SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 28, 1998 Commission file number 1-6682
HASBRO, INC.
--------------------
(Name of Registrant)
Rhode Island O5-0155090
- - - ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1027 Newport Avenue, Pawtucket, Rhode Island 02861
---------------------------------------------------
(Principal Executive Offices)
(401) 431-8697
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
--- ---
The number of shares of Common Stock, par value $.50 per share,
outstanding as of August 7, 1998 was 131,534,304.
<PAGE>
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands of Dollars Except Share Data)
(Unaudited)
<CAPTION>
Jun. 28, Jun. 29, Dec. 28,
Assets 1998 1997 1997
--------- --------- ---------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 180,595 82,510 361,785
Accounts receivable, less allowance
for doubtful accounts of $52,400,
$49,600 and $51,700 600,254 714,212 783,008
Inventories:
Finished products 277,608 302,213 198,215
Work in process 17,215 16,025 12,208
Raw materials 36,815 49,983 32,279
--------- --------- ---------
Total inventories 331,638 368,221 242,702
Deferred income taxes 92,929 78,461 96,489
Prepaid expenses 130,811 110,452 89,890
--------- --------- ---------
Total current assets 1,336,227 1,353,856 1,573,874
Property, plant and equipment, net 281,327 296,139 280,603
--------- --------- ---------
Other assets
Cost in excess of acquired net assets,
less accumulated amortization of
$138,162, $123,524 and $128,237 615,297 508,439 486,502
Other intangibles, less accumulated
amortization of $154,513, $114,346
and $135,467 707,775 419,439 478,798
Other 87,139 68,922 79,940
--------- --------- ---------
Total other assets 1,410,211 996,800 1,045,240
--------- --------- ---------
Total assets $3,027,765 2,646,795 2,899,717
========= ========= =========
</TABLE>
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<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, continued
(Thousands of Dollars Except Share Data)
(Unaudited)
<CAPTION>
Jun. 28, Jun. 29, Dec. 28,
Liabilities and Shareholders' Equity 1998 1997 1997
--------- --------- ---------
<S> <C> <C> <C>
Current liabilities
Short-term borrowings $ 527,259 314,288 122,024
Trade payables 124,479 89,967 179,156
Accrued liabilities 486,715 336,112 596,033
Income taxes 65,666 91,151 106,333
--------- --------- ---------
Total current liabilities 1,204,119 831,518 1,003,546
Long-term debt, excluding current
installments - 149,040 -
Deferred liabilities 77,886 67,206 58,054
--------- --------- ---------
Total liabilities 1,282,005 1,047,764 1,061,600
--------- --------- ---------
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 139,799,011, 132,176,967
and 139,799,011 69,900 66,088 69,900
Additional paid-in capital 488,374 279,798 489,447
Retained earnings 1,449,609 1,382,557 1,457,495
Accumulated other comprehensive income (20,076) (7,075) (3,903)
Treasury stock, at cost; 7,786,821,
4,735,697 and 6,357,948 shares (242,047) (122,337) (174,822)
--------- --------- ---------
Total shareholders' equity 1,745,760 1,599,031 1,838,117
--------- --------- ---------
Total liabilities and
shareholders' equity $3,027,765 2,646,795 2,899,717
========= ========= =========
See accompanying condensed notes to consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Thousands of Dollars Except Share Data)
(Unaudited)
<CAPTION>
Quarter Ended Six Months Ended
------------------ --------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1998 1997 1998 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net Revenues $ 572,057 583,886 1,054,877 1,139,670
Cost of Sales 247,095 252,917 451,407 488,288
-------- -------- --------- ---------
Gross Profit 324,962 330,969 603,470 651,382
-------- -------- --------- ---------
Expenses
Amortization 15,880 11,194 30,023 21,226
Royalties, Research and
Development 82,129 87,864 149,465 151,756
Advertising 73,213 66,908 128,970 138,210
Selling, Distribution and
Administration 141,479 142,289 276,728 277,070
-------- -------- --------- ---------
Total Expenses 312,701 308,255 585,186 588,262
-------- -------- --------- ---------
Operating Profit 12,261 22,714 18,284 63,120
-------- -------- --------- ---------
Nonoperating (income) expense
Interest Expense 6,416 5,493 8,728 9,923
Other (Income) Expense, Net (2,417) (3,062) (10,514) (7,233)
-------- -------- --------- ---------
Total nonoperating (income)
expense 3,999 2,431 (1,786) 2,690
-------- -------- --------- ---------
Earnings Before Income Taxes 8,262 20,283 20,070 60,430
Income Taxes 2,809 7,302 6,824 21,755
-------- -------- --------- ---------
Net Earnings $ 5,453 12,981 13,246 38,675
======== ======== ========= =========
Per Common Share
Net Earnings
Basic $ .04 .10 .10 .30
======== ======== ========= =========
Diluted $ .04 .10 .10 .30
======== ======== ========= =========
Cash Dividends Declared $ .08 .08 .16 .16
======== ======== ========= =========
See accompanying condensed notes to consolidated financial statements.
