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 26, 1993 Commission file number 1-6682
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Hasbro, Inc.
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(Name of registrant)
Rhode Island 05-0155090
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(State of Incorporation) (I.R.S. Employer
Identification No.)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock American Stock Exchange
Preference Share Purchase Rights American Stock Exchange
Common Stock Purchase Warrants
Expiring July 12, 1994 American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] or No[ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part II of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the registrant computed by reference to the price at which the stock was sold on March 18, 1994 was $2,865,624,732.
The number of shares of Common Stock outstanding as of March 18, 1994 was 87,977,666.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement for its 1994 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 26, 1993, is included as Exhibit 13, and incorporated by reference into Parts I and II of this Report.
PART I
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.
The Playskool toy line includes such well known products as Lincoln Logs(R), Tinkertoys(R), Mr. Potato Head(R), In-Line Skates, Play-Doh(R), Raggedy Ann(R) and Raggedy Andy(R) rag dolls, Magic Tea Party(TM), the "Busy" line of toys and electronic items including Alphie(R) II, Talking Barney(R) and Teddy Ruxpin(R). The line also includes toys utilizing the "Sesame Street(R)" character motifs sold domestically and internationally by the Company under licenses from The Children's Television Workshop. New items for 1994 include the Playskool Dollhouse Stable, Magic Smoking Grill(TM), Cool Tools(TM) and 4 in 1 Busy(TM) Center.
Playskool's line of infant and juvenile items consists of products for very young children, including the Pur(R) line of silicone nipples and pacifiers, bibs and other infant accessories such as the Hugger(R) toothbrush, a full line of health care and safety products, Tommee Tippee(TM) training cups and feeding items, water-filled teething rings, soft toys, rattles, inflatable and squeeze toys and infant apparel including the Scootees(R) line of soft shoes for babies. New products in 1994 include the 1-2-3 High Chair(TM).
Kenner Products offers a wide range of products. A leader in toys tied to entertainment properties, Kenner's offerings for 1994 include The Shadow(TM), Jurassic Park(TM), Batman(R), Aliens(TM) and Predator(TM) action figures and accessories, as well as Shaq Attack(TM) and Starting Lineup(R) sports action figures. Other boys' toys include the CLAW(TM) monster vehicles, Carzillas(TM) motorized vehicles and the Nerf(R) line of soft action play equipment. For girls, Kenner markets Baby Check-Up(R), Baby All Gone(R) and the Baby Sitters Club(R) dolls, Beethoven's 2nd(TM) plush pups and the Littlest Pet Shop(TM) figures and playsets. In addition, Kenner offers a selection for at home activity play including the E Z 2 Do(TM) line of items, the Spirograph(R) family of products, the Colorblaster(TM) series of design toys and the classic Easy Bake(R) Oven.
Parker Brothers markets a full line of games for families, children and adults. Its classic line of family board games includes Monopoly(R), Clue(R), Sorry!(R), Risk(R), Boggle(R), Ouija(R) and Trivial Pursuit(R). Some of these classics have been in the Parker Brothers' line for more than 50 years. The Company also markets traditional card games such as Mille Bornes(R), Rook(R), Rack-O(R), Old Maid and Go Fish. Its line of travel games includes travel editions of Monopoly(R) Junior, Clue(R), Sorry!(R) and Boggle(R) Jr. New to the Parker Brothers' line in 1994 are Willy Go Boom(TM), Swinging Snakes(TM), Bottle Topps(R) and, in the electronic talking game line, Sounds of Fun(TM), a new item featuring licensed characters from Disney's The Lion King.
Products sold by subsidiaries in the United Kingdom, The Netherlands, Germany, France, Italy, Spain, Portugal, Belgium, Austria, Switzerland, Hungary and Greece are manufactured at plants located in Ireland, The Netherlands and Spain and also supplied by a Hong Kong subsidiary. In early 1994, the Company announced the planned closure of its manufacturing operation in The Netherlands with the transfer of its production to plants in Ireland and Spain. Certain products sold by the Canadian subsidiary are assembled in Canada, although the U.S. and Mexican operations and a Hong Kong subsidiary supply some component parts as well as finished goods. The Mexican marketing unit sells products supplied primarily by the domestic operations and a Hong Kong subsidiary. The Company also has a manufacturing operation in Mexico which supplies certain products, primarily for distribution through the North American operations. The New Zealand and Australian subsidiaries sell products manufactured by the New Zealand unit and also supplied by a Hong Kong subsidiary. The Company also markets certain products, primarily supplied by a Hong Kong subsidiary, in Japan, Hong Kong, Taiwan, China and other areas in the Far East. A Hong Kong subsidiary sources product for the Company's U.S. and foreign operations working primarily through unrelated manufacturers in various Far East countries. The Company also has small investments in joint ventures in India and The Peoples Republic of China which manufacture and sell products to both the Company and non-affiliated customers. In early 1993, the Company established a new Hong Kong subsidiary which markets directly to retailers a line of high quality, low priced toys, games and related products, primarily on a direct import basis.
In addition, certain toy products are licensed to other toy companies to manufacture and sell product in selected foreign markets where the Company does not otherwise have a presence.
economic conditions. As a result, comparisons of unshipped orders on any date with those at the same date in a prior year are not necessarily indicative of sales for that entire given year. In addition, as more retailers move to just- in-time inventory management practices, fewer orders are being placed in advance of shipment and more orders, when placed, are for immediate delivery. The Company's unshipped orders at March 11, 1994 and March 12, 1993 were approximately $205,000,000 and $265,000,000, 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 1994 are not substantially different from those employed in 1993.
As part of the traditional marketing strategies of the toy industry, many sales made early in the year are not due for payment until the fourth quarter, thus making it necessary for the Company to borrow significant amounts pending collection of these receivables. The Company relies on internally generated funds and short-term borrowing arrangements, including commercial paper, to finance its working capital needs. Currently, the Company has available to it unsecured lines of credit, which it believes are adequate, of approximately $1,550,000,000 including a $500,000,000 revolving credit agreement with a group of banks which is also used as a back-up to commercial paper issued by the Company.
In addition to its own staff, the Company deals with a number of independent toy designers for whose designs and ideas the Company competes with many other toy manufacturers. Rights to such designs and ideas, when acquired by the Company, are usually exclusive under agreements requiring the Company to pay the designer a royalty on the Company's net sales of the item. These designer royalty agreements in some cases provide for advance royalties and minimum guarantees.
The Company also produces a number of toys under trademarks and copyrights utilizing the names or likenesses of Sesame Street, Walt Disney, Barney(R) and other familiar movie, television and comic strip characters. Licensing fees are paid as a royalty on the Company's net sales of the item. Licenses for the use of characters are generally exclusive for specific products or product lines in specified territories. In many instances, advance royalties and minimum guarantees are required by character license agreements.
The Company advertises its toy and game products extensively on television. The Company generally advertises selected items in its product groups in a manner designed to promote the sale of other specific items in those product groups. Each year, the Company introduces its new products at its New York City showroom 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 1993, the Company spent approximately $383,918,000 in advertising, promotion and marketing programs compared to $377,219,000 in 1992 and $325,282,000 in 1991.
The Company makes its own tools and fixtures but purchases dies and molds principally from independent domestic and foreign sources. Several of the Company's domestic production departments operate on a two-shift basis and its molding departments operate on a continuous basis through most of the year.
The Children's Television Act of 1990 and the rules promulgated thereunder by the Federal Communications Commission as well as the laws of certain foreign countries place certain limitations on television commercials during children's programming.
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
Rhode Island
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Pawtucket Executive Offices &
Product Development 343,000 Owned(1) --
Pawtucket Marketing Office 23,000 Owned --
Pawtucket Manufacturing 306,500 Owned --
Central Falls Manufacturing 261,500 Owned --
West Warwick Warehouse 402,000 Leased 1994
East Providence Administrative & Sales
Offices 120,000 Leased 1994
Massachusetts
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East Longmeadow Office, Manufacturing
& Warehouse 1,147,500 Owned --
East Longmeadow Office, Manufacturing
& Warehouse 254,400 Owned --
East Longmeadow Warehouse 500,000 Leased 1998
Beverly Office 100,000 Owned --
Salem Manufacturing
& Warehouse 344,000 Owned --
Danvers Warehouse 125,000 Leased 1996
Holyoke Warehouse 15,000 Leased 1994
New Jersey
- ----------
Northvale Office & Manufacturing 75,000 Leased 2002
Wayne Manufacturing 65,000 Leased 1995
New York
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New York Office & Showroom 70,300 Leased 2000
New York Office & Showroom 32,300 Leased 1999
Arcade Manufacturing 15,000 Leased 1998
Amsterdam Manufacturing 297,400 Owned --
Orangeburg Warehouse 51,000 Leased 2002
Ohio
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Cincinnati Office 161,000 Leased 2007
Cincinnati Warehouse 33,000 Leased 1999
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Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
Pennsylvania
- ------------
Lancaster Warehouse 150,000 Owned(2) --
South Carolina
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Easley Manufacturing 31,500 Leased 1997
Easley Manufacturing 75,000 Owned --
Easley Manufacturing 29,000 Owned --
Texas
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El Paso Manufacturing
& Warehouse 373,000 Owned --
El Paso Manufacturing
& Warehouse 487,000 Leased 1998
El Paso Warehouse 48,800 Leased 1994
Vermont
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Fairfax Manufacturing 43,000 Owned --
Washington
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Seattle Office & Warehouse 125,100 Leased(3) 1994
Australia
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Rydalmere Office & Warehouse 68,000 Leased 1994
Rydalmere Office & Warehouse 22,300 Leased 1994
Austria
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Vienna Office 2,505 Leased 1997
Belgium
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Brussels Office & Showroom 16,700 Leased 1995
Canada
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Montreal Office, Manufacturing
& Showroom 133,900 Leased 1997
Montreal Warehouse 88,100 Leased 1997
Boucherville Warehouse 110,000 Leased 1994
Mississauga Sales Office & Showroom 16,300 Leased 1998
Peoples Republic of China
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Guangzhou Warehouse 32,900 Leased 1994
Guangzhou Manufacturing 22,900 Leased 1995
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Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
England
- -------
Uxbridge Office & Showroom 94,500 Leased 2013
Coalville Office & Warehouse 141,200 Owned --
France
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Le Bourget
du Lac Office, Manufacturing
& Warehouse 108,300 Owned --
Savoie
Technolac Office 33,500 Owned --
Pantin Office 20,900 Leased 2001
Creutzwald Warehouse 108,700 Owned --
Germany
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Fuerth Office & Warehouse 28,400 Owned --
Soest Warehouse 78,800 Owned --
Dietzenbach Office 30,400 Leased 1998
Greece
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Athens Office & Warehouse 134,400 Leased 1995
Zakynthos
Island Manufacturing 57,500 Owned --
Athens Office 26,900 Leased 1995
Hong Kong
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Kowloon Office 36,700 Leased 1994
Kowloon Office & Warehouse 14,900 Leased 1994
Harbour City Office 11,000 Leased 1996
Hungary
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Budapest Office 3,700 Leased 1996
Ireland
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Waterford Office, Manufacturing
& Warehouse 184,400 Owned --
Italy
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Milan Office & Showroom 12,100 Leased 1998
Japan
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Tokyo Office 10,800 Leased 1995
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Lease
Square Type of Expiration
Location Use Feet Possession Dates
- -------- --- ------ ---------- ----------
Malaysia
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Selangor
Darul Ehsan Office 6,800 Leased 1995
Mexico
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Tijuana Office & Manufacturing 144,000 Leased 1995
Tijuana Warehouse 45,000 Leased 1994
Tijuana Warehouse 69,800 Leased 1994
Reyna Office 61,000 Leased 1996
Espana Warehouse 53,700 Leased 1996
Venados Warehouse 59,100 Leased 1995
The Netherlands
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Ter Apel Office, Manufacturing
& Warehouse 139,300 Owned --
Utrecht Sales Office & Showroom 17,000 Leased 1996
Emmen Warehouse 40,800 Leased 1994
Emmen Warehouse 21,500 Leased 1994
New Zealand
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Auckland Office, Manufacturing
& Warehouse 110,900 Leased 2005
Singapore
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Singapore Office & Warehouse 12,900 Leased 1994
Spain
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Valencia Office, Manufacturing
& Warehouse 115,100 Leased 1999
Valencia Office 46,300 Leased 1995
Valencia Manufacturing
& Warehouse 161,700 Leased 1997
Valencia Warehouse 94,400 Owned --
Valencia Warehouse 38,700 Leased 1994
Valencia Warehouse 43,000 Leased 1996
Switzerland
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Mutschellen Office & Warehouse 23,400 Leased 1994
Taiwan
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TPE County Warehouse 9,800 Leased 1996
Wales
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Newport Warehouse 76,000 Leased 2003
Newport Warehouse 52,000 Owned --
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(1) Although this property is leased pursuant to industrial revenue bond financing, the Company has an option to purchase the property for $1 at any time upon making all rental and other payments required under terms of the lease.
