Hasbro, Inc. (HAS) Q1 2012 Earnings Report, Transcript and Summary

Good morning, and welcome to the Hasbro First Quarter 2012 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the call over to Ms. Debbie Hancock, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Our first quarter earnings release was issued earlier this morning and is available on our website. Additionally, also available on our website, our presentation slides containing information covered in today's earnings release and call. The press release and presentation include information regarding non-GAAP financial measures included in today's call. Please note that during today's call, whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share. This morning, Brian Goldner, Hasbro's President and Chief Executive Officer; and Deb Thomas, Hasbro's CFO, will review our first quarter financial results and discuss important factors impacting our performance. Following their statements, David Hargreaves, Hasbro's Chief Operating Officer, will join Brian and Deb to field your questions. Before we begin, please 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 plans, anticipated product performance, business opportunities, plans and strategies, costs, financial goals, targets and expectations for our future financial performance, including expectations for revenues and earnings per share in 2012, as well as 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. You should review such factors together with any forward-looking statements made on today's call. 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. At our Investor Day in November 2011, as well as our Toy Fair meeting following Q4 earnings in February, we communicated our plan for 2012, which called for a greater percentage of our business to come later in the year as we better aligned our shipments with the timing of consumer demand on a global basis. Our first quarter results are consistent with the execution of this plan, and we continue to believe that we are on track to deliver revenues and earnings per share growth absent the impact of foreign exchange for the full year 2012. We experienced point-of-sale growth versus the first quarter 2011 in both the U.S. and major international markets. And according to NPD, through the first quarter 2012, we gained share in the U.S. and Europe. Let me share some of the highlights of the first quarter. The momentum in our International business has continued, and we posted growth in every major geographic region during the quarter. We grew shipments in the Boys and Games product categories, and we are experiencing positive point-of-sale trends in the major markets where we receive data. In the U.S. and Canada, we are making progress toward our plan to return the business to historical operating profit margin levels versus 2011 results. We reduced our headcount and right sized the business during the first quarter. We are also working with our retailers to better align the timing of our shipments with the timing of consumer demand that comes later in the year. Finally, we are aggressively increasing our media spend this year versus 2011 as we shift more dollars towards selling innovative Hasbro product lines to consumers. So far, we're seeing good results. Point-of-sale was up in…

Thank you, and good morning. As Brian said, beginning in November of last year, we outlined for you our plan that calls for 2012 to develop later in the year more closely aligned with the timing of consumer demand in the U.S. and Canada and more reflective of the trends historically evident in our International segment. As you may recall, our plan outlined approximately 2% to 4% more of our full year revenues to occur in the second half 2012 than we historically reported. This shift impacted both our revenues in the first quarter and our profit. Consistent with this plan, first quarter worldwide net revenues were $648.9 million, down 3% versus $672 million last year. Foreign exchange had a negative $8.5 million impact on net revenues for the quarter. Operating profit for the quarter was $15.7 million versus $48.9 million in 2011. This reflected not only the lower revenues in the quarter but also $11.1 million in severance costs. We also had an extra week of certain fixed expenses, as the first quarter 2012 was a 14-week period versus a 13-week period in 2011. The extra week of expense equated to approximately $6 million. As a result, we reported a net loss of $2.6 million or $0.02 per share in the quarter. Excluding the severance costs, net earnings were $5.1 million or $0.04 per share. Looking at our first quarter 2012 results by segment, the U.S. and Canada segment net revenues were $329 million, down 16% versus $391.2 million last year. We are executing our plan to return the segment to historical operating profit margin levels and better align our shipment timing with the timing of consumer demand. We've taken steps to right size the organization and implement a higher level of spending in consumer-facing marketing and advertising. As…

[Operator Instructions] Our first question is from the line of Felicia Hendrix of Barclays Capital.

You guys did provide us with a lot of detail in the prepared remarks. You did say that retail inventories in the Games business was down year-over-year. Last quarter as well, you provided some useful color. Wondering if you could just give us some more detail around the inventories perhaps around some of your other business lines?

Yes. I think, Felicia, we're feeling very good about inventories both at Hasbro and at our retailers. If you look at the retailers, we're down nearly 40%, 39.9% or something in terms of gains. And overall, we're down 20%. We're down -- in addition to Games, we're down in Nerf, where we're a little bit long at the end of the year, but we're up in a lot of the new lines like Beyblade, we we're in short supply at the beginning of last year. We're up in Beyblade. We're up in My Little Pony, which is a brand that's doing very well for us at the moment. And the brands that has been experiencing some decline, like Littlest Pet Shop, we're down in Littlest Pet Shop, for example. So overall, as you look at our inventories, we're feeling good. We're longer where we've got momentum and the product's selling well and is driving up POS, and the brands that are moving a little bit less well at the moment, we're significantly down in those brands.

That's helpful. And did you see -- do you think you saw any impact from Easter on either at point-of-sale levels or inventory levels or overall?

Our point-of-sale in the first quarter was up in the U.S., as we said, by 6%. And if you look Easter versus Easter, we're up as well in single digits.

On Games and Puzzles, are you continuing to see a bifurcation of performance? In other words, how did the mega brands do compared to the rest of the business? I know you highlighted some aspects that were strong, but just in general.

