties, research and development 319,494 304,704 273,039
Advertising 418,003 417,886 397,094
Selling, distribution and administration 563,645 555,280 493,570
Discontinued development project and
restructuring charges - 31,100 12,500
--------- --------- ---------
Total expenses 1,341,206 1,347,441 1,213,106
--------- --------- ---------
Operating profit 332,267 273,572 295,677
--------- --------- ---------
Nonoperating (income) expense
Interest expense 31,465 37,588 30,789
Other (income), net (6,091) (16,566) (26,681)
--------- --------- ---------
Total nonoperating expense 25,374 21,022 4,108
--------- --------- ---------
Earnings before income taxes and
cumulative effect of change in
accounting principles 306,893 252,550 291,569
Income taxes 106,981 96,979 112,254
--------- --------- ---------
Earnings before cumulative effect
of change in accounting principles 199,912 155,571 179,315
Cumulative effect of change in
accounting principles - - ( 4,282)
--------- --------- ---------
Net earnings $ 199,912 155,571 175,033
========= ========= =========
Per common share
Earnings before cumulative effect
of change in accounting principles $ 1.52 1.18 1.34
========= ========= =========
Net earnings $ 1.52 1.18 1.31
========= ========= =========
Cash dividends declared $ .27 .21 .19
========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Thousands of Dollars)
<CAPTION>
Additional Foreign Total
Common Paid-in Retained Currency Treasury Shareholders'
Stock Capital Earnings Translation Stock Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 26, 1993 $ 43,898 296,823 920,956 15,006 - 1,276,683
Net earnings - - 175,033 - - 175,033
Purchase of treasury stock - - - - (26,140) (26,140)
Stock option and warrant
transactions 145 (14,672) - - 9,421 (5,106)
Dividends declared - - (24,573) - - (24,573)
Currency translation - - - (480) - (480)
--------- --------- --------- --------- --------- ---------
Balance, December 25, 1994 44,043 282,151 1,071,416 14,526 (16,719) 1,395,417
Net earnings - - 155,571 - - 155,571
Purchase of treasury stock - - - - (15,228) (15,228)
Stock option and warrant
transactions - (2,872) - - 9,536 6,664
Dividends declared - - (28,050) - - (28,050)
Currency translation and other - 9 2,305 8,924 - 11,238
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1995 44,043 279,288 1,201,242 23,450 (22,411) 1,525,612
Net earnings - - 199,912 - - 199,912
Three-for-two stock split 22,027 (22,027) - - - -
Purchase of treasury stock - - - - (83,657) (83,657)
Stock option and warrant
transactions - 25,063 - - 24,834 49,897
Dividends declared - - (34,559) - - (34,559)
Currency translation and other 10 598 (3,804) (1,963) - (5,159)
--------- --------- --------- --------- --------- ---------
Balance, December 29, 1996 $ 66,080 282,922 1,362,791 21,487 (81,234) 1,652,046
========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended in December
(Thousands of Dollars)
1996 1995 1994
---- ---- ----
Cash flows from operating activities
Net earnings $199,912 155,571 175,033
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization of plant
and equipment 98,201 91,437 85,368
Other amortization 40,064 38,471 36,903
Deferred income taxes (8,120) (9,149) (1,245)
Gain on investments (18) (474) (25,284)
Discontinued development cost - 13,256 -
Change in operating assets and liabilities
(other than cash and cash equivalents):
(Increase) decrease in accounts
receivable (22,418) (66,658) 9,871
Decrease (increase) in inventories 42,959 (64,686) 28,678
(Increase) in prepaid expenses and
other current assets (37,036) (1,633) (3,142)
(Decrease) increase in trade payables
and other current liabilities (35,852) 65,860 (22,231)
Other 2,301 5,405 (166)
------- ------- -------
Net cash provided by operating
activities 279,993 227,400 283,785
------- ------- -------
Cash flows from investing activities
Additions to property, plant and
equipment (101,946) (100,639) (110,944)
Investments and acquisitions, net of
cash acquired (33,027) (117,406) (192,379)
Sale of investments 318 1,715 59,322
Other 7,369 6,999 (177)
------- ------- -------
Net cash utilized by investing
activities (127,286) (209,331) (244,178)
------- ------- -------
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Fiscal Years Ended in December
(Thousands of Dollars)
1996 1995 1994
---- ---- ----
Cash flows from financing activities
Proceeds from borrowings with original