(2) In addition, the Company owns an additional 316,000 square feet at this location which is not currently being utilized and is included in the unused property noted below.
(3) In addition, at this location the Port of Seattle operates a 400,000 square foot distribution facility pursuant to an agreement with the Company.
In addition to the above listed facilities, the Company either owns or leases various other properties approximating 200,000 square feet which are utilized in its operations. The Company also either owns or leases an aggregate of approximately 650,000 square feet not currently being utilized in its operations. Most of these properties are being leased, subleased or offered for sublease or sale. A portion of this space not used in the Company's operations represent facilities used by the Tonka Corporation units prior to their acquisition by the Company and integration into its existing operations.
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. The Company is continuing the renovation of its principal offices in Pawtucket, Rhode Island.
Preston Robert Tisch, a director of the Company, is also a director of CBS and President and Co-Chief Executive Officer of Loews Corporation, a major shareholder of CBS. By virtue of the foregoing, Mr. Tisch may be deemed to have an interest adverse to the Company with respect to the above-described action.
The Company is party to certain other legal proceedings involving routine litigation incidental to the Company's business, none of which, individually or in the aggregate, is deemed to be material.
Period
Serving in
Current
Name Age Position and Office Held Position
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Alan G. Hassenfeld (1) 45 Chairman of the Board,
President and Chief Executive
Officer Since 1989
Barry J. Alperin (2) 53 Vice Chairman Since 1990
George R. Ditomassi, Jr.(3) 59 Chief Operating Officer,
Games and International Since 1990
Alfred J. Verrecchia (4) 51 Chief Operating Officer,
Domestic Toy Operations Since 1990
John T. O'Neill (5) 49 Executive Vice President and
Chief Financial Officer Since 1989
Norman C. Walker (6) 55 Executive Vice President and
President, International Since 1990
Lawrence H. Bernstein (7) 51 Executive Vice President and
President, Hasbro Toy Since 1989
Dan D. Owen (8) 45 President, Playskool Since 1990
Bruce L. Stein (9) 39 President, Kenner Products Since 1990
Robert F. S. Wann (10) 43 President, Parker Brothers Since 1992
E. David Wilson (11) 56 President, Milton Bradley Since 1990
Richard B. Holt (12) 52 Senior Vice President
and Controller Since 1992
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Period
Serving in
Current
Name Age Position and Office Held Position
- ---- --- ------------------------ ----------
Donald M. Robbins (13) 58 Senior Vice President
General Counsel and
Corporate Secretary Since 1992
Phillip H. Waldoks (14) 41 Senior Vice President-
Corporate Legal Affairs Since 1992
Russell L. Denton (15) 49 Vice President and Treasurer Since 1989
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(1) Prior thereto, President and Chief Operating Officer.
(2) Prior thereto, Co-Chief Operating Officer from 1989 to 1990; prior thereto, Executive Vice President.
(3) Prior thereto, Group Vice President and President, Milton Bradley.
(4) Prior thereto, Co-Chief Operating Officer from 1989 to 1990; prior thereto, Executive Vice President and President, Hasbro Manufacturing Services Division.
(5) Prior thereto, Senior Vice President - Finance, Chief Financial Officer and Treasurer during 1989; prior thereto, Senior Vice President - Finance and Chief Financial Officer.
(6) Prior thereto, Senior Vice President and President - European Operations.
(7) Prior thereto, Senior Vice President - Sales.
(8) Prior thereto, Senior Vice President - Sales, Playskool.
(9) Prior thereto, Executive Vice President - Marketing and Design, Kenner Products.
(10) Prior thereto, Chief Operating Officer, Parker Brothers from 1991 to 1992; prior thereto, Executive Vice President - Marketing and R & D, Playskool from 1990 to 1991; prior thereto, Senior Vice President - Marketing, Playskool.
(11) Prior thereto, Senior Vice President - Sales, Milton Bradley.
(12) Prior thereto, Vice President and Controller.
(13) Prior thereto, Vice President/General Counsel and Secretary.
(14) Prior thereto, Vice President - Corporate Legal Affairs.
(15) Prior thereto, independent financial consultant.
PART II
PART III
ITEMS 10, 11, 12 and 13.
The information required by these items is included in registrant's
definitive proxy statement for the 1994 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
Independent Auditors' Report
Consolidated Balance Sheets at December 26, 1993 and December 27, 1992
Consolidated Statements of Earnings for the Three Fiscal Years Ended in December 1993, 1992 and 1991
Consolidated Statements of Shareholders' Equity for the Three Fiscal Years Ended in December 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the Three Fiscal Years Ended in December 1993, 1992 and 1991
Notes to Consolidated Financial Statements
For the Three Fiscal Years Ended in December 1993, 1992
and 1991:
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation and Amortization
of Property, Plant and Equipment
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Schedule VIII - Valuation and Qualifying Accounts and Reserves
Schedule IX - Short-Term Borrowings
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.
(b) Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit (c)(3) to the Company's Current Report on Form 8-K, dated July 15, 1993, 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.)
10. Material Contracts
(a) Agreement and Plan of Merger, dated January 31, 1991, by and
among the Company, HIAC III Corp., a subsidiary of the
Company ("Sub") and Tonka Corporation ("Tonka"). (Incorpo-
rated by reference to Exhibit (c)(1) to the Company's Tender
Offer Statement on Schedule 14D-1, dated February 6, 1991,
relating to the Common Stock of Tonka.)
(b) Amendment, dated April 17, 1991 to Agreement and Plan of Merger among the Company, Sub and Tonka. (Incorporated by reference to Exhibit (c)(4) to Amendment No. 9 to the Company's Tender Offer Statement on Schedule 14D-1, dated April 18, 1991, relating to the Common Stock of Tonka.)
(c) Letter Agreement, dated April 29, 1991, among the Company, Sub and Tonka. (Incorporated by reference to Exhibit (c)(8) to Amendment No. 11 to the Company's Tender Offer Statement on Schedule 14D-1, dated April 29, 1991, relating to the Common Stock of Tonka.)
(d) Shareholder Rights Agreement, dated May 17, 1983, between Warner Communications Inc. ("Warner") and the Company. (Incorporated by reference to Exhibit 3 to the Statement on Schedule 13D, dated May 17, 1983, relating to the Company's Common Stock.)
(e) Amendment No. 1 to Shareholder Rights Agreement, dated as of December 1, 1985, between Warner and the Company. (Incorporated by reference to Exhibit 9(b) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 29, 1985, File No. 1-6682.)
(f) Exchange Agreement, dated as of December 1, 1985, between the Company and Warner. (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 29, 1985, File No. 1-6682.)
(g) 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.)
(h) Lease between Hasbro Canada Inc. and Central Toy, together with an Addendum thereto, each dated as of May 1, 1987. (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
Executive Compensation Plans and Arrangements
(i) 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.)
(j) 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.)
(k) 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.)
(l) 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.)
(m) 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.)
(n) 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.)
(o) 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.)
(p) Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form 14, File No. 2-92550.)
(q) 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.)
(r) 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.)
(s) 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.)
(t) 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.)
(u) 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.)
(v) Form of Stock Option Agreement (For Employees) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(w) Form of Stock Option Agreement (For Participants in the Long Term Incentive Program) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(w) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(x) Form of Employment Agreement, dated July 5, 1989, between the Company and seven 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.)
(y) Change in Control Agreement dated as of December 13, 1990 between Tonka and Bruce L. Stein. (Incorporated by reference to Exhibit 10.2 to Tonka's Annual Report on Form 10-K for the Fiscal Year Ended December 29, 1990, File No. 1-4683.)
(z) Letter Agreement between Tonka and Bruce L. Stein, dated March 21, 1994.
(aa) 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.)
(bb) 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.)
(cc) Hasbro, Inc. Deferred Compensation Plan for Non-Employee Directors.
(dd) 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.)
(ee) 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.)
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.
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.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
Under date of February 8, 1994, we reported on the consolidated balance sheets of Hasbro, Inc. and subsidiaries as of December 26, 1993 and December 27, 1992 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 26, 1993, as contained in the 1993 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 1993. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related supporting schedules listed in Item 14 (a)(2). These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such schedules when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ KPMG Peat Marwick Providence, Rhode Island February 8, 1994 |
SCHEDULE V
HASBRO, INC. AND SUBSIDIARIES
Property, Plant and Equipment
Fiscal Years Ended in December
(Thousands of Dollars)
Balance at Translation Balance
Beginning of Disposals/ Adjustments at End of
Description Year Additions Retirements and Other(a) Year
- ----------- ------------ --------- ----------- ------------ ---------
1993
Land and
improvements $ 13,585 1,022 (1,195) (1,402) $ 12,010
Buildings and
improvements 170,220 22,062 (4,339) 770 188,713
Machinery and
equipment 150,851 33,282 (7,527) (3,556) 173,050
------- ------- ------- ------- -------
$334,656 56,366 (13,061) (4,188) $373,773
======= ======= ======= ======= =======
Tools, dies
and molds $ 28,485 43,426 (32,627)(b) (72) $ 39,212
======= ======= ======= ======= =======
1992
Land and
improvements $ 13,548 1,556 (1,235) (284) $ 13,585
Buildings and
improvements 160,604 11,773 (7,255) 5,098 170,220
Machinery and
equipment 122,074 44,167 (13,748) (1,642) 150,851
-------- ------- ------- ------- -------
$296,226 57,496 (22,238) 3,172 $334,656
======= ======= ======= ======= =======
Tools, dies
and molds $ 28,819 32,935 (33,593)(b) 324 $ 28,485
======= ======= ======= ======= =======
1991
Land and
improvements $ 8,586 446 (3) 4,519 $ 13,548
Buildings and
improvements 129,607 11,061 (2,375) 22,311 160,604
Machinery and
equipment 101,307 16,650 (8,003) 12,120 122,074
------- ------- ------- ------- -------
$239,500 28,157 (10,381) 38,950 $296,226
======= ======= ======= ======= =======
Tools, dies
and molds $ 13,335 27,847 (26,742)(b) 14,379 $ 28,819
======= ======= ======= ======= =======
|
(a) 1992 includes $8,665 and $1,746 of buildings and improvements and
machinery and equipment, respectively, relating to the gross-up of
assets acquired in prior business combinations as required by SFAS
109. 1992 also includes $622 and $415 of machinery and equipment
and tools, dies and molds, respectively, of acquired companies.