Yes. Again, I think we have major innovations. We're seeing those brands doing very well. Obviously, Battleship is up year-over-year. Magic: The Gathering is performing exceedingly well, up probably nearly 40% in the quarter. We're seeing things like Monopoly, with the Electronic Banking, perform very well. So again, a range of where there are innovations, a range of games that are performing well. In fact, as we look at it, a few categories of games like children's games and preschool games were actually up in terms of POS in the quarter. So I think what we're seeing is, as we're applying more innovation, as we're beginning the process of reinventing and reimagining that business, and we have a number of new initiatives that are first launching now like the Fighter Pods as well as Bot Shots now, and then in the second half of year, whether it's Lazer Tag or a number of other new initiatives that are coming, we feel very good about our plan for Games and our guidance that we've provided, again, stabilizing the business in '12, growing it for '13.

Well, you didn't mention the zAPPed GAME OF LIFE. Is that -- how is that doing?

It's been off to a good start. Again, it's a -- spring is always about creating the marketing and impression around the brand. We start to see the volumes going. But you're going to see a number of brands that marry iPads or iPhones or that hybridization of games where you have the -- both digital and analog together, and they're off to a very good start.

Okay. And Deb, the gross margins. Just wondering, what drove the year-over-year improvement on a year-over-year decline in revenues?

The improvement in gross margin really related to the product mix. In addition to that, we had some factory under absorption last year that we didn't have this year. And that was just -- really, it was about product mix and the pricing that we took early in the year.

Okay. And then final question also for you, Deb. The share repurchase, it just is -- we haven't seen a level this low since fourth quarter of 2010. Just wondering how we should think about that going forward? And is that mainly due to cash being mostly offshore or other issues?

Well, that's correct, Felicia. I mean, most of the cash is offshore, and we've been trying to highlight it. As a matter of fact, the predominant amount of our cash at the end of this quarter, again, remains offshore. And we continue to expect to opportunistically repurchase in the market under our open authorization, however, at lower levels than 2011 and 2010.

Our next question is from Rob Carroll with UBS.

Just a quick question. I mean, if you would have talk about some of the entertainment properties, is there any color in terms of what shipped domestically during Q1? Outside of Star Wars, obviously.

Yes. In fact, Rob, if you look across the entertainment brands, Star Wars was up significantly in the quarter, as you indicate. But so was Marvel, and we are seeing great early success from Avengers. We feel very good about the Marvel brand overall, that was up significantly in the quarter. G.I. Joe was up in the quarter. Beyblade was flat in the quarter. Transformers as a brand was flat in the quarter. Battleship was up significantly in the quarter. And then a kind of an entertainment brand of a difference sort, Sesame Street was up in the quarter. But so was My Little Pony, up in the quarter behind television. And we also, if you go underneath, Transformers and the Prime, Transformers Prime, the TV related product line where we have TV shows airing around the world, 160-plus [ph] countries, that too was off to a very strong start. So the premise around -- our premise around both television-supported initiatives as well as movies initiatives are working, albeit early days. And I would just remind you in terms of -- as you think about quarter-on-quarter revenues, remember that next quarter, the second quarter, you're going to see that motion picture revenue versus a year ago and things like Transformers be much stronger. So again, it's that mix of Transformers overtime that will change what we're seeing. But underneath Transformers, a little more color, is that we're beating the trend on the year after for movie-related or Boys' action-related product lines. And then the Transformers Prime, Bot Shots and some of our other initiatives, like KRE-O, the new brand KRE-O, are making up that difference, and that's how we get back to virtually flat.

Okay. And then on Beyblade specifically, I mean, during Q1 of 2011, were you guys still supply constrained on manufacturing?

We were. We were -- particularly, as we were chasing product in the U.S. In U.S., we're seeing very strong point-of-sale albeit not as strong shipments versus a year ago, only in that we're working -- had been working through some of the early inventories. But the point of sale is very, very strong and similarly catching up on year-ago inventory in international markets.

Our next question is from James Hardiman of Longbow Research.

Couple of questions. First on the retail, you talked about 20% decline in inventories at retail overall. How much of that was a function of the shifted timing of your shipments later into the year? And how much was that -- how much of that was retail proactively scaling back on their inventories? And as we work our way through the year, do you get any of that back?

Well, in fact, if you look back to what we had outlined for you, in fact, what we're saying is that 2% to 4% of our annualized revenue is one could expect to see in the back half of the year versus the first half of the year versus historical trends. So in fact, we do expect that we will get that back more in line with consumer demand. It's been a partnership between us and the retailers to ensure we're dropping retail inventories at the right places. Meanwhile, we're bringing in lot of new initiatives, so whether it's Dizzy Dancers or Transformers Bot Shots or Fighter Pods and Star Wars. So you're seeing a lot of new initiatives get up and underway, as well as rolling out KRE-O around the world in Transformers and Battleship KRE-O in 10 markets. So it's really that combination. I would say that it is all about the inventory management. It's the reason why the inventories are down. And obviously, our POS has been up, so we're also selling through inventory.

And so as I think about that inventory over the remainder of the year, it sounds like maybe you get some of that back. But how should I think about, when we exit from 2012, what do you think based on the cadence that you're hearing from retailers, what do you think you'll finish the year on that front?

