Hasbro Reports Financial Results for the Second Quarter 2014

Hasbro, Inc. (NASDAQ: HAS) today reported financial results for the second quarter 2014. Net revenues for the second quarter 2014 increased 8% to $829.3 million from $766.3 million in 2013. Foreign exchange had an unfavorable $1.2 million impact on second quarter revenues.

Net earnings for the second quarter 2014 were $33.5 million, or $0.26 per diluted share, compared to $36.5 million, or $0.28 per diluted share, in 2013. Excluding an unfavorable tax adjustment of $13.8 million, or $0.10 per diluted share, adjusted net earnings for the second quarter 2014 were $47.3 million, or $0.36 per diluted share. Excluding pre-tax partial pension settlement charges of $2.5 million, or $0.01 per diluted share, associated with restructuring actions, adjusted net earnings for the second quarter 2013 were $38.3 million, or $0.29 per diluted share.

“Second quarter performance reflects our continuing re-imagination of brands across the brand blueprint and the positive impact of our investment and focus on strategic growth opportunities within Hasbro,” said Brian Goldner, Hasbro’s President and Chief Executive Officer. “Hasbro Franchise Brands, Emerging Markets and the Entertainment and Licensing segment posted strong second quarter growth. The combination of great brand innovation and storytelling is resonating with consumers globally to deliver revenue and profit improvements across multiple product categories and segments.”

“While delivering our second quarter, we continued to focus on long-term strategic investments in our brands, our systems and our capital structure,” said Deborah Thomas, Hasbro’s Chief Financial Officer. “Notably, we successfully refinanced $425 million of debt, raising a total of $600 million at the lowest coupon rate in our history. Our inventory is positioned to support consumer demand in the all-important holiday period, and our cash position remains strong after returning $325 million to shareholders through share repurchases and dividends in the first six months of the year.”

Second Quarter 2014 Major Segment Performance

Note: Second quarter 2013 pre-tax partial pension settlement charges are in Corporate and Eliminations. See attached table: Supplemental Financial Data, Restructuring Charges, Pension Costs and Tax Adjustments.

U.S. and Canada segment net revenues of $383.0 million decreased 2% compared to $389.2 million in 2013. The segment’s results reflect growth in the Boys and Girls product categories offset by declines in the Games and Preschool categories. The U.S. and Canada segment reported operating profit of $46.9 million versus $59.0 million in 2013.

International segment net revenues increased 17% to $396.8 million compared to $340.2 million in 2013. Revenues in the International segment reflect double-digit growth in Europe, Latin America and Asia Pacific as well as growth in the Boys, Girls and Preschool product categories. The International segment reported operating profit of $29.2 million, up 98% versus $14.8 million in 2013.

Entertainment and Licensing segment net revenues increased 35% to $47.7 million compared to $35.3 million in 2013. The segment benefited from growth in lifestyle licensing, digital gaming and the addition of Backflip Studios. The Entertainment and Licensing segment reported 295% growth in operating profit to $14.6 million compared to $3.7 million in 2013.

Second Quarter 2014 Product Category Performance

Second quarter 2014 net revenues in the Boys category increased 32% to $335.8 million behind growth in TRANSFORMERS and MARVEL products.

Games category revenues decreased 12% in the quarter to $225.7 million. Growth in Franchise Brand MONOPOLY, THE GAME OF LIFE, initial shipments of SIMON SWIPE - one of several new gaming initiatives launching for the important holiday season - and the contribution of Backflip Studios all contributed positively to the category. These gains were offset by declines in several brands, including TWISTER, DUEL MASTERS and MAGIC: THE GATHERING.

The Girls category grew 10% in the second quarter 2014 to $163.8 million. MY LITTLE PONY, MY LITTLE PONY EQUESTRIA GIRLS and NERF REBELLE continued to drive the strong growth in the category.

Preschool category revenues decreased 4% to $103.9 million in the second quarter 2014. PLAY-DOH and TRANSFORMERS RESCUE BOTS revenues increased but were more than offset by declines in other Preschool initiatives, including core PLAYSKOOL and SESAME STREET products.

Dividend and Share Repurchase

The Company paid $55.7 million in cash dividends to shareholders during the second quarter 2014. The next quarterly cash dividend payment of $0.43 per common share is scheduled for August 15, 2014 to shareholders of record at the close of business on August 1, 2014.

During the second quarter, Hasbro repurchased a total of 2.5 million shares of common stock at a total cost of $136.3 million and an average price of $54.06 per share. Through the first two quarters, the Company repurchased 4.0 million shares of common stock at a total cost of $216.8 million and an average price of $54.17 per share. At quarter-end, $308.1 million remained available in the current share repurchase authorization.

Conference Call Webcast

Hasbro will webcast its second quarter 2014 earnings conference call at 8:30 a.m. Eastern Time today. To listen to the live webcast and access the accompanying presentation slides, please go to http://investor.hasbro.com. The replay of the call will be available on Hasbro’s web site approximately 2 hours following completion of the call.

About Hasbro, Inc.