maturities of more than three months 265,017 433,646 -
Repayments of borrowings with original
maturities of more than three months (255,636) (416,515) (53,736)
Net (payments) proceeds of other
short-term borrowings (6,116) 20,997 18,938
Purchase of common stock (83,657) (15,228) (26,140)
Stock option and warrant transactions 17,745 6,664 (5,106)
Dividends paid (32,959) (27,190) (23,711)
------- ------- -------
Net cash (utilized) provided by
financing activities (95,606) 2,374 (89,755)
------- ------- -------
Effect of exchange rate changes on cash 840 3,559 922
------- ------- -------
Increase (decrease) in cash and
cash equivalents 57,941 24,002 (49,226)
Cash and cash equivalents at beginning
of year 161,030 137,028 186,254
------- ------- -------
Cash and cash equivalents at end
of year $218,971 161,030 137,028
======= ======= =======
Supplemental information
Cash paid during the year for
Interest $ 29,430 39,050 33,471
Income taxes $ 92,670 81,179 99,601
See accompanying notes to consolidated financial statements
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Thousands of Dollars Except Share Data)
(1) Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Hasbro,
Inc. and all significant majority-owned subsidiaries (Hasbro or 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 amounts reported in the financial statements
and notes thereto. Actual results could differ from those estimates.
Fiscal Year
-----------
Hasbro's fiscal year ends on the last Sunday in December. The fiscal
years ended December 29, 1996 and December 25, 1994 were fifty-two week
periods while the fiscal year ended December 31, 1995 was a fifty-three
week period.
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.
Long-Lived Assets
-----------------
During the first quarter of 1996, Hasbro adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and Long-Lived Assets to be Disposed Of (SFAS 121). The
Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate the carrying value may not be
recoverable. Recoverability is measured by a comparison of the carrying
amount of an asset to future undiscounted net cash flows expected to be
generated by the asset. Adoption of SFAS 121 had no material impact to
the Company.
<PAGE>
Cost in Excess of Net Assets Acquired and Other Intangibles
-----------------------------------------------------------
Approximately 90% of Hasbro'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.
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 other product-
related rights. Approximately 34% of these other intangibles relate to
the acquisition of Milton Bradley and Tonka and an additional 49%
relates to Hasbro'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.
Income Taxes
------------
Hasbro 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.
<PAGE>
Pension Plans, Postretirement and Postemployment Benefits
---------------------------------------------------------
Hasbro, 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.
Hasbro has a contributory postretirement health and life insurance plan
covering substantially all employees who retire under any of its 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.
Research and Development
------------------------
Research and product development costs for 1996, 1995 and 1994 were
$152,487, $148,057 and $135,406, respectively.
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.
Risk Management Contracts
-------------------------
Hasbro does not enter into derivative financial instruments for
speculative purposes. In the normal course of business, however, the
Company employs off-balance sheet forward exchange contracts to manage
its exposure to fluctuations in foreign currency exchange rates. Gains
and losses deferred under hedge accounting provisions are subsequently
included in the measurement of the related foreign currency transaction.
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, adjusted to reflect
the three-for-two stock split declared February 19, 1997 (note 9), used
in the computation of earnings per common share was 131,856,140,
132,379,059 and 133,996,128 in 1996, 1995 and 1994, respectively.
The difference between primary and fully diluted earnings per share was
not significant for any year.
<PAGE>
(2) Acquisitions
------------
During February 1995, Hasbro 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.