1991 includes $4,434, $21,789, $12,449 and $14,549 of land and
improvements, buildings and improvements, machinery and equipment
and tools, dies and molds, respectively, of acquired company.
(b) Primarily represents amortization which is credited directly against the cost of the assets.
SCHEDULE VI
HASBRO, INC. AND SUBSIDIARIES
Accumulated Depreciation and Amortization of Property, Plant and Equipment
Fiscal Years Ended in December
(Thousands of Dollars)
Balance at Balance
Beginning of Disposals/ Translation at End of
Description Year Additions Retirements Adjustments Year
- ----------- ------------ --------- ----------- ----------- ----------
1993
Land
improvements $ 638 121 - (6) $ 753
Buildings and
improvements 42,734 11,601 (2,536) (877) 50,922
Machinery and
equipment 68,429 20,933 (5,787) (2,068) 81,507
------- ------- ------- ------- -------
$111,801 32,655 (8,323) (2,951) $133,182
======= ======= ======= ======= =======
1992
Land
improvements $ 533 118 (9) (4) $ 638
Buildings and
improvements 39,184 7,534 (3,327) (657) 42,734
Machinery
and equipment 60,136 20,842 (11,134) (1,415) 68,429
------- ------- ------- ------- -------
$ 99,853 28,494 (14,470) (2,076) $111,801
======= ======= ======= ======= =======
1991
Land
improvements $ 418 119 (3) (1) $ 533
Buildings and
improvements 32,012 9,453 (1,551) (730) 39,184
Machinery and
equipment 51,216 16,210 (7,038) (252) 60,136
------- ------- ------- ------- -------
$ 83,646 25,782 (8,592) (983) $ 99,853
======= ======= ======= ======= =======
|
SCHEDULE VIII
HASBRO, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Fiscal Years Ended in December
(Thousands of Dollars)
Provision
Balance at Charged to Write-Offs Balance
Beginning of Costs and Other Allowances at End of
Year Expenses Additions(a) Taken(b) Year
------------ ---------- ------------ ----------- ---------
Valuation
accounts
deducted
from assets
to which
|
they apply -
for doubtful
accounts
receivable:
1993 $52,200 13,078 - (11,078) $54,200
====== ====== ====== ====== ======
1992 $60,500 10,674 - (18,974) $52,200
====== ====== ====== ====== ======
1991 $43,100 15,024 29,285 (26,909) $60,500
====== ====== ====== ====== ======
|
(a) Doubtful accounts reserve of acquired company.
(b) Includes write-offs, recoveries of previous write-offs and translation adjustments.
SCHEDULE IX
HASBRO, INC. AND SUBSIDIARIES
Short-Term Borrowings
Fiscal Years Ended in December
(Thousands of Dollars)
Weighted Weighted
Average Average Average
Interest Maximum Amount Interest
Category of Balance Rate Amount Outstanding Rate
Short-Term at End at End Outstanding During During
Borrowings(b) of Year of Year During Year Year (a) Year (a)
- ------------- ------- -------- ----------- ----------- --------
1993
Bank $ 62,242 9.0% $182,588 $152,004 7.6%
======= ==== ======= ======= ====
Commercial
Paper - - $385,160 $134,944 3.4%
======= ==== ======= ======= ====
1992
Bank (b) $ 64,174 11.8% $401,956 $254,036 6.8%
======= ==== ======= ======= ====
Commercial
Paper - - $154,748 $ 65,704 3.7%
======= ==== ======= ======= ====
1991
Bank (b) $186,084 8.5% $568,391 $238,410 7.5%
======= ==== ======= ======= ====
Commercial
Paper - - $332,278 $135,384 6.1%
======= ==== ======= ======= ====
|
(a) Computed daily.
(b) Includes short-term borrowings (none at end of 1992 and $150,000 at end of 1991) classified as long-term debt reflecting the Company's ability and intent to refinance such borrowings on a long-term basis.
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 25, 1994 ------------------------- --------------- 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 25, 1994
Alan G. Hassenfeld President,Chief Executive
Officer and Director
(Principal Executive Officer)
/s/John T. 0'Neill
- ---------------------------- Executive Vice President March 25, 1994
John T. 0'Neill and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/Barry J. Alperin
- ---------------------------- Director March 25, 1994
Barry J. Alperin
/s/Alan R. Batkin
- ---------------------------- Director March 25, 1994
Alan R. Batkin
/s/George R. Ditomassi, Jr.
- ---------------------------- Director March 25, 1994
George R. Ditomassi, Jr.
/s/Harold P. Gordon
- ---------------------------- Director March 25, 1994
Harold P. Gordon
|
/s/Alex Grass - ---------------------------- Director March 25, 1994 Alex Grass /s/Sylvia K. Hassenfeld - ---------------------------- Director March 25, 1994 Sylvia K. Hassenfeld /s/Claudine B. Malone - ---------------------------- Director March 25, 1994 Claudine B. Malone /s/James R. Martin - ---------------------------- Director March 25, 1994 James R. Martin /s/Norma T. Pace - ---------------------------- Director March 25, 1994 Norma T. Pace /s/E. John Rosenwald, Jr. - ---------------------------- Director March 25, 1994 E. John Rosenwald, Jr. /s/Carl Spielvogel - ---------------------------- Director March 25, 1994 Carl Spielvogel /s/Henry Taub - ---------------------------- Director March 25, 1994 Henry Taub /s/Preston Robert Tisch - ---------------------------- Director March 25, 1994 Preston Robert Tisch /s/Alfred J. Verrecchia - ---------------------------- Director March 25, 1994 Alfred J. Verrecchia |
HASBRO, INC.
Annual Report on Form 10-K
for the Year Ended December 26, 1993
Exhibit Index
(b) Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit (c)(3) to the Company's Current Report on Form 8-K, dated July 15, 1993, 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.)
10. Material Contracts
(a) Agreement and Plan of Merger, dated January 31, 1991, by and
among the Company, HIAC III Corp., a subsidiary of the
Company ("Sub") and Tonka Corporation ("Tonka"). (Incorpo-
rated by reference to Exhibit (c)(1) to the Company's Tender
Offer Statement on Schedule 14D-1, dated February 6, 1991,
relating to the Common Stock of Tonka.)
(b) Amendment, dated April 17, 1991 to Agreement and Plan of Merger among the Company, Sub and Tonka. (Incorporated by reference to Exhibit (c)(4) to Amendment No. 9 to the Company's Tender Offer Statement on Schedule 14D-1, dated April 18, 1991, relating to the Common Stock of Tonka.)
(c) Letter Agreement, dated April 29, 1991, among the Company, Sub and Tonka. (Incorporated by reference to Exhibit (c)(8) to Amendment No. 11 to the Company's Tender Offer Statement on Schedule 14D-1, dated April 29, 1991, relating to the Common Stock of Tonka.)
(d) Shareholder Rights Agreement, dated May 17, 1983, between Warner Communications Inc. ("Warner") and the Company. (Incorporated by reference to Exhibit 3 to the Statement on Schedule 13D, dated May 17, 1983, relating to the Company's Common Stock.)
(e) Amendment No. 1 to Shareholder Rights Agreement, dated as of December 1, 1985, between Warner and the Company. (Incorporated by reference to Exhibit 9(b) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 29, 1985, File No. 1-6682.)
(f) Exchange Agreement, dated as of December 1, 1985, between the Company and Warner. (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 29, 1985, File No. 1-6682.)
(g) 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.)
(h) Lease between Hasbro Canada Inc. and Central Toy, together with an Addendum thereto, each dated as of May 1, 1987. (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
Executive Compensation Plans and Arrangements
(i) 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.)
(j) 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.)
(k) 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.)
(l) 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.)
(m) 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.)
(n) 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.)
(o) 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.)
(p) Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form 14, File No. 2-92550.)
(q) 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.)
(r) 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.)
(s) 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.)
(t) 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.)
(u) 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.)
(v) Form of Stock Option Agreement (For Employees) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(w) Form of Stock Option Agreement (For Participants in the Long Term Incentive Program) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(w) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(x) Form of Employment Agreement, dated July 5, 1989, between the Company and seven 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.)
(y) Change in Control Agreement dated as of December 13, 1990 between Tonka and Bruce L. Stein. (Incorporated by reference to Exhibit 10.2 to Tonka's Annual Report on Form 10-K for the Fiscal Year Ended December 29, 1990, File No. 1-4683.)
(z) Letter Agreement between Tonka and Bruce L. Stein, dated March 21, 1994.
(aa) 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.)
(bb) 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.)
(cc) Hasbro, Inc. Deferred Compensation Plan for Non-Employee Directors.
(dd) 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.)
(ee) 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.)
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.
EXHIBIT 10(z)
TONKA CORPORATION
1027 Newport Avenue
Pawtucket, Rhode Island 02862
March 21, 1994
Bruce L. Stein
1026 Hatch Street
Cincinnati, Ohio 45202
Dear Bruce:
On behalf of Tonka Corporation, I am pleased to confirm that, in recognition of the superlative 1993 performance of the Kenner Products Division of Tonka Corporation and your outstanding leadership as President of that division, you have been awarded a special and extraordinary bonus in the amount of $1,000,000, payable as follows:
1) $250,000 paid on or before March 15, 1994, receipt of
which you hereby acknowledge;
2) $250,000 payable on March 15, 1995, together with
accrued interest;
3) $250,000 payable on March 15, 1996, together with
accrued interest; and
4) $250,000 payable on March 15, 1997, together with
accrued interest;
provided, however, that you shall be eligible to receive the payments described in clauses 2, 3 and 4 above (collectively the "Installments" and individually an "Installment") only if you are employed by Tonka Corporation or an affiliate thereof (the "Corporation") on the date the Installment is otherwise payable. Interest shall accrue on the unpaid portion of the bonus from March 15, 1994 at the Prime Rate, as reported in the Wall Street Journal, and all such accrued and unpaid interest shall be paid annually as part of an Installment.
Notwithstanding the foregoing, if you cease to be employed by the Corporation as a result of:
(a) your being afflicted with any physical or mental condition which would qualify you for a disability benefit under the Corporation's long term disability plan, or
(b) your death,
unpaid Installments will still continue to be paid to you, your personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees, as the case may be.
In addition, if you cease to be an employee of the Corporation as a result of the involuntary termination of your employment by the Corporation, you shall receive, within 30 days of such termination, payment in full of all unpaid Installments,
except if such involuntary termination was based upon (a) your wilful and continued failure substantially to perform your duties and obligations (other than any such failure resulting from your incapacity due to physical or mental illness) or (b) your wilful misconduct which is materially injurious to the Corporation, monetarily or otherwise. For purposes of the previous sentence, no act, or failure to act, on your part shall be considered "wilful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your act or omission was in the best interest of the Corporation.
