Hasbro 2010 Annual Report Download - page 14

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increased product sales, royalty revenues, and overall brand awareness. To a lesser extent, we can also earn
revenue from our participation in the financial results of motion pictures and related DVD releases and through
the distribution of television programming. Revenue from product sales is a component of the U.S. and Canada
and International segments, while royalty revenues, including revenues earned from movies and television
programming, is included in the Entertainment and Licensing segment.
Global Operations
In our Global Operations segment, we manufacture and source production of substantially all of our toy
and game products. The Company owns and operates manufacturing facilities in East Longmeadow,
Massachusetts and Waterford, Ireland which predominantly produce games and puzzles. Sourcing of our other
production is done through unrelated third party manufacturers in various Far East countries, principally China,
using a Hong Kong based wholly-owned subsidiary operation for quality control and order coordination
purposes. See “Manufacturing and Importing” below for more details concerning overseas manufacturing and
sourcing.
Other Information
To further extend our range of products in the various segments of our business, we sell a portion of our
toy and game products directly to retailers, on a direct import basis from the Far East. These sales are
reflected in the revenue of the related segment where the customer resides.
Certain of our products are licensed to other companies for sale in selected countries where we do not
otherwise have a direct business presence.
During 2010, net revenues generated from NERF products were approximately $414,000, which was
10.3% of our consolidated net revenues for that year. During 2009, net revenues generated from TRANS-
FORMERS products were approximately $592,000, which was 14.5% of our consolidated net revenues in that
year. No other line of products constituted 10% or more of our consolidated net revenues in 2010 or 2009. No
individual line of products accounted for 10% or more of our consolidated net revenues during our 2008 fiscal
year.
Working Capital Requirements
Our working capital needs are primarily financed through cash generated from operations and, when
necessary, proceeds from short-term borrowings. Our borrowings generally reach peak levels during the third
or fourth quarter of each year. This corresponds to the time of year when our receivables also generally reach
peak levels as part of the production and shipment of product in preparation for the holiday season. The
strategy of retailers has generally been to make a higher percentage of their purchases of toy and game
products within or close to the fourth quarter holiday consumer buying season, which includes Christmas. We
expect that retailers will continue to follow this strategy. Our historical revenue pattern is one in which the
second half of the year is more significant to our overall business than the first half. In 2010, the second half
of the year accounted for approximately 65% of full year revenues with the third and fourth quarters
accounting for 33% and 32% of full year revenues, respectively. In years where the Company has products
tied to a major motion picture release, such as in 2009 with the mid-year releases of TRANSFORMERS:
REVENGE OF THE FALLEN,G.I. JOE: THE RISE OF COBRA and X-MEN ORIGINS: WOLVERINE, this
concentration of revenue late in the year may not be as pronounced due to the higher level of sales that occur
around and just prior to the time of the motion picture theatrical release. In 2010, the Company had products
tied to only one major motion picture release, IRON MAN 2, in May 2010.
The toy and game business is also characterized by customer order patterns which vary from year to year
largely because of differences each year in the degree of consumer acceptance of product lines, product
availability, marketing strategies and inventory policies of retailers, the dates of theatrical releases of major
motion pictures for which we have product licenses, and changes in overall economic conditions. As a result,
comparisons of our unshipped orders on any date with those at the same date in a prior year are not
necessarily indicative of our sales for that year. Moreover, quick response inventory management practices
4