(3) Inventories
-----------
1996 1995
---- ----
Finished products $209,903 240,126
Work in process 16,810 22,093
Raw materials 46,534 53,401
------- -------
$273,247 315,620
======= =======
(4) Property, Plant and Equipment
-----------------------------
1996 1995
---- ----
Land and improvements $ 14,543 14,845
Buildings and improvements 205,408 207,129
Machinery and equipment 257,499 229,882
------- -------
477,450 451,856
Less accumulated depreciation 215,172 187,650
------- -------
262,278 264,206
Tools, dies and molds, net of
amortization 51,267 49,034
------- -------
$313,545 313,240
======= =======
Expenditures for maintenance and repairs which do not materially extend
the life of the assets are charged to operations.
(5) Short-Term Borrowings
---------------------
Hasbro has available unsecured committed and uncommitted lines of credit
from various banks approximating $550,000 and $790,000, respectively.
Substantially all of the short-term borrowings outstanding at the end of
1996 and 1995 represent bank borrowings related to international units
made under these lines of credit. The weighted average interest rates of
the outstanding borrowings were 5.0% and 6.2%, respectively. Hasbro'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 creditworthiness. 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.
<PAGE>
(6) Accrued Liabilities
-------------------
1996 1995
---- ----
Royalties $ 81,053 77,752
Advertising 83,694 111,853
Payroll and management incentives 32,879 36,205
Other 202,270 207,757
------- -------
$399,896 433,567
======= =======
(7) Long-Term Debt
--------------
Long-term debt of $149,382 and $149,991 at December 29, 1996 and
December 31, 1995, respectively, consists of Hasbro's 6% Convertible
Subordinated Notes Due 1998. These notes are convertible into common
stock at a conversion price of $19.55 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:
1996 1995 1994
---- ---- ----
Current
United States $ 58,580 54,979 60,539
State and local 9,033 9,309 10,417
International 47,488 41,840 42,543
------- ------- -------
115,101 106,128 113,499
------- ------- -------
Deferred
United States 4,309 (5,122) 1,924
State and local 406 (483) 180
International (12,835) (3,544) (3,349)
------- ------- -------
(8,120) (9,149) (1,245)
------- ------- -------
$106,981 96,979 112,254
======= ======= =======
Certain tax benefits are not reflected in income taxes in the statements
of earnings. Such benefits of $6,793 in 1996, $6,532 in 1995 and $9,800
in 1994, relate primarily to stock options.
A reconciliation of the statutory United States federal income tax rate
to Hasbro's effective income tax rate is as follows:
<PAGE>
1996 1995 1994
---- ---- ----
Statutory income tax rate 35.0% 35.0% 35.0%
State and local income taxes, net
of federal income tax effect 2.0 2.3 2.4
Amortization of goodwill 1.6 1.9 1.6
International earnings taxed at
rates other than the United States
statutory rate (1.1) (.3) (.7)
Reduction of valuation allowance (1.1) - -
Other, net (1.5) (.5) .2
---- ---- ----
34.9% 38.4% 38.5%
==== ==== ====
The components of earnings before income taxes are as follows:
1996 1995 1994
---- ---- ----
United States $208,864 151,094 177,672
International 98,029 101,456 113,897
------- ------- -------
$306,893 252,550 291,569
======= ======= =======
The components of deferred income tax expense arise from various
temporary differences and relate to items included in the statements of
earnings.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 29, 1996
and December 31, 1995 are:
1996 1995
---- ----
Deferred tax assets:
Accounts receivable $ 25,643 28,433
Inventories 10,650 14,671
Net operating loss carryovers 24,266 18,677
Operating expenses 34,039 36,024
Postretirement benefits 12,136 11,834
Other 39,971 39,281
------- -------
Gross deferred tax assets 146,705 148,920
Valuation allowance (7,724) (15,869)
------- -------
Net deferred tax assets 138,981 133,051
------- -------
Deferred tax liabilities:
Property rights and property, plant
and equipment 52,229 59,760
Other 9,563 6,787
------- -------
Gross deferred tax liabilities 61,792 66,547
------- -------
Net deferred income taxes $ 77,189 66,504
======= =======
<PAGE>
Hasbro has a valuation allowance for deferred tax assets at December 29,
1996 of $7,724, which is a decrease of $8,145 from the $15,869 at
December 31, 1995. Such decrease relates primarily to the current and
expected future utilization of certain international tax losses from
prior years. The remaining allowance pertains to other 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 $7,724.