So I think we're going to make it both at the end of 2011 and at the end of 2010. Within the U.S., our retailer inventories were too high. So I think within our guidance this year, that we expect to grow revenues again. We actually are expecting a bit in the U.S. our POS grows by more than our shipments into the trade and we actually will finish the year with less retailer inventory than we've had in either the last 2 years.

Great. And then shifting gears here to the Games business. I've got to ask, this Draw Something game basically seems like iOS version of your Pictionary game. And this is ultimately the second time this has kind of happened to you guys. I guess, first question, can you talk about patent protection in some of your Games business? Creating a digital version of your game, does that basically get around any patents or exclusivity you have there? And I guess, just secondly, talk a bit about your ability to win on digital platforms versus competitors that take what seems to be some of your intellectual property and just puts it on those digital platforms?

If you look at our licensing revenues and digital year-over-year, they're running about a year ago, a little bit down versus a year ago. But that's just as we transition from console gaming to some of the online and mobile gaming, but again very strong revenues overall continue in our digital gaming. Obviously, we have some protections around trademarks, but there's play patterns and copyrights that you can't protect. And so one of the strategies we've had proactively over the last couple of years since '07 as we signed the deal with EA and then, more recently, with Activision, has been to ensure that our games are out there. And so we have, I think over the period, over 75 Games brands EA has launched and titles that they've launched for Hasbro in the digital arena and with good operating profit margins for us as a partner in all of that. As we go forward, clearly, we've reached out to some of these partners, and our long-term deal now with Zynga enables us to take advantage of some of their development. And certainly, anything that Zynga has would be something that we'll develop. And we're going to develop it in a way that really as additive, not just exploitive of the online property. So you'll see this fall our new launches, which we haven't outlined yet. The new launches for this fall literally add to the play in a way that you haven't been able to play before online. And then in doing so, in our analog game, it enhances the online play, and then the online play in turn would enhance the analog play. So you'll see that we're going to marry up our brands in a number of ways. You have fully digital versions, hybridized versions, versions on the iPad and versions on mobile, but also brand new ways to think about what we might call, broadly speaking, board gaming and off-the-board gaming as we go forward.

Excellent. And then just one last clarification here. Help me understand the extra week. You talked about it being $6 million in fixed expenses. Was there any impact on the top line? And ultimately, what was the bottom line impact of that extra week?

Well, the extra week really, because of the time of the year, when it comes, we talked about it being in the early part of the year. So it really didn't add anything significant in terms of revenue. However, by having an extra week of fixed expenses in the company, it impacted us by about $6 million in the quarter.

And that's ultimately the net impact, $6 million to the bottom line as well?

That's right.

Right.

Our next question is from Margaret Whitfield with Sterne Agee. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: I was curious, since I saw some Avengers products on shelves early, how much that line contributed to the quarter? Also with Beyblade starting out relatively good in terms of consumer demand, what's your current thought of where you might end the year for Beyblade? Will it still be down significantly?

Well, thus far, Margaret, Beyblade is basically flat. Obviously, we've guided everyone to not expect that as we go forward. But it's very heartening to see the kinds of POS gains we're seeing in the U.S. and several countries around the world. We had mentioned to you, we were going try to buck historical trends by adding new innovations to Beyblade, which we are adding and will both be expressed in toys as well as expressed in the animation and the series itself, which is new for the brand versus the last time it was launched. Let's see, on Avengers, it did contribute to the quarter. And I don't think we give like quarterly numbers. But it did contribute to the quarter, we began shipping Avengers. But overall, we feel very strongly the Avengers is going to perform very well in the marketplace. What's heartening about the Marvel business for us is not only is it growing in the U.S., but it's growing more quickly internationally as we work with Marvel globally to really build this business. And so we're seeing great uptake on Avengers and anticipation and excitement around Spider-Man that follows. And we also have a lot of classic product. And the Marvel business will also be supported by a number of animated shows, both here in the U.S. and outside the U.S. around the world. So again, the Marvel business for us, we had always seen as a significant contributor, plus side contributor, and it's bearing out. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: And Sesame Street did not increase overseas, but it did in the U.S. of course. It wasn't in the line a year ago. What's going on with Sesame Street in terms of your international markets?

It just -- it takes a bit longer. A lot of preschool products are language-dependent so you have to take the time in order to translate those products into multiple different languages. So that takes a few more quarters, and then we want to coordinate that with the television episodes that are airing around the world. So I think you'll just see that happen, it's just -- again, it's a matter of timing. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: Can I conclude from the inventory at retail that your carryover inventory is virtually gone at this point?

I mean, the retailers are heading into the second quarter. And clearly, they've got inventory to sell. I think areas where we were long will certainly work that down, and it's at an adequate level. And we've got a lot of inventory -- or not a lot, but sufficient inventory of the new initiatives like The Avengers and Battleship, which are coming very shortly, and supply in terms of Beyblade now were fairly short a year ago. So I think we feel good about the overall quality of the inventory. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: And for Deb, could you comment on the outlook for program production cost amortization for the year? Because you were flat year-over-year in Q1.

Yes, we were. And for the full year, 50 -- I think we're looking at about $70 million in program production amortization.

Yes, $60 million or $70 million, Margaret.

Our next question is from the line of Greg Badishkanian with Citigroup.