</TABLE>
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<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 28, 1998 and June 29, 1997
(Thousands of Dollars)
(Unaudited)
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 13,246 38,675
Adjustments to reconcile net earnings to net cash
utilized by operating activities:
Depreciation and amortization of plant and equipment 43,857 48,297
Other amortization 30,023 21,226
Deferred income taxes (1,153) (2,325)
Change in operating assets and liabilities (other
than cash and cash equivalents):
Decrease in accounts receivable 176,595 87,426
Increase in inventories (69,208) (78,110)
(Increase) Decrease in prepaid expenses (30,447) 1
Decrease in trade payables and accrued liabilities (254,312) (185,664)
Other (1,739) 739
------- -------
Net cash utilized by operating activities (93,138) (69,735)
------- -------
Cash flows from investing activities
Additions to property, plant and equipment (47,969) (34,655)
Investments and acquisitions, net of cash acquired (355,000) (164,153)
Other 9,019 1,166
------- -------
Net cash utilized by investing activities (393,950) (197,642)
------- -------
Cash flows from financing activities
Proceeds from borrowings with original maturities
of more than three months 850 70,446
Repayments of borrowings with original maturities
of more than three months (25,775) (31,721)
Net proceeds of other short-term borrowings 433,825 160,646
Purchase of common stock (107,647) (63,539)
Stock option transactions 39,350 18,978
Dividends paid (21,268) (18,801)
------- -------
Net cash provided by financing activities 319,335 136,009
------- -------
Effect of exchange rate changes on cash (13,437) (5,093)
------- -------
Decrease in cash and cash equivalents (181,190) (136,461)
Cash and cash equivalents at beginning of year 361,785 218,971
------- -------
Cash and cash equivalents at end of period $180,595 82,510
======= =======
</TABLE>
<PAGE>
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Six Months Ended June 28, 1998 and June 29, 1997
(Thousands of Dollars)
(Unaudited)
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Supplemental information
Cash paid during the period for:
Interest $ 8,033 8,017
Income taxes $ 33,495 74,875
See accompanying condensed notes to consolidated financial statements.
</TABLE>
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
(Thousands of Dollars and Shares Except Per share Data)
(Unaudited)
(1) In the opinion of management and subject to year-end audit, the
accompanying unaudited interim financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position of the Company as of June 28, 1998 and June 29,
1997, and the results of operations and cash flows for the periods then
ended.
The results of operations for the six months ended June 28, 1998, are
not necessarily indicative of results to be expected for the full year.
(2) On May 2, 1997, the Company purchased certain assets of OddzOn
Products and Cap Toys, Inc. (OddzOn). The consideration for this purchase
was $167,379. This acquisition was accounted for using the purchase
accounting method and, based on estimates of fair market value, $43,582 was
allocated to net tangible assets, $76,700 to product rights and $47,097 to
goodwill.
(3) On April 1, 1998, the Company acquired substantially all of the
business and operating assets of Tiger Electronics, Inc. and certain
affiliates (Tiger) for an initial payment of $335,000, subject to post-
closing adjustment, plus the closing date value of inventory, tooling,
equipment and prepaid assets. The estimated total cost of this acquisition
approximates $395,000 and is being accounted for using the purchase
accounting method. Based on current estimates of fair market value,
approximately $42,000 has been allocated to net tangible assets, $213,000
to product rights and $140,000 to goodwill.