Based on Hasbro's history of taxable income and the anticipation of
sufficient taxable income in years when the temporary differences are
expected to become tax deductions, it believes that it will realize the
benefit of the deferred tax assets, net of the existing valuation
allowance. Of the deferred tax assets, approximately 67% are expected to
be realized during the next two fiscal years.
Deferred income taxes of $78,031 and $85,849 at the end of 1996 and
1995, respectively, are included as a component of prepaid expenses and
other current assets, and $16,123 and $4,007, respectively, are included
as a component of other assets. At the same dates, deferred income taxes
of $16,017 and $22,198, respectively, are included as a component of
deferred liabilities.
The cumulative amounts of undistributed earnings of Hasbro's
international subsidiaries held for reinvestment amounted to
approximately $307,000 at December 29, 1996 and $289,000 at December 31,
1995.
(9) Capital Stock
-------------
Preference Share Purchase Rights
--------------------------------
Hasbro 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 Hasbro'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 Hasbro'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 Hasbro (the Board),
receive shares of Hasbro's stock in exchange for Rights.
Prior to the acquisition by the person or group of beneficial ownership
of a certain percentage of Hasbro's common stock, the Rights are
redeemable for $.00444 per Right. The Rights Plan contains certain
exceptions with respect to the Hassenfeld family and related entities.
<PAGE>
Common Stock
------------
On February 19, 1997, the Board declared a three-for-two stock split,
payable in the form of a 50% stock dividend, on March 21, 1997 to
shareholders of record on March 7, 1997. Appropriate changes, to reflect
the split, have been effected in the stock options and other securities
exercisable for or convertible into Hasbro's common stock.
Except for the balance sheet presentation of the December 31, 1995
outstanding and treasury shares, all share and per share amounts have
been adjusted to reflect this split.
In August 1990, the Board authorized the purchase of up to 6,750,000
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
7,500,000 shares. At December 29, 1996, a balance of 5,685,750 shares
remained under these authorizations.
(10) Employee Stock Options and Warrants
-----------------------------------
Hasbro has a Non-Qualified Stock Option Plan, an Incentive Stock Option
Plan, a 1992 Stock Incentive Plan, a Stock Incentive Performance Plan
and a Stock Option Plan for Non-Employee Directors (collectively, the
plans). During 1996, Hasbro adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123 (SFAS 123) but, as
permitted, continues to apply Accounting Principles Board Opinion No. 25
(APB 25) in accounting for the plans. Under APB 25, no compensation cost
is recognized. A comparison of the Company's net earnings and earnings
per share as reported and pro forma as they would have been had
compensation cost been determined consistent with SFAS 123 follows:
1996 1995
---- ----
Net earnings: As reported $199,912 155,571
Pro forma 196,911 154,802
======= =======
Earnings per share: As reported $ 1.52 1.18
Pro forma 1.49 1.17
======= =======
As the provisions of SFAS 123 have not been applied to options granted
prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
<PAGE>
Hasbro has reserved 14,955,055 shares of its common stock for issuance
upon exercise of options granted or to be granted under the plans. These
options generally vest in equal annual amounts over three to five years.
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.
