Hasbro Annual Report Analysis: Hasbro

Hasbro

Annual Report Analysis: Hasbro

Hasbro has been in business for decades as a producer of games and toys, including such popular and well-known brands as G.I. Joe, Transformers, Trivial Pursuit, Scrabble, and Monopoly. Recent moves into movie and television licensing as well as video game collaborations with other companies have massively expanded the company's set of endeavors, though core operations remain largely the same. A recent contract signed with Sesame Workshop will soon lead to the introduction of a Hasbro line of Sesame Street-related toys, further expanding the number of recognizable characters that Hasbro is licensed to produce or owns outright. Incorporated in Rhode Island, Brian Goldner is both the President and CEO of Hasbro, and the stock is publicly traded on the New York Stock Exchange.

The company was first organized on January 8, 1926, and according to the company's own description their area of business is "children's and family leisure time products and services." Brand names owned by the company include Parker Brothers, Milton Bradley, Nerf, Playskool, Cranium, Tonka, and Magic: The Gatehring. The company also purchased a fifty percent stake in Discovery Communications, Inc. known simply as "Discovery," the cable television network dedicated to educational programming and children's entertainment. In recent years, the company has begun to explore entertainment media more heavily in general, licensing video games produced by Electronic Arts (EA) and Activision as well as licensing characters for films, primarily through Universal.

Financial Statements

The company is highly cash solvent, with a considerable operating profit and a consistent history of increasing this profit (despite a drop in 2008, at which point the operating profit was still higher than in 2006). Record operating profits and net earnings have been posted by the company for 2009, and its current assets outweigh its current and long-term debts by more than a three-to-one ratio. A significant portion of the cash surplus the company has experienced every year for at least the past five comes from company investments, but over a third of this surplus comes directly from operations, providing a strong and certain cash flow even through the fairly volatile and uncertain economic times the global economy recently experienced -- though the effects of this downturn are visible in Hasbro's financial records, the company has remained profitable as an entity and to its shareholders throughout.

Accounting Policies

The accountants' preamble to the financial statements effectively waives any true responsibility on the part of the accountant as to the accuracy of the financial statements, then goes on to say that based on accepted auditing procedures the financial statements appear to give an accurate representation of Hasbro's current financial state. Certain accounts receivables may not be collected, affecting actual cash flow; inventories do not necessarily represent finished or saleable products; revenues do not include discounts given post-shipment; pension plans are accounted for in a confusing manner; net-earnings per share are weighted.

Financial Performance

The total debt to equity ratio of the company is .92, making Hasbro highly liquid, and its profitability is also quite high -- the company currently boasts a gross margin of 60.20. Total assets for the company total over two billion ($2,764,894,000) even after long-term debt is subtracted, leaving the company a large amount of working capital, and the profit margin is currently 10.30. All of this shows the company to be in a very strong position in terms of its on-hand cash assets and its long-term resources, which would also help to cheapen credit for the company should future capital needs arise. The current ratio of 3.20 strengthens Hasbro's position in this regard still further, showing them to be an excellent credit risk and a high solvent and well-capitalized company poised for continued growth.

Hasbro's return on equity is a substantial 24.80, and inventory turnover is hovering just under 5 (4.9968, to be exact). The current return on assets ration is 10.20, again demonstrating the company's high profitability and substantial cash flow and capital-generating potential. Average daily sales for the company lie just over two million dollars, which again strengthens this company's stance as a cash-generating machine capable of significantly enlarging operations and expanding endeavors into other media still further should the market warrant such actions. With a debt to equity ratio of .92, the company is more than prepared to continue generating capital for its future growth, with little cause to worry over its relatively small long-term debt and other liabilities, all of which are dwarfed by the company's positive cash flow.