Some tidbits about Hasbro's second quarter, and sales looking real good for Transformers Toys... Hasbro quarterly net profit tumbles on Lucas warrants buyback By Andria Cheng, MarketWatch Last Updated: 10:26 AM 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's 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: News, Quote) 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. 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. "We do expect to grow the business in the second half," Chief Executive Al 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 shares fell 4% to $31.30 in early morning 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, 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. 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 Paramount Pictures, which is owned by Viacom Inc. (VIA: News, Quote) "Transformers has been an unqualified box office success," he said. 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. Bob Eckert, chief of Hasbro's larger rival Mattel Inc. (MAT: News, Quote) , last week cited Littlest Pet Shop among toys where it saw competitive pressure. Mattel said its second-quarter profit rose 15%, driven by gains overseas and by its Fisher-Price toys. Andria Cheng is a MarketWatch reporter based in New York.