The changes in outstanding options and warrants for the three years
ended December 29, 1996 follow:
Weighted
Average
Shares (in Exercise
thousands) Price
------- -------
Outstanding at December 26, 1993 10,684 $16.11
Granted 1,869 19.97
Exercised (2,991) 11.67
Expired or canceled (757) 19.15
------
Outstanding at December 25, 1994 8,805 18.17
Granted 1,108 22.71
Exercised (475) 11.34
Expired or canceled (561) 20.91
------
Outstanding at December 31, 1995 8,877 18.93
Granted 6,339 21.75
Exercised (1,236) 14.47
Expired or canceled (345) 22.17
------
Outstanding at December 29, 1996 13,635 $20.56
====== =====
The number of shares exercisable and the weighted average exercise price
for such shares at the end of 1996, 1995 and 1994 were 6,585,280 at
$19.32, 4,727,262 at $16.89 and 3,264,852 at $14.63, respectively. At the
end of 1996, by range of exercise prices, the number of shares
represented by outstanding options and warrants with their weighted
average exercise price and weighted average remaining contractual life,
in years, and the number of shares represented by exercisable options and
warrants with their weighted average exercise price were:
<PAGE>
Outstanding Exercisable
------------------------ ------------------
Exercise Price Shares Price Life Shares Price
------------- ---------- ----- ---- ---------- -----
$ 5.06 - 9.83 955,623 $ 7.57 3.1 955,623 $ 7.57
========== ===== ==== ========== =====
$16.67 - 19.75 2,291,923 $18.39 6.7 1,575,507 $18.30
========== ===== ==== ========== =====
$20.21 - 28.99 10,387,438 $22.23 6.8 4,054,150 $22.48
========== ===== ==== ========== =====
The weighted average fair value of options granted in 1996 and 1995 were
$6.93 and $6.44, respectively. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in
1996 and 1995, respectively: risk-free interest rates of 5.51% and 7.19%;
expected dividend yields of 1.13% and 1.18%; expected volatility of
approximately 21% and lives of 5.9 years for both years.
(11) Pension, Postretirement and Postemployment Benefits
---------------------------------------------------
Pension Benefits
----------------
Hasbro's net pension and profit sharing cost for 1996, 1995 and 1994 was
approximately $15,700, $12,200 and $12,500, 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:
1996 1995 1994
---- ---- ----
Benefits earned during the year $ 8,583 6,304 7,029
Interest cost on projected benefits 9,868 9,492 8,219
Actual return on plan assets (23,227) (31,154) (521)
Net amortization and deferral 11,763 21,153 (8,429)
------ ------ ------
$ 6,987 5,795 6,298
====== ====== ======
The funded status and the amounts recognized in Hasbro's balance sheets
relating to these plans are:
<PAGE>
1996 1995
----------------------- -----------------------
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 $103,870 6,591 98,149 8,303
Nonvested benefits 3,205 673 3,162 199
------- ------ ------- ------
Accumulated benefit
obligation 107,075 7,264 101,311 8,502
Effect of assumed
increase in
compensation level 29,542 3,469 27,972 5,997
------- ------ ------- ------
Projected benefit
obligation 136,617 10,733 129,283 14,499
Net assets available
for benefits 162,641 - 137,292 919
------- ------ ------- ------
Plan assets in excess
of (less than)
projected benefits $ 26,024 (10,733) 8,009 (13,580)
======= ====== ======= ======
Consisting of:
Unrecognized net
asset $ 1,372 - 1,715 -
Unrecognized prior
service cost (6,085) (4,474) (815) (4,310)
Unrecognized net gain
(loss) 32,406 2,818 9,407 (1,984)
Accrued pension
recognized in the
balance sheet (1,669) (9,077) (2,298) (7,286)
------- ------ ------- ------
$ 26,024 (10,733) 8,009 (13,580)
======= ====== ======= ======
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 7.75% for 1996, 7.25% for 1995 and 8.5% for 1994 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 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 1996, 1995 and 1994
was approximately $5,000, $4,800 and $5,100, respectively.
<PAGE>
International Plans
-------------------
Pension coverage for employees of Hasbro'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
-----------------------
Hasbro 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 29,
1996 and December 31, 1995 consists of:
1996 1995
---- ----
Retired employees $17,632 17,873
Fully eligible active employees 1,021 952
Other active employees 5,909 5,322
------ ------
$24,562 24,147
====== ======
The net periodic postretirement benefit cost included the following
components:
1996 1995 1994
---- ---- ----
Benefits earned during the period $ 289 267 403
Interest cost on projected benefits 1,727 1,822 1,709
------ ------ ------
$ 2,016 2,089 2,112
====== ====== ======
For measuring the expected postretirement benefit obligation, an 8.6%
annual rate of increase in the per capita cost of covered health care
benefits was assumed for 1996 and a rate of 9.2% for 1995 and 1994. The
1996 rate was further assumed to decrease gradually to 5% in 2012. The
1995 and 1994 rates were assumed to decrease to 6% over this same
period. All were assumed to remain constant after 2012. The weighted
average discount rate used in determining the accumulated postretirement
benefit obligation was 7.75% in 1996, 7.25% in 1995 and 8.5% in 1994.
