ITEM 1. BUSINESS -------- (a) General Development of Business ------------------------------- The Company designs, manufactures and markets a diverse line of toy products and related items throughout the world. Included in its offerings are games and puzzles, preschool, boys' action and girls' toys, dolls, plush products and infant products, including infant apparel. The Company also licenses various tradenames, characters and other property rights for use in connection with the sale by others of noncompeting toys and non-toy products.
Except as expressly indicated or unless the context otherwise requires, as used herein, the "Company" means Hasbro, Inc., a Rhode Island corporation organized on January 8, 1926, and its subsidiaries.
(b) Description of Business Products -------------------------------- The Company's products are categorized for marketing purposes as follows:
(i) Hasbro Toy Group ---------------- During 1994, the Company established the Hasbro Toy Group, bringing all of its domestic infant, preschool, activity, boys and girls products together within one organization. Previously, the Company operated separate organizations to develop and market its Playskool, Hasbro Toy and Kenner brand products.
The infant and preschool items are principally marketed under the Playskool brand and are specifically designed for preschool children, toddlers and infants.
The preschool line includes such well known products as Lincoln Logs(R), Tinkertoy(R), Mr. Potato Head(R), In-Line Skates, 1-2-3 Bike(TM) and the "Busy(R)" line of toys; electronic items including Talking Alphie(R) and Talking Barney(TM); various role play products including the Magic Tea Party(TM) and the Magic Smoking Grill(TM) and toys utilizing the "Sesame Street(R)" character motifs sold under licenses from Children's Television Workshop. New items for 1995 include the Playskool(R) Playstore, the 1-2-3 Swing(TM), 1-2-3 Baseball(TM) and All-in-One Fun Learning Center.
Playskool's line of infant and juvenile items consists of products for very young children, including the award winning 1-2-3 High Chair(TM), Musical Dream Screen(TM), the Steady Steps(R) line of walkers, the Pur(R) line of silicone nipples and pacifiers, bibs and other infant accessories such as the Hugger(R) toothbrush, a full line of health care and safety products, Tommee Tippee(TM) training cups and feeding items, water-filled teething rings, soft toys, rattles and infant apparel including the Scootees(R) line of soft shoes for babies. New products in 1995 include the Roll 'n Rattle Ball, Big 'n Bright Quilt and First Wheels.
The Hasbro Toy Group also offers activity items for both girls and boys including the Fantastic Sticker Maker(TM) and the Fantastic Flowers(TM) flower making kit as well as such classics as Play-Doh(R), Easy-Bake(R) Oven and the Spirograph(R) design toy. New offerings for 1995 include several innovative toys based on The Magic School Bus(TM) television and book series, an assortment of toys marketed under the Nickelodeon(R) name, the Power Spark(TM) Welding Set and Techno Zoids(TM) action construction toys.
Its girls items include the Raggedy Ann(R) and Raggedy Andy(R) line of rag dolls and the Littlest Pet Shop(R) figures and playsets along with the Baby Check-Up(R) and Baby All Gone(R) dolls. Included in its new introductions for 1995 are Bride Surprise(TM), Princess Wishing Star(TM) and the Baby Buddies(TM) line of collectible figures and playsets.
In boys' toys it offers a wide range of products, many of which are tied to entertainment properties, including Batman(R), Mortal Kombat(TM) and Congo(TM) action figures and accessories. It also offers such classic properties as G.I. Joe(R), The Transformers(R), the Tonka(R) line of trucks and vehicles, including the Electronic Talk'n Play(TM) Fire Truck, and the Nerf(R) line of soft action play equipment. A sucessful entrant into the remote controlled vehicle category in 1994 was the Ricochet(TM) radio-controlled vehicle which will be joined by other vehicles in 1995, namely the Tirestorm(TM) and Stunt Boss(TM). Other new introductions for 1995 include action figures based on the upcoming movie Batman(TM) Forever and the television series Gargoyles and Saban's VR Troopers(TM) and the Tonka(R) Farm Playset. In 1995, the Company acquired the Super Soaker(TM) line of water products and certain other assets from the Larami group of companies. These products will give the Company a core franchise in an area in which it had not previously been represented.
(ii) Hasbro Games Group ------------------ Beginning in 1995, the Company's two game units, Milton Bradley and Parker Brothers, are being managed as one organization, the Hasbro Games Group.
Milton Bradley markets quality games and puzzles, including board, strategy and word games, skill and action games and travel games. It maintains a diversified line of more than 200 games and puzzles for children and adults. Its staple items include Battleship(R), The Game of Life(R), Scrabble(R), Chutes and Ladders(R), Candy Land(R), Lite-Brite(R), Trouble(R), Mousetrap(R), Operation(R), Hungry Hungry Hippos(R), Connect Four(R), Twister(R) and Big Ben(R) Puzzles. The Company also manufactures and sells games and puzzles for the entire family, including such games as Yahtzee(R), Parcheesi(R), Aggravation(R), Jenga(R) and Scattergories(R) and Puzz 3-D(TM), a series of three dimensional jigsaw puzzles. Games added to the Milton Bradley line for 1995 include Chicken Limbo(TM), Channel Surfing(TM) and a refreshed version of Pictionary(R).