You hereby acknowledge that the extraordinary bonus described herein is in lieu of, and substitution for, any bonus to which you may have otherwise been entitled to receive with respect to fiscal 1993 under the Corporation's normal management incentive bonus program.
You hereby acknowledge that you understand and agree that if you voluntary terminate your employment with the Corporation prior to the date any Installment is otherwise payable hereunder, you shall not be entitled to receive such Installment or any future Installments from the Corporation.
All payments made by the Corporation pursuant to this letter agreement shall have deducted or withheld therefrom all amounts as shall be required by applicable law and regulation.
Hasbro, Inc. (the "Guarantor") hereby guarantees the obligations of Tonka Corporation set forth in this letter.
If the foregoing is acceptable to you, please so signify by signing a copy of this letter below and returning it to the Corporation.
Again, let me offer my congratulations on a job very well done.
Very truly yours,
TONKA CORPORATION
By: /s/ Alfred J. Verrecchia
------------------------
Alfred J. Verrecchia
Executive Vice President
|
HASBRO, INC., as Guarantor
By: /s/ Alan G. Hassenfeld
-----------------------
Alan G. Hassenfeld
Chairman and Chief
Executive Officer
ACCEPTED AND AGREED:
/s/ Bruce L. Stein
- ------------------
Bruce L. Stein
|
EXHIBIT 10(cc)
HASBRO, INC. DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
Article I - Purpose and Participation
1.1 The purpose of this Plan is to enhance the ability of Hasbro, Inc. ("Hasbro") to attract and retain as members of its Board of Directors ("Board") individuals of outstanding competence.
1.2 Non-employee members ("Directors") of the Board of Hasbro may elect to defer receipt of all or any portion of earned Director's fees into either a stock unit account (the "Stock Unit Account") or an interest-bearing account (the "Interest Account"). (A Director must, however, defer a minimum of 20% of the annual Board retainer fee into the Stock Unit Account.) All other amounts deferred are at the election of the Director. One-Quarter of a Director's annual Board (and Committee Chair, if applicable) retainer fee shall be deemed earned on the last business day of each calendar quarter and all Board and Board committee attendance fees shall be deemed earned on the last business day of the calendar quarter in which the meeting is attended by the Director.
1.3 Each Director must file with Hasbro by December 15 in any year a Deferral Election Form (Exhibit 1) indicating deferrals during the following calendar year.
1.4 If any individual initially becomes a Director during a calendar year, he or she may elect to defer Director's fees for that calendar year at any time before the start of such Director's term.
Article II - Deferred Compensation Accounts
2.1 For record-keeping purposes only, Hasbro shall maintain a Stock Unit Account and an Interest Account.
As of the end of each calendar quarter, Hasbro shall credit to the Stock Unit Account 110% (which includes a 10% deemed matching contribution by Hasbro (the "Hasbro Contribution")) of the amount deferred into this account (whether voluntarily or mandatorily) by the Director during the quarter.
For purposes of determining the number of shares of Common Stock which shall be credited to the Stock Unit Account, the hypothetical purchase shall be deemed to be made on the last day of such quarter at a price equal to the closing price of such shares as reported in the Wall Street Journal for the last trading day in that quarter.
The equivalent of any cash dividends paid with respect to the shares of Common Stock shall be applied on the last business day of the quarter in which such dividends are paid, based on the hypothetical number of shares of Common Stock in the Stock Unit Account as of the record date for such dividend, to the hypothetical purchase of shares of Common Stock in accordance with the foregoing formula and credited to the Stock Unit Account.
In the event the Company pays a stock dividend or reclassifies or divides or combines its outstanding Common Stock then an appropriate adjustment shall be made in the hypothetical number of shares of Common Stock held in the Stock Unit Account.
Half of the 10% Hasbro Contribution shall vest (become nonforfeitable) on December 31 of the calendar year in which the deferred compensation otherwise would have been paid and the remaining half on the next December 31, but only to the extent that the participant is a Director on such vesting date. Unvested Hasbro Contributions shall vest immediately upon the death or total disability of the Director as determined by the Board or retirement by the Director at or after the mandatory retirement age then in effect.
Article III - Payments
3.1 Payments or withdrawals from either the Stock Unit Account or the Interest Account or transfers between the two accounts shall not be allowed while the individual remains a Director of Hasbro.
3.2 As of the last day of the calendar quarter in which a Director dies, resigns, retires or is removed from, or does not otherwise stand for reelection to, the Board, all amounts in the Stock Unit Account will automatically be converted to the Interest Account. The cash amount transferred will be determined by multiplying the then current value of the Common Stock by the number of whole Stock Units in the Stock Unit Account plus any amounts remaining to be carried forward. The current value shall be the price equal to the closing price, as reported in the Wall Street Journal, for the last trading day of the calendar quarter in which the participant is no longer a Director.
3.3 At the time of filing a Deferral Election Form, a
Director must also file a Payment Election Form (Exhibit 2),
indicating an election to receive (1) the entire amount in
the Interest Account immediately following the end of the
quarter in which the participant is no longer a Director,
(2) the entire amount in the following January, or (3)
payments annually over a period of up to ten years with the
initial payment paid in the following January. If no
Payment Election Form is filed by the Director or is in
effect at the time a participant is no longer a Director,
the balance of the Interest Account will be paid in
installments over five years. Annual installments shall be
calculated each year by dividing the unpaid amount as of
January 1 of that year by the remaining number of unpaid
installments.
3.4 During the installment period, the unpaid balance in the Interest Account will continue to earn interest at the same rate as if the participant had continued as a Director.
3.5 If the Director or former Director dies before all payments have been made, payment(s) shall be made to the beneficiary designated on the Designation of Beneficiary Form (Exhibit 3). The designated beneficiary may be changed from time to time by delivering a new Designation of Beneficiary Form to Hasbro. If no designation is made, or if the named beneficiary predeceases the Director, payment shall be made to the Director's estate.
At the discretion of the Board (without the participation of the affected Director), the payments to be made after the participant is no longer a Director pursuant to this Article III may be accelerated as to such amounts and at such times as the Board determines.
Article IV - Miscellaneous
4.1 Benefits provided under this Plan are unfunded obligations of Hasbro. Nothing contained in this Plan shall require Hasbro to segregate any monies from its general funds with respect to such obligations. This Plan is not an employee benefit plan as defined in the Employee Retirement Income Security Act of 1974, as amended, and is not intended for the benefit of any common law employee of the Company.
4.2 The Board shall be the plan administrator of this Plan and shall be solely responsible for its general administration and interpretation and for carrying out the provisions hereof, and shall have all such powers as may be necessary to do so. The Board shall have the right to delegate from time to time the administration of the Plan, in whole or in part, to any committee of the Board. The decisions made, and the actions taken, by the Board or any committee thereof in the administration of the Plan shall be final and conclusive on all persons, and no member of the Board or any committee thereof shall be subject to individual liability with respect to the Plan.
4.3 Neither the Director nor any beneficiary nor any next- of-kin shall have the right to assign or otherwise alienate the right to receive payments hereunder, in whole or in part, which payments are expressly non-assignable and non- transferable, whether voluntarily or involuntarily. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such amount, whether presently or thereafter payable, shall be void. Except as required by law, no benefit payable under this Plan shall in any manner be subject to garnishment, attachment, execution or other legal process, or be liable for or subject to the debts or liability of any Director.
4.4 Hasbro shall withhold from amounts paid under this Plan any taxes or other amounts required to be withheld by law.
4.5 The Board may at any time amend or terminate the Plan for whatever reasons it may deem appropriate. No amendment or termination shall (a) impair the rights of a participant with respect to amounts then in the participant's account or (b) be effective without the written consent of the Continuing Directors. A "Continuing Director" means a director of Hasbro serving continuously as a director of Hasbro from and including December 6, 1993 or a person designated (before or simultaneously with initially becoming a Director) as a Continuing Director by at least a majority of the then Continuing Directors. All references to action by the Continuing Directors shall mean a vote of a majority of the total number of the then Continuing Directors.
4.6 Each participant in the Plan will receive an annual statement indicating the amount credited to the participant's account as of the end of the preceding calendar year.
4.7 This Plan shall become effective with respect to retainer and attendance fees earned on and after January 1, 1994, with all elections and designations filed by the Directors prior to January 1, 1994 becoming effective as of such date.
4.8 Nothing contained in the Plan shall be construed as a commitment by Hasbro to nominate any person for election or re-election to the Board. Nothing contained in this Plan shall be construed to create a right in any person to be elected or continued as a Director.
4.9 This Plan shall be governed by the laws of the State of Rhode Island.
4.10 The adoption of this Plan shall have no effect on the existing Hasbro, Inc. Retirement Plan for Directors. Nothing contained in this Plan shall prevent Hasbro from adopting other or additional compensation plans or arrangements for its non-employee Directors.
ADOPTED AND APPROVED BY THE BOARD OF DIRECTORS OF HASBRO, INC.
this 6th day of December, 1993.
BY ORDER OF THE BOARD OF DIRECTORS
Exhibit 1
HASBRO, INC.
Deferred Compensation Plan
for
Non-Employee Directors
Deferral Election Form
[1993]
In accordance with the provisions of the Deferred Compensation Plan for Non-Employee Directors, I hereby elect to defer fees payable to me for [1994] and following years as indicated below. The percentage deferral set forth below shall remain in effect until I shall have filed an election superseding this election. I understand that, although a superseding election will become effective to alter the deferral percentages for future fees payable beginning in the year following the election, the amounts already deferred in the aAccounts set forth below may not be transferred or withdrawn so long as I remain a Director of Hasbro.
Annual Retainer (including
Annual Chair Retainer, if any) All Other Fees
----------------------------- --------------
Mandatory Deferral to
Stock Unit Account 20% N.A.
Voluntary Deferral to
Stock Unit Account % %
--- ---
Voluntary Deferral to
Interest Account % %
--- ---
TOTAL* TOTAL**
=== ===
|
* Total may not exceed 100% and must not be less than 20% ** Total may not exceed 100%
Signature Date
Exhibit 2
HASBRO, INC.
Deferred Compensation Plan
for
Non-Employee Directors
Payment Election Form
|
Select one:
( ) Pay full amount immediately following the end of the quarter in which I no longer serve as a Hasbro Director.
( ) Pay full amount in the January following the end of the quarter in which I no longer serve as a Hasbro Director.
( ) Pay annually over _________________ (2 to 10) years beginning in the January following the end of the quarter in which I no longer serve as a Hasbro Director.
Signature Date
Exhibit 3
HASBRO, INC.
Deferred Compensation Plan
for
Non-Employee Directors
Designation of Beneficiary
|
I hereby designate the following person to receive from the Hasbro, Inc. Deferred Compensation Plan for Non-Employee Directors any amounts payable in the event of my death.
Social Security
Name Number Address
-------------------- --------------- -------------------
-------------------
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This designation is intended to replace all prior designations made by me.