(4) Late in the fourth quarter of 1997, the Company announced a global
integration and profit enhancement program which anticipated the redundancy
of approximately 2,500 employees, principally in manufacturing, and
provided for actions in three principal areas: a continued consolidation of
the Company's manufacturing operations; the streamlining of marketing and
sales, while exiting from certain underperforming markets and product
lines; and the further leveraging of overheads. Of the $140,000 estimated
costs related to these actions, $125,000 was reported as a nonrecurring
charge and $15,000 was reflected in cost of sales. Of the nonrecurring
amount, approximately $54,000 related to severance and people costs,
$52,000 to property, plant and equipment and leases and $19,000 to product
line related costs. During the first six months of 1998, approximately
1,900 employees were terminated. The approximate $100,000 accrual remaining
at June 28, 1998, is principally attributable to severance costs, which
will be disbursed over the employee's entitlement period, and property,
plant and equipment costs, which will not be incurred prior to the
cessation of production at the various facilities. The program remains on
schedule to be substantially completed by the end of 1998.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements, continued
(Thousands of Dollars and Shares Except Per share Data)
(Unaudited)
(5) Earnings per share data for the fiscal quarters and six months ended
June 28, 1998 and June 29, 1997 were computed as follows:
1998 1997
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Quarter
- - - -------
Net earnings $ 5,453 5,453 12,981 12,981
Effect of dilutive securities;
6% Convertible Notes due 1998 - - - 1,437
------- ------- ------- -------
Adjusted net earnings $ 5,453 5,453 12,981 14,418
======= ======= ======= =======
Average shares outstanding 132,560 132,560 127,847 127,847
Effect of dilutive securities;
6% Convertible Notes due 1998 - - - 7,630
Options and warrants - 5,668 - 2,129
------- ------- ------- -------
Equivalent Shares 132,560 138,228 127,847 137,606
======= ======= ======= =======
Earnings per share $ .04 .04 .10 .10
======= ======= ======= =======
Six Months
- - - ----------
Net earnings $ 13,246 13,246 38,675 38,675
Effect of dilutive securities;
6% Convertible Notes due 1998 - - - 2,875
------- ------- ------- -------
Adjusted net earnings $ 13,246 13,246 38,675 41,550
======= ======= ======= =======
Average shares outstanding 132,835 132,835 128,223 128,223
Effect of dilutive securities;
6% Convertible Notes due 1998 - - - 7,633
Options and warrants - 5,383 - 2,302
------- ------- ------- -------
Equivalent Shares 132,835 138,218 128,223 138,158
======= ======= ======= =======
Earnings per share $ .10 .10 .30 .30
======= ======= ======= =======
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements, continued
(Thousands of Dollars and Shares Except Per share Data)
(Unaudited)
(6) Effective for fiscal 1998, Hasbro adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130).
SFAS 130 requires that all items recognized under accounting standards as
components of comprehensive earnings be reported in a financial statement
that is displayed with the same prominence as other financial statements.
SFAS 130 also requires that an entity classify items of other comprehensive
earnings by their nature in the financial statements and display the
accumulated amount thereof separately within the equity section of the
balance sheet. The Company's other comprehensive earnings (loss) primarily
results from foreign currency translation adjustments. Hasbro's total
comprehensive earnings (loss) for the fiscal quarters and six months ended
June 28, 1998 and June 29, 1997 were as follows:
1998 1997
---- ----
Quarter
- - - -------
Net earnings $ 5,453 12,981
Other comprehensive earnings (loss) (7,891) (11,608)
------- -------
Total comprehensive earnings (loss) $ (2,438) 1,373
======= =======
Six Months
- - - ----------
Net earnings $ 13,246 38,675
Other comprehensive earnings (loss) (16,173) (27,068)
------- -------
Total comprehensive earnings (loss) $ (2,927) 11,607
======= =======
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Thousands of dollars)
NET REVENUES
- - - ------------
Worldwide net revenues in local currencies for the second quarter of 1998
were essentially unchanged from the second quarter of 1997. The acquisition
of the operating assets of Tiger Electronics, Inc. and certain affiliates
thereof (Tiger), on April 1, 1998 (see note 3), added approximately $40,000
to net revenues. This increase, however, was offset by ongoing changes in
inventory flow policies at Toys `R Us, coupled with year-over-year
differences in the timing of movie releases of some of the Company's major
entertainment properties. In addition, the adverse impact of the stronger
U.S. dollar reduced revenues by approximately $9,000, resulting in reported
revenues of $572,057, compared to $583,886 reported last year. For the six
months, revenues were $1,054,877 and $1,139,670 in 1998 and 1997,
respectively. In addition to the second quarter factors noted above, the
1998 six month amounts reflect an approximate $10,000 impact of the
strengthened U.S. dollar during the first quarter as well as that quarter's
impact of the Toys `R Us inventory flow policy change.