Parker Brothers markets a full line of games for families, children and adults. Its classic line of family board games includes Monopoly(R), Clue(R), Sorry!(R), Risk(R), Boggle(R), Ouija(R) and Trivial Pursuit(R), some of which have been in the Parker Brothers' line for more than 50 years. The Company also markets traditional card games such as Mille Bornes(R), Rook(R), Rack-O(R), Old Maid and Go Fish. Its line of travel games includes travel editions of Monopoly(R) Junior, Clue(R), Sorry!(R) and Boggle(R) Jr. Several well-known games, including Balderdash(R), Hi! Ho! Cherry-O(R) and Outburst(R), were added to its portfolio during 1994 through the acquisition of certain game and puzzle assets from Western Publishing. New to the Parker Brothers' line in 1995 are Peanut Panic(TM), Marble Dome(TM) and Puzzle Pursuit(TM), a new game from the makers of Trivial Pursuit(R).
(iii) International ------------- The Company conducts its international operations through subsidiaries in more than 25 countries which sell a representative range of the products marketed in the United States together with some items which are sold only internationally.
Throughout the world, the Company markets products sourced by a Hong Kong subsidiary working primarily through unrelated manufacturers in various Far East countries, and in the Americas it markets products supplied by the Company's Mexican and U.S. manufacturing operations. Additionally, subsidiaries in Europe market products primarily manufactured by the Company in Ireland and Spain; those in Australia and New Zealand, products manufactured by the Company in New Zealand and in Canada, certain products which it assembles in Canada from components supplied by the Company's U.S. and Mexican operations. The Company has small investments in joint ventures in India and the Peoples Republic of China which manufacture and sell products both to the Company and unaffiliated customers. The Company also has Hong Kong units which market directly to retailers a line of high quality, low priced toys, games and related products, primarily on a direct import basis.
In addition, certain toy products are licensed to other toy companies to manufacture and sell product in selected foreign markets where the Company does not otherwise have a presence.
Working Capital Requirements ---------------------------- The Company's shipments of products are greater in each of the third and fourth quarters than shipments in each of the first and second quarters. During the past several years, the Company has experienced a gradual shift in its revenue pattern wherein the second half of the year has grown in significance to its overall business and within that half, the fourth quarter has become more prominent and the Company expects this trend to continue. Production has been financed historically by means of short-term borrowings which reach peak levels during September through November of each year when receivables also generally reach peak levels. The toy 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 a product line, product availability, marketing strategies and inventory levels of retailers and differences in overall economic conditions. As a result, comparisons of unshipped orders on any date with those at the same date in a prior year are not necessarily indicative of sales for that entire given year. In addition, as more retailers move to
just-in-time inventory management practices, fewer orders are being placed in advance of shipment and more orders, when placed, are for immediate delivery. The Company's unshipped orders at March 3, 1995 and March 4, 1994 were approximately $170,000,000 and $150,000,000, respectively. Also, it is a general industry practice that orders are subject to amendment or cancellation by customers prior to shipment. The backlog at any date in a given year can be affected by programs the Company may employ to induce its customers to place orders and accept shipments early in the year. This method is a general industry practice. The programs the Company is employing to promote sales in 1995 are not substantially different from those employed in 1994.
As part of the traditional marketing strategies of the toy industry, many sales made early in the year are not due for payment until the fourth quarter, thus making it necessary for the Company to borrow significant amounts pending collection of these receivables. The Company relies on internally generated funds and short-term borrowing arrangements, including commercial paper, to finance its working capital needs. Currently, the Company has available to it unsecured lines of credit, which it believes are adequate, of approximately $1,400,000,000 including a $440,000,000 revolving credit agreement with a group of banks which is also used as a back-up to commercial paper issued by the Company.
Research and Development ------------------------ The Company's business is based to a substantial extent on the continuing development of new products and the redesigning of existing items for continuing market acceptance. In 1994, 1993 and 1992, approximately $135,406,000, $125,566,000 and $109,655,000, respectively, were incurred on activities relating to the development, design and engineering of new products and their packaging (including items brought to the Company by independent designers) and to the improvement or modification of ongoing products. Much of this work is performed by the Company's staff of designers, artists, model makers and engineers.
In addition to its own staff, the Company deals with a number of independent toy designers for whose designs and ideas the Company competes with many other toy manufacturers. Rights to such designs and ideas, when acquired by the Company, are usually exclusive under agreements requiring the Company to pay the designer a royalty on the Company's net sales of the item. These designer royalty agreements in some cases provide for advance royalties and minimum guarantees.
