Hasbro Reported Q1 Results
Hasbro, Inc., reported financial results for the first quarter of 2014. Net revenues for the first quarter 2014 increased two percent to $679.5 million from $663.7 million in 2013. Foreign exchange had an unfavorable $6 million impact on first quarter revenues.
Net earnings for the first quarter 2014 were $32.1 million, or $0.24 per diluted share, compared to a net loss of $6.7 million, or ($0.05) per diluted share, in 2013. As adjusted, net earnings for the first quarter 2014 were $18.6 million, or $0.14 per diluted share. This excludes favorable tax adjustments of $13.5 million, or $0.10 per diluted share. As adjusted, net earnings for the first quarter 2013 were $6.6 million, or $0.05 per diluted share. This excludes pre-tax charges of $28.9 million, or $0.14 per diluted share, associated with restructuring actions as well as favorable tax adjustments of $5.5 million, or $0.04 per diluted share.
“Our first quarter results reflect continued strong performance across several key initiatives including Hasbro Franchise Brands, Emerging Markets, and the Entertainment and Licensing segment,” said Brian Goldner, Hasbro’s president and CEO, in a statement. “Growth in both revenues and operating profit for the first quarter, despite a later Easter this year and ahead of our major theatrical launches, speaks to the strength of the brand innovation we are delivering to consumers globally.”
U.S. and Canada segment net revenues were $337.7 million compared to $342.1 million in 2013. The segment’s results reflect growth in the Girls category, offset by declines in the Boys, Games, and Preschool categories. The U.S. and Canada segment reported operating profit of $35.8 million compared to $37.7 million in 2013.
International segment net revenues increased five percent to $305.5 million compared to $289.8 million in 2013. Net revenues in the International segment grew seven percent excluding an unfavorable $4.9 million impact of foreign exchange. Revenues in the International segment reflect growth in Europe and Latin America as well as growth in the Boys and Girls categories. The International segment reported operating profit of $2.4 million compared to an operating loss of $4.5 million in 2013.
Entertainment and Licensing segment net revenues increased 13 percent to $34.9 million compared to $30.8 million in 2013. The segment benefited from the revenue contribution of Backflip Studios. Revenue growth in lifestyle licensing was offset by lower entertainment revenues. The Entertainment and Licensing segment reported an operating profit of $6 million compared to $5.3 million in 2013.
First quarter 2014 net revenues in the Boys category increased two percent to $247.8 million behind growth in Nerf and Marvel products, partially offset by continued year-over-year declines in Beyblade.
Games category revenues declined four percent in the quarter. Franchise Brands Magic: The Gathering and Monopoly increased revenues in the quarter. Additionally, revenues grew in several Games Mega Brands, while Action Battling games and Duel Master, a trading card game, experienced a decline in revenues.
The Girls category grew 21 percent in the first quarter 2014. My Little Pony, My Little Pony Equestria Girls, and Nerf Rebelle contributed to the continued strong growth in the category.
Preschool category revenues declined four percent in the first quarter 2014. Play-Doh continued to experience strong growth while core Playskool declined.
Dividend and Share Repurchase
Hasbro paid $52.4 million in cash dividends to shareholders during the first quarter 2014. The next quarterly cash dividend payment of $0.43 per common share is scheduled for May 15, 2014, to shareholders of record at the close of business on May 1, 2014.
During the first quarter, Hasbro repurchased a total of 1.5 million shares of common stock at a total cost of $80.5 million and an average price of $54.36 per share. At quarter-end, $444.3 million remained available in the current share repurchase authorization.
Mattel Reported Q1 Results
Mattel, Inc., reported 2014 first quarter financial results. For the quarter, Mattel reported a net loss of $11.2 million, or $0.03 per share, compared to last year’s first quarter net income of $38.5 million, or $0.11 per share.
“For the first quarter, revenues were consistent with our expectations as we worked through inventories in a challenging global retail environment,” said Bryan G. Stockton, Mattel chairman and CEO. “In addition, we managed costs and streamlined our workforce as part of our initiatives to drive efficiencies throughout the organization. Importantly, we made significant progress against two of our strategic objectives, entering new categories and strengthening our Girls Portfolio. We launched BOOMco., our highly anticipated entry into the outdoor category, announced the acquisition of MEGA Brands, Inc., a leading player in the rapidly-growing construction and arts & crafts categories, and continued the global launch of our newest doll franchise, Ever After High. As we approach the second half of the year, and the all-important holiday season, we are optimistic that these initiatives will help drive our business this year and for many years to come.”
Financial Overview
For the quarter, net sales were $946.2 million, down five percent compared to $995.6 million last year. On a regional basis, first quarter gross sales decreased two percent in the North American Region, which consists of the U.S., Canada, and American Girl, including a one percentage point unfavorable impact from changes in currency exchange rates. For the International Region, gross sales decreased seven percent, including a one percentage point unfavorable impact from changes in currency exchange rates. Operating income for the quarter was $6.2 million, which included an incremental severance expense of $16 million as part of streamlining Mattel’s workforce to drive efficiencies throughout the organization, compared to prior year’s operating income for the quarter of $65.8 million.
The company’s debt-to-total capital ratio of 34.1 percent is in line with its capital investment framework. Cash flows from operating activities were approximately $61 million, compared to cash flows used for operating activities of approximately $62 million in 2013. The change was primarily due to reductions in working capital. Cash flows used for financing and other activities were approximately $173 million, compared to cash flows from financing and other activities of approximately $52 million in 2013. The change was primarily due to prior year proceeds from the issuance of long-term debt and lower proceeds from the exercise of stock options, partially offset by prior-year repayments of long-term debt.
Capital Deployment
The company announced that its board of directors declared a second quarter cash dividend of $0.38 per share on the company’s common stock. The dividend will be payable on June 13, 2014, to stockholders of record on May 23, 2014. The dividend is the second of four quarterly dividends the company expects to pay this year, reflecting an annualized dividend of $1.52 per share, which represents a six percent increase to last year’s total dividends. During the first quarter of 2014, the company repurchased 736,000 shares of its common stock at a cost of approximately $28 million.
Sales by Brand
Mattel Girls and Boys Brands
For the first quarter, worldwide gross sales for Mattel Girls & Boys Brands were $656.9 million, down five percent versus the prior year. Worldwide gross sales for the Barbie brand were down 14 percent.
Worldwide gross sales for Other Girls brands were up four percent, primarily driven by Disney Princess and Ever After High, partially offset by Monster High. Worldwide gross sales for the Wheels category, which includes the Hot Wheels and Matchbox brands, were down two percent. Worldwide gross sales for the Entertainment business, which includes Radica and Games, were down eight percent.
Fisher-Price Brands
First quarter worldwide gross sales for Fisher-Price Brands, which includes the Fisher-Price Core, Fisher-Price Friends, and Power Wheels brands, were $271.4 million, down six percent versus the prior year.
American Girl Brands
First quarter gross sales for American Girl Brands, which offers American Girl-branded products directly to consumers, were $105.9 million, up five percent versus the prior year.
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