Hasbro Reports Strong Fourth Quarter and Full-Year 2003 Results

PAWTUCKET, R.I.--()--Feb. 9, 2004--

  Highlights  



-- Net revenues up 11.4% for the year, to $3.1 billion, results include 4.5% positive impact from foreign exchange;

-- Operating margin improved 3.2 percentage points to 11.0% for 2003, achieving the Company's target of 10% or better;

-- Earnings per diluted share for the year, before the cumulative effect of accounting changes, of $0.98 vs. prior year of $0.43;

-- Earnings for the quarter of $76.6 million or $0.43 per diluted share;

-- All major segments performed well, reporting strong growth in both revenue and operating profit;

-- Balance sheet improved with total debt, net of cash, reduced by $394.0 million;

-- Growth led by innovative new products such as BEYBLADE, FURREAL FRIENDS and VIDEONOW, as well as strong performances from board games and a number of core brands including TRANSFORMERS, PLAYSKOOL and MAGIC: THE GATHERING trading card games.

Hasbro, Inc. (NYSE: HAS) today announced strong sales and earnings growth for its 2003 full year and fourth quarter. For the year, the Company reported earnings before cumulative effect of accounting change of $175.0 million or $0.98 per diluted share, compared to earnings before cumulative effect of accounting change of $75.1 million or $0.43 per diluted share for 2002. The Company reported net earnings of $157.7 million or $0.88 per diluted share in 2003, compared to a net loss of $170.7 million or $0.98 per diluted share in 2002. For the fourth quarter, the Company reported net earnings of $76.6 million or $0.43 per diluted share, compared to $62.2 million or $0.36 per diluted share last year.

"I am particularly pleased we achieved our financial goals during a year in which we also took a number of significant actions to improve future profitability," said David Hargreaves, Chief Financial Officer.

"Some of these actions required charges in the fourth quarter. The most significant charges were severance payments related to the cessation of toy manufacturing operations at our Valencia, Spain facility of $18.4 million, and charges for exiting leases and severance for employees of the remaining Wizards of the Coast retail stores of $14.0 million. The Company also incurred inventory and tooling obsolescence, as well as administrative expenses related to these operations that are considered part of the normal course of business," Hargreaves continued.

"In addition, we had a $20.3 million charge related to the December bond tender offer, primarily comprised of the premium we paid to bondholders that participated in our tender offer. The bankruptcy filing of K-B Toys did not have a significant impact on our fourth quarter results," Hargreaves concluded.

For the year, worldwide net revenues grew 11.4% to $3.1 billion, compared to $2.8 billion a year ago. For the fourth quarter, the Company reported worldwide net revenues of $1.1 billion, up 12.7% compared to $997.4 million a year ago.

"Our focus on new product innovation and core brands drove strong growth in 2003," said Alfred J. Verrecchia, President and Chief Executive Officer. "We did very well absent the favorable impact of foreign exchange and up against difficult comparisons related to Star Wars and other movie properties. We continue to believe over time, we can grow revenue between three to five percent per year. Equally important, we expect to deliver operating margins of 12% or better by the end of 2005," Verrecchia concluded.

Revenues in the U.S. Toys segment were $1.1 billion for the year and $318.9 million for the quarter, an increase of 6.2% and 10.4% over 2002, respectively. Full year operating profit increased 21.6% to $92.0 million, compared with $75.7 million last year. The segment experienced strength in many brands, including BEYBLADE, TRANSFORMERS, PLAYSKOOL and VIDEONOW, as well as continuing strong sales of FURREAL FRIENDS, including GO GO MY WALKIN' PUP.

Revenues in the Games segment were $804.5 million for the year and $293.5 million for the quarter, an increase of 8.8% and 9.1% over 2002, respectively. Full year operating profit increased to $175.3 million, compared with $124.5 million last year, an increase of 40.8%. The segment experienced strength in many brands and products, including MONOPOLY, TRIVIAL PURSUIT, TWISTER and MAGIC: THE GATHERING trading card games.

International segment revenues were $1.2 billion for the year and $477.2 million for the quarter, an increase of 22.0% and 21.7% over 2002, respectively. This increase includes the positive impact of foreign exchange of approximately $127.9 million for the year and $55.7 million for the quarter. Absent this impact, revenues increased 8.8% for the year to $1.1 billion and increased 7.5% for the quarter to $421.5 million. Full year operating profit increased significantly to $91.3 million, compared with $5.2 million last year. The segment experienced strength in board games and many other brands, including BEYBLADE, MAGIC: THE GATHERING trading card games, TRANSFORMERS and PLAYSKOOL.

The 2003 full year results include the cumulative effect of a change in accounting principle related to the adoption of FASB Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." As a result of adopting this statement, Hasbro recorded a one-time non-cash charge from the cumulative effect of this accounting change totaling $17.4 million, or $0.10 per diluted share, in the consolidated statement of operations for 2003. In addition to the cumulative effect, year to date the Company had an after tax charge of $13.6 million or $0.08 per diluted share related to the adjustment of certain warrants to their fair value. The Company will continue to adjust these warrants to fair value through earnings each quarter. The 2002 full year results included a $245.7 million or $1.42 per diluted share, net of tax non-cash charge as a cumulative effect of a change in accounting principle related to the adoption of FASB Statement No. 142 "Goodwill and Other Intangibles".