The Company also produces a number of toys under trademarks and copyrights utilizing the names or likenesses of Sesame Street, Walt Disney, Barney(TM) and other familiar movie, television and comic strip characters. Licensing fees are paid as a royalty on the Company's net sales of the item. Licenses for the use of characters are generally exclusive for specific products or product lines in specified territories. In many instances, advance royalties and minimum guarantees are required by character license agreements.
Marketing and Sales ------------------- The Company's products are sold nationally and internationally to a broad spectrum of customers including wholesalers, distributors, chain stores, discount stores, mail order houses, catalog stores, department stores and other retailers, large and small. The Company and its subsidiaries employ their own sales forces which account for nearly all of the sales of their products. Remaining sales are generated by independent distributors who sell the Company's products principally in areas of the world where the Company does not otherwise maintain a presence. The Company maintains showrooms in New York and selected other major cities world-wide as well as at most of its subsidiary locations. Although there has been significant consolidation at the retail level over the last several years, in the United States and Canada, the Company has more than 2,000 customers, most of which are wholesalers, distributors or large chain stores. In other countries, the Company has in excess of 20,000 customers, many of which are individual retail stores. During 1994, sales to the Company's two largest customers represented 21% and 12%, respectively, of consolidated net revenues.
The Company advertises its toy and game products extensively on television. The Company generally advertises selected items in its product groups in a manner designed to promote the sale of other specific items in those product groups. Each year, the Company introduces its new products at its New York City showrooms at the time of the American International Toy Fair in February. It also introduces some of its products to major customers during the last half of the prior year.
In 1994, the Company spent approximately $397,094,000 in advertising, promotion and marketing programs compared to $383,918,000 in 1993 and $377,219,000 in 1992.
Manufacturing and Importing --------------------------- The Company manufactures its products in facilities within the United States and various foreign countries (see "Properties"). Most of its toy products are manufactured from basic raw materials such as plastic and cardboard which are readily available. The Company's manufacturing process includes injection molding, blow molding, metal stamping, printing, box making, assembly and wood processing. In early 1994, the Company announced the planned closure of its manufacturing operation in The Netherlands with the transfer of its production to plants in Ireland and Spain. This closure was subsequently delayed until the first quarter of 1995. During the fourth quarter of 1994, the Company announced a consolidation of its domestic manufacturing facilities through the closure of one facility and the reduction of the workforce at a second location. The Company purchases certain components and accessories used in its toys and some finished items from domestic manufacturers as well as from manufacturers in the Far East, which is the largest manufacturing center of toys in the world, and other foreign countries. The Company believes that the manufacturing capacity of its facilities and the supply of components, accessories and completed products which it purchases from unaffiliated manufacturers is adequate to meet the foreseeable demand for the products which it markets. The Company's reliance on external sources of manufacturing can be shifted, over a period of time, to alternative sources of supply for products it sells, should such changes be necessary. However, if the Company is prevented from obtaining products from a substantial number of its current Far East suppliers due to
political, labor and other factors beyond its control, the Company's operations would be disrupted while alternative sources of product were secured. While the recently rescinded trade sanctions proposed by the United States against the Peoples Republic of China did not affect any of the Company's products, the imposition of same by the United States against a class of products imported by the Company from China or the loss by the People's Republic of China of "most favored nation" trading status as granted by the United States, could significantly increase the cost of the Company's products imported into the United States from China. The Company anticipates that the implementation of the new General Agreement on Tariffs and Trade will reduce or eliminate customs duties on certain of the products imported by the Company.
The Company makes its own tools and fixtures but purchases dies and molds principally from independent domestic and foreign sources. Several of the Company's domestic production departments operate on a two-shift basis and its molding departments operate on a continuous basis through most of the year.
Competition ----------- The Company's business is highly competitive and it competes with several large and many small domestic and foreign manufacturers. The Company is a worldwide leader in the design, manufacture and marketing of toys, games and infant care products.
Employees --------- The Company employs approximately 12,500 persons worldwide, approximately 7,000 of whom are located in the United States.
Trademarks, Copyrights and Patents ---------------------------------- The Company's products are protected, for the most part, by registered trademarks, copyrights and patents to the extent that such protection is available and meaningful. The loss of such rights concerning any particular product would not have a material adverse effect on the Company's business, although the loss of such protection for a number of significant items might have such an effect.
Government Regulation --------------------- The Company's toy products sold in the United States are subject to the provisions of the Consumer Product Safety Act (the "CPSA"), The Federal Hazardous Substances Act (the "FHSA") and the regulations promulgated thereunder. The CPSA empowers the Consumer Product Safety Commission (the "CPSC") to take action against hazards presented by consumer products, including the formulation and implementation of regulations and uniform safety standards. The CPSC has the authority to seek to declare a product "a banned hazardous substance" under the CPSA and to ban it from commerce. The CPSC can file an action to seize and condemn an "imminently hazardous consumer product" under the CPSA and may also order equitable remedies such as recall, replacement, repair or refund for the product. The FHSA provides for the repurchase by the manufacturer of articles which are banned. Similar
laws exist in some states and cities and in Canada, Australia and Europe. The Company maintains a laboratory which has testing and other procedures intended to maintain compliance with the CPSA and FHSA. Notwithstanding the foregoing, there can be no assurance that all of the Company's products are or will be hazard free. While the Company neither has had any material product recalls nor knows of any currently, should any such problem arise, it could have an effect on the Company depending on the product and could affect sales of other products.