How do you think the inventory reduction overall at retail for the industry will impact the manufacturers both from a sales perspective or maybe needing to have more inventory on hand as we get to the holiday?

Well , I think what's interesting is that, in fact, and what we've done in the U.S. as part of employing the strategy has been to up the advertising and to work through good products in the springtime, driving POS or the product lines that were good albeit not shipped in necessarily in the quarter, driving down that inventory and beginning to ship a lot of new initiatives in a lot of these brands. And you'll see more of that as we get into the second half and across the brand portfolio, whether it's Nerf or Pet Shop or Pony or in our Games business, a raft of new initiatives there widely supported by retailers not only here in the U.S. but globally. So I think it's been part of our expressed strategy. It's something we outlined for you last fall and, again, in February. And I would say we are absolutely executing the plan we intended to execute in 2012. David, I don't know if you want to add anything.

No, I think as we all know, most toy sell 50% in the last quarter of the year. And in international markets, in markets around the world, we tend to ship close to 40% in the last quarter of the year. In the U.S., working with the retailers, we tried to level or lower that a bit, and we've been shipping a lot more during the early part of the year and earning maybe 24% during the fourth quarter of the year. I think as we and retailers work together, we say that go forward, we need the shipping patterns to look -- need to look more like the international level. They had issues associated with shipping too much in -- early in the year. And to be honest, if you're going to give retailers flow allowances or warehouse allowances, then you're spending money against the retailer, which will be better spending against your consumer and your advertising. So I think with -- working with the retailers in the U.S., we're saying no, we won't be shipping it later in the year, more in line with consumer demand.

It also allows us to be more responsive as we start to see product lines accelerate. We're able to ship more of those inventories, and we're already seeing that in the first quarter where we're able to -- where we'd look at new product lines that have begun quite strongly in certain regions or territories. Star Wars Fighter Pods, Avengers, Transformers Bot Shot, where we're able to fill that inventory because we haven't already put inventory into play.

Good. And just in terms of sales of your movie-related products. Last year was, obviously, a tough comparison year. Do you have any change in terms of your view on how some of those products are selling at retail at this point?

Yes. We -- as I was looking at the numbers, what we're really seeing, as we said, is Transformers overall as a brand is relatively flat year-on-year. And that has to do with new Games initiatives and our Preschool initiative with our Rescue Bot line. Overall, if you look at the Boys business, it's tracking better than one would expect on a year-over-year decline in following a movie year. So typically, we would see about a 50% decline, and we're tracking more strongly than that in the first quarter, recognized that we had the benefit of a DVD out in the fourth quarter, lots of excitement around the Transformers brand as people see that and still shipping Transformers-related movie product and selling it through in the first quarter. So right now, we are down around 30% versus historical level of 50%.

Good. And just finally, on games, how much do you think of the decline and kind of softness that you've been seeing the last year or so? Is it due to just the category being a little bit softer which we've seen or is it just a function of your -- getting your kind of your product, new product, as well as marketing and improving that to capitalize on it.

Yes. I think it's been -- really, it's a shift in thought process and a shift in strategy. There was a day many years ago, actually -- and now, as we think about it, not that many years ago, that you could make a new game, "game brand" and you have a game SKU and a TV commercial and you'd be off to the races. And what we've really recognize now is you need a raft of innovations, you need to really think about that brand across multiple platforms and you need to focus on fewer brands and -- much more intensely. And so in doing so, like Magic: The Gathering is a perfect example and very emblematic of what we've done, which is to develop the online Magic: The Gathering online game, a digital game that marries up with the analog game to go back out to lapsed users, the team's done a very effective job of getting lapsed users as well as new users into the analog, meaning paper-based trading card game around the world but also marrying that with any number of iterations of digital game play. That's -- to me, that's a great example of what you're going to see from us in developing that ecosystem both in our own brands as well as our partnered brands alongside Zynga, alongside of EA, alongside of Activision.

Our next question is from Eric Handler of MKM Partners.

So first on Battleship. Correct me if I'm wrong, but I believe that gross revenue participations from the film are not included in your guidance. Now that we're seeing a strong start to the film internationally, I wondered if you might be able to give some color on what those contributions could be in 2012? And then secondly, with regard to your buybacks, given your positive tones toward the back half of the year and given the prices where you bought stock back before, why not be a little bit more aggressive down here in the low 30s?

So on the first point, Battleship now, we've gotten some final numbers in this -- early this morning from the weekend. So after just 12 days, we've done nearly $130 million, $129.6 million at the global box office, very strong starts around the world, #1 in a number of markets around the world, in Asia, in Europe, in Russia. So again, really bearing out our strategy. In terms of our participation, as we get participation, which we are a first-dollar gross participant on this film, that would appear as revenue in the Entertainment and Licensing segment of the business. Although, I'm not going to guide you as to what that could be. But again, it's an improvement versus our prior deals that we had made as we get or established in...

And we certainly planned for that in our plan. So the guidance we gave, we certainly assumed that we would be getting some revenues from Battleship participation.

Right. And in terms of the buybacks, I think it's a matter of us looking at our cash throughout the year, utilization of cash versus short and long-term debt and making good decisions about how to return excess cash to shareholders, recognizing that a lot of our cash is now held offshore. So again, we've guided around remembering last year that we were buying back shares more aggressively based on our week.

