Hasbro 2014 Annual Report Download - page 20

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Major motion pictures and television programming based on our owned and controlled brands provide both
storytelling and the ability for our consumers to experience these properties in a different format, which we
believe can result in 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 home
entertainment releases and through the distribution of television programming. Revenue from toy and game
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 game products. 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 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 is geographically located.
Certain of our products are licensed to other companies for sale in selected countries where we do not
otherwise have a direct business presence.
Each of our four product categories, namely boys, games, girls and preschool, generate greater than 10% of
our net revenues. For more information, including the amount of net revenues attributable to each of our four
product categories, see note 18 to our consolidated financial statements, which are included in Item 8 of this
Form 10-K.
Working Capital Requirements
Our working capital needs are financed primarily 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 2014, the second half of the year accounted for
approximately 65% of full year revenues with the third and fourth quarters accounting for 35% and 30% of full
year net revenues, respectively.
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 offer products, 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 result in fewer
orders being placed significantly in advance of shipment and more orders being placed for immediate delivery.
Retailers generally time their orders so that they are being filled by suppliers, such as us, closer to the time of
purchase by consumers. Although the Company may receive orders from customers in advance, it is a general
industry practice that these orders are subject to amendment or cancellation by customers prior to shipment and,
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