The Children's Television Act of 1990 and the rules promulgated thereunder by the Federal Communications Commission as well as the laws of certain foreign countries place certain limitations on television commercials during children's programming.
(c) Financial Information About Foreign and Domestic Operations ----------------------------------------------------------- and Export Sales ---------------- The information required by this item is included in note 16 of Notes to Consolidated Financial Statements in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 2.

ITEM 2. PROPERTIES ---------- Lease Square Type of Expiration Location Use Feet Possession Dates -------- --- ------ ---------- ----------
Rhode Island ------------ Pawtucket Executive, Sales & Marketing Offices & Product Development 343,000 Owned -- Pawtucket Administrative Office 23,000 Owned -- Pawtucket Manufacturing 306,500 Owned -- Central Falls Manufacturing 261,500 Owned -- West Warwick Warehouse 402,000 Leased 1995 East Providence Administrative Office 120,000 Leased 1999
Massachusetts ------------- East Longmeadow Office, Manufacturing & Warehouse 1,147,500 Owned -- East Longmeadow Office, Manufacturing & Warehouse 254,400 Owned -- East Longmeadow Warehouse 500,000 Leased 1998 Beverly Office 100,000 Owned --
New Jersey ---------- Northvale Office & Manufacturing 75,000 Leased 2002 Wayne Manufacturing 65,000 Leased 1995
Lease Square Type of Expiration Location Use Feet Possession Dates -------- --- ------ ---------- ----------
New York -------- New York Office & Showroom 70,300 Leased 2000 New York Office & Showroom 32,300 Leased 1999 Arcade Manufacturing 15,000 Leased 1998 Amsterdam Manufacturing 297,400 Owned -- Orangeburg Warehouse 51,000 Leased 2002
Ohio ---- Cincinnati Office 161,000 Leased 2007 Cincinnati Warehouse 33,000 Leased 1999
Pennsylvania ------------ Lancaster Warehouse 464,000 Owned (1) --
South Carolina -------------- Easley Manufacturing 31,500 Leased 1997 Easley Manufacturing 75,000 Owned -- Easley Manufacturing 29,000 Owned --
Texas ----- El Paso Manufacturing & Warehouse 373,000 Owned -- El Paso Manufacturing & Warehouse 487,000 Leased 1998 El Paso Warehouse 97,200 Leased 1995 El Paso Warehouse 100,000 Leased 1995
Vermont ------- Fairfax Manufacturing 43,000 Owned --
Washington ---------- Seattle Office & Warehouse 125,100 Leased(2) 1995
Australia --------- Lidcombe Office & Warehouse 161,400 Leased 2002 Eastwood Office 16,900 Leased 1997
Austria ------- Vienna Office 2,505 Leased 1997
Belgium ------- Brussels Office & Showroom 16,700 Leased 1995
Lease Square Type of Expiration Location Use Feet Possession Dates -------- --- ------ ---------- ----------
Canada ------ Montreal Office, Manufacturing & Showroom 133,900 Leased 1997 Montreal Warehouse 88,100 Leased 1997 Mississauga Sales Office & Showroom 16,300 Leased 1998
Peoples Republic of China ------------------------- Guangzhou Manufacturing 22,900 Leased 1995
Denmark ------- Copenhagen Office 5,900 Leased 1999
England ------- Uxbridge Office & Showroom 94,500 Leased 2013 Castlegate Office & Manufacturing 400,000 Leased 1997 Paddock Wood Office 30,000 Leased 1995
France ------ Le Bourget du Lac Office, Manufacturing & Warehouse 108,300 Owned -- Savoie Technolac Office 33,500 Owned -- Pantin Office 20,900 Leased 2001 Creutzwald Warehouse 108,700 Owned --
Germany ------- Fuerth Office & Warehouse 28,400 Owned -- Soest Warehouse 78,800 Owned -- Dietzenbach Office 30,400 Leased 1998 Soest Office & Warehouse 156,300 Owned --
Greece ------ Athens Office & Warehouse 176,500 Leased 1996 Athens Office 26,900 Leased 1995
Hong Kong --------- Kowloon Office 36,700 Leased 1995 Kowloon Office & Warehouse 14,900 Leased 1995 Kowloon Office 18,600 Leased 1996 Kowloon Office 16,100 Leased 1996 Harbour City Office 11,000 Leased 1996
Lease Square Type of Expiration Location Use Feet Possession Dates -------- --- ------ ---------- ----------
Hungary ------- Budapest Office 3,700 Leased 1996
Ireland ------- Waterford Office, Manufacturing & Warehouse 244,400 Owned -- Italy ----- Milan Office & Showroom 12,100 Leased 1998
Japan ----- Tokyo Office 10,800 Leased 1995
Malaysia ------- Selangor Darul Ehsan Office 6,800 Leased 1995
Mexico ------ Tijuana Office & Manufacturing 144,000 Leased 1995 Tijuana Warehouse 45,000 Leased 1995 Tijuana Warehouse 117,300 Leased 1995 Reyna Office 61,000 Leased 1996 Espana Warehouse 53,700 Leased 1996 Venados Warehouse 59,100 Leased 1995 Juarez Manufacturing 169,500 Owned --
