Hasbro 2008 Annual Report Download - page 3

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TO OUR SHAREHOLDERS
2008 was a year of expansion and investment for Hasbro. While the global economic environment was extremely
challenging and consumer spending retrenched dramatically, Hasbro held its own. As a result, Hasbro grew revenues for
the fourth consecutive year, and, for the eighth consecutive year, grew earnings per share.
COMMITMENT TO LONGER-TERM STRATEGY ENABLES GROWTH
Our commitment to Hasbro’s long-term strategy and the strong execution of our teams globally enabled us to grow our
business in 2008 while creating sustainable competitive advantages for the long term.
Specifi cally, we executed against the key elements of our strategy:
• Re-invent and re-imagine Hasbro’s core brands;
• Expand and drive Hasbro brands into digital gaming;
• Make our brands more meaningful by bringing them to life via lifestyle licensing and publishing;
• Expand and contemporize our brands by delivering the right entertainment and immersive brand experience for every
consumer and audience; and
• Execute globally, including in our emerging markets business.
To bring our strategy to life, we created and instituted a new global marketing and product development organization.
Through this global approach, we are gaining a deeper understanding of consumers so that we can create and provide
immersive brand experiences that are rewarding, entertaining and globally relevant.
FINANCIAL STRENGTH
After a very strong fi rst nine months of 2008, Hasbro was negatively impacted during the fourth quarter by both the
strengthening of the U.S. dollar relative to foreign currencies as well as the broad-based economic downturn experienced
in most markets in which we operate. We worked with our retail customers to put promotional programs in place with the
goal of both driving sales as well as managing inventory at retail given the weakening demand. However, these actions
resulted in reduced operating margins during the fourth quarter and were the major factor in the reduction of our full-year
operating margin to 12.3% in 2008 from 13.5% in 2007.
Despite the impact of the economic conditions, we grew revenue in the fourth quarter, absent the impact of foreign
exchange rate changes, as well as for the full year, and we entered 2009 with high quality inventory in the channel.
Our balance sheet is strong and we ended the year with $630 million in cash after generating $593 million in cash fl ow
from operations during the year. Over the past 5 years, we have generated an average of approximately $475 million
of cash from operating activities per year. In 2008, we invested more than $60 million in new growth opportunities,
namely digital initiatives, emerging markets and entertainment, and $146 million to acquire CRANIUM and the worldwide
rights to TRIVIAL PURSUIT. Additionally, we returned $467 million to shareholders through both our dividend program,
increasing the quarterly dividend 25% to $0.20 per share in February 2008, and repurchasing 11.7 million shares of
common stock at a total cost of $358 million in 2008. We also repaid $135 million in maturing debt.
Hasbro’s fi nancial strength provides us with a solid foundation upon which we are building our business and our
medium-term fi nancial targets remain in place. Specifi cally, we believe we can deliver revenue growth in a range of 3%
to 5% on average over time and improve operating margin to 15% of revenues.