What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-01 compared with 2023-08-04 · 293 added, 198 removed, 694 unchanged (41% of the section changed)

3 unchanged sentences

(Millions of Dollars Except Share Data)

2023 June 26,

2023 September 25,

2022 December 25,

6 unchanged sentences

Prepaid expenses and other current assets 286.2 658.8 676.8

Assets held for sale 1,048.7 16.8 —

Total current assets 3,240.1 3,260.5 2,999.1

17 unchanged sentences

985.4 1,537.5 1,506.8

Liabilities held for sale 607.4 15.0 —

Total current liabilities

12 unchanged sentences

Authorized 600,000,000 shares;

issued 220,286,736 shares at July 2, 2023, June 26, 2022, and December 25, 2022

issued 220,286,736 shares at October 1, 2023, September 25, 2022, and December 25, 2022

110.1 110.1 110.1

6 unchanged sentences

Treasury stock, at cost;

81,568,249 shares at July 2, 2023;

82,199,298 shares at June 26, 2022;

81,541,637 shares at October 1, 2023;

82,178,615 shares at September 25, 2022;

and 82,106,383 shares at December 25, 2022

10 unchanged sentences

(Millions of Dollars Except Per Share Data)

Quarter Ended Six Months Ended

2023 June 26,

Quarter Ended Nine Months Ended

2023 September 25,

2022 October 1,

2023 September 25,

Net revenues $ 1,503.4 $ 1,675.9 $ 3,714.4 $ 4,178.2

7 unchanged sentences

Selling, distribution and administration 352.3 365.8 1,050.0 1,000.1

Loss on assets held for sale 473.0 23.1 473.0 23.1

Impairment of goodwill — — 231.2 —

7 unchanged sentences

Earnings (loss) before income taxes ( 215.0 ) 165.6 ( 463.9 ) 425.7

Income tax expense 7.0 39.4 7.7 56.7

Income tax expense (benefit)

( 44.6 ) 37.4 ( 36.9 ) 94.1

Net earnings (loss) ( 170.4 ) 128.2 ( 427.0 ) 331.6

10 unchanged sentences

(Millions of Dollars)

Quarter Ended Six Months Ended

2023 June 26,

Quarter Ended Nine Months Ended

2023 September 25,

2022 October 1,

2023 September 25,

Net earnings (loss) $ ( 170.4 ) $ 128.2 $ ( 427.0 ) $ 331.6

5 unchanged sentences

Reclassifications to earnings, net of tax:

Net (gains) losses on cash flow hedging activities 1.8 ( 2.7 ) ( 0.4 ) ( 1.3 )

Net losses (gains) on cash flow hedging activities

2.9 ( 5.9 ) 2.5 ( 7.2 )

Amortization of unrecognized pension and postretirement amounts ( 0.1 ) 0.1 ( 0.2 ) 0.3

7 unchanged sentences

(Millions of Dollars)

Six months ended

2023 June 26,

Nine months ended

2023 September 25,

Cash flows from operating activities:

5 unchanged sentences

Impairment of intangible assets 65.0 —

Loss on assets held for sale

Program cost amortization 325.3 365.7

3 unchanged sentences

Change in operating assets and liabilities net of acquired balances:

Decrease in accounts receivable 237.5 517.5

Increase in inventories ( 48.4 ) ( 324.7 )

(Increase) decrease in prepaid expenses and other current assets ( 14.6 ) 13.9

(Increase) decrease in accounts receivable

( 86.3 ) 201.8

Decrease (increase) in inventories

53.0 ( 327.2 )

Decrease in prepaid expenses and other current assets

Program spend, net ( 337.5 ) ( 498.1 )

20 unchanged sentences

Net decrease in cash, cash equivalents and restricted cash ( 257.2 ) ( 462.8 )

Net change due to cash classified as held for sale ( 70.4 ) ( 4.8 )

Net decrease in cash, cash equivalents and restricted cash ( 327.6 ) ( 467.6 )

Cash, cash equivalents and restricted cash at beginning of year 513.1 1,019.2

8 unchanged sentences

(Millions of Dollars)

Three Months Ended July 2, 2023

Three Months Ended October 1, 2023

Stock Additional

4 unchanged sentences

Equity Redeemable Noncontrolling Interests

Balance, April 2, 2023 $ 110.1 2,535.7 3,951.8 ( 237.4 ) ( 3,629.4 ) 27.9 $ 2,758.7 $ —

Balance, July 2, 2023 $ 110.1 2,554.6 3,618.1 ( 213.5 ) ( 3,626.3 ) 27.2 $ 2,470.2 $ —

Net loss attributable to Hasbro, Inc.

6 unchanged sentences

Distributions paid to noncontrolling owners and other foreign exchange — — — — — ( 2.5 ) ( 2.5 ) —

Balance, July 2, 2023 $ 110.1 2,554.6 3,618.1 ( 213.5 ) ( 3,626.3 ) 27.2 $ 2,470.2 $ —

Three Months Ended June 26, 2022

Balance, October 1, 2023 $ 110.1 2,574.1 3,348.3 ( 208.4 ) ( 3,626.3 ) 25.4 $ 2,223.2 $ —

Three Months Ended September 25, 2022

Stock Additional

5 unchanged sentences

Equity Redeemable Noncontrolling Interests

Balance, March 27, 2022 $ 110.1 2,475.7 4,220.9 ( 246.9 ) ( 3,513.8 ) 34.7 $ 3,080.7 $ 23.5

Balance, June 26, 2022 $ 110.1 2,503.4 4,265.9 ( 259.6 ) ( 3,636.2 ) 29.2 $ 3,012.8 $ 23.0

Net earnings attributable to Hasbro, Inc.

