Hasboro Financial Analysis

FRS:  Hasboro

History and 2015 Company performance:

Founded in 1923, Hasboro has been a leading global toy company that provides an innovative and family approach to play.  They are widely known as they have brought to the market iconic board games such as Monopoly, the first TV launch of a product “Mr. Potato Head”, new age gaming platforms, and key partnerships within the entertainment industry representing mega hits like Transformers, Star Wars, and Marvel.  Hasboro leads the industry in executing its strategic initiatives and embodying superior brand recognition within the marketplace.  Hasboro operates within a highly competitive environment, and for the purposes of benchmark comparison I will be utilizing Mattel.  These companies have very different core businesses; however competes directly for many segments (Playskool versus Fisher Price).  All in, Mattel is another leading global toy company of similar size, scope, and also utilizes GAAP.

Hasboro had a solid 2015 performance while navigating beyond several key challenges to produce results.  This was a big year; they had a sale of a European manufacturing facility as well as three Blockbuster movie releases, related to established partnerships, which assisted in additional revenues and cash flow.  They were able to achieve a revenue growth of 4% that translates to $4.45 billion dollars for the company.  Not only did they grow revenue but after reviewing their 2015 financial statements they also improved operating profitability, operating cash flow, earnings per share, and returned over $300 million cash to shareholders.  As they are in a highly competitive market place, they have done a good job of staying out in front of their competitors like Mattel; this is illustrated in the gross margin difference of 62% for Hasboro and only 49.2% for Mattel (Appendix A).  To further support the profitability of Hasboro they were able to utilize investments as well as current cash flow in a much more effective manner than Mattel in 2015. (Appendix A: ROE & ROA).  So my initial questions for them; what is their long term plan to maintain these efficiencies?  Are these sustainable for long run or are they only due to major impact events that were seen within the 2015 year?

 As we look into the financial statements and notes, there are many other indicators of great performance but also many opportunities to gain greater ground and become more efficient and effective as a company.

I took a look first at the Cash Flow Statement, one of the most significant standouts was the increase in accounts receivable coupled with the difference year over year in accounts payable and accrued liabilities.  I am a little concerned with accounts receivable, this indicates that Hasboro is not being effective in collecting their monies due to them; this is cash in use that they could utilize and the AR has been continuing to increase in size for the past three years.  What is being done to rectify this AR challenge?  What is the biggest obstacle they face in collecting in general? You can see that their strategy in partnerships has paid off as per the past two years their earnings has gone up dramatically, telling us that what they have employed is working from a strategy standpoint, and the market is behind them.  As you stack them up to their key competitor, in revenue and earnings, Hasboro is ahead of the game and potentially making a very strong play for the top spot in the industry, whereas Mattel is declining in both earnings and revenues.