Our next question is from Sean McGowan of Needham & Company. Sean P. McGowan - Needham & Company, LLC, Research Division: A couple of questions here. Could you be more specific about where you're seeing the bulk of the weakness in Girls' toys? And you've mentioned a couple of lines that were up, but could you get us to the 18% decline somehow?

Yes. I think the biggest element there has been -- as the U.S. business is down in the first quarter, clearly, that's impacted the Girls business in particular and a couple of brands. Pet Shop has been down. It's down more in the U.S. than internationally. And FurReal Friends year-over-year in the first quarter is certainly down as we transition out of some product lines and into the early days of Dizzy Dancers. And those 2 things have an impact in the quarter, given that it's a low revenues quarter overall. And then, as we've said, Littlest Pet Shop is now planned for the new animation as well as a whole new line in the fall. FurReal Friends, in addition to Dizzy Dancers, which is off to a strong start, has number of new brand. And then Baby Alive, that had modest growth in the quarter, has a lot of new initiatives in the second half of the year. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. And could you comment on what you're seeing in -- within Games at point-of-sale relative to some of the other category? I mean, you mentioned that overall it was up 6%, but how is it trending in Games?

Games is -- Games was down in POS 5.8% around in the first quarter, but recognize that's far above the decline in inventories and in sell-in. So we're selling down and selling through those inventories. A number of Games brands certainly performed well in the quarter. We have strong sell-through in Transformers Bot Shots and Fighter Pods, as well as Monopoly and Battleship. And there's a few other brands I probably haven't mentioned, but certainly, in that mix, we're also selling through inventories of the Games. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. The program -- just to follow up on Margaret's question of program amortization cost being flat with last year. Is this the kind of relationship of first quarter to full year that we should be expecting from here on out? Because it just seems a little low relative to the full year, or actually, more than a little low.

I think it's really just kind of the timing. If you look at and think about when we've talked before about looking at the trend of the amortization along the lines of our revenue in the quarter, that's probably why it's looking so low right now, so the amortization timing tends to follow basically the revenue trends. Sean P. McGowan - Needham & Company, LLC, Research Division: Yes, I just thought that with all the program sales that happened kind of late last year -- or the second half, anyway, of last year that, that line would be at least up.

Right. And we do have a lot of those shows that are going to start to air a little bit later in the year. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. And then, I guess, a related question, then. And so how will entertainment revenue then trend vis-a-vis program sales? You book a deal then I know you've recognized the revenue over some time periods, so how's that going to trend the balance of this year? Will we continue to see increases in that line?

You would see the entertainment line trend up as we get paid for our TV shows. The TV shows have to be delivered and, therefore, they have to be translated into multiple languages and we have to -- we have different windows of airing around the world for those shows. But as we start to put those shows on the air, we get paid for the episodes. And that's what you're beginning to see, but again, it's early days. But the early indications, if you look at the impact from television, the early indications in the U.S. throughout Latin America, Korea, Hong Kong, Taiwan, Singapore, I mean, every market really where Transformers Prime is now running, we're seeing strong point-of-sale trends. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. And 2 other quick questions. So in terms of royalties or whatever you would get on that box office participation on Battleship, has some of that already been booked at the time -- was some of that booked last year when the production got to a certain level? Or has any of that been booked?

We do booked some when we start principal photography on the movie. So we did recognize that last year, maybe even late in '10. However, the box office revenue, when it begins to be reported to us, will be recognized through to Licensing. And as David mentioned, that was included -- there was an amount of that included in our plan when we gave our guidance for the year. Sean P. McGowan - Needham & Company, LLC, Research Division: Right. So that's kind of thinking at the end of the quarter, they tell you what you earned, and if you find out what it is, will you open the mail and look at the check, right?

Well, yes, obviously, we can do some math and we can look at how the box office has performed with our participation. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay, so a lag on timing. And then finally, could you clarify what your goal is when you say that returning U.S. and Canada to historical levels of margins, what's your target timing on that? Is it run rate by the end of this year, or is it for the full year or is it full year 2013?

Yes. Operating profit margin is to get more normalized, and I think I would look back to years like 2010 as a good guidepost, and we would like to get there or close to that by the end of this year. So that would be for the full year 2012, the U.S. and Canada segment. Operating profit margin would be similar to 2010's level, not '11's. And to -- as we say, versus '11, we would be therefore up, and that to us is back to more historical levels and operating profit margin. And then at go forward, we would drive off of that number.

Our next question is from Gerrick Johnson of BMO Capital Markets.

A question on the balance sheet. Other current assets were up 62%. This is a 3/4 trend of big growth. What's in that line that's causing that to grow?

Well, year-on-year, it's actually just the VAT receivable. So it's a timing issue on year-over-year.

I'm sorry, it’s a what receivable?

Tax receivable. Internationally, it's value-added tax. That's what's really causing it. It's just a timing issue.

Okay. And Brian, I think you mentioned Bot Shots and Fighter Pods in Games, is that accurate or should be in Boys?

No. Fighter Pods and Bot Shots are not considered board games, but they're in the broader definition of games, just as BOP IT! is in Games or Lazer Tag is in Games.