If the health care cost trend rate were increased one percentage point
in each year, the accumulated postretirement benefit obligation at
December 31, 1996 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%.
<PAGE>
Postemployment Benefits
-----------------------
Hasbro 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 Hasbro's employ
under terms of its long-term disability plan.
At the beginning of 1994, Hasbro adopted Statement of Financial
Accounting Standards No. 112 (SFAS 112). 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.
(12) Leases
------
Hasbro 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 1996, 1995 and 1994 amounted to $46,092, $43,486 and
$39,186, respectively.
Minimum rentals, net of minimum sublease income which is not material,
under long-term operating leases for the five years subsequent to 1996
and in the aggregate are as follows:
1997 $ 33,749
1998 24,539
1999 20,056
2000 15,619
2001 13,995
Later years 100,452
-------
$208,410
=======
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 1996.
In addition, Hasbro leases certain facilities which, as a result of
prior restructurings, are no longer in use. Future costs relating to
such facilities were included as a component of the restructuring charge
and are not included in the table above.
<PAGE>
(13) Discontinued Development Project and Restructuring Charges
----------------------------------------------------------
During the second quarter of 1995, Hasbro 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. Substantially
all of the liabilities established for this action have been paid.
During the third quarter of 1994, Hasbro 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, have been paid.
(14) Financial Instruments
---------------------
Hasbro'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 29, 1996, 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.
Hasbro enters 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
-----------------------------
Hasbro had unused open letters of credit of approximately $20,000 and
$18,000 at December 29, 1996 and December 31, 1995, respectively.
<PAGE>
Hasbro had the equivalent of approximately $35,000 and $42,000 of
forward exchange contracts outstanding at December 29, 1996 and December
31, 1995, 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 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
-----------------------------------
Hasbro 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 Hasbro operates internationally, it is exposed to the risk of changes
in social, political and economic conditions inherent in such
operations.
Information about Hasbro'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 1996 follows.
Hasbro'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.
1996 1995 1994
---- ---- ----
Net revenues:
United States $1,642,569 1,550,454 1,530,928
International 1,359,801 1,307,756 1,139,334
--------- --------- ---------
$3,002,370 2,858,210 2,670,262
========= ========= =========
Operating profit:
United States $ 201,312 146,841 169,782
International 130,955 126,731 125,895
--------- --------- ---------
$ 332,267 273,572 295,677
========= ========= =========
Identifiable assets:
United States $1,793,915 1,782,276 1,612,982
International 907,594 834,112 765,393
--------- --------- ---------
$2,701,509 2,616,388 2,378,375
========= ========= =========
<PAGE>
Certain of Hasbro's international units sell products, primarily on a
letter of credit basis, directly to United States customers, and certain
United States units sell products to international customers, primarily
in Latin America. Were such transactions reported by the geographic
destination of the sale rather than the geographic location of the unit
making the sale, United States revenues would be increased and
international revenues decreased by $135,010, $71,998 and $36,666 in
1996, 1995 and 1994, respectively.
Other Information
-----------------
Hasbro markets its products primarily to customers in the retail sector.
Although the Company closely monitors the creditworthiness 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 22% and 13%, respectively, of
consolidated net revenues during 1996 and 21% and 12%, respectively,
during each of 1995 and 1994.
Hasbro 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 Hasbro were 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 Hasbro from, or the loss of "most
favored nation" trading status by the Peoples Republic of China could
significantly increase the cost of the Company's products imported into
the United States from China.