The Netherlands --------------- Ter Apel Office & Warehouse 139,300 Owned -- Utrecht Sales Office & Showroom 17,000 Leased 1996 Emmen Warehouse 40,800 Leased 1995 Emmen Warehouse 21,500 Leased 1995
New Zealand ----------- Auckland Office, Manufacturing & Warehouse 110,900 Leased 2005 Portugal -------- Estoril-Lisboa Office 2,900 Leased 1995
Singapore --------- Singapore Office & Warehouse 12,900 Leased 1995
Lease Square Type of Expiration Location Use Feet Possession Dates -------- --- ------ ---------- ----------
Spain ----- Valencia Office, Manufacturing & Warehouse 115,100 Leased 1999 Valencia Manufacturing & Warehouse 161,700 Leased 2002 Valencia Office 46,300 Leased 1995 Valencia Warehouse 21,500 Leased 1995 Valencia Warehouse 94,400 Owned -- Valencia Warehouse 43,000 Leased 1996
Switzerland ----------- Mutschellen Office & Warehouse 23,400 Leased 1995
Taiwan ------ TPE County Warehouse 9,800 Leased 1996
Wales ----- Newport Warehouse 76,000 Leased 2003 Newport Warehouse 52,000 Owned --
(1) See ITEM 3.

ITEM 3. LEGAL PROCEEDINGS ----------------- The Company has been proceeding with an environmental clean-up (the clean-up) at its former manufacturing facility in Lancaster, Pennsylvania. This facility, a portion of which is being utilized for limited warehousing operations in 1994, was acquired in 1986 from the CBS Toys Division of CBS Inc. (CBS) in conjunction with the purchase of rights to selected products formerly marketed by CBS. Since 1992, the Company has been involved in a legal action against CBS to recover all costs associated with the clean-up and, on August 10, 1994, the U.S. District Court for the Eastern District of Pennsylvania entered a judgment in favor of the Company, awarding the Company all of its past and future costs associated with such clean-up. The Company and CBS subsequently negotiated and concluded a resolution of the matter involving CBS' waiver of its rights to appeal the judgment, a payment by CBS to the Company on account of costs to date associated with environmental remediation together with interest and certain litigation costs, CBS' undertaking responsibility for future remediation of the site, the termination by the Pennsylvania Department of Environmental Resources of the consent order directing the Company to undertake such responsibility and the Company's agreement to sell the site to CBS on or before April 15, 1995.
Preston Robert Tisch, a director of the Company, is also a director of CBS and Co-Chairman and Co-Chief Executive Officer of Loews Corporation, a major shareholder of CBS. By virtue of the foregoing, Mr. Tisch may be deemed to have an interest adverse to the Company with respect to the above-described action.
The Company is party to certain other legal proceedings involving routine litigation incidental to the Company's business, none of which, individually or in the aggregate, is deemed to be material.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None.
EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------ The following persons are the executive officers of the Company and its subsidiaries and divisions. Such executive officers are elected annually. The position and office listed below are the principal position(s) and office(s) held by such person with the Company, subsidiary or divisions employing such person. The persons listed below generally also serve as officers and directors of the Company's various subsidiaries at the request and convenience of the Company.
Period Serving in Current Name Age Position and Office Held Position ---- --- ------------------------ ----------
Alan G. Hassenfeld 46 Chairman of the Board, President and Chief Executive Officer Since 1989
Barry J. Alperin (1) 54 Vice Chairman Since 1990
Harold P. Gordon (2) 57 Vice Chairman Since 1995
George R. Ditomassi, Jr.(3) 60 Chief Operating Officer, Games and International Since 1990
Alfred J. Verrecchia (4) 52 Chief Operating Officer, Domestic Toy Operations Since 1990
John T. O'Neill 50 Executive Vice President and Chief Financial Officer Since 1989
Norman C. Walker (5) 56 Executive Vice President and President, International Since 1990
Dan D. Owen (6) 46 President, Hasbro Toy Group Since 1994
E. David Wilson (7) 57 President, Hasbro Games Group Since 1995
Richard B. Holt (8) 53 Senior Vice President and Controller Since 1992
Donald M. Robbins (9) 59 Senior Vice President General Counsel and Corporate Secretary Since 1992
Phillip H. Waldoks (10) 42 Senior Vice President- Corporate Legal Affairs Since 1992
Russell L. Denton 50 Vice President and Treasurer Since 1989
(1) Prior thereto, Co-Chief Operating Officer.