Okay. And speaking of Games, how about just the board game performance on its own? I was going to ask excluding trading card games because you call those had a strong performance. But now, I guess I'll exclude trading card games and Bot Shots and Fighter Pods. How about the board game -- the core board game business?

Yes, let me look. Board games, the board game business was certainly down in the quarter, not down as much as inventories were down in the quarter. As we said, inventories were down 40% in the quarter. We're seeing some positive areas within board games as I mentioned. For example, Monopoly and some places where we have electronic banking and some of the early innovations that were out there either from fall or in springtime. And we would expect to see more of that in the second half of the year and -- as well, we will be launching the line of Zynga-based games, and that will be happening in the second half of 2012 as well. So that's where we are.

Okay, great. And one last one, if I can. Your marketing that you plan for this year, is there any shift in the way you're using those marketing dollars versus traditional?

It is -- actually, let me follow up with one more point. The biggest decline within the Games business is actually the puzzle business, and we have a plan for how to handle puzzle. So that, as a percent, that's really the biggest drag on Games in the first quarter. Okay, and then -- sorry, what was the question?

Yes. I was asking about marketing, the increase in marketing spend this year. Is there going to be any sort of shift in the way you use those marketing dollars this year away from how we traditionally TV advertise things?

I think you'll see it's kind of an all-platform strategy. The team has done a very good job in looking at how consumers make decisions about purchases, particularly in mature markets and certainly particularly in the U.S., recognizing the importance of digital platforms. You're going to certainly see an array of new digital marketing elements. Television is still important, and you'll see us focus on TV when we believe there's the highest propensity to drive consumer demand around Hasbro's strong brands and innovations. So it's really -- it's a kind of an all-mediums approach to marketing.

Our next question is from Michael Kelter of Goldman Sachs.

I wanted to ask within Boys about Nerf brand that was flat overall in '11, including down in the U.S. after a multiyear positive run. What are the current trends look like for Nerf and how confident are you that you can get that growing again versus being maybe a third drag in Boys along with Transformers and Beyblade this year?

It's going to be -- if you look at Nerf, the biggest decline in Nerf year-over-year is really in the U.S. business. So that had to do, as David mentioned, with the fact that we did have too much inventory on that brand than we've been selling through. The sell-through on that brand has been very good in this first quarter, and we do have some new initiatives around the glow-in-the-dark products in the springtime, as well as a lot of darts promotions. And so we've seen sell-through and lots of promotion around that brand. So again, that's really been the biggest element there in terms of the drag on the business.

Yes, and I think in our international markets, where sales tend to come later as we said, Nerf is still very much a growing business.

Yes. And then the other thing, Michael, to know is we had a complete reinvention of the core dart business, which we did not have last fall. If you remember last fall, with Vortex, we added a new form factor in the disk caters [ph]. But this fall, we have new dart-related business, Nerf Elite line, which is brand new to the business and will allow for there to be a number of SKUs in the favorite -- fan-favorite dart business that are brand new and much higher performance.

And then I also wanted to ask, from what I understand, action figures or the category hasn't been doing all that great for a little while now. I'm curious to understand, since it's an important category for you, due to the extent that you have visibility, what the trends look like? What do you think is going on there? Our play patterns changing for children, and this is something that to keep an eye on or do you think it's maybe just a fleeting kind of a dynamic because the properties haven't been enough to stimulate people to purchase? What do you think?

Well, I think we've certainly, over the last year, expanded the number and types of play patterns and the different kinds of innovations, whether it's Preschool, Transformers with Rescue Bots and our new play pattern that's easier to transform for littler hands. In Bot Shots, which is a brand new play pattern in Transformers, which is doing very well early this year as we launched it, that's a new play pattern, although its action figures and it's merchandised in the Boys isle. Fighter Pods within Star Wars, which is a whole new play pattern. So you're going to see from us a raft of new innovations in a short while, coming out, I believe, May 1, will start with -- and we told you about BONKAZONKS. And BONKAZONKS is all around the Marvel brands and a fun -- really a fun, new way to play action figures collect. So it's both the collectability of action figures, as well as a fun new battling kind of a play pattern. So when I talk about the game-ification of play, this is what we're thinking about, that so many of our brands have the opportunity to provide these new innovative ways to play, and so we're out really doing that proactively and we've been doing this for some time. Hence, we're launching these new initiatives now. The last area, I would say, is that as we see the growth of KRE-O around the world, we're really reemphasizing the innovation strategy there. There are things that we understand about that business being the Boys action business that we can really bring to KRE-O as we roll out, and that's why we're seeing such good early success.

And Preschool, which is up only 2% despite adding Sesame Street to the mix. And Fisher-Price wasn't doing that well of late either. What do you think is going on from a consumer perspective in that category? Why are sales not necessarily all that robust in Preschool right now?

Well, if you look, our POS and Preschool was actually very strong in the quarter. So I think it's a matter of looking at Preschool again a bit differently. Our Play-Doh business is part of our Preschool business, and while it was only up a bit in revenues, the POS as we start to ship new play sets and new innovations as -- was quite strong in the quarter. If you look within Playskool Heroes, that whole category is really performing well, with Transformers Rescue Bots, the Star Wars Jedi Force and the Marvel Super Hero Squad, which is also on The Hub, and those have all strong performance. So I think it's different kinds of play patterns that are certainly working, and certainly Sesame Street is a major new contributor for us. So I just think it's early days, early in the year, and certainly our lowest revenue quarter year -- revenue quarter within the year. And so clearly, positive signs for us are the POS around our new initiatives.