GROSS PROFIT
- - - ------------
While the Company's gross margin for the quarter and six months of 1998, at
56.8% and 57.2%, were both essentially flat with the 1997 amounts of 56.7%
and 57.2%, certain of the Company's global integration and profit
enhancement program initiatives have increased margins. Offsetting this
favorable movement, however, was the decrease in sales of certain higher
margin boys action toys, many of which are tied to entertainment properties
which had more visibility in 1997 as a result of various motion picture
releases.
EXPENSES
- - - --------
Amortization expense in both periods of 1998 was greater than in the
comparable periods of 1997, reflecting the Company's recent acquisitions,
including OddzOn in May of 1997 (see note 2) and Tiger in April of 1998.
Royalties, research and development expenses for the quarter decreased in
both amount and as a percentage of net revenues from comparable 1997
levels. The royalty component decreased in both dollars and as a percentage
of net revenues to rates more comparable with those experienced during the
later quarters of 1997. Research and development, at $39,103 and $74,379
for the quarter and six months of 1998, respectively, increased in both
dollars and as a percentage of net revenues from $37,376 and $68,433 a year
ago. These increases reflect both the inclusion of new units, OddzOn in May
1997, and Tiger in April 1998, and the continuing impact of increased
development efforts within the Company's Interactive unit as it builds for
the future.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Thousands of dollars)
Advertising expense for the second quarter increased both in dollars and as
a percentage of net revenues. The increase in dollars reflects the
inclusion of Tiger while the increase in percentage reflects the mix of
more non-entertainment based product in 1998, in the absence of major movie
support. For the six months, it remained essentially unchanged as a
percentage of net revenues while decreasing in amount. This decrease was
the result of the greater proportion of first quarter revenues which arose
from products not as extensively advertised as many of the Company's other
offerings.
Selling, distribution and administration expenses, which are largely fixed,
decreased marginally in amount during both the second quarter and six
months of 1998 from comparable 1997 levels. This, despite the inclusion of
both OddzOn and Tiger for a full second quarter of 1998. The increase in
percentage terms is principally a function of the lower level of 1998
revenues.
NONOPERATING (INCOME) EXPENSE
- - - -----------------------------
Interest expense during the quarter, $6,416 in 1998 compared with $5,493 in
1997, reflects both the conversion of the Company's 6% Notes into common
stock during the fourth quarter of 1997 and the increased borrowing
requirements relating to the funding of the Tiger acquisition. For the six
months of 1998, interest expense was lower than in 1997, reflecting the
lower first quarter borrowing requirements as well as the two factors
previously noted for the second quarter. The change in other nonoperating
income, in both the quarter and six months, reflects the earnings
differential resulting from changes in levels of short-term investments,
the impact of minority investments in certain subsidiaries, as well as
foreign exchange transactions and translation.
INCOME TAXES
- - - ------------
Income tax expense for the second quarter and six months of 1998 remained
constant with the full year 1997 rate of 34%, while decreasing from 36% in
the second quarter and six months of 1997. The decrease in the period to
period rates resulted principally from the continued reorganization of the
Company's global business, which reduced the tax on international earnings.
OTHER INFORMATION
- - - -----------------
During the past several years, the Company has experienced a shift in its
revenue pattern wherein the second half of the year has grown in
significance to its overall business and within that half the fourth
quarter has become more prominent. The Company expects that this trend will
continue. This concentration increases the risk of (a) underproduction of
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Thousands of dollars)
popular items, (b) overproduction of less popular items and (c) failure to
achieve tight and compressed shipping schedules. The business of the
Company is characterized by customer order patterns which vary from year to
year largely because of differences 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. 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. As a result, comparisons of unshipped
orders on any date in a given year with those at the same date in a prior
year are not necessarily indicative of sales for the entire year. In
addition, it is a general industry practice that orders are subject to
amendment or cancellation by customers prior to shipment. At the end of its
fiscal July (July 26, 1998 and July 27, 1997) the Company's unshipped
orders were approximately $670,000 and $860,000.
