Hasbro 2007 Annual Report Download - page 32

theatrical and DVD releases of STAR WARS EPISODE III: REVENGE OF THE SITH and remained strong
in 2006.
North American segment operating profit increased to $275,959 in 2006 from $165,676 in 2005. The
increase in operating profit was primarily due to increased gross profit as a result of the increased sales in
2006 as well as decreases in royalty and amortization expense principally due to the decrease in sales of
STAR WARS products. Operating profit for the North American segment was negatively impacted by higher
research and product development costs due to higher investments in the PLAYSKOOL line and costs related
to MARVEL products introduced in 2007. North American operating profit was negatively impacted in 2005
by a loss of approximately $23,000 in the electronic games category, which included charges associated with
inventory obsolescence and customer allowances related to plug and play games.
International
International segment net revenues for the year ended December 30, 2007 increased by 33% to
$1,278,589 from $959,319 in 2006. In 2007, net revenues were positively impacted by currency translation of
approximately $88,500 as a result of a weaker U.S. dollar. Although international revenues increased in all
categories, the largest increase in net revenues was in the boys’ toys category. As in the North American
segment, this increase was driven by higher sales of TRANSFORMERS products resulting from the theatrical
release of the TRANSFORMERS movie in most countries in July of 2007 and MARVEL products resulting
from the theatrical release of SPIDER-MAN 3 in May of 2007. Increased revenues in the girls’ toys category
were principally the result of increased sales of LITTLEST PET SHOP products, and to a lesser extent, MY
LITTLE PONY products. Revenues in the preschool category were higher in 2007 based on increased sales of
PLAYSKOOL products, partially due to strong revenues of IN THE NIGHT GARDEN in the United
Kingdom. Revenues in the games and puzzles category increased primarily due to increased sales of
MONOPOLY. Revenues from the tweens category increased primarily as a result of sales of the POWER
TOUR GUITAR which was introduced in 2007.
International segment operating profit increased 75% to $158,846 in 2007 from $90,893 in 2006.
Operating profit for the segment in 2007 was positively impacted by approximately $10,400 due to the
translation of foreign currencies to the U.S. dollar. The remaining increase in operating profit is due to the
higher revenues discussed above. The increased gross profit as a result of the higher revenues was partially
offset by higher royalty expense due to higher sales of MARVEL and TRANSFORMERS products as well as
higher advertising and selling, distribution and administration expenses.
International segment net revenues for the year ended December 31, 2006 decreased by 3% to $959,319
from $988,591 in 2005. In 2006 net revenues were positively impacted by currency translation by approx-
imately $24,300 as a result of a weaker U.S. dollar. The decrease in net revenues was primarily the result of
decreased sales of STAR WARS products in 2006 as well as decreased sales of FURBY and DUEL MASTERS
products. These decreases were partially offset by increased revenues from LITTLEST PET SHOP, PLAY-
SKOOL and MONOPOLY products. To a lesser extent, 2006 net revenues were also positively impacted by
increased sales of MY LITTLE PONY, TRANSFORMERS and PLAY-DOH products as well as the
reintroduction of the BABY ALIVE doll.
International segment operating profit decreased 15% to $90,893 in 2006 from $106,435 in 2005.
Operating profit for the segment in 2006 was positively impacted by approximately $4,900 due to the
translation of foreign currencies to the U.S. dollar. The decrease in operating profit was the result of decreased
gross profit primarily as a result of the decrease in net revenues, partially offset by decreases in royalties and
amortization expense as a result of the decrease in sales of STAR WARS products.
Gross Profit
The Company’s gross profit margin increased to 58.9% for the year ended December 30, 2007 from
58.6% in 2006. This increase is due to changes in product mix, primarily the positive impact of higher sales of
licensed products. Although licensed products generally carry a higher gross margin, the increased gross
margin is largely offset by higher royalty expense associated with these products. Gross profit in 2007 was
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