And lastly, I just wanted to circle back on inventory because the number this quarter was roughly in line with last year. But if you recall, you guys weren't all that happy with the number last year and you spent all of 2011 trying to work it down, and you had. And you did a great job with that. And now that inventory number and dollars is back pretty much exactly where you started beginning of '11, how should we think about that?

Well, remember that our business outside the U.S. grew by 14% -- or 17% ex FX. So inventory -- pools of inventory are following sales. We have more territories, more new Hasbro marketing and sales teams and marketing and sales personnel selling Hasbro brands around the world than we ever have. And so as we build our capabilities and build brand blueprint, meaning TV on the air around our brands, motion pictures coming from our partners and from Hasbro, you are going to see a demand for more inventory because those markets need to feed consumer demand in those geographies. So that's a major driver of that. And then the U.S., clearly we have a lot of new initiatives. What we wanted to do is clear out the retailer shelves and clear out retail inventories so that we'd make room for our new initiatives that could benefit from the additional advertising and to guide you guys to say that, in fact, we are going to follow more of consumer demand and do that early enough so that you could be along there with us and on the same page as we go through this process.

Our next question is from Tim Conder of Wells Fargo.

A couple of things. Most questions have been answered here. But Brian, there's been a little confusion out in the market as far as the definition of Games being stable this year, your goal. Can you clarify that, are you talking flat year-over-year revenues or are you talking stabilization in the rate of decline?

Okay. I guess, the way I would view it, I would view stable meaning we would be very pleased if we improve the rate of decline, is one way to look at it. But I would just look at it in simple terms, Tim, to be plus-or-minus a few percentage points in terms of revenue for the full year. And just a very simple way to look at it is if we were down a few percentage points in revenue this year, and our rate of decline was better than prior year's or it'd be up a bit if everything broke right for us. That would be -- to me, that's the range we're talking about. So both has those 2 components. It's stabilizing the rate of decline, and it's also looking at just overall revenues being plus-or-minus a few percent.

Okay. Great, great. And on the Zynga relationship, you talk about and you've mentioned this since day one of announcing the relationship that on the back half of the year, you're going be shipping product to -- off of the Zynga properties. I think also, you'd mentioned that there is the ability under the agreement for Zynga to do online games to be developed off of Hasbro's IP. Any timetable for where we could potentially see some of that being developed here?

Well, we certainly will have a number of brands of Zynga's activated across a number of different iterations for this fall. So that's on track, and there'll be a number of ways to play Zynga games in an analog space, as well as adding to the digital play in a really unique way, and I can't wait to tell you guys or for you guys to see what we're talking about there. But certainly an added enhancement, building on what I talked about as that ecosystem, one enhances the other and the other feeds the next in a virtuous circle. So that's certainly a part of our plan. If you look at the -- our opportunities in digital gaming as we go forward, certainly, we have great partnership with Electronic Arts that was signed in 2007. That deal goes through the end of 2013 on a number of Games brands. There's an opportunity to renew that under certain conditions for another 4 years, and we've talked to you guys about that. But there are Games brands that are available to us right now to go after and to look at and there's new ways to think about Zynga's brands that would benefit the analog space, and we're doing both of those things right now. And clearly, also Activision is working with us as we're also working in joint ventures with NetDragon and Jagex on sort of MMOG. So there's an array of ways that we're bringing to life our Games business across a number of platforms.

Okay. And then one related to the Girls business, and I apologize if I missed this. But I don't think you commented on how Girls' POS specifically was trending in the quarter?

Just hang on. I'm looking. Girls' POS was down in the quarter, and it was down less than shipments.

Our final question is from the line of John Taylor of Arcadia Investment Advisors.

So I got a couple of questions. First, on The Hub. I wonder if you could give us any sense, quantify for us what kind of lift you're seeing in the markets. I think you mentioned Sony, for instance. So is there any way to do a before and after, and kind of give us a sense for that? That's the first question for The Hub. And the second one is given all the timing issues related to amortization and stuff that folks were asking about before, I'm wondering what the first quarter episodes -- broadcasts versus episodes broadcast last year might have been like and kind of maybe what your outlook for the full year is versus full year of 2011? So 2 questions on Hub, and then I got another question.

Yes. So John, if you look around the world, in fact, My Little Pony's on the air now in more than 160 countries, as is Transformers Prime. So we're actually seeing strong lifts in POS in early shipments around the world. Our POS and My Little Pony, for example, even in the U.S. was up over 50% in the quarter. Transformers was up very strongly around -- behind Prime in the quarter in the U.S. As we go around the world, we're seeing that My Little Pony in Latin America is up well more than 50%, whether it's Peru, Chile, Brazil, Mexico, Ecuador. So again, great point-of-sale gains. And it's really, our long stated premise but not -- it's not lost on everyone that television, particularly television outside the U.S. has historically driven merchandise sales and that's what we're seeing. On Transformers, the programming continues to drive and help us to drive our retail POS, whether it's Korea, Singapore, Hong Kong and Europe. The U.K, has seen significant growth in Transformers Prime in POS year-to-date, recognizing again it's still early days, but certainly a strong performance. As you look at The Hub, our growth on The Hub in the first quarter was up 32% in Kids total day, in our ratings. And Kids total day against kids 2 to 11 and it also grew with kids 6 to 11 and also grew with 18 to 49-year-olds. This is the second best quarter we've had since our start. And so again, it bodes well for the trends that Margaret and her team are putting together. Lots of new excitement as we bring on new series, and we get to our second and third seasons on some of our shows, as well as adding new shows like Kaijudo. So overall, very positive trend within television.