Late in the fourth quarter of 1997, the Company announced a global
integration and profit enhancement program which anticipated the redundancy
of approximately 2,500 employees, principally in manufacturing, and
provided for actions in three principal areas: a continued consolidation of
the Company's manufacturing operations; the streamlining of marketing and
sales, while exiting from certain underperforming markets and product
lines; and the further leveraging of overheads. Of the $140,000 estimated
costs related to these actions, $125,000 was reported as a nonrecurring
charge and $15,000 was reflected in cost of sales. Of the nonrecurring
amount, approximately $54,000 related to severance and people costs,
$52,000 to property, plant and equipment and leases and $19,000 to product
line related costs. During the first six months of 1998, approximately
1,900 employees were terminated. The approximate $100,000 accrual remaining
at June 28, 1998, is principally attributable to severance, which will be
disbursed over the employee's entitlement period, and property, plant and
equipment costs, which will not be incurred prior to the cessation of
production at the various facilities. The program remains on schedule to be
substantially completed by the end of 1998.
LIQUIDITY AND CAPITAL RESOURCES
- - - -------------------------------
The seasonality of the Company's business coupled with certain customer
incentives, mainly in the form of extended payment terms, result in the
interim cash flow statements being not representative of that which may be
expected for the full year. As a result of these extended payment terms,
the majority of the Company's cash collections occur late in the fourth
quarter and early in the first quarter of the subsequent year. As
receivables are collected late in the fourth quarter and through the first
quarter of the subsequent year, cash flow from operations becomes positive
and is used to repay a significant portion of the short-term borrowings.
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Thousands of dollars)
As a result, management believes that on an interim basis, rather than
discussing its cash flows, a better understanding of its liquidity and
capital resources can be obtained through a discussion of the various
balance sheet categories. Also, as several of the major categories,
including cash and cash equivalents, accounts receivable, inventories and
short-term borrowings, fluctuate significantly from quarter to quarter,
again due to the seasonality of its business and the extended payment terms
offered, management believes that a comparison to the comparable period in
the prior year is generally more meaningful than a comparison to the prior
year-end.
Receivables, both in dollars and in days sales outstanding, decreased from
June 1997 levels. In amount, receivables were approximately $114,000, or
16% lower and, at 95 days sales outstanding, 16 days less than the 111 days
sales outstanding at the same point in 1997. These improvements reflect the
increased impact of the Company's letter of credit business and its non-
traditional toy and game businesses, both of which have shorter payment
terms. Inventories decreased from 1997 levels despite the inclusion of
Tiger in 1998, reflecting the Company's efforts to manage them more
efficiently. Other assets, as a group, increased approximately $415,000
from their June 1997 levels reflecting the acquisition of Tiger as well as
other acquisitions of product rights and licenses during the most recent
twelve months, all partially offset by an additional year of amortization
expense.
Net borrowings (short- and long-term borrowings less cash and cash
equivalents) decreased by approximately $34,000 to $346,664 from $380,818
at June 29, 1997. This decrease occurred despite the fact that more than
$500,000 of cash was utilized during the last twelve months for
acquisitions and the continuation of the Company's share repurchase
program. At June 28, 1998, the Company had committed unsecured lines of
credit totaling approximately $550,000 available to it. It also had
available uncommitted lines approximating $750,000. The Company believes
that these amounts are adequate for its needs. Of these available lines,
approximately $540,000 was in use at June 28, 1998. Trade payables and
accrued liabilities both increased from the comparable 1997 levels,
reflecting the impact of the unpaid amounts relating to the Tiger
acquisition and the Company's global integration and profit enhancement
program.
RECENT INFORMATION
- - - ------------------
During the quarter, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). The Company is
currently reviewing the provisions of SFAS 133, which must be adopted not
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Thousands of dollars)
later than the beginning of the Company's fiscal 2000, but does not believe
that it will have a material impact on either the Company's financial
condition or its results of operations.
On July 15, 1998, in a public offering, the Company issued $150,000 of
6.15% notes due July 15, 2008 and $150,000 of 6.60% debentures due July 15,
2028. The net proceeds from the sale of these notes will be used to repay a
portion of the Company's outstanding short-term debt, primarily incurred in
connection with the acquisition of Tiger.