(2) Prior thereto, Partner, Stikeman, Elliott (law firm).
(3) Prior thereto, Group Vice President and President, Milton Bradley.
(4) Prior thereto, Co-Chief Operating Officer.
(5) Prior thereto, Senior Vice President and President - European Operations.
(6) Prior thereto, President, Playskool.
(7) Prior thereto, President, Milton Bradley.
(8) Prior thereto, Vice President and Controller.
(9) Prior thereto, Vice President/General Counsel and Secretary.
(10) Prior thereto, Vice President - Corporate Legal Affairs.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED ----------------------------------------------------- STOCKHOLDER MATTERS ------------------- The information required by this item is included in Market for the Registrant's Common Equity and Related Stockholder Matters in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA ----------------------- The information required by this item is included in Selected Financial Data in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- The information required by this item is included in Management's Review in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- The information required by this item is included in Financial Statements and Supplementary Data in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ----------------------------------------------------------- AND FINANCIAL DISCLOSURE ------------------------ None.
PART III
ITEMS 10, 11, 12 and 13.
The information required by these items is included in registrant's definitive proxy statement for the 1995 Annual Meeting of Shareholders and is incorporated herein by reference, except that the sections under the headings (a) "Comparison of Five Year Cumulative Total Shareholder Return Among Hasbro, S&P 500 and Russell 1000 Consumer Discretionary Economic Sector" and accompanying material and (b) "Report of the Compensation and Stock Option Committee of the Board of Directors" in the definitive proxy statement shall not be deemed "filed" with the Securities and Exchange Commission or subject to Section 18 of the Securities Exchange Act of 1934.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K --------------------------------------------------------------- (a) Financial Statements, Financial Statement Schedules and Exhibits ---------------------------------------------------------------- (1) Financial Statements -------------------- Included in PART II of this report: Independent Auditors' Report
Consolidated Balance Sheets at December 25, 1994 and December 26, 1993
Consolidated Statements of Earnings for the Three Fiscal Years Ended in December 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity for the Three Fiscal Years Ended in December 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the Three Fiscal Years Ended in December 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules ----------------------------- Included in PART IV of this Report: Report of Independent Certified Public Accountants on Financial Statement Schedule
For the Three Fiscal Years Ended in December 1994, 1993 and 1992: Schedule VIII - Valuation and Qualifying Accounts and Reserves
Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable.
(3) Exhibits -------- The Company will furnish to any shareholder, upon written request, any exhibit listed below upon payment by such shareholder to the Company of the Company's reasonable expenses in furnishing such exhibit.
Exhibit ------- 3. Articles of Incorporation and Bylaws (a) Restated Articles of Incorporation of the Company. (Incorporated by reference to Exhibit (c)(2) to the Company's Current Report on Form 8-K, dated July 15, 1993, File No. 1-6682.)
(b) Amended and Restated Bylaws of the Company.
4. Instruments defining the rights of security holders, including indentures. (a) Revolving Credit Agreement, dated as of June 22, 1992, among the Company, certain banks (the "Banks"), and The First National Bank of Boston, as agent for the Banks (the "Agent"). (Incorporated by reference to Exhibit 4(a) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(b) Subordination Agreement, dated as of June 22, 1992, among the Company, certain subsidiaries of the Company, and the Agent. (Incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(c) Amendment No. 1, dated as of April 1, 1994, to Revolving Credit Agreement among the Company, the Banks and the Agent. (Incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the Period Ended March 27, 1994, File No. 1-6682.)
10. Material Contracts (a) Lease between Hasbro Canada Inc. (formerly named Hasbro Industries (Canada) Ltd.) and Central Toy Manufacturing Co. ("Central Toy"), dated December 23, 1976. (Incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-14, File No. 2-92550.)
(b) Lease between Hasbro Canada Inc. and Central Toy, together with an Addendum thereto, each dated as of May 1, 1987. (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
Executive Compensation Plans and Arrangements (c) Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8, File No. 2-78018.)
(d) Amendment No. 1 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(l) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 28, 1986, File No. 1-6682.)
(e) Amendment No. 2 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
(f) Amendment No. 3 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 25, 1988, File No. 1-6682.)
(g) Amendment No. 4 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(s) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(h) Form of Incentive Stock Option Agreement for incentive stock options. (Incorporated by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
(i) Form of Non Qualified Stock Option Agreement under the Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(q) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 25, 1988, File No. 1-6682.)
(j) Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form 14, File No. 2-92550.)
(k) Amendment No. 1 to Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 28, 1986, File No. 1-6682.)
(l) Amendment No. 2 to Non Qualified Stock Option Plan. (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1987 Annual Meeting of Shareholders, File No. 1-6682.)