EXHIBIT 11
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(Thousands of Dollars and Shares Except Per Share Data)
1993 1992 1991
--------------- --------------- ---------------
Fully Fully Fully
|
Net earnings applicable to common shares:
Net earnings $200,004 200,004 179,164 179,164 81,654 81,654
Interest and amort-
ization on 6%
convertible notes,
net of taxes (a) - 5,745 - 5,826 - -
------- ------- ------- ------- ------- -------
Total $200,004 205,749 179,164 184,990 81,654 81,654
======= ======= ======= ======= ======= =======
|
Average number of shares outstanding (b):
Beginning balance 87,176 87,176 86,184 86,184 84,743 84,743
Exercise of stock
options and warrants:
Actual 304 304 530 530 698 698
Assumed 2,551 2,647 2,372 2,790 1,542 2,700
Assumed conversion
of 6% convertible
notes (a) - 5,114 - 5,114 - -
------- ------- ------- ------- ------- -------
Total 90,031 95,241 89,086 94,618 86,983 88,141
======= ======= ======= ======= ======= =======
Earnings per common
share $ 2.22 2.16 2.01 1.96 .94 .93
======= ======= ======= ======= ======= =======
|
(a) The effect of these notes, issued in November 1991, was anti- dilutive in 1991 and as such was not included.
(b) Computation to arrive at the average number is a weighted average computation.
EXHIBIT 12
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Fiscal Years Ended in December
(Thousands of Dollars)
Earnings available for fixed charges:
Net earnings $200,004 179,164 81,654 89,182 92,194
Fixed charges 42,839 48,050 52,801 23,185 30,817
Taxes on income 125,206 113,212 63,897 63,266 64,599
------- ------- ------- ------- -------
Total $368,049 340,426 198,352 175,633 187,610
======= ======= ======= ======= =======
Fixed charges:
Interest on long-term
debt $ 10,178 16,932 22,913 6,856 13,888
Other interest charges 19,636 18,959 19,417 9,620 10,135
Amortization of debt
expense 386 623 267 47 265
Rental expense representa-
tive of interest factor 12,639 11,536 10,204 6,662 6,529
------- ------- ------- ------- -------
Total $ 42,839 48,050 52,801 23,185 30,817
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges 8.59 7.08 3.76 7.58 6.09
======= ======= ======= ======= =======
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EXHIBIT 13
HASBRO, INC. AND SUBSIDIARIES
Selected Information Contained in
Annual Report to Shareholders
for the Year Ended December 26, 1993
Sales Prices
---------------- Cash Dividends
Period High Low Declared
- ------ ---- --- --------------
1992
1st Quarter $28 1/4 23 3/4 $.05
2nd Quarter 29 3/4 23 1/8 .05
3rd Quarter 34 3/8 26 1/2 .05
4th Quarter 35 7/8 31 1/2 .05
1993
1st Quarter $34 7/8 28 1/8 $.06
2nd Quarter 38 3/8 29 7/8 .06
3rd Quarter 39 5/8 34 .06
4th Quarter 40 1/8 35 1/8 .06
|
The approximate number of holders of record of the Company's Common Stock as of March 18, 1994 was 6,000.
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 26, 1993, under the most restrictive agreement the full amount of retained earnings is free of restrictions.
On February 18, 1994 the Company's Board of Directors declared a quarterly cash dividend on the Company's Common Stock of $.07 per share payable on May 20, 1994 to holders of record on May 6, 1994.
SELECTED FINANCIAL DATA
- -----------------------
(Thousands of Dollars and Shares Except per share Data and Ratios)
Fiscal Year
------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Statement of
Earnings Data:
Net revenues $2,747,176 2,541,055 2,141,096 1,520,032 1,409,678
Net earnings $ 200,004 179,164 81,654 89,182 92,194
Per Common Share
Data:
Earnings $ 2.22 2.01 .94 1.02 1.04
Cash dividends
declared $ .24 .20 .16 .13 .11
Balance Sheet Data:
Working capital $ 552,821 415,586 431,441 504,001 422,825
Total assets $2,293,018 2,082,766 1,950,127 1,284,765 1,246,485
Long-term debt $ 200,510 206,189 380,304 56,912 57,633
Ratio of Earnings
to Fixed
Charges (1) 8.59 7.08 3.76 7.58 6.09
Weighted Average
Number of Common
Shares 90,031 89,086 86,983 87,119 88,603
|
(1) For purposes of calculating the ratio of earnings to fixed charges, fixed charges include interest, amortization of debt expense and one-third of rentals, and earnings available for fixed charges represent earnings before fixed charges and income taxes.
1993 1992 1991
---- ---- ----
Net revenues 100.0% 100.0% 100.0%
Cost of sales 43.0 43.1 45.2
----- ----- -----
Gross profit 57.0 56.9 54.8
Amortization 1.3 1.3 1.3
Royalties, research and development 10.2 9.8 9.0
Advertising 14.0 14.8 15.2
Selling, distribution and administrative 18.1 18.2 18.2
Restructuring .6 - 2.8
Interest expense 1.1 1.4 2.0
Other income, net (.1) (.1) (.5)
----- ----- -----
Earnings before income taxes 11.8 11.5 6.8
Income taxes 4.5 4.5 3.0
----- ----- -----
Net earnings 7.3% 7.0% 3.8%
===== ===== =====
(Thousands of Dollars Except Share Data)
Results of Operations
- ---------------------
|
Revenue growth continued to be very strong during 1993, up 8% from the 1992 level which had increased 19% over 1991. Net revenues for 1993 were $2,747,176 compared to $2,541,055 and $2,141,096 for 1992 and 1991, respectively. Domestically, revenues grew by approximately 11%, with the growth relatively evenly spread across the Company's three major product categories, promoted brands, games and puzzles and infant and preschool. Within the promoted brands area, Kenner's new Jurassic Park(TM) products based on the movie of the same name were very well received by retailers and consumers alike while its Batman(R) action figures, Littlest Pet Shop(R) items and many of the more traditional products such as Nerf(R) and Easy Bake(R) Oven continued to be very strong. Hasbro Toy, after a difficult period during the year, ended the year positively, in part due to an up-turn in several products including Tonka's Talking Fire Truck(TM) and The Real Power Tool Shop(TM). The revenue growth in the games group occurred in both Milton Bradley and Parker Brothers. Again in 1993, both units had success with new products, including Forbidden Bridge(TM) and Snardvark(TM), revived items such as Cootie(R) and Sorry(R), and their classics like Monopoly(R) and Scrabble(R). The infant and preschool group were led by the success of its new Barney(R) line, although many other items including In-Line Skates, Playskool Dollhouse, Tinkertoy(R) and Play-Doh(R) also were strong. Internationally, 1993 revenues increased approximately 4% to $1,076,904 from $1,034,533 in 1992 and $867,599 in 1991. Absent the approximate $107,000 negative effect of changed foreign currency rates during the year, 1993 international growth would have
approached 15%. During 1992, the effect of changed foreign currency translation rates marginally increased revenues. While we experienced solid growth in Germany, the U.K., Canada and Mexico, our acquisitions in Southeast Asia and the Pacific Rim will require more time to reach their full potential.
Also affecting 1992 growth was the 1991 acquisition of Tonka Corporation (Tonka). This acquisition, which occured on May 7, 1991 and brought with it the products marketed under the Tonka, Kenner and Parker Brothers names, was accounted for as a purchase and as such, the results of the Tonka units are included from that date.
The Company's gross profit margin remained stable at 57.0% after increasing to 56.9% in 1992 from 54.8% in 1991. The 1992 margin improvement was the result of a combination of factors including the significant revenue increase within the promoted brands group, whose products generally return a higher gross profit percentage, and the positive impact resulting from the successful restructuring and integration of the Tonka units into the Company's operations.
Amortization expense, which includes amortization of both intellectual property rights and cost in excess of net assets acquired, of $35,366 compares with $33,528 in 1992 and $29,330 in 1991. The increases in both the current year and in 1992 are largely attributable to the acquisitions during 1991 and 1992.
Expenditures for royalties, research and development increased to $280,571 from $249,851 in 1992 and $192,451 in 1991. Included in these amounts are expenditures for research and development of $125,566 in 1993, $109,655 in 1992 and $78,983 in 1991. As percentages of net revenues, research and development was 4.6% in 1993, 4.3% in 1992 and 3.7% in 1991. The significantly increased percentage in 1992 was largely attributable to the efforts involved in rejuvenating many of the products acquired in the Tonka acquisition, while the current year's increase reflects the Company's efforts to remain competitive in a changing technological environment. The revenue growth of the promotional brands was a major cause of the increased royalties in both 1993 and 1992 as these products generally have higher than average royalty rates.
Advertising, which also includes promotion and programming costs, was $383,918 in 1993 compared with $377,219 in 1992 and $325,282 in 1991. As a percentage of net revenues in 1993, 1992 and 1991, however, it was 14.0%, 14.8% and 15.2%, respectively. The lower sales volume of the Tonka product lines and the need to re-establish them in the marketplace following their acquisition by the Company were the primary reasons for the higher 1991 percentage. The subsequent year's decreases also reflect the strength of several of the Company's promoted product lines which have not required the traditional level of advertising support.
Selling, distribution and administrative expense of $498,066 in 1993 compares with $461,888 and $389,301 in 1992 and 1991, respectively. While increasing in dollars, as a percentage of net revenues it has decreased to 18.1% in 1993 from 18.2% in each of 1992 and 1991.
In early 1994, after an intensive study and analysis of its European manufacturing capacity, the Company announced that, subject to negotiations with local trade unions and authorities, it would close its Netherlands manufacturing facility and transfer its production to the Company's larger manufacturing facilities in Ireland and Spain. The cost of this closure and other non-recurring reorganization expenses, classified as restructuring charges, including facility costs, severance and other related costs have been estimated at $15,500.
Interest expense was $29,814 during 1993 compared to $35,891 during 1992 and $42,597 in 1991. The decrease in 1993 is largely reflective of the lower interest rates experienced during the year while the 1992 decrease results from lower interest rates partially offset by the increased working capital needs during the year.
The restructuring charge of $59,000 in 1991 included facility costs, severance and other items related to the integration of the Tonka units with those of the Company following its acquisition in mid-1991.
Income tax expense as a percentage of pretax earnings in 1993 decreased to 38.5% from 38.7% in 1992, which had decreased from 43.9% in 1991. The current year decrease is primarily attributable to two factors; an increase resulting from the U.S. federal rate changing from 34% to 35%, partially offset by the impact of this change on domestic net deferred tax assets, and a decrease resulting from lower effective state tax rates. The 1992 percentage decrease was primarily attributable to the increased earnings in 1992 which reduced the impact of non-deductible amortization.
Receivables, at $720,442 were approximately $82,000 higher at the end of 1993 than at the end of 1992. This increase is primarily attributable to the approximate $100,000 of increased sales made during the fourth quarter of 1993.
Property, plant and equipment increased approximately $28,000 to $279,803. The Company had no material capital commitments at December 26, 1993. Other assets decreased by approximately $2,000. This net decrease includes the current year amortization expense, partially offset by the Company's $25,000 investment for approximately 15% of Virgin Interactive Entertainment, plc, a video game and software company, and several smaller acquisitions.
Substantially all of the short-term borrowings, which at the end of 1993 and 1992 amounted to $62,242 and $64,174, respectively, represented bank borrowings of the Company's foreign subsidiaries. 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 1994, 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 February 27, 1994, the Company's unused committed and uncommitted lines of credit, including a $500,000 revolving credit agreement, were in excess of $1,000,000. Trade payables and other accrued liabilities increased to $594,021 at December 26, 1993 from $551,211 at the end of 1992. A significant portion of this increase results from timing differences in the payment of fourth quarter advertising costs and the provision for restructuring costs previously discussed.