<PAGE>
(17) Quarterly Financial Data (Unaudited)
------------------------------------
1996
----
Quarter
------------------------------------
First Second Third Fourth Full Year
----- ------ ----- ------ ---------
Net revenues $538,685 511,609 845,148 1,106,928 3,002,370
Gross profit $300,914 277,425 472,875 622,259 1,673,473
Earnings before
income taxes $ 39,109 9,143 104,934 153,707 306,893
Net earnings $ 24,365 5,986 70,469 99,092 199,912
======= ======= ======= ========= =========
Per common share
Earnings $ .18 .05 .54 .75 1.52
Market price
High $ 31 1/4 25 3/4 25 1/2 29 3/8 31 1/4
Low $ 19 1/4 23 1/2 21 1/4 24 5/8 19 1/4
Cash dividends
declared $ .07 .07 .07 .07 .27
======= ======= ======= ========= =========
1995
----
Quarter
-------------------------------------
First Second Third Fourth Full Year
----- ------ ----- ------ ---------
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) $ .16 (.11) .48 .64 1.18
Market price
High $ 22 1/2 23 1/2 22 1/4 21 3/4 23 1/2
Low $ 18 7/8 20 7/8 19 3/4 19 18 7/8
Cash dividends
declared $ .05 .05 .05 .05 .21
======= ======= ======= ========= =========
<PAGE>
1994
----
Quarter
------------------------------------
First Second Third Fourth Full Year
----- ------ ----- ------ ---------
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 account-
ing principles $ .20 .01 .56 .57 1.34
Earnings $ .17 .01 .56 .57 1.31
Market price
High $ 24 3/8 24 21 3/8 22 1/4 24 3/8
Low $ 22 1/4 18 3/4 18 3/4 18 1/2 18 1/2
Cash dividends
declared $ .05 .05 .05 .05 .19
======= ======= ======= ======= =========
(a) Includes the effect of nonrecurring charges in 1995 of $31,100 relating
to a discontinued development project and in 1994, $12,500 relating to
restructuring of operations. (See note 13)
EXHIBIT 22
HASBRO, INC. AND SUBSIDIARIES
Subsidiaries of the Registrant (a)
Name Under Which Subsidiary State or Other Jurisdiction of
Does Business Incorporation or Organization
- - --------------------------- ------------------------------
Claster Television, Inc. Maryland
Hasbro Far East Services, Ltd. Hong Kong
Hasbro Interactive, Inc. Delaware
Hasbro International, Inc. Delaware
Groupe Hasbro France S.A. France
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 Ireland Limited Ireland
Hasbro Italy S.r.l. Italy
Hasbro Japan K.K. Japan
Hasbro New Zealand Limited New Zealand
Hasbro Osterreich Ges.m.b.H Austria
Hasbro (Schweiz) AG Switzerland
Hasbro U.K. Limited United Kingdom
Hasbro Interactive 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 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
MB Espana, S.A. Spain
S.A. Hasbro N.V. Belgium
Palmyra Holdings Pte Ltd. Singapore
Hasbro Hong Kong Limited Hong Kong
Hasbro Singapore Pte Ltd. Singapore
Hasbro Toy (Malaysia) Sdn Bhd Malaysia
Hasbro International Trading, Inc. Delaware
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 5, 1997 relating to the
consolidated balance sheets of Hasbro, Inc. and subsidiaries as of December
29, 1996 and December 31, 1995 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 29, 1996, 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 29, 1996.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 218,971
<SECURITIES> 0
<RECEIVABLES> 853,749
<ALLOWANCES> 46,600
<INVENTORY> 273,247
<CURRENT-ASSETS> 1,486,589
<PP&E> 528,717
<DEPRECIATION> 215,172
<TOTAL-ASSETS> 2,701,509
<CURRENT-LIABILITIES> 830,818
<BONDS> 149,382
0
0
<COMMON> 66,080
<OTHER-SE> 1,585,966
<TOTAL-LIABILITY-AND-EQUITY> 2,701,509
<SALES> 3,002,370
<TOTAL-REVENUES> 3,002,370
<CGS> 1,328,897
<TOTAL-COSTS> 1,328,897
<OTHER-EXPENSES> 777,561
<LOSS-PROVISION> 5,834
<INTEREST-EXPENSE> 31,465
<INCOME-PRETAX> 306,893
<INCOME-TAX> 106,981
<INCOME-CONTINUING> 199,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 199,912
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 0
</TABLE>
