Hasbro quarterly net profit tumbles on Lucas warrants buyback

Discussion in 'Transformers News and Rumors' started by Primeconvoy1, Jul 23, 2007.

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  1. Primeconvoy1

    Primeconvoy1 Cybertronian Broker

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    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.
     
  2. Team Jetfire

    Team Jetfire Pop-POP!

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    Good news for Transformers fans. Looks like the golden age is upon us.

    I’m kind of thinking that the star wars well has dried up some.
     
  3. tobecat

    tobecat Transformers KISS Toby TFW2005 Supporter

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    Star Wars is expensive! I wonder how it will continue to do without film support.

    Transformers rocks, glad to see it take center stage for awhile!
     
  4. thoughtcrime

    thoughtcrime Well-Known Member

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    Hopefully TF will ramp up and kick Star Wars off the pegs entirely. Glad to hear TF is doing so well.
     
  5. Ktulu

    Ktulu Whoosh TFW2005 Supporter

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    Well it'll have that animated show soon, endless video game releases, endless re-releases of the films on DVD apparently, the Jar Jar Playgirl centerfold, etc, there's always plenty going on to keep SW well promoted

    Anyway, it's obviously safe to say Transformers is totally going to carry Hasbro this year
     
  6. T16skyhopp

    T16skyhopp Well-Known Member

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    star wars has actually been performing too well, as in 'so well i cant find anything'. they're also releasing way too many figures too fast this year, they need to cool it down.
     
  7. Galaxy Convoy

    Galaxy Convoy Well-Known Member

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    I think it dried up a long time ago, and interest in Star Wars toys has dropped to nil. TFs consistently sell out everywhere I look, with the occasional shelf warmers of course. Star Wars on the other hand, everything is a shelfwarmer. Stores can't even give'em away.
     
  8. McBradders

    McBradders James Franco Club! Moderator

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    Not bad considering the money they just pumped back in to Star Wars. Good times for Hasbro, all things considered.
     
  9. Bryan

    Bryan ΜΟΛΩΝ ΛΑΒΕ

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    Y'know, I pride myself on understanding money-talk, and I have NO idea what "repurchasing warrants" means, or why Hasbro would have to give Lucas companies monies.

    Can anyone translate?
     
  10. Jarodimus

    Jarodimus the guy with that scan Veteran TFW2005 Supporter

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    Does "repurchasing warrants" just mean reupping the SW license?
     
  11. Sector Seven

    Sector Seven ∞ GΣΣK™

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    I'm no more of an expert than the average man on the street - but I do watch the financial news on CNN.

    What I think they are referring to are equity warrants. Those are stock options issued by the company that allows the holder of the warrant to purchase a specific number of shares at a certain price within a certain amount of time. When the holder of the warrant exercises his rights - like Hasbro just did with LucasFilm, they pay a certain amount of money directly to the company, and the company issues new shares to holder.
     
  12. RabidYak

    RabidYak Go Ninja Go Ninja Go

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    Warrents are where the holder has the right to buy shares in the issuing company at a fixed price for a set period of time.

    I should imagine that Hasbro owed the Lucas empire money at some point and decided to give them warrents as part of the payment arrangements. Hasbro are probably buying them back because they are doing well off the back of Transformers and don't want Lucas to buy thier shares below market rate if thier value goes above the price on the warrant.

    Its all financial maneuvering and the like, not an indicator of how Star Wars products are performimg. If anything it shows that it must be a healthy line since Hasbro were willing to put themselves into such a situation in order to hold the licence, they woulden't be doing that if it was loosing money.
     
  13. Bryan

    Bryan ΜΟΛΩΝ ΛΑΒΕ

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    Okay, so in this case, does that mean Lucas probably held the warrants to purchase Hasbro stock as part of the SW licensing deal, and Hasbro repurchased the warrants to hold onto the stock rather than allow Lucas to exercise it?
     
  14. Sector Seven

    Sector Seven ∞ GΣΣK™

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    Yup - I believe that's the ticket.
     
  15. Bryan

    Bryan ΜΟΛΩΝ ΛΑΒΕ

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    Cool. I learned sumptin' today, then. Thanks.
     
  16. KA

    KA PENIS GOES WHERE?!!

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    gee, 'yak and secter sevin shore are some smart fellas, she-uh.
     
  17. KA

    KA PENIS GOES WHERE?!!

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    they already did that awhile back. it was a minor hoohaa but it basically indicated hasbro still had faith that theres money to be made in SW for quite awhile beyond ROTS.
     
  18. Omnibus Prime

    Omnibus Prime I'm too old for this shit TFW2005 Supporter

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    Star Wars ain't goin' anywhere. It's still the top selling boys' toy brand and is still quite profitable, just not as much as movie year spikes, something Hasbro no doubt takes into consideration when cooking up earnings estimates (and is now a pattern you're now going to see play out with TFs for the forseeable future). The movies are over, but there's two TV shows in the works to keep it in the public consciousness for quite a while. They wouldn't have ponied up to keep the license if they didn't think it would remain at/near the top. If SW just suddenly dried up/went away, it would seriously hurt Hasbro across the board; tis a silly thing to wish for.
     
  19. ckbuddha

    ckbuddha Well-Known Member

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    SW is definitely not going anywhere. I collect both SW and TF, and SW has two major figure lines going right now (over 100 figures when all is said and done) out through '08 along with a bunch of other stuff (Unleashed, Galactic Heroes and vehicles). With the animated series coming out that will generate additional interest and there will be toys to support that as well. SW is more established and has a larger collection base than TF, but as long as both do well, they will continue to be made, which is good for us!
     
  20. ganymede2010

    ganymede2010 Well-Known Member

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    Transformers is the new Starwars. I'm a die-hard Starwars fan, like all of us here. But I was watching ROTS this weekend, and thought to myself, "Transformers is better then this".

    Then I asked all of my other Starwar geek friends. And they all agreed, Transformers is better then the prequels. I wonder what GL will do once he realizes that Starwars isn't the most coveted SCI-FI franchise. Once TF2 comes out, I'm predicting all records besides Titanic will be obliterated.
     
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