During August 1990, the Board of Directors authorized a program to purchase up to 4,500,000 shares of the Company's common stock. Through the end of 1993, 2,445,300 shares remained under this authorization. The shares acquired under this program were issued in the exercise of stock options and warrants.
Cumulative translation adjustments decreased to $15,006 at December 26, 1993 from $32,568 at December 27, 1992. This decrease was principally due to the relationship of the U.S. dollar relative to currencies in foreign countries in which the Company operates.
The effect of inflation on the Company's operations during 1993 was not significant and the Company will continue its policy of monitoring costs and adjusting prices accordingly.
The Company is currently proceeding with an environmental clean-up at its former manufacturing facility in Lancaster, Pennsylvania. This facility, a portion of which is being utilized for limited warehousing operations in 1994, was acquired in 1986 from the CBS Toys Division of CBS Inc. (CBS) in conjunction with the purchase of rights to selected products formerly marketed by CBS. CBS has acknowledged its responsibility with respect to some areas of contamination and some of the remedial actions needed to facilitate this clean- up, but has not yet funded any of these obligations. The Company believes that CBS has full responsibility and is engaged in legal action against CBS to recover all of the costs associated with the environmental clean-up. While it is impossible to assure the outcome of the court action, the Company believes that it will prevail. The Consolidated Financial Statements reflect, pursuant to Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, certain costs that the Company expects to ultimately recover from CBS.
During November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits (SFAS 112). The Company must adopt the provisions of SFAS 112 in 1994, but believes that the adoption will not have a material effect on its financial statements.
On February 18, 1994, the Company announced a 17% increase in its quarterly cash dividend from that previously in effect. The first dividend at the increased rate of $.07 per share is payable on May 20, 1994 to shareholders of record on May 6, 1994.
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 26, 1993 and December 27, 1992 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 26, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hasbro, Inc. and subsidiaries at December 26, 1993 and December 27, 1992 and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended December 26, 1993 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick Providence, Rhode Island February 8, 1994 |
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 26, 1993 and December 27, 1992
(Thousands of Dollars Except Share Data)
Assets 1993 1992
------ ---- ----
Current assets
Cash and cash equivalents $ 186,254 125,953
Accounts receivable, less allowance for
doubtful accounts of $54,200 in 1993
and $52,200 in 1992 720,442 638,282
Inventories 250,067 217,918
Prepaid expenses and other current assets 144,372 134,776
--------- ---------
Total current assets 1,301,135 1,116,929
Property, plant and equipment, net 279,803 251,340
--------- ---------
Other assets
Cost in excess of acquired net assets, less
accumulated amortization of $68,122 in 1993
and $53,514 in 1992 475,607 484,278
Other intangibles, less accumulated amortization
of $85,290 in 1993 and $65,497 in 1992 185,953 206,628
Other 50,520 23,591
--------- ---------
Total other assets 712,080 714,497
--------- ---------
Total assets $2,293,018 2,082,766
========= =========
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HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 26, 1993 and December 27, 1992
(Thousands of Dollars Except Share Data)
Liabilities and Shareholders' Equity 1993 1992
------------------------------------ ---- ----
Current liabilities
Short-term borrowings $ 62,242 64,174
Trade payables 173,545 183,545
Accrued liabilities 420,476 367,666
Income taxes 92,051 85,958
--------- ---------
Total current liabilities 748,314 701,343
Long-term debt, excluding current installments 200,510 206,189
Deferred liabilities 67,511 69,613
--------- ---------
Total liabilities 1,016,335 977,145
--------- ---------
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 87,795,251 shares
in 1993 and 87,176,079 shares in 1992 43,898 43,588
Additional paid-in capital 296,823 287,478
Retained earnings 920,956 741,987
Cumulative translation adjustments 15,006 32,568
--------- ---------
Total shareholders' equity 1,276,683 1,105,621
--------- ---------
Total liabilities and shareholders' equity $2,293,018 2,082,766
========= =========
|
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Fiscal Years Ended in December
(Thousands of Dollars Except Share Data)
1993 1992 1991
---- ---- ----
Net revenues $2,747,176 2,541,055 2,141,096
Cost of sales 1,182,567 1,094,031 967,359
--------- --------- ---------
Gross profit 1,564,609 1,447,024 1,173,737
--------- --------- ---------
Expenses
Amortization 35,366 33,528 29,330
Royalties, research and development 280,571 249,851 192,451
Advertising 383,918 377,219 325,282
Selling, distribution and administrative 498,066 461,888 389,301
Restructuring charges 15,500 - -
--------- --------- ---------
Total expenses 1,213,421 1,122,486 936,364
--------- --------- ---------
Operating profit 351,188 324,538 237,373
--------- --------- ---------
Nonoperating (income) expense
Interest expense 29,814 35,891 42,597
Acquisition restructuring costs - - 59,000
Other (income), net (3,836) (3,729) (9,775)
--------- --------- ---------
Total nonoperating expense 25,978 32,162 91,822
--------- --------- ---------
Earnings before income taxes 325,210 292,376 145,551
Income taxes 125,206 113,212 63,897
--------- --------- ---------
Net earnings $ 200,004 179,164 81,654
========= ========= =========
Per common share
Earnings $ 2.22 2.01 .94
========= ========= =========
Cash dividends declared $ .24 .20 .16
========= ========= =========
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See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Fiscal Years Ended in December
(Thousands of Dollars)
1993 1992 1991
---- ---- ----
Common stock
Balance at beginning of year $ 43,588 43,397 28,931
Stock option and warrant transactions 310 191 -
Three-for-two stock split - - 14,466
--------- --------- ---------
Balance at end of year 43,898 43,588 43,397
--------- --------- ---------
Additional paid-in capital
Balance at beginning of year 287,478 276,725 286,433
Stock option and warrant transactions 9,345 10,753 4,758
Three-for-two common stock split - - (14,466)
--------- --------- ---------
Balance at end of year 296,823 287,478 276,725
--------- --------- ---------
Retained earnings
Balance at beginning of year 741,987 580,211 512,291
Net earnings 200,004 179,164 81,654
Dividends declared (21,035) (17,388) (13,734)
--------- --------- ---------
Balance at end of year 920,956 741,987 580,211
--------- --------- ---------
Cumulative translation adjustments
Balance at beginning of year 32,568 60,297 58,233
Equity adjustments from foreign
currency translation (17,562) (27,729) 2,064
--------- --------- ---------
Balance at end of year 15,006 32,568 60,297
--------- --------- ---------
Treasury stock
Balance at beginning of year - (5,361) (18,061)
Stock option and warrant transactions - 5,361 12,700
--------- --------- ---------
Balance at end of year - - (5,361)
--------- --------- ---------
Total shareholders' equity $1,276,683 1,105,621 955,269
========= ========= =========
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See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended in December
(Thousands of Dollars)
1993 1992 1991
---- ---- ----
Cash flows from operating activities
Net earnings $200,004 179,164 81,654
Adjustments to reconcile net earnings
to net cash provided (utilized) by
operating activities:
Depreciation and amortization of plant
and equipment 65,282 62,087 52,524
Other amortization 35,366 33,528 29,330
Deferred income taxes 2,281 2,228 (20,148)
Change in current assets and liabilities
(other than cash and cash equivalents):
(Increase) in accounts receivable (90,833) (132,935) (53,564)
(Increase) decrease in inventories (34,088) (15,182) 23,773
(Increase) decrease in prepaid expenses
and other current assets (8,434) 9,555 (8,135)
Increase in trade payables and accrued
liabilities 52,761 94,820 15,242
Other (5,102) (3,455) (622)
------- ------- -------
Net cash provided by operating
activities 217,237 229,810 120,054
------- ------- -------
Cash flows from investing activities
Additions to property, plant
and equipment (99,792) (90,431) (56,004)
Acquisitions, net of cash acquired (32,171) (13,516) (343,392)
Purchase of marketable securities (141,411) (144,000) -
Sale of marketable securities 141,839 144,000 -
Other 5,534 9,953 (5,004)
------- ------- -------
Net cash utilized by investing
activities (126,001) (93,994) (404,400)
------- ------- -------
Cash flows from financing activities
Net (payments) proceeds of short-term
borrowing (9,054) 38,397 (67,609)
Proceeds from long-term debt - - 300,000
Repayment of long-term debt (11,705) (161,413) (112,513)
Stock option and warrant transactions 9,655 16,305 17,458
Dividends paid (20,125) (16,476) (13,104)
Other - - (2,646)
------- ------- -------
Net cash provided (utilized) by
financing activities (31,229) (123,187) 121,586
------- ------- -------
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HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Fiscal Years Ended in December
(Thousands of Dollars)
1993 1992 1991
---- ---- ----
Effect of exchange rate changes on cash 294 (7,290) (5,923)
------- ------- -------
Increase (decrease) in cash and cash
equivalents 60,301 5,339 (168,683)
Cash and cash equivalents at beginning of
year 125,953 120,614 289,297
------- ------- -------
Cash and cash equivalents at end
of year $186,254 125,953 120,614
======= ======= =======
Supplemental information
Cash paid during the year for
Interest $ 31,842 41,665 43,743
Income taxes $107,716 83,160 91,562
|
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Thousands of Dollars Except Share Data)
During 1992, the Company reported a net $214 of income from the cumulative effect of changes in accounting principles. For current year presentation, this amount has been reclassified to other (income), net. Certain other prior year data have also been reclassified to conform with current presentation.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Substantially all costs in excess of net assets (goodwill) of subsidiaries acquired are being amortized on the straight-line method over forty years.
Other intangibles, which include the cost of license agreements, trademarks and copyrights and cost in excess of net assets acquired through the purchase of product rights and licenses, are being amortized over five to twenty years using the straight-line method.
Tools, dies and molds are amortized over a three year period or their useful lives, whichever is less, using an accelerated method. Amortization is credited directly against the cost of the assets.
Prior to 1992, deferred income taxes were recorded for timing differences between tax and financial statement accounting, pursuant to the gross change method under Opinion 11 of the Accounting Principles Board.
Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries as substantially all of such earnings are indefinitely reinvested by the Company.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The Company has a contributory postretirement health and life insurance plan covering substantially all employees who retire under any of the Company's domestic defined benefit pension plans and meet certain age and length of service requirements. At the beginning of 1992, the Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions (SFAS 106), which required that the cost of such benefits be accrued over the employee service period, a change from the Company's prior practice of recording those costs when incurred.
The weighted average number of shares outstanding used in the computation of earnings per common share was 90,030,568, 89,085,751 and 86,983,019 in 1993, 1992 and 1991, respectively.
The difference between primary and fully diluted earnings per share was not significant in any year.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Beginning in 1994, the Company will be required to account for this investment under Statement of Financial Accounting Standards No. 115, Accounting for Investments in Certain Debt and Equity Securities (SFAS 115), if VIE proceeds with its announced plans to have its shares, represented by American Depository Receipts, admitted for quotation on the NASDAQ National Market System. SFAS 115 will require that the investment be reported at fair value with the unrealized gain or loss shown as a separate component of shareholders' equity.