Yes. I was wondering on the episodes side though, as you take the Hasbro programming global, kind of what your episode comparison looked like maybe first quarter and your outlook for the year.

Well, I'm trying to figure out how to answer to that.

I mean, 160 countries is -- that's a good headliner. But you just kind of wonder how many episodes are under each one of those and...

Okay. So what we've sold thus far is really we've sold in Season 1 or Season 1 and 2 depending on the brands. Overall, we have green lit [ph], which doesn't mean they're all being -- had been produced. But we have green lit [ph] over 750 half hours of programming around all of our brand shows. Our brand shows are 6 of the top 10 rated shows on The Hub and outperforming, working with great partners around the world, whether it's Disney or Nickelodeon or Cartoon Network or Carousel in Russia, our shows are performing very well. And as we're trying to give you some early indication of POS, certainly contributing to our POS as well as contributing to revenues because both Pony was up in the quarter versus a year ago, and that wasn't just in U.S. but actually vast growth outside the U.S. And Transformers being flat, certainly Transformers Prime has contributed to helping us get back that gap that is what we've talked about a lot, that we didn't have -- in 2010, because we're waiting on the launch of The Hub, we didn't have an animated series throughout 2010. We do have that animated series in 2012, so we would expect the decline in Transformers to be less than a traditional 50% drop-off in a non-movie year. So I'm not sure how else to answer that but I'm trying to give you some color around it.

Yes. Just kind of getting at the broadcast episodes around the world, kind of how many half-hour segments have actually been shown? That kind of comparison as a unit revenue driver and cost driver kind of...

No. So most of the series began airing in roughly in the fourth quarter of 2011. So it's just been early days. So I would say you're in the Season 1 primarily. I would doubt that anywhere around the world has seen Season 2, although it's been produced. And we're also translating episodes as we speak. So I would say primarily, you're talking about Season 1 shows, and that is the first season of Transformers Prime, which was 26 episodes; the first season of My Little Pony, which I remember as being 26 episodes; Pound Puppies; Chuck & Friends in Preschool; and then some of our game show formats being translated and aired in countries around the world.

Okay, great. And then Deb, on the DSO coming down so much and the shift in timing of shipments and so on, how -- do you think that was related to the price increase? And I recall, you had one in February 1 or something, that people buy early?

And they have been some of it, but it was so -- it was really the January and February compared to the March timing. So it really was a shift in the quarter, but it was February as much as March -- I mean, as much as January rather. So -- and that extra week helped as well, particularly internationally, where you get March -- the very last day of March being a big collection day.

Okay, great. And then on the whole first half versus second half shift to 2% to 4%. So Brian, can we assume that huge piece of that is related to the gained shift closer to fourth quarter? Or are there -- is there shift towards more seasonal, the sort of higher price point holiday start shipping later? I mean, is there any way to talk about that in baskets?

Yes. I think that the way to think about it is, in the first and second quarters, it's been about -- particularly, in the first quarter, been a reduction of historical inventories. And also as David outlined, typically, the U.S. might do 25% of its revenue in the first quarter, whereas the total company might do 15% to 17% of its revenue in the first quarter. We're going to follow more of that pattern over the first and second quarter, just in terms of matching consumer demand and consumer takeaways so as to allow us to get visibility to those lines that are really performing, given that we've made so many strong strides and improvement in our supply chain. We're able to do that, more just-in-time inventory. And therefore, able to follow really the consumer takeaway patterns. So it's kind of an across-the-board approach. It's advertising when the consumer has a high propensity to buy. There are certainly mitigating factors within that, especially in 2012 as we have strong entertainment properties coming out in second quarter. But recognize we have strong comps to go up against versus a year ago in Transformers in particular. And so I think that as we view the year, we look at it as being -- the best way to view it is that if you take 2% to 4% of historical level annualized inventory and were to ship that, that's what we'd sort of describe to you guys back in November and again in February, I think some of you have understood that more than others.

There are no further questions at this time. I'd like to turn the floor back to Debbie Hancock for closing comments.

Thank you for everyone for joining the call today. The replay will be available on our website in approximately 2 hours. Additionally, management's prepared remarks will be posted on our website following this call. Finally, before we end today's call, we wanted to take this opportunity to update you on some of our investor relations activities for this year to facilitate your planning. First, our second quarter earnings release is tentatively scheduled for Monday, July 23, 2012, and our third quarter release is tentatively slated for Monday, October 22. Second, we are not planning to hold our fall investor day this year and plan to use this time as an opportunity to get out on the road and meet with investors. Additionally, on June 4, we will be presenting at the Goldman Sachs Lodging, Gaming, Restaurant and Leisure Conference. We look forward to speaking with you in the coming months. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Thanks.