MarketWatch Report: Hasbro Second-Quarter Profit

[DESTRO]

NEW YORK (MarketWatch) -- Hasbro Inc., the world's second-largest toymaker, said Monday second-quarter profit tumbled 82% after costs to repurchase warrants from "Star Wars" director George Lucas' film venture. But its sales surged on Transformers and Spider-Man toys.

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[DESTRO]

http://www.marketwatch.com/news/story/hasbro-profit-tumbles-lucas-warrants/story.aspx?guid=%7B35991E47%2D548D%2D4978%2DA9AF%2 DA8855CBB8AC5%7D


Hasbro net drops 82% on Lucas buyback
Second-largest toymaker's sales soar on Transformers, Spider-Man toys
By Andria Cheng, MarketWatch
Last Update: 12:22 PM ET Jul 23, 2007

NEW YORK (MarketWatch) -- Hasbro Inc., the world's second-largest toymaker, said Monday second-quarter profit tumbled 82% after costs to repurchase warrants from "Star Wars" director George Lucas' film venture. But its sales surged on Transformers and Spider-Man toys.
Net income fell to $4.8 million, or 3 cents a share, down from $27.1 million, or 7 cents, earned a year earlier, the Pawtucket, R.I.-based company (HAS :Hasbro Inc

HAS30.80, -1.76, -5.4% ) said. Sales rose 31% to $691.4 million.
Costs to buy warrants for Hasbro's common stock from Lucasfilm Ltd. and Lucas Licensing Ltd. totaled $36.5 million, or 21 cents a share. Excluding those expenses, Hasbro said it earned $41.3 million, or 24 cents a share, for the latest quarter.
On that basis, profit beat the 18-cent average estimate of analysts surveyed by Thomson Financial. Sales also exceeded the average estimate of $648 million.
Chart of HAS
Orders increased for action figures and other toys tied to this year's releases of "Transformers" and Marvel Entertainment Inc.'s "Spider-Man 3" movies. FurReal Friends electronic animals, Littlest Pet Shop digital pets also lifted demand.
"This year you are having two big home runs" with Spider-Man and Transformers, said Tim Conder, an A.G. Edwards & Sons analyst, in an interview. "Will it grow at the rate next year that it did this year? Probably not. They are going to have to replace some of these revenues."
Hasbro shares fell 4.8% to $31 in midday trading after having gained more than 70% in the past year.
Transformers apparel
The company has sold more than 3 million Transformers action figures at stores since introducing them in early June ahead of the July 4 theatrical release, Chief Executive Al Verrecchia said on the call. Hasbro expects a continued boost in demand for Transformers as the movie opens later in Japan, U.K. and other countries. Both Transformers and Spider-Man 3 DVDs will be released in fall, which should further boost results, Verrecchia said.
"We do expect to grow the business in the second half," even though growth will be less than that in the first half, Verrecchia said on a conference call with analysts. "Retailers have been pleasantly surprised by Transformers. Spider-Man will certainly be a good contributor to profit this year."
Hasbro also plans to unveil a Transformers line of apparel, shoes and other products for the back-to-school season, and the company cited a possible sequel of the movie. Hasbro, which didn't finance the first movie, has yet to decide if it will participate in the financing for a possible sequel, management said.
Transformers was released by DreamWorks Pictures and Paramount Pictures, which is owned by Viacom Inc. (VIA :
viacom inc new cl a


Hasbro's North American sales surged 24% to 449.4 million, lifting profit in that unit even as the company had costs to recall Easy-Bake Oven products, which hurt profit by 4 cents a share during the quarter.
Sales outside of the U.S. increased 49% to $227.6 million, also paced by movie-tied products.
Lucas agreement

Hasbro and other toymakers often generate portions of their sales from products tied to movies and other entertainment properties even as they try to focus on their own staple of toy brands, including Hasbro's Mr. Potato Head.
Hasbro signed an agreement with Marvel in 2006 that gave Hasbro the rights to sell licensed toys tied to Marvel's properties that also include Fantastic Four and Hulk.
The Lucas warrants are part of an agreement Hasbro has had with Lucasfilm that gave it rights to make and sell toys tied to Star Wars entertainment. It paid Lucasfilm and its licensing operation $200 million in May to buy back the remaining warrants that Lucas held. Those warrants would have given Lucas the rights to buy a specific amount of Hasbro shares at a given price.
"They prevent Lucas from taking the stock" by buying back the warrants, Conder said.
Toys tied to Star Wars dropped during the quarter, though less than the company expected. In 2005, Star Wars toys, helped by that year's movie release, represented 16% of Hasbro's total revenue before their sales declined last year, the company said in its annual filing. End of Story
Andria Cheng is a MarketWatch reporter based in New York.

[C.I.A.D.]

Hasbro's 3rd quarter results will be quite impressive considering the amount of lure the 25th anniversary assortment has. Fans & non-fans alike want the figures, simply put.