(m) Amendment No. 3 to Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10(l) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(n) Form of Stock Option Agreement (For Employees) under the Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(o) 1992 Stock Incentive Plan (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1992 Annual Meeting of Shareholders, File No. 1-6682.)
(p) Form of Stock Option Agreement (For Employees) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(q) Form of Stock Option Agreement (For Participants in the Long Term Incentive Program) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(w) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(r) Form of Employment Agreement, dated July 5, 1989, between the Company and six executive officers of the Company. (Incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(s) Hasbro, Inc. Retirement Plan for Directors. (Incorporated by reference to Exhibit 10(x) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 30, 1990, File No. 1-6682.)
(t) Form of Director's Indemnification Agreement. (Incorporated by reference to Appendix B to the Company's definitive proxy statement for its 1988 Annual Meeting of Shareholders, File No. 1-6682.)
(u) Hasbro, Inc. Deferred Compensation Plan for Non-Employee Directors.(Incorporated by reference to Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 26, 1993, File No. 1-6682.)
(v) Hasbro, Inc. Stock Option Plan for Non-Employee Directors. (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1994 Annual Meeting of Shareholders, File No. 1-6682.)
(w) Form of Stock Option Agreement for Non-Employee Directors under the Hasbro, Inc. Stock Option Plan for Non-Employee Directors.
(x) Hasbro, Inc. Senior Management Annual Performance Plan. (Incorporated by reference to Appendix B to the Company's definitive proxy statement for its 1994 Annual Meeting of Shareholders, File No. 1-6682.)
(y) Hasbro, Inc. Stock Incentive Performance Plan. (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1995 Annual Meeting of Shareholders, File No. 1-6682.)
11. Statement re computation of per share earnings
12. Statement re computation of ratios
13. Selected information contained in Annual Report to Shareholders
22. Subsidiaries of the registrant
24. Consents of experts and counsel (a) Consent of KPMG Peat Marwick LLP
27. Financial data schedule
The Company agrees to furnish the Securities and Exchange Commission, upon request, a copy of each agreement with respect to long-term debt of the Company, the authorized principal amount of which does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K ------------------- A Current Report on Form 8-K dated February 9, 1995 was filed to announce the Company's results for the quarter and year ended December 25, 1994. Consolidated statements of earnings (without notes) for the quarter and year ended December 25, 1994 and December 26, 1993 and consolidated condensed balance sheets (without notes) as of said dates were also filed.
(c) Exhibits -------- See (a)(3) above
(d) Financial Statement Schedules ----------------------------- See (a)(2) above
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders Hasbro, Inc.:
Under date of February 8, 1995, we reported on the consolidated balance sheets of Hasbro, Inc. and subsidiaries as of December 25, 1994 and December 26, 1993 and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the fiscal years in the three-year period ended December 25, 1994, as contained in the 1994 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule listed in Item 14 (a)(2). This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
February 8, 1995
SCHEDULE VIII HASBRO, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Fiscal Years Ended in December
(Thousands of Dollars)
Provision Balance at Charged to Write-Offs Balance Beginning of Costs and Other Allowances at End of Year Expenses Additions Taken(a) Year ------------ ---------- ------------ ----------- ---------
Valuation accounts deducted from assets to which they apply - for doubtful accounts receivable:
1994 $54,200 5,120 - (8,320) $51,000 ====== ====== ====== ====== ======
1993 $52,200 13,078 - (11,078) $54,200 ====== ====== ====== ====== ======
1992 $60,500 10,674 - (18,974) $52,200 ====== ====== ====== ====== ======
(a) Includes write-offs, recoveries of previous write-offs and translation adjustments.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HASBRO, INC. (Registrant)
By: /s/ Alan G. Hassenfeld Date: March 24, 1995 ------------------------- --------------- Alan G. Hassenfeld Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ----
/s/ Alan G. Hassenfeld ---------------------------- Chairman of the Board, March 24, 1995 Alan G. Hassenfeld President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ John T. 0'Neill ---------------------------- Executive Vice President March 24, 1995 John T. 0'Neill and Chief Financial Officer (Principal Financial and Accounting Officer)
/s/ Barry J. Alperin ---------------------------- Director March 24, 1995 Barry J. Alperin
/s/ Alan R. Batkin ---------------------------- Director March 24, 1995 Alan R. Batkin
/s/ George R. Ditomassi, Jr. ---------------------------- Director March 24, 1995 George R. Ditomassi, Jr.
/s/ Harold P. Gordon ---------------------------- Director March 24, 1995 Harold P. Gordon
/s/ Alex Grass ---------------------------- Director March 24, 1995 Alex Grass
/s/ Sylvia K. Hassenfeld ---------------------------- Director March 24, 1995 Sylvia K. Hassenfeld
/s/ Claudine B. Malone ---------------------------- Director March 24, 1995 Claudine B. Malone
/s/ Norma T. Pace ---------------------------- Director March 24, 1995 Norma T. Pace
/s/ E. John Rosenwald, Jr. ---------------------------- Director March 24, 1995 E. John Rosenwald, Jr.