Accounting for this acquisition using the purchase method, the Company allocated the purchase price to assets and liabilities based on fair values at the date of acquisition. These fair values, adjusted for the 1992 adoption of SFAS 109, were comprised of intellectual property rights of $147,447, net tangible liabilities assumed of $145,752 and goodwill of $341,697.
The intellectual property rights are being amortized over twenty years and the goodwill is being amortized over forty years, both using the straight- line method. The Consolidated Statements of Earnings include the results of Tonka from the acquisition date, May 7, 1991.
Following the acquisition, the Company integrated the Tonka operations through the restructuring and consolidation of certain operations. The cost of this restructuring, including facility costs, severance and other related items, was recorded as a nonrecurring charge of $59,000 during the second quarter of 1991. The amount was classified as nonoperating as it related to facilities and operations which had not previously been included as part of the Company's operations.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
On a pro-forma basis, reflecting this acquisition as if it had taken place at the beginning of fiscal 1991, net revenues, net earnings and earnings per common share for the year ended December 29, 1991, would have been $2,282,776, $30,593 and $.35, respectively. These pro-forma results are not indicative of either future financial performance or actual results which would have occurred had the acquisition taken place at that time.
(3) Inventories
-----------
1993 1992
---- ----
Finished products $183,899 161,192
Work in process 22,486 16,315
Raw materials 43,682 40,411
------- -------
$250,067 217,918
======= =======
(4) Property, Plant and Equipment
-----------------------------
1993 1992
---- ----
Land and improvements $ 12,010 13,585
Buildings and improvements 188,713 170,220
Machinery and equipment 173,050 150,851
-------- -------
373,773 334,656
Less accumulated depreciation 133,182 111,801
-------- -------
240,591 222,855
Tools, dies and molds, less accumulated
amortization 39,212 28,485
-------- -------
$279,803 251,340
======== =======
|
Expenditures for maintenance and repairs which do not materially extend the life of the assets are charged to operations.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(6) Accrued Liabilities
-------------------
1993 1992
---- ----
Royalties $ 83,820 73,982
Advertising 116,243 99,550
Payroll and management incentives 37,438 36,814
Other 182,975 157,320
-------- -------
$420,476 367,666
======== =======
(7) Long-Term Debt
--------------
1993 1992
---- ----
6% Convertible Subordinated Notes Due 1998.
Interest is paid semi-annually.(a) $150,000 150,000
Subordinated variable rate notes (4.5% rate
at December 26, 1993) due 1995. Interest
is paid quarterly. (b) 50,000 50,000
Other (excluding current installments). 510 6,189
-------- -------
$200,510 206,189
======== =======
|
(a) These notes are convertible into common stock at a conversion price of $29.33 per share and are not redeemable by the Company prior to November 21, 1994.
(b) This borrowing agreement contains certain restrictions on the payment of cash dividends. Under the agreement, the full amount of retained earnings is free of restrictions.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Current installments aggregated $3,236 and $11,821 at December 26, 1993 and December 27, 1992, respectively, and are included in trade payables. The aggregate maturities of long-term debt in 1995 and in the succeeding three years are $50,093, $83, $83 and $150,083, respectively.
Certain tax benefits are not reflected in income taxes on the Consolidated Statements of Earnings. Such benefits include; $4,235 in 1993 and $4,546 in 1992 which were allocated to shareholders' equity, $2,064 in 1993 and $715 in 1992 which were allocated to goodwill, and $7,322 in 1992 which was allocated to cumulative effect of changes in accounting principles.
Income taxes attributable to earnings before income taxes are:
1993 1992 1991
---- ---- ----
Current
Federal $ 81,770 64,825 24,673
Foreign 28,614 33,147 40,370
State and local 12,541 13,012 5,543
------- ------- -------
122,925 110,984 70,586
------- ------- -------
Deferred
Federal 315 2,612 (6,855)
Foreign 1,817 (663) (168)
State and local 149 279 334
------- ------- -------
2,281 2,228 (6,689)
------- ------- -------
$125,206 113,212 63,897
======= ======= =======
|
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
A reconciliation of the statutory United States federal income tax rate to the Company's effective income tax rate is as follows:
1993 1992 1991
---- ---- ----
Statutory income tax rate 35.0% 34.0% 34.0%
State and local income taxes, net
of federal income tax effect 2.6 3.0 2.7
Amortization of goodwill (1991
also includes amortization of
other intangibles) 1.4 1.4 5.0
Foreign earnings taxed at rates other
than the United States statutory rate - ( .6) ( .5)
Other, net (.5) .9 2.7
---- ---- ----
38.5% 38.7% 43.9%
==== ==== ====
|
The components of earnings before income taxes are as follows:
1993 1992 1991
---- ---- ----
Domestic $243,820 190,268 48,821
Foreign 81,390 102,108 96,730
------- ------- -------
$325,210 292,376 145,551
======= ======= =======
|
The components of deferred income tax expense in 1993 and 1992 arise from various temporary differences which are all attributable to earnings before income taxes. Domestic deferred tax assets and liabilities were adjusted for the effect of legislation enacted during 1993 increasing the United States federal tax rate from 34% to 35%. The adjustment decreased deferred tax expense by $1,266. In 1991, the deferred income tax benefits resulted from timing differences between tax and financial statement accounting. These timing differences originated from various income and expense items and depreciation of tangible and intangible property.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 26, 1993 and December 27, 1992 are:
1993 1992
---- ----
Deferred tax assets:
Accounts receivable $ 30,049 29,644
Inventories 12,090 10,379
Net operating loss and other loss
carryovers 11,073 4,712
Operating expenses 32,393 36,626
Postretirement benefits 8,675 8,140
Other 39,554 41,569
------- -------
Total gross deferred tax assets 133,834 131,070
Valuation allowance (10,376) (4,712)
------- -------
Net deferred tax assets 123,458 126,358
------- -------
Deferred tax liabilities:
Property rights and property, plant and
equipment 68,614 71,078
Other 6,468 3,731
------- -------
Total gross deferred tax liabilities 75,082 74,809
------- -------
Net deferred income taxes $ 48,376 51,549
======= =======
|
The Company has a valuation allowance for deferred tax assets at December 26, 1993 of $10,376, which is an increase of $5,664 from the $4,712 at December 27, 1992. These allowances pertain to certain foreign and state operating loss carryforwards, all of which will expire over various periods of time. If fully realized, $1,142 will reduce goodwill and the balance will reduce income tax expense.
Based on the Company's history of taxable income and the anticipation of sufficient taxable income in years when the temporary differences are expected to become tax deductions, the Company believes that it will realize the benefit of the deferred tax assets, net of the existing valuation allowance. More than 70% of the deferred tax assets are expected to be realized during the next two years.
Deferred income taxes of $78,413 and $76,093 at the end of 1993 and 1992, respectively, are included as a component of prepaid expenses and other current assets.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The cumulative amounts of undistributed earnings of the Company's foreign subsidiaries (after considering distributions made subsequent to year end) amounted to approximately $271,000 and $239,000 at December 26, 1993 and December 27, 1992, respectively.
Prior to the acquisition by the person or group of beneficial ownership of a certain percentage of the Company's common stock, the Rights are redeemable for two-thirds of a cent per Right. The Rights Plan contains certain exceptions with respect to the Hassenfeld family and related entities.
In August 1990, the Board authorized the purchase of up to 4,500,000 shares of the Company's common stock. At December 26, 1993, a balance of 2,445,300 shares remained under this authorization.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The Company has reserved 7,579,423 shares of its common stock for issuance upon exercise of options granted or to be granted under the plans. These options generally vest in equal annual amounts over three to five years beginning one year after grant. The plans provide that options be granted at exercise prices not less than market value on the date the option is granted and options are adjusted for such changes as stock splits and stock dividends. No options are exercisable for periods of more than ten years after date of grant. Although the plans may permit the granting of awards in the form of stock options, stock appreciation rights, stock awards and cash awards, to date, only stock options have been granted.
Additionally, the Company has reserved 1,461,112 shares of its common stock for issuance upon exercise of 5,844,448 outstanding warrants. The warrants expire on July 12, 1994 and carry an exercise price of $18.92 per share. The Company, at its option, may pay the exercising warrantholder an amount in cash equal to the closing price of the common stock on the date prior to exercise in lieu of issuing any shares of common stock.
The changes in outstanding options and warrants for the three years ended December 26, 1993 follow:
Shares Exercise Price
(In Thousands) Per Share
------------ --------------
Outstanding at December 30, 1990 6,704 $ 1.48 - 18.92
Granted (a) 103 19.00 - 53.88
Exercised (1,616) 1.48 - 18.92
Expired and cancelled (247) 7.58 - 43.49
-----
Outstanding at December 29, 1991 4,944 1.48 - 53.88
Granted 1,333 25.00 - 31.88
Exercised (1,012) 1.48 - 25.00
Expired and cancelled (61) 7.58 - 53.88
-----
Outstanding at December 27, 1992 5,204 7.58 - 43.49
Granted 2,712 31.62 - 37.44
Exercised (730) 7.58 - 31.62
Expired and cancelled (63) 10.25 - 38.29
-----
Outstanding at December 26, 1993 7,123 $ 7.58 - 43.49
=====
|
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(a) 1991 grants principally represent conversion of Tonka options into those of the Company, computed at the date of merger in accordance with the merger agreement.
The number of shares exercisable at the end of 1993, 1992 and 1991 were 2,919,654, 2,831,801 and 3,073,824, respectively. The prices at which these shares may be exercised are those shown for outstanding options and warrants in the preceding table.
The net periodic pension cost of these plans included the following components:
1993 1992 1991
Benefits earned during the year $ 5,630 5,248 3,816
Interest cost on projected benefits 7,243 5,438 4,674
Actual return on plan assets (10,834) (5,183) (22,260)
Net amortization and deferral 3,190 (1,099) 16,894
------ ------ ------
$ 5,229 4,404 3,124
====== ====== ======
|
The funded status and the amounts recognized in the Company's balance sheets relating to these plans are:
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
1993 1992
----------------------- -----------------------
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 $14,144 58,581 56,934 2,109
Nonvested benefits 409 1,447 951 275
------ ------ ------ ------
Accumulated benefit
obligation 14,553 60,028 57,885 2,384
Effect of assumed
increase in
compensation level - 30,301 17,941 2,509
------ ------ ------ ------
Projected benefit
obligation 14,553 90,329 75,826 4,893
Net assets available
for benefits 23,159 80,413 95,271 508
------ ------ ------ ------
Plan assets in excess of
(less than) projected
benefits $ 8,606 (9,916) 19,445 (4,385)
====== ====== ====== ======
Consisting of:
Unrecognized net
asset $ 782 1,618 2,742 -
Unrecognized prior
service cost (841) (2,204) (1,168) (2,251)
Unrecognized net gain 5,864 2,146 19,092 161
Prepaid (accrued)
pension recognized
in the balance sheet 2,801 (11,476) (1,221) (2,295)
------ ------ ------ ------
$ 8,606 (9,916) 19,445 (4,385)
====== ====== ====== ======
|
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 7.2% for 1993 and 8% for 1992 and 1991, assumed long-term rates of compensation increase of 5% for 1993 and 5.5% for 1992 and 1991 and an assumed long-term rate of return on plan assets of 9% for all years.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The Company also has a profit sharing plan covering substantially all of its domestic non-union employees. The plan provides for an annual discretionary contribution by the Company which for 1993, 1992 and 1991 was approximately $6,100, $5,400 and $3,800, respectively.