Full Year Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was $460.6 million, compared to $365.4 million last year. The attached schedules provide a reconciliation of EBITDA to net earnings for the fourth quarter and year to date.

The Company will webcast its fourth quarter earnings conference call at 9:00 a.m. Eastern Standard Time today. Investors and the media are invited to listen at http://www.hasbro.com (select "Corporate Info" from the home page, click on "Investor Information," and then click on the webcast microphone).

Hasbro is a worldwide leader in children's and family leisure time and entertainment products and services, including the design, manufacture and marketing of games and toys ranging from traditional to high-tech. Both internationally and in the U.S., its PLAYSKOOL, TONKA, SUPER SOAKER, MILTON BRADLEY, PARKER BROTHERS, TIGER and WIZARDS OF THE COAST brands and products provide the highest quality and most recognizable play experiences in the world.

Certain statements contained in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as "anticipate", "believe", "could", "expect", "intend", "look forward", "may", "planned", "potential", "should", "will" and "would". Such forward-looking statements are inherently subject to known and unknown risks and uncertainties. The Company's actual actions or results may differ materially from those expected or anticipated in the forward-looking statements. Specific factors that might cause such a difference include, but are not limited to: the Company's ability to manufacture, source and ship new and continuing products on a timely basis and the acceptance of those products by customers and consumers at prices that will be sufficient to profitably recover development, manufacturing, marketing, royalty and other costs of products; economic and public health conditions, including factors which impact the retail market or the Company's ability to manufacture and deliver products, higher fuel and commodity prices, higher transportation costs, currency fluctuations and government regulation and other conditions in the various markets in which the Company operates throughout the world; the concentration of the Company's customers; the inventory policies of retailers, including the concentration of the Company's revenues in the second half and fourth quarter of the year, together with increased reliance by retailers on quick response inventory management techniques, which increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve tight and compressed shipping schedules; work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product; the bankruptcy or other lack of success of one of the Company's significant retailers which could negatively impact the Company's revenues or bad debt exposure; the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees in a competitive environment; market conditions, third party actions or approvals and the impact of competition that could delay or increase the cost of implementation of the Company's consolidation programs or alter the Company's actions and reduce actual results; the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization; and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances occurring after the date of this release.

This presentation includes a non-GAAP financial measure as defined under SEC rules, specifically EBITDA. As required by SEC rules, we have provided a reconciliation on the attached schedule of this measure to the most directly comparable GAAP measure. EBITDA (earnings before interest, taxes, depreciation and amortization) represents net earnings (loss) before cumulative effect of accounting change, excluding, interest expense, income taxes, depreciation and amortization. Management believes that EBITDA is one of the appropriate measures for evaluating the operating performance of the Company because it reflects the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet, and make strategic acquisitions. However, this measure should be considered in addition to, not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with generally accepted accounting principles as more fully discussed in the Company's financial statements and filings with the Securities and Exchange Commission. As used herein, "GAAP" refers to accounting principles generally accepted in the United States. This presentation also includes the Company's International segment net revenues excluding the impact of changes in exchange rates. Management believes that the presentation of International segment net revenues minus the impact of exchange rate changes provides information that is helpful to an investor's understanding of the segment's underlying business performance absent exchange rate fluctuations which are beyond the Company's control.

HASBRO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS


                                            December 28,  December 29,
(Thousands of Dollars)                           2003         2002
                                            ------------  ------------
      ASSETS
Cash and Cash Equivalents                    $  520,747    $  495,372
Accounts Receivable, Net                        607,556       555,144
Inventories                                     168,979       190,144
Other Current Assets                            211,981       190,964
                                            ------------  ------------
Total Current Assets                          1,509,263     1,431,624
Property, Plant and Equipment, Net              199,854       213,499
Other Assets                                  1,454,259     1,497,758
                                            ------------  ------------
Total Assets                                 $3,163,376    $3,142,881
                                            ============  ============

      LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term Borrowings                        $   23,354    $   21,051
Current Installments of Long-term Debt            1,333       201,841
Payables and Accrued Liabilities                905,368       743,958
                                            ------------  ------------
Total Current Liabilities                       930,055       966,850
Long-term Debt                                  686,871       857,274
Deferred Liabilities                            141,210       127,391
                                            ------------  ------------
Total Liabilities                             1,758,136     1,951,515
Total Shareholders' Equity                    1,405,240     1,191,366
                                            ------------  ------------
Total Liabilities and Shareholders' Equity   $3,163,376    $3,142,881
                                            ============  ============

HASBRO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands of Dollars and Shares Except Per Share Data)             