/s/ Carl Spielvogel ---------------------------- Director March 24, 1995 Carl Spielvogel
/s/ Henry Taub ---------------------------- Director March 24, 1995 Henry Taub
/s/ Preston Robert Tisch ---------------------------- Director March 24, 1995 Preston Robert Tisch
/s/ Alfred J. Verrecchia ---------------------------- Director March 24, 1995 Alfred J. Verrecchia
HASBRO, INC.
Annual Report on Form 10-K
for the Year Ended December 25, 1994
Exhibit Index
Exhibit ------- 3. Articles of Incorporation and Bylaws (a) Restated Articles of Incorporation of the Company. (Incorporated by reference to Exhibit (c)(2) to the Company's Current Report on Form 8-K, dated July 15, 1993, File No. 1-6682.)
(b) Amended and Restated Bylaws of the Company.
4. Instruments defining the rights of security holders, including indentures. (a) Revolving Credit Agreement, dated as of June 22, 1992, among the Company, certain banks (the "Banks"), and The First National Bank of Boston, as agent for the Banks (the "Agent"). (Incorporated by reference to Exhibit 4(a) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(b) Subordination Agreement, dated as of June 22, 1992, among the Company, certain subsidiaries of the Company, and the Agent. (Incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(c) Amendment No. 1, dated as of April 1, 1994, to Revolving Credit Agreement among the Company, the Banks and the Agent. (Incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the Period Ended March 27, 1994, File No. 1-6682.)
10. Material Contracts (a) Lease between Hasbro Canada Inc. (formerly named Hasbro Industries (Canada) Ltd.) and Central Toy Manufacturing Co. ("Central Toy"), dated December 23, 1976. (Incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-14, File No. 2-92550.)
(b) Lease between Hasbro Canada Inc. and Central Toy, together with an Addendum thereto, each dated as of May 1, 1987. (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
Executive Compensation Plans and Arrangements (c) Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8, File No. 2-78018.)
(d) Amendment No. 1 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(l) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 28, 1986, File No. 1-6682.)
(e) Amendment No. 2 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
(f) Amendment No. 3 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 25, 1988, File No. 1-6682.)
(g) Amendment No. 4 to Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(s) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(h) Form of Incentive Stock Option Agreement for incentive stock options. (Incorporated by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1987, File No. 1-6682.)
(i) Form of Non Qualified Stock Option Agreement under the Employee Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10(q) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 25, 1988, File No. 1-6682.)
(j) Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form 14, File No. 2-92550.)
(k) Amendment No. 1 to Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 28, 1986, File No. 1-6682.)
(l) Amendment No. 2 to Non Qualified Stock Option Plan. (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1987 Annual Meeting of Shareholders, File No. 1-6682.)
(m) Amendment No. 3 to Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10(l) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(n) Form of Stock Option Agreement (For Employees) under the Non Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(o) 1992 Stock Incentive Plan (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1992 Annual Meeting of Shareholders, File No. 1-6682.)
(p) Form of Stock Option Agreement (For Employees) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(q) Form of Stock Option Agreement (For Participants in the Long Term Incentive Program) under the 1992 Stock Incentive Plan. (Incorporated by reference to Exhibit 10(w) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(r) Form of Employment Agreement, dated July 5, 1989, between the Company and six executive officers of the Company. (Incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(s) Hasbro, Inc. Retirement Plan for Directors. (Incorporated by reference to Exhibit 10(x) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 30, 1990, File No. 1-6682.)
(t) Form of Director's Indemnification Agreement. (Incorporated by reference to Appendix B to the Company's definitive proxy statement for its 1988 Annual Meeting of Shareholders, File No. 1-6682.)
(u) Hasbro, Inc. Deferred Compensation Plan for Non-Employee Directors. (Incorporated by reference to Exhibit 10(cc) to the Company's Annual Report on Form 10-K for the Fiscal Year Ended December 26, 1993, File No. 1-6682.)
(v) Hasbro, Inc. Stock Option Plan for Non-Employee Directors. (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1994 Annual Meeting of Shareholders, File No. 1-6682.)
(w) Form of Stock Option Agreement for Non-Employee Directors under the Hasbro, Inc. Stock Option Plan for Non-Employee Directors.
(x) Hasbro, Inc. Senior Management Annual Performance Plan. (Incorporated by reference to Appendix B to the Company's definitive proxy statement for its 1994 Annual Meeting of Shareholders, File No. 1-6682.)
(y) Hasbro, Inc. Stock Incentive Performance Plan. (Incorporated by reference to Appendix A to the Company's definitive proxy statement for its 1995 Annual Meeting of Shareholders, File No. 1-6682.)
11. Statement re computation of per share earnings
12. Statement re computation of ratios
13. Selected information contained in Annual Report to Shareholders
22. Subsidiaries of the registrant
24. Consents of experts and counsel (a) Consent of KPMG Peat Marwick.
27. Financial data schedule