Hasbro 2008 Annual Report Download - page 35

U.S. and Canada operating profit decreased to $283,152 in 2008 from $287,800 in 2007. Operating profit
in 2008 was negatively impacted by approximately $1,100 due to the translation of foreign currencies to the
U.S. dollar. U.S. and Canada segment gross profits increased in dollars but decreased as a percentage of net
revenues in 2008 primarily as a result of the increased promotional programs implemented by the Company in
the fourth quarter of 2008, including the provision of sales allowances and markdowns, to address the weak
retail environment. The increase in gross profit in dollars was more than offset by increased product
development and sales and marketing expenses related to investments the Company is making in both core
brands and its digital initiative related to its Wizards of the Coast subsidiary; increased amortization as a result
of the acquisition of Cranium and the purchase of intellectual property rights related to TRIVIAL PURSUIT;
increased royalty expense; and increased shipping and distribution costs, reflecting higher sales volume and
higher transportation costs.
U.S. and Canada segment net revenues for the year ended December 30, 2007 increased 15% to
$2,293,742 from $1,997,141 in 2006. The impact of foreign currency translation on U.S. and Canada segment
net revenues in 2007 was favorable, due to the strength of the Canadian dollar, and increased net revenues by
approximately $4,500. The increase was due primarily to increased revenues in the boys’ toys category driven
by sales of MARVEL and TRANSFORMERS products due to the theatrical releases of SPIDER-MAN 3 in
May 2007 and TRANSFORMERS in July 2007. Although STAR WARS product sales declined in 2007 from
2006, sales of these products were a significant contributor to boys’ toys revenues in 2007. Revenues in the
girls’ toys category increased as a result of higher sales of LITTLEST PET SHOP and FURREAL FRIENDS
products as well as higher revenues from the BABY ALIVE line which was reintroduced in the second quarter
of 2006. To a lesser extent, revenues in the girls’ toys category were positively impacted by increased
shipments of MY LITTLE PONY products. Girls’ toys revenues were negatively impacted by decreased sales
of EASY-BAKE oven products due to the recall of the product in July of 2007. Revenues from the preschool
category decreased slightly in 2007. Revenue from games and puzzles decreased slightly due to lower revenues
from trading card and plug and play games partially offset by increased sales of traditional board games.
Revenues from the tweens category decreased as a result of lower sales of electronic products such as
VIDEONOW, ZOOMBOX and I-DOG partially offset by increased sales of NERF products. Revenues in 2007
were also positively impacted by increased sales of TOOTH TUNES.
U.S. and Canada operating profit increased to $287,800 in 2007 from $254,502 in 2006. Operating profit
in 2007 was positively impacted by approximately $1,300 due to the translation of foreign currencies to the
U.S. dollar. The increase in operating profit was primarily the result of higher gross profits resulting from the
higher revenues discussed above. Although U.S. and Canada gross profit increased as a result of higher
revenues, this increase in gross profit was negatively impacted by approximately $10,400 of charges recorded
in the second quarter of 2007 related to the July 2007 EASY-BAKE oven recall. The increase in gross profit
was also partially offset by higher royalty expense as the result of the increased sales of MARVEL and
TRANSFORMERS movie-related products. Operating profit was also negatively impacted by higher advertis-
ing expense as well as higher selling and distribution costs related to the increased sales volume. In addition,
U.S. and Canada operating profit included increased investment spending in an online initiative of the
Company’s Wizards of the Coast operation.
International
International segment net revenues for the year ended December 28, 2008 increased by 4% to $1,499,334
from $1,444,863 in 2007. In 2008 net revenues were negatively impacted by currency translation of
approximately $7,400 as a result of a stronger U.S. dollar. The increase in net revenues was primarily the
result of increased product sales in the girls’ toys and preschool categories primarily relating to LITTLEST
PET SHOP in the girls’ toys category and PLAYSKOOL, which includes IN THE NIGHT GARDEN products,
in the preschool category. Net revenues in the games and puzzles category decreased primarily as a result of
decreased revenues from MAGIC: THE GATHERING product, TRIVIAL PURSUIT products and MONOP-
OLY products. Net revenues in the boys’ toys category decreased primarily as a result of decreased sales of
MARVEL and TRANSFORMERS products, however, both product lines continued to be significant contribu-
tors to International segment net revenues in 2008. Decreased net revenues in the boys’ toys category were
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