— — 129.2 — — — 129.2 —

Net earnings (loss) attributable to noncontrolling interests — — — — — ( 1.6 ) ( 1.6 ) 0.1

Net loss attributable to noncontrolling interests — — — — — ( 1.0 ) ( 1.0 ) —

Other comprehensive loss — — — ( 65.3 ) — — ( 65.3 ) —

3 unchanged sentences

Dividends declared — 0.7 ( 97.3 ) — — — ( 96.6 ) —

Buyout of redeemable noncontrolling interest — 4.5 — — — — 4.5 ( 23.0 )

Distributions paid to noncontrolling owners and other foreign exchange — — — — — ( 5.2 ) ( 5.2 ) —

Balance, June 26, 2022 $ 110.1 2,503.4 4,265.9 ( 259.6 ) ( 3,636.2 ) 29.2 $ 3,012.8 $ 23.0

Six Months Ended July 2, 2023

Balance, September 25, 2022 $ 110.1 2,530.1 4,297.8 ( 324.9 ) ( 3,637.1 ) 23.0 $ 2,999.0 $ —

Nine Months Ended October 1, 2023

Stock Additional

14 unchanged sentences

Renegade buyout — ( 2.1 ) — — — — ( 2.1 ) —

Balance, July 2, 2023 $ 110.1 2,554.6 3,618.1 ( 213.5 ) ( 3,626.3 ) 27.2 $ 2,470.2 $ —

Six Months Ended June 26, 2022

Balance, October 1, 2023 $ 110.1 2,574.1 3,348.3 ( 208.4 ) ( 3,626.3 ) 25.4 $ 2,223.2 $ —

Nine Months Ended September 25, 2022

Stock Additional

15 unchanged sentences

Dividends declared — 1.2 ( 292.4 ) — — — ( 291.2 ) —

Buyout of redeemable noncontrolling interest — 4.5 — — — — 4.5 ( 23.0 )

Distributions paid to noncontrolling owners and other foreign exchange — — — — — ( 12.8 ) ( 12.8 ) ( 1.5 )

Balance, June 26, 2022 $ 110.1 2,503.4 4,265.9 ( 259.6 ) ( 3,636.2 ) 29.2 $ 3,012.8 $ 23.0

Balance, September 25, 2022 $ 110.1 2,530.1 4,297.8 ( 324.9 ) ( 3,637.1 ) 23.0 $ 2,999.0 $ —

AND SUBSIDIARIES

3 unchanged sentences

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial position of Hasbro, Inc.

and all majority-owned subsidiaries ("Hasbro" or the "Company") as of July 2, 2023 and June 26, 2022, and the results of its operations and cash flows and shareholders' equity for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S.

and all majority-owned subsidiaries ("Hasbro" or the "Company") as of October 1, 2023 and September 25, 2022, and the results of its operations and cash flows and shareholders' equity for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S.

The preparation of consolidated financial statements in conformity with U.S.

1 unchanged sentence

Actual results could differ from those estimates.

The quarters ended July 2, 2023 and June 26, 2022 were each 13-week periods.

The six-month periods ended July 2, 2023 and June 26, 2022 were 27-week and 26-week periods, respectively.

The results of operations for the quarter ended July 2, 2023 are not necessarily indicative of results to be expected for the full year 2023, nor were those of the comparable 2022 period representative of those actually experienced for the full year 2022.

The quarters ended October 1, 2023 and September 25, 2022 were each 13-week periods.

The nine-month periods ended October 1, 2023 and September 25, 2022 were 40-week and 39-week periods, respectively.

The results of operations for the quarter ended October 1, 2023 are not necessarily indicative of results to be expected for the full year 2023, nor were those of the comparable 2022 period representative of those actually experienced for the full year 2022.

Significant Accounting Policies

The Company's significant accounting policies are summarized in note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 25, 2022 ("2022 Form 10-K").

An update and supplement to these accounting policies for the treatment of assets and liabilities held for sale associated with our planned sale of the non-core eOne Film and TV business is below.

Assets and Liabilities Held for Sale

We classify assets and related liabilities as held for sale when:

(i) management has committed to a plan to sell the assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer, (iv) the sale and transfer of the net assets is probable within one year, (v) the sale price of the net assets is comparable to current fair value and (vi) actions required to complete the plan indicate it is unlikely that significant changes will be made or that management will withdraw from the sale.

Assets and liabilities held for sale are presented separately on our consolidated balance sheets at the lower of cost or fair value, less costs to sell.

Depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets are not recorded while these assets are classified as held for sale.

For each period that assets are classified as being held for sale, they are tested for recoverability.

Unless otherwise specified, the amounts and information in the notes presented do not include assets and liabilities that have been reclassified as held for sale as of October 1, 2023.

See note 15 — Assets held for sale, for additional information.

Impairment of Film and TV Reporting Unit

During the second quarter of 2023, the Company determined that a triggering event occurred following a downward revision of the Company's financial forecast for its Film and TV business, driven by challenging industry conditions that include the ongoing strike by the Writers Guild of America.

As a result, the Company performed a quantitative impairment test and determined that the Film and TV reporting unit within the Company's Entertainment segment, was impaired.

During the second quarter of 2023, the Company recorded pre-tax non-cash impairment charges of $ 296.2 million as the carrying value of the Film and TV reporting unit exceeded its expected fair value, as determined using a discounted cash flow model which is primarily based on management’s future revenue and cost estimates.

These impairment charges consisted of a $ 231.2 million goodwill impairment charge associated with goodwill assigned to the Company's Film and TV reporting unit, recorded within Impairment of Goodwill and a $ 65.0 million intangible asset impairment charge related to the Company's definite-lived intangible eