Q3 2010 Earnings Call
October 18, 2010 9:30 a.m. ET
Debbie Hancock – VP, IR
Brian Goldner – President and CEO
Deb Thomas – CFO
David Hargreaves – COO
Robert Carroll – UBS
Margaret Whitfield – Sterne, Agee
Felicia Hendrix – Barclays Capital
Michael Kelter – Goldman Sachs
Greg Badishkanian - Citigroup
Gerrick Johnson – BMO Capital Markets
Drew Crum - Stifel Nicolaus
Sean McGowan – Needham & Co.
Tim Conder – Wells Fargo
Jeff Blaeser - Morgan Joseph
Edward Woo - Wedbush
John Taylor – Arcadia Investment
Good morning and welcome to the Hasbro's third quarter 2010 earnings conference call. [Operator instructions.] At this time, I would like to turn the call over to Ms. Debbie Hancock, vice president of investor relations. Please go ahead.
Thank you and good morning, everyone. Joining me today are Brian Goldner, president and chief executive officer; David Hargreaves, chief operating officer; and Deb Thomas, chief financial officer.
Our third quarter earnings release was issued earlier this morning and is available on our website. The press release includes information regarding non-GAAP financial measures included in today's call. Additionally, whenever we discuss earnings per share, or EPS, we are referring to earnings per diluted share.
This morning, Brian will discuss key factors impacting our results and Deb will review the financials. We will then open the call to your questions.
Before we begin, let me note that during this call and the question-and-answer session that follows, members of Hasbro management may make forward-looking statements concerning management's expectations, goals, objectives and similar matters.
These forward-looking statements may include comments concerning our product and entertainment plan, anticipated product performance, business opportunities and strategies, costs, financial goals, and expectations for our future financial performance in achieving our objectives.
There are many factors that could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. Some of those factors are set forth in our annual report on Form 10-K, in today's press release, and in our other public disclosures. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call.
Now, I would like to introduce Brian Goldner. Brian?
Thank you Debbie. Good morning everyone and thank you for joining us today. Our business grew in the third quarter, reflecting the continued execution of our long-term strategy and our steadfast focus on innovation and immersive consumer experiences, backed by a strong performance from the Hasbro team globally.
Our growth was broad-based, both geographically and across numerous world-class brands. While Transformers and G.I. Joe shipments presented a difficult challenge in 2010, we are overcoming this comparison through a number of global brand initiatives across categories.
This success is also translating to our bottom line. Operating profit reached record third quarter levels as we continued to unlock the profitability in our business and better leverage our investments globally.
Taking a closer look at our third quarter performance, we experienced growth in the pre-school, boys, and games and puzzles categories, while the girls category declined slightly in the quarter.
Several of our mega-brands contributed to growth this quarter, including Nerf, which continues to post strong revenue gains globally. The new Nerf Stampede launched globally on 9/9, and was the single most successful product launch in the history of the Nerf brand. The Stamped is on a number of the hot toy lists for this holiday season.
Magic The Gathering again this quarter was a standout performer. The team has done a great job reigniting this brand over the past few years.
Playskool also continues to post strong year-over-year performances, with successful new initiatives including Alphie, Weebles, and juvenile products, as well as growth in Mr. and Mrs. Potato Head.
As anticipated, Transformers and G.I. Joe will continue to present difficult comparisons in 2010, although the revenue decline in the third quarter was not as great in absolute dollars as it was in the second quarter.
I spoke earlier to the broad-based brand strength and innovation driving our results. Beyond our mega-brands, we have a number of brands contributing to growth this quarter, including Baby Alive, Furreal Friends, Play Doh, Tonka, Iron Man, and Beyblade. Our board game business grew in the quarter, with increases in a number of brands, including Operation, Scrabble, U-Build, Bop It, and games based on Toy Story 3.
Must-have toy and award lists for this holiday reflect the broad portfolio of Hasbro brands we are showcasing this season, including the Nerf Stampede, Tonka Chuck and Friends Chuck's Stunt Park, Weebles Musical Treehouse, Play Doh Shape and Spin Elmo, Alphie, and others, as well as games like Scrabble Flash, Monopoly Revolution, U-Build, Sorry Spin, Twister Hoopla, and CUPONK, a new skill and action game in our line this year.
Through our ongoing efforts to deliver innovation at a great value, brands like Furreal Friends have brought technology into affordable price points for the consumer, with products such as GoGo My Walkin' Pup.
For consumers looking for premium products and gifts this holiday, select higher price point items return to our line, including Furreal Friends Biscuit and Butterscotch Pony, Star Wars Millennium Falcon, Transformers Movie Ultimate Bumblebee, and the Scrabble Premier Wood Edition.
Our marketing campaigns begin in earnest in the fourth quarter, and we are well-positioned to meet demand with a good supply of high-quality, safe toys this holiday season, although some of the hotter items may run in short supply due to high consumer demand.