Although Hasbro's profits "tumbled" for the 2nd quarter, it's really interesting to see that they only reason the bottom line took a dip is because of paying off Lucas...which you know isn't/wasn't/will never be cheap. I'm sure profits were nice & healthy, and you know that old saying "have to spend money to make money"....

[bluebikerboy1]

thats what i was thinking. true they had to spend it all to buy the warrants but in the long run they saved millions that will go twords hopefully advertising and stuff

[Spirit-Iron_Lun]

What surprises me is that Hasbro is still #2.

Mattel has 2 major lines, Barbie and Hot Wheels/Matchbox. What keeps this crappy company #1? It sure isnt me

[flash70]

wow...now Hasbro wants to blame Lucas...I don't get it man...what a bunch of crying babies...maybe if we had new product on the market worth buying not worthless junk ...which I spoke about before in other threads they wouldn't be in this situation....

[DESTRO]

wow...now Hasbro wants to blame Lucas...I don't get man...what a bunch of crying babies...maybe if we had new product on the market worth buying not worthless junk ...which I spoke about before in other threads they wouldn't be in this situation....

That report is good so what situation are you talking about?

[flash70]

" HAS30.80, -1.76, -5.4% ) said. Sales rose 31% to $691.4 million.
Costs to buy warrants for Hasbro's common stock from Lucasfilm Ltd. and Lucas Licensing Ltd. totaled $36.5 million"

Right here it sounds like like the blame game on Hasbro's part. I think a toy company should just get to the point and make really good toys. I seen some of the new stuff coming out for marvel legends and spider-man action figures...I am personally not at all pleased. Then the blame game on Lucas ...oh we could of made more money but we had to pay lucas his cash...ah too bad. Why don't you get of your high horse and make some great kick ass toys instead. The new Transformers movie helped out alot and the new G.I.*JOE 25th Annie figures are another great move in the right direction. Lets keep going that way! I 've been a fan of Hasbro since my first 12' G.I*JOE's and I will continue to be. However, I don't want to hear the whinning "why they didn't make more money". Just pick yourselves up and continue to make great product!

[Shin Densetsu]

" HAS30.80, -1.76, -5.4% ) said. Sales rose 31% to $691.4 million.
Costs to buy warrants for Hasbro's common stock from Lucasfilm Ltd. and Lucas Licensing Ltd. totaled $36.5 million"

Right here it sounds like like the blame game on Hasbro's part. I think a toy company should just get to the point and make really good toys. I seen some of the new stuff coming out for marvel legends and spider-man action figures...I am personally not at all pleased. Then the blame game on Lucas ...oh we could of made more money but we had to pay lucas his cash...ah too bad. Why don't you get of your high horse and make some great kick ass toys instead. The new Transformers movie helped out alot and the new G.I.*JOE 25th Annie figures are another great move in the right direction. Lets keep going that way! I 've been a fan of Hasbro since my first 12' G.I*JOE's and I will continue to be. However, I don't want to hear the whinning "why they didn't make more money". Just pick yourselves up and continue to make great product!
They aren't lying about Lucas however. They do have to pay him a lot of money for royalties and other expenses, this time however its more expensive since they are trying to prevent him from taking stock, which would have given him more money from them than he already has(which is already a lot). Thats why star wars figures cost more than the new joes, even if construction is very similar with less articulation. Thats why some vehicles are sold for up to $5 more than they should be.

As far as the new MLs, some of the ones people complained about initially were designed by Toybiz. Waves 1-2 may have been designed primarily by Toybiz. People complain about the increased price and lack of comic for Hasbro ML. Toybiz or Marvel Toys' new Independent comic line is the exact same price and also lacks a comic. So what Hasbro did, was what Toybiz was hinting at doing not long before the license was handed to Hasbro. Toybiz at one point was thinking about dropping the comics from the figures. Before the license traded hands, they were also talking about the high price of petro, and how it was more expensive to make the figures. Everyone complains about how toybiz did things better. In many cases what hasbro is doing now isn't different from what toybiz didn't do. If I remember correctly, even toybiz was thinking about going to a smaller scale (5"). Sure there are growing pains with each line, but the Comic Hulk waves(2), the new Icons, the 6" comic FF wave, and ML4 look great. People complained about the 5" movie figures. Later this year(as was revealed months back), Hasbro is putting out 6" FF and Spiderman 3 waves. Heck for 8" sigma 6 fans, theres even Spiderman Unleashed 360 figures in 8" scale utilizing joints from the super articulated S6 figures, with bases. There is something for everyone. Most collectors did not like the 5" scale. However the 5" scale was for kids. The 6" stuff is more geared towards us. We are getting those. If we are getting what we want, and kids are getting what they want, why should we complain about what kids are getting, if we are already getting what we want? Thats how I look at it.