                         Quarter Ended              Year Ended
                   ------------------------- -------------------------
                   December 28, December 29, December 28, December 29,
                        2003         2002         2003        2002
                   ------------ ------------ ------------ ------------
Net Revenues        $1,124,349   $  997,441   $3,138,657   $2,816,230
Cost of Sales          465,049      393,665    1,287,962    1,099,162
                   ------------ ------------ ------------ ------------
Gross Profit           659,300      603,776    1,850,695    1,717,068
Amortization            22,146       28,093       76,053       94,576
Royalties               79,418       93,774      248,423      296,152
Research and
 Product
 Development            40,767       47,105      143,183      153,775
Advertising            137,973      108,242      363,876      296,549
Selling,
 Distribution and
 Administration        215,720      211,644      674,544      656,725
                   ------------ ------------ ------------ ------------
Operating Profit       163,276      114,918      344,616      219,291
Interest Expense        12,896       21,743       52,462       77,499
Other Expense, Net      41,709        6,522       48,090       37,704
                   ------------ ------------ ------------ ------------
Earnings before
 Income Taxes and
 Cumulative
  Effect of
   Accounting
   Change              108,671       86,653      244,064      104,088
Income Taxes            32,077       24,497       69,049       29,030
                   ------------ ------------ ------------ ------------
Earnings before
 Cumulative
  Effect of
   Accounting
   Change               76,594       62,156      175,015       75,058
Cumulative Effect
 of Accounting
 Change, Net of Tax          -            -      (17,351)    (245,732)
                   ------------ ------------ ------------ ------------
Net Earnings
 (Loss)             $   76,594   $   62,156   $  157,664   $ (170,674)
                   ============ ============ ============ ============

Per Common Share
   Earnings before
    Cumulative
    Effect of
    Accounting
    Change
       Basic        $     0.44   $     0.36   $     1.01   $     0.43
                   ============ ============ ============ ============
       Diluted      $     0.43   $     0.36   $     0.98   $     0.43
                   ============ ============ ============ ============

   Cumulative
    Effect of
    Accounting
    Change, Net of
    Tax
       Basic and
        Diluted     $    -       $     -      $    (0.10)  $    (1.42)
                   ============ ============ ============ ============

   Net Earnings 
    (Loss)
       Basic        $     0.44   $     0.36   $     0.91   $    (0.99)
                   ============ ============ ============ ============
       Diluted      $     0.43   $     0.36   $     0.88   $    (0.98)
                   ============ ============ ============ ============

   Cash Dividends
    Declared        $     0.03   $     0.03   $     0.12   $     0.12
                   ============ ============ ============ ============

Weighted Average
 Number of Shares
   Basic               174,915      172,802      173,748      172,720
                   ============ ============ ============ ============
   Diluted             178,228      173,240      178,484      173,488
                   ============ ============ ============ ============


HASBRO, INC.
Supplemental Financial Data

(Thousands of Dollars)

Major Segment Results                        Quarter Ended
                                  ------------------------------------

                                  December 28,  December 29,
                                       2003          2002    % Change
                                  ------------ ------------- ---------
U.S. Toys
--------- 
   External Revenues               $   318,870  $   288,837       10%
   Operating Profit                     27,889        9,379      197%

Games
----- 
   External Revenues                   293,523      269,023        9%
   Operating Profit                     73,613       56,202       31%

International
------------- 
   External Revenues                   477,190      391,966       22%
   Operating Profit                     63,504       41,628       53%


Reconciliation of EBITDA

Net Earnings (Loss)                $    76,594   $   62,156
Cumulative Effect of Accounting
 Change, Net of Tax                          -            -
                                  ------------- ------------
Earnings before Cumulative
 Effect of Accounting Change            76,594       62,156
Interest Expense                        12,896       21,743
Income Taxes                            32,077       24,497
Depreciation                            32,443       21,898
Amortization                            22,146       28,093
                                  ------------- ------------
   EBITDA                          $   176,156   $  158,387
                                  ============= ============


Major Segment Results                         Year Ended
                                  -----------------------------------

                                  December 28,  December 29,
                                       2003          2002    % Change
                                  ------------ ------------- ---------
U.S. Toys
---------  
   External Revenues               $ 1,057,984  $   996,496        6%
   Operating Profit                     91,996       75,664       22%

Games
----- 
   External Revenues                   804,547      739,782        9%
   Operating Profit                    175,295      124,523       41%

International
------------- 
   External Revenues                 1,184,532      970,825       22%
   Operating Profit                     91,273        5,177     1663%


Reconciliation of EBITDA

Net Earnings (Loss)                $   157,664   $ (170,674)
Cumulative Effect of Accounting
 Change, Net of Tax                     17,351      245,732
                                  ------------- ------------
Earnings before Cumulative
 Effect of Accounting Change           175,015       75,058
Interest Expense                        52,462       77,499
Income Taxes                            69,049       29,030
Depreciation                            88,070       89,262
Amortization                            76,053       94,576
                                  ------------- ------------
   EBITDA                          $   460,649   $  365,425
                                  ============= ============

Contacts

Hasbro, Inc.
Investor Relations
Karen A. Warren, 401-727-5401
or
News Media
Wayne S. Charness, 401-727-5983

Contacts

Hasbro, Inc.
Investor Relations
Karen A. Warren, 401-727-5401
or
News Media
Wayne S. Charness, 401-727-5983