On August 12, 1998, the Company announced that it had entered into a
definitive agreement to acquire MicroProse, Inc. (MicroProse), a 17-year
publisher of popular simulation, 3-D action and strategy games for the
personal computer. The purchase price is $6.00 per common share of
MicroProse, payable in cash. The total value of the transaction is
approximately $70 million, including assumed debt and redeemable preferred
stock. Closing is expected in September of 1998.
The agreement calls for a wholly owned subsidiary of the Company to
commence a tender offer no later than August 18, 1998 for all of
MicroProse's outstanding common shares. The offer will be conditioned upon,
among other things, the expiration or earlier termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of
1976 and the tender of a majority of the common shares outstanding on a
fully diluted basis of MicroProse. Following the consummation of the offer,
the Company's subsidiary will be merged with MicroProse and any remaining
MicroProse common shares will be converted into the right to receive $6.00
per share in cash.
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
On July 15, 1998, in a public offering, the Company issued
$150,000,000 of 6.15% notes due July 15, 2008 and $150,000,000
of 6.60% debentures due July 15, 2028.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Shareholders held on May
13, 1998, the Company's shareholders reelected the following
persons to the Board of Directors of the Company: Claudine B.
Malone (110,059,507 votes for, 1,209,763 votes withheld); Alan
R. Batkin (110,063,694 votes for, 1,205,576 votes withheld);
Morris W. Offit (103,279,297 votes for, 7,989,973 votes
withheld; Carl Spielvogel (103,273,532 votes for, 7,995,738
votes withheld; and Paul Wolfowitz (110,156,771 votes for,
1,112,499 votes withheld). There were no votes against any
nominee and no broker nonvotes.
Item 5. Other Information
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11.1 Computation of Earnings Per Common Share - Six Months
Ended June 28, 1998 and June 29, 1997.
11.2 Computation of Earnings Per Common Share - Quarter
Ended June 28, 1998 and June 29, 1997.
12 Computation of Ratio of Earnings to Fixed Charges -
Six Months and Quarter Ended June 28, 1998.
27 Article 5 Financial Data Schedule - Second Quarter 1998
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated July 14, 1998, was filed by
the Company in connection with the issuance of an aggregate
amount of $300,000,000 of long-term debt. The filing included
the following exhibits: Underwriting Agreement, dated July 14,
1998, by and among the Registrant and Bear, Stearns & Co. Inc.
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated; Terms Agreement dated July 14, 1998, by and among
the Registrant and Bear, Stearns & Co. Inc. and Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated;
Indenture, dated July 17, 1998, by and between the Registrant
and Citibank, N.A., as Trustee; Form of Note (Global); Form of
Debenture (Global); Opinion of Phillip H. Waldoks, Esq., Senior
Vice President - Corporate Legal Affairs and Secretary of the
Registrant, as to the legality of the securities being
registered; and Consent of Phillip H. Waldoks, Esq., Senior
Vice President - Corporate Legal Affairs and Secretary of the
Registrant.
A Current Report on Form 8-K, dated July 16, 1998, was filed by
the Company and included the Press Release dated July 16, 1998,
announcing the Company's results for the current quarter.
Consolidated Statements of Earnings (without notes) for the
quarters and six months ended June 28, 1998 and June 29, 1997
and Consolidated Condensed Balance Sheets (without notes) as
of said dates were also filed.
A Current Report on Form 8-K, dated July 17, 1998, was filed by
the Company in connection with the issuance of an aggregate
amount of $300,000,000 of long-term debt. The filing included a
Statement of Eligibility under the Trust Indenture Act of 1939
of a Corporation Designated to Act as Trustee on Form T-1,
completed by Citibank, N.A.