Upon adoption of SFAS 106, the Company recognized the accumulated liability for such benefits measured at that date (transition obligation). The cumulative effect of this change in accounting principles, for years prior to 1992, reduced 1992 earnings by $19,457 ($12,135 after tax).
The accrued postretirement benefits (actuarial present value of accumulated benefit obligation) recognized in the Company's balance sheets relating to this plan consist of:
1993 1992
---- ----
Retired employees $16,265 15,121
Fully eligible active employees 1,329 3,064
Other active employees 5,898 3,446
------ ------
$23,492 21,631
====== ======
|
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The net periodic postretirement benefit cost included the following components:
1993 1992
---- ----
Benefits earned during the period $ 338 290
Interest cost on projected benefits 1,783 1,640
------ ------
2,121 1,930
Recognition of transition obligation - 19,457
------ ------
$ 2,121 21,387
====== ======
|
For measuring the expected postretirement benefit obligation, a 10.4% and 12% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1993 and 1992, respectively. These rates were further assumed to decrease gradually to 5% and 6%, respectively, in 2012 and remain level thereafter. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.2% in 1993 and 8% in 1992.
If the health care cost trend rate were increased one percentage point in each year, the accumulated postretirement benefit obligation at December 28, 1992 would have increased by approximately 11% and the aggregate of the benefits earned during the period and the interest cost would have each increased by approximately 9%.
Prior to 1992, the Company recognized the expense in the year the benefits were provided. On that basis, the cost of postretirement health care and life insurance benefits in 1991 was $1,100.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Minimum rentals, net of minimum sublease income which is not material, under long-term operating leases for the five years subsequent to 1993 and in the aggregate are as follows:
1994 $ 30,721
1995 22,541
1996 15,976
1997 13,789
1998 10,584
Later years 67,655
--------
$161,266
========
|
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 1993.
In addition, the Company leases certain facilities which, as a result of the 1991 restructuring of operations, are no longer in use. Future costs relating to these facilities were included as a component of the restructuring charge and thus are not included in the table above.
The Company uses forward exchange contracts to purchase various currencies and had the equivalent of approximately $65,000 and $50,000 outstanding at December 26, 1993 and December 27, 1992, respectively. Such contracts have been determined to be hedges of foreign currency commitments and as such any gain or loss has been deferred and will be included in the measurement of the related transaction. The aggregate amount of gains and losses resulting from foreign currency transactions was not material.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
The Company is involved in various claims and legal actions 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.
The fair value of the Company's convertible notes, based on the year-end market price, approximates $198,000 compared to a carrying value of $150,000. The fair value of the remaining long-term debt approximates its carrying value of $50,510 as substantially all is variable rate and is repriced quarterly. The estimated fair value of the Company's foreign exchange contracts, based on dealer quotations, is approximately $65,000, substantially the same as the notional value.
Estimates of the fair values of financial instruments are subjective in nature and involve uncertainties and judgments and, as such, cannot be determined with precision. Any changes in assumptions would affect these estimates.
Information about the Company's operations in different geographic locations for each of the fiscal years in the three-year period ended December 1993 follows. The Company's primary operations in areas outside of the United States include Europe, Canada, Mexico, Australia and New Zealand and Hong Kong. As the foreign areas have similar business environments and the Company's operations in those areas are similar, they are presented as one category. Revenues from unaffiliated customers represent total net revenues from the respective geographic areas after elimination of intercompany transactions. Operating profit is net revenues less operating costs and expenses pertaining to specific geographic areas. Identifiable assets are those assets used in the geographic areas and are reflected after elimination of intercompany balances.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Revenues from unaffiliated customers:
United States $1,670,272 1,506,522 1,273,497
Foreign 1,076,904 1,034,533 867,599
--------- --------- ---------
$2,747,176 2,541,055 2,141,096
========= ========= =========
Operating profit:
United States $ 242,038 193,466 120,242
Foreign 109,150 131,072 117,131
--------- --------- ---------
$ 351,188 324,538 237,373
========= ========= =========
Identifiable assets:
United States $1,540,887 1,451,951 1,374,126
Foreign 752,131 630,815 576,001
--------- --------- ---------
$2,293,018 2,082,766 1,950,127
========= ========= =========
Capital expenditures:
United States $ 55,666 64,203 31,279
Foreign 44,126 26,228 24,725
--------- --------- ---------
$ 99,792 90,431 56,004
========= ========= =========
Depreciation and amortization:
United States $ 73,264 74,814 64,253
Foreign 27,384 20,801 17,601
--------- --------- ---------
$ 100,648 95,615 81,854
========= ========= =========
|
Sales to the Company's two largest customers, Toys R Us, Inc. and Wal-Mart Stores, Inc., amounted to 20% and 11%, respectively, of consolidated net revenues during 1993, 17% and 9%, respectively, in 1992 and 17% and 8%, respectively, in 1991.
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
(17) Quarterly Financial Data (Unaudited)
------------------------------------
Quarter
----------------------------------
First Second Third Fourth Full Year
1993 ----- ------ ----- ------ ---------
----
Net revenues $487,036 515,551 812,393 932,196 2,747,176
Gross profit $279,015 294,031 461,329 530,234 1,564,609
Earnings before
income taxes $ 42,871 43,791 122,865 115,683(a) 325,210
Net earnings $ 26,580 27,150 75,548 70,726 200,004
======== ======= ======= ======= =========
Per common share
Earnings $ .30 .30 .84 .78 2.22
Market price
High $ 34 7/8 38 3/8 39 5/8 40 1/8 40 1/8
Low $ 28 1/8 29 7/8 34 35 1/8 28 1/8
Cash dividends
declared $ .06 .06 .06 .06 .24
|
(a) Includes the effect of a nonrecurring charge of $15,500 relating to restructuring of operations. (See note 13)
Quarter
----------------------------------
First Second Third Fourth Full Year
1992 ----- ------ ----- ------ ---------
----
Net revenues $452,569 485,958 771,192 831,336 2,541,055
Gross profit $256,609 276,545 437,373 476,497 1,447,024
Earnings before
income taxes $ 38,552 37,540 111,415 104,869 292,376
Net earnings $ 23,408 22,712 67,406 65,638 179,164
======== ======= ======= ======= =========
Per common share
Earnings $ .26 .26 .75 .73 2.01
Market price
High $ 28 1/4 29 3/4 34 3/8 35 7/8 35 7/8
Low $ 23 3/4 23 1/8 26 1/2 31 1/2 23 1/8
Cash dividends
declared $ .05 .05 .05 .05 .20
|
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Thousands of Dollars Except Share Data)
Quarter
----------------------------------
First Second Third Fourth Full Year
1991 ----- ------ ----- ------ ---------
----
Net revenues $306,557 368,501 704,833 761,205 2,141,096
Gross profit $173,800 197,738 382,349 419,850 1,173,737
Earnings (loss)
before income
taxes $ 34,094 (41,726)(a) 80,071 73,112 145,551
Net earnings
(loss) $ 20,456 (31,149) 47,501 44,846 81,654
======== ======= ======= ======= =========
Per common share
Earnings (loss)$ .24 (.36) .55 .51 .94
Market price
High $ 16 5/8 20 5/8 20 25 5/8 25 5/8
Low $ 10 15 3/4 16 1/4 19 10
Cash dividends
declared $ .04 .04 .04 .04 .16
|
(a) Includes the effect of a nonrecurring acquisition restructuring charge of $59,000 relating to Tonka. (See note 2)
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 Foreign Sales Corp. U.S. Virgin Islands
Hasbro International, Inc. Massachusetts
Hasbro Australia Pty. Limited Australia
Hasbro Far East Limited Hong Kong
Hasbro Canada Inc. Canada
Hasbro Sales Inc./Les Ventes Hasbro Inc. Canada
Hasbro de Mexico S.A. de C.V. Mexico
Hasbro Deutschland GmbH Germany
Hasbro S.A. France
Hasbro U.K. Limited United Kingdom
Hasbro Industries (U.K.) Limited United Kingdom
Milton Bradley Limited United Kingdom
Milton Bradley Storage Limited United Kingdom
MB France S.A. France
Hasbro Asia-Pacific Marketing Ltd Hong Kong
HMS Juquetes S.A. de C.V. Mexico
MB International B.V. The Netherlands
Hasbro B.V. The Netherlands
MB Nederland B.V. The Netherlands
S.A. Hasbro N.V. Belgium
Hasbro Magyarorszag Kft Hungary
MB Espana, S.A. Spain
Hasbro Hellas S.A. Greece
Hasbro Importacao e Exportacao de Jogos
Brinquedos Lds Portugal
Hasbro Israel Ltd. Israel
MB Ireland Limited Ireland
Hasbro Italy S.r.l.(b) Italy
M.B.(New Zealand) Limited New Zealand
Hasbro New Zealand Limited New Zealand
Hasbro Schweiz AG (c) Switzerland
Nomura Toys Limited Japan
Palmyra Holding Pte. Ltd. Singapore
Palmyra (Hong Kong) Limited Hong Kong
Palson Toys (Hong Kong) Limited Hong Kong
Palmyra (Malaysia) Sdn. Bhd. Malaysia
Palmyra (Singapore) Pte. Ltd. Singapore
Hasbro Managerial Services, Inc. Rhode Island
Hasbro Promotions and Direct, Inc. Delaware
Kid Dimension, Inc. Delaware
Kid Dimension Far East Ltd Hong Kong
Milton Bradley Wood Products Co., Inc. Delaware
Playskool, Inc. Delaware
Playskool Baby, Inc. New Jersey
Pant-Ease Infant Wear Company, Inc. New York
|
Name Under Which Subsidiary State or Other Jurisdiction of
Does Business Incorporation or Organization
- --------------------------- ------------------------------
Tonka Corporation Minnesota
Hasbro Osterreich Ges.m.b.H Austria
Juguetrenes S.A. de C.V. Mexico
Kenner Parker Australia Limited Australia
Kenner Parker Tonka Products Limited Delaware
Kenner Parker France S.A. France
|
(a) Inactive subsidiaries and subsidiaries with minimal operations have been omitted. Such subsidiaries, if taken as a whole, would not constitute a significant subsidiary.
(b) Formerly named MB Italy S.r.l.
(c) Formerly named MB (Switzerland) AG
EXHIBIT 24(a)
ACCOUNTANTS' CONSENT
The Board of Directors
Hasbro, Inc.:
We consent to incorporation by reference in the Registration Statements Nos. 2-78018, 2-93483 and 33-57344 on Form S-8 and No. 33-41548 on Form S-3 of Hasbro, Inc. of our reports dated February 8, 1994 relating to the consolidated balance sheets of Hasbro, Inc. and subsidiaries as of December 26, 1993 and December 27, 1992 and the related consolidated statements of earnings, shareholders' equity and cash flows and related schedules for each of the fiscal years in the three-year period ended December 26, 1993, which report on the consolidated financial statements incorporated by reference and which report on the related schedules is included in the Annual Report on Form 10-K of Hasbro, Inc. for the fiscal year ended December 26, 1993.
/s/ KPMG Peat Marwick Providence, Rhode Island March 25, 1994 |