Hasbro, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 25, 2022, a 52-week year. This is an annual filing; the supplied text does not provide a clear standalone fourth-quarter income statement or cash-flow summary.
Business context
Hasbro is a global branded entertainment company spanning consumer products, Wizards of the Coast and digital gaming, and entertainment. Its portfolio includes MAGIC: THE GATHERING, DUNGEONS & DRAGONS, NERF, TRANSFORMERS, PLAY-DOH and PEPPA PIG. In October 2022, the company introduced Blueprint 2.0, aiming to focus on fewer, larger, more profitable brands and expand gaming, digital, direct-to-consumer and licensing activities.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net revenue | $5,856.7 million | $6,420.4 million | Down 9%; includes $166.3 million unfavorable foreign-exchange impact |
| Operating profit | $407.7 million | $763.3 million | Down 47% |
| Operating margin | 7.0% | 11.9% | Down 4.9 percentage points |
| Net earnings attributable to Hasbro | $203.5 million | $428.7 million | Down 53% |
| Diluted earnings per share | $1.46 | $3.10 | Down 53% |
| Cash from operating activities | $372.9 million | $817.9 million | Down $445.0 million |
Cash from investing activities was a $313.0 million outflow, including the $146.3 million cash acquisition of D&D Beyond; financing activities used $553.3 million. Cost of sales was 32.6% of revenue versus 30.0% in 2021, while advertising fell to 6.6% from 7.9%. Higher input costs, inventory obsolescence, sales allowances and closeout activity weighed on profitability. Interest expense was $171.0 million, compared with $179.7 million.
Segments: Consumer Products revenue fell 10% to $3,572.5 million and operating profit fell 46% to $217.3 million. Wizards of the Coast and Digital Gaming revenue rose 3% to $1,325.1 million, but operating profit declined 2% to $538.3 million. Entertainment revenue declined 17% to $959.1 million; operating results improved to $22.7 million profit from an $91.8 million loss in 2021, partly reflecting the prior-year eOne Music impairment.
Liquidity, debt and capital allocation
Year-end cash and cash equivalents were $513.1 million, including $14.5 million restricted cash, down from $1,019.2 million. Current assets were $2,999.1 million and current liabilities $2,189.7 million. Long-term debt was $3,711.2 million, with a further $113.2 million current portion; the debt table reports $3,848.1 million of total principal including production financing. Hasbro also had $142.4 million of short-term borrowings, primarily production financing. The $1.5 billion committed revolver was undrawn, and the company reported covenant compliance. Management said available cash, operating cash flow and financing facilities were adequate for 2023 needs, including scheduled debt payments.
Dividends paid totaled $385.3 million in 2022. Hasbro repurchased approximately 1.4 million shares for $125.0 million and had $241.6 million remaining under its authorization at year-end.
Changes, outlook and notable items
- Revenue declined across all reported brand portfolios. MAGIC: THE GATHERING became Hasbro’s first billion-dollar brand, and Wizards tabletop revenue grew 12%; these gains were offset by weaker consumer-products demand and lower digital gaming revenue.
- Inventory rose 23% to $676.8 million after accelerated purchases intended to protect supply amid disruptions. Sales did not match expectations as inflation and rising interest rates constrained discretionary spending. Hasbro used additional promotions and closeout sales to reduce excess stock.
- Blueprint 2.0 and related actions generated $322.4 million of strategy-related charges, including a $281.0 million partial impairment of the Power Rangers intangible asset. Operational Excellence charges were $106.4 million, including $94.1 million in severance and employee costs.
- Operational Excellence targets $250–$300 million of annualized run-rate savings by year-end 2025. The filing says $20 million of savings had been actualized in 2022.
- Hasbro acquired D&D Beyond for $146.3 million. It also began marketing certain eOne film and television assets for potential sale; there is no assurance a sale will result. Hasbro expects to retain content capabilities supporting core Hasbro brands.
- In January 2023, Hasbro announced organizational changes expected to eliminate about 1,000 positions, approximately 15% of its global full-time workforce. Leadership transitions include the CFO’s announced retirement and the COO’s planned departure in March 2023.
- Management cited inflation, weaker consumer demand, foreign-exchange effects, supply-chain and inventory risks, seasonal sales concentration, reliance on third-party manufacturers and major retail customers, and competition as significant uncertainties. The filing provides no specific consolidated revenue or earnings guidance for 2023.
Investor facts to verify
- Whether inventory and promotional activity normalize without further material margin or obsolescence charges.
- Delivery of the $250–$300 million savings target, including costs and timing of workforce reductions.
- Whether the eOne asset-marketing process produces a sale, and the resulting proceeds and accounting effects.
- Debt repayment, production-financing balances, cash generation and capacity to sustain dividends and any repurchases.
- Assumptions behind the $281.0 million Power Rangers impairment; the auditor identified this valuation as a critical audit matter.
- Reliance on MAGIC: THE GATHERING and other leading franchises, licensed properties, concentrated retail customers and third-party supply chains.
KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. Hasbro reported that its disclosure controls and internal controls were effective as of December 25, 2022.