Hasbro 2010 Annual Report Download - page 33

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the audited consolidated financial statements
of the Company included in Part II Item 8 of this document.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains
forward-looking statements concerning the Company’s expectations and beliefs. See Item 1A “Forward-
Looking Information and Risk Factors That May Affect Future Results” for a discussion of other uncertainties,
risks and assumptions associated with these statements.
Unless otherwise specifically indicated, all dollar or share amounts herein are expressed in thousands of
dollars or shares, except for per share amounts.
Executive Summary
The Company earns revenue and generates cash primarily through the sale of a variety of toy and game
products, as well as through the out-licensing of rights for use of its properties in connection with non-
competing products, including digital games, offered by third parties. The Company sells its products both
within the United States and in a number of international markets. The Company’s business is highly seasonal
with a significant amount of revenues occurring in the second half of the year. In 2010 and 2009, the second
half of the year accounted for 65% of the Company’s net revenues and, in 2008, the second half of the year
accounted for 63% of the Company’s net revenues. While many of the Company’s products are based on
brands and technology the Company owns or controls, the Company also offers products which are licensed
from outside inventors. In addition, the Company licenses rights to produce products based on movie,
television, music and other entertainment properties owned by third parties, such as the MARVEL,
STAR WARS and SESAME STREET properties.
The Company’s business is separated into three principal business segments, U.S. and Canada, Interna-
tional and Entertainment and Licensing. The U.S. and Canada segment develops, markets and sells both toy
and game products in the U.S. and Canada. The International segment consists of the Company’s European,
Asia Pacific and Latin and South American marketing and sales operations. The Company’s Entertainment and
Licensing segment includes the Company’s lifestyle licensing, digital gaming, movie, television and online
entertainment operations. In addition to these three primary segments, the Company’s world-wide manufactur-
ing and product sourcing operations are managed through its Global Operations segment.
The Company seeks to make its brands relevant in all areas important to its consumers. Brand awareness
is amplified through immersive traditional play, digital applications, publishing and lifestyle licensing and
entertainment experiences, including television programming and motion pictures, presented for consumers’
enjoyment. The Company’s focus remains on growing core owned and controlled brands, developing new and
innovative products which respond to market insights, offering immersive entertainment experiences which
allow consumers to experience the Company’s brands across multiple forms and formats, and optimizing
efficiencies within the Company’s operations to reduce costs, increase operating profits and maintain a strong
balance sheet. The Company’s core brands represent Company-owned or Company-controlled brands, such as
TRANSFORMERS, MY LITTLE PONY, LITTLEST PET SHOP, MONOPOLY, MAGIC: THE GATHERING,
PLAYSKOOL, G.I. JOE and NERF, which have been successful over the long term. The Company has a large
portfolio of owned and controlled brands, which can be introduced in new formats and platforms over time.
These brands may also be further extended by pairing a licensed concept with a core brand. By focusing on
core brands, the Company is working to maintain a more consistent revenue stream and basis for future
growth, and to leverage profitability. During 2010 the Company had significant revenues from core brands,
namely NERF, LITTLEST PET SHOP, TRANSFORMERS, FURREAL FRIENDS, PLAYSKOOL, PLAY-
DOH, MONOPOLY and MAGIC: THE GATHERING. The Company’s strategy of re-imagining, re-inventing
and re-igniting its brands has been instrumental in achieving its overall long-term growth objectives.
The Company also seeks to drive product-related revenues by increasing the visibility of its core brands
through entertainment. As an example of this, in June of 2009, the TRANSFORMERS: REVENGE OF THE
FALLEN motion picture was released by Dreamworks, LLC and Paramount Pictures Corporation as a sequel to
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