Hasbro, Inc. (NASDAQ: HAS) is a branded play company dedicated to fulfilling the fundamental need for play for children and families through the creative expression of the Company’s world class brand portfolio, including TRANSFORMERS, MONOPOLY, PLAY-DOH, MY LITTLE PONY, MAGIC: THE GATHERING, NERF and LITTLEST PET SHOP. From toys and games, to television programming, motion pictures, digital gaming and a comprehensive licensing program, Hasbro strives to delight its global customers with innovative play and entertainment experiences, in a variety of forms and formats, anytime and anywhere. The Company's Hasbro Studios develops and produces television programming for more than 180 territories around the world, and for the U.S. on Hub Network, part of a multi-platform joint venture between Hasbro and Discovery Communications (NASDAQ: DISCA, DISCB, DISCK). Through the Company's deep commitment to corporate social responsibility, including philanthropy, Hasbro is helping to build a safe and sustainable world for future generations and to positively impact the lives of millions of children and families every year. It has been recognized for its efforts by being named one of the "World's Most Ethical Companies" and is ranked as one of Corporate Responsibility Magazine's "100 Best Corporate Citizens." Learn more at www.hasbro.com.

© 2014 Hasbro, Inc. All Rights Reserved.

Certain statements in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include expectations concerning the Company’s potential performance in the future, including with respect to its planned cost savings initiative and profitability, and the Company’s ability to achieve its other financial and business goals and may be identified by the use of forward-looking words or phrases. The Company's actual actions or results may differ materially from those expected or anticipated in the forward-looking statements due to both known and unknown risks and uncertainties. Specific factors that might cause such a difference include, but are not limited to: (i) the Company's ability to design, develop, produce, manufacture, source and ship products on a timely and cost-effective basis, as well as interest in and purchase of those products by retail customers and consumers in quantities and at prices that will be sufficient to profitably recover the Company’s costs; (ii) downturns in economic conditions affecting the Company’s markets which can negatively impact the Company’s retail customers and consumers, and which can result in lower employment levels, lower consumer disposable income and spending, including lower spending on purchases of the Company’s products; (iii) other factors which can lower discretionary consumer spending, such as higher costs for fuel and food, drops in the value of homes or other consumer assets, and high levels of consumer debt; (iv) potential difficulties or delays the Company may experience in implementing cost savings and efficiency enhancing initiatives; (v) other economic and public health conditions or regulatory changes in the markets in which the Company and its customers and suppliers operate which could create delays or increase the Company’s costs, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease; (vi) currency fluctuations, including movements in foreign exchange rates, which can lower the Company’s net revenues and earnings, and significantly impact the Company’s costs; (vii) the concentration of the Company's customers, potentially increasing the negative impact to the Company of difficulties experienced by any of the Company’s customers or changes in their purchasing or selling patterns; (viii) consumer interest in and acceptance of Hub Network, and programming created by Hasbro Studios, and other factors impacting the financial performance of the network and Hasbro Studios; (ix) the inventory policies of the Company’s retail customers, including retailers’ potential decisions to lower their inventories, even if it results in lost sales, as well as the concentration of the Company's revenues in the second half and fourth quarter of the year, which coupled with reliance by retailers on quick response inventory management techniques increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve compressed shipping schedules; (x) delays, increased costs or difficulties associated with any of our or our partners’ planned digital applications or media initiatives; (xi) work disruptions, which may impact the Company's ability to manufacture or deliver product in a timely and cost-effective manner; (xii) the bankruptcy or other lack of success of one of the Company's significant retailers which could negatively impact the Company's revenues or bad debt exposure; (xiii) the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to offer Company products which consumers choose to buy instead of competitive products, the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees; (xiv) concentration of manufacturing for many of the Company’s products in the People’s Republic of China and the associated impact to the Company of social, economic or public health conditions and other factors affecting China, the movement of products into and out of China, the cost of producing products in China and exporting them to other countries; (xv) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xvi) the impact of other market conditions, third party actions or approvals and competition which could reduce demand for the Company’s products or delay or increase the cost of implementation of the Company's programs or alter the Company's actions and reduce actual results; (xvii) the impact of litigation or arbitration decisions or settlement actions; and (xviii) other risks and uncertainties as may be detailed from time to time in the Company's public announcements and Securities and Exchange Commission (“SEC”) filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances occurring after the date of this release.

This press release includes a non-GAAP financial measure as defined under SEC rules, specifically EBITDA. EBITDA represents net earnings attributable to Hasbro, Inc. excluding net loss attributable to noncontrolling interests, interest expense, income taxes, depreciation and amortization. As required by SEC rules, we have provided reconciliation on the attached schedule of this measure to the most directly comparable GAAP measure. Management believes that EBITDA is one of the appropriate measures for evaluating the operating performance of the Company because it reflects the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet, and make strategic acquisitions. However, this measure should be considered in addition to, not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with GAAP as more fully discussed in the Company's financial statements and filings with the SEC. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America.

This press release also includes the Company’s 2013 costs and expenses, operating profit, net earnings and diluted earnings per share excluding the impact of restructuring and related pension charges. 2014 net earnings and diluted earnings per share also exclude certain unfavorable tax adjustments. Management believes that presenting this data excluding these charges and tax adjustments assists investors’ understanding of the underlying performance of the results of operations.

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