<PAGE>
SIGNATURES
Pursuant to the requirements 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)
Date: August 12, 1998 By: /s/ John T. O'Neill
---------------------
John T. O'Neill
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Period Ended June 28, 1998
Exhibit Index
Exhibit
No. Exhibits
- - - ------- --------
11.1 Computation of Earnings Per Common Share -
Six Months Ended June 28, 1998 and June 29, 1997
11.2 Computation of Earnings Per Common Share -
Quarter Ended June 28, 1998 and June 29, 1997
12 Computation of Ratio of Earnings to Fixed Charges -
Six Months and Quarter Ended June 28, 1998
27 Article 5 Financial Data Schedule - Second Quarter 1998
EXHIBIT 11.1
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
Six Months Ended June 28, 1998 and June 29, 1997
(Thousands of Dollars and Shares Except Per Share Data)
<CAPTION>
1998 1997
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings $ 13,246 13,246 38,675 38,675
Interest and amortization on 6%
convertible notes, net of taxes - - - 2,875
------- ------- ------- -------
Net earnings applicable to
common shares $ 13,246 13,246 38,675 41,550
======= ======= ======= =======
Weighted average number of shares
outstanding:
Outstanding at beginning of
period 133,441 133,441 128,863 128,863
Exercise of stock
options and warrants:
Actual 914 914 555 555
Assumed - 5,383 - 2,302
Conversion of 6%
convertible notes:
Actual - - 8 8
Assumed - - - 7,633
Purchase of common stock (1,520) (1,520) (1,203) (1,203)
------- ------- ------- -------
Total 132,835 138,218 128,223 138,158
======= ======= ======= =======
Per common share:
Net earnings $ .10 .10 .30 .30
======= ======= ======= =======
</TABLE>
EXHIBIT 11.2
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
Quarter Ended June 28, 1998 and June 29, 1997
(Thousands of Dollars and Shares Except Per Share Data)
<CAPTION>
1998 1997
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings $ 5,453 5,453 12,981 12,981
Interest and amortization on 6%
convertible notes, net of taxes - - - 1,437
------- ------- ------- -------
Net earnings applicable to
common shares $ 5,453 5,453 12,981 14,418
======= ======= ======= =======
Weighted average number of shares
outstanding:
Outstanding at beginning of
period 133,072 133,072 128,463 128,463
Exercise of stock
options and warrants:
Actual 196 196 102 102
Assumed - 5,668 - 2,129
Conversion of 6%
convertible notes:
Actual - - 2 2
Assumed - - - 7,630
Purchase of common stock (708) (708) (720) (720)
------- ------- ------- -------
Total 132,560 138,228 127,847 137,606
======= ======= ======= =======
Per common share:
Net earnings $ .04 .04 .10 .10
======= ======= ======= =======
</TABLE>
EXHIBIT 12
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Six Months and Quarter Ended June 28, 1998
(Thousands of Dollars)
<CAPTION>
Six
Months Quarter
------- -------
<S> <C> <C>
Earnings available for fixed charges:
Net earnings $ 13,246 5,453
Add:
Fixed charges 16,253 10,503
Income taxes 6,824 2,809
------- -------
Total $ 36,323 18,765
======= =======
Fixed Charges:
Interest on long-term debt $ - -
Other interest charges 8,728 6,416
Rental expense representative
of interest factor 7,525 4,087
------- -------
Total $ 16,253 10,503
======= =======
Ratio of earnings to fixed charges 2.23 1.79
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-27-1998 DEC-28-1997
<PERIOD-END> JUN-28-1998 JUN-29-1997
<CASH> 180,595 82,510
<SECURITIES> 0 0
<RECEIVABLES> 652,654 763,812
<ALLOWANCES> 52,400 49,600
<INVENTORY> 331,638 368,221
<CURRENT-ASSETS> 1,336,227 1,353,856
<PP&E> 538,669 558,284
<DEPRECIATION> 257,342 262,145
<TOTAL-ASSETS> 3,027,765 2,646,795
<CURRENT-LIABILITIES> 1,204,119 831,518
<BONDS> 0 149,040
0 0
0 0
<COMMON> 69,900 66,088
<OTHER-SE> 1,675,860 1,532,943
<TOTAL-LIABILITY-AND-EQUITY> 3,027,765 2,646,795
<SALES> 1,054,877 1,139,670
<TOTAL-REVENUES> 1,054,877 1,139,670
<CGS> 451,407 488,288
<TOTAL-COSTS> 451,407 488,288
<OTHER-EXPENSES> 308,458 311,192
<LOSS-PROVISION> 2,121 4,908
<INTEREST-EXPENSE> 8,728 9,923
<INCOME-PRETAX> 20,070 60,430
<INCOME-TAX> 6,824 21,755
<INCOME-CONTINUING> 13,246 38,675
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,246 38,675
<EPS-PRIMARY> .10 .30<F1>
<EPS-DILUTED> .10 .30<F1>
<FN>
<F1>As required under Statement of Financial Accounting Standards No. 128, the
Company has restated its earnings per share into the new 'Basic' and 'Diluted'
amounts. 1997 data in column 2 is provided solely to reflect that restatement.
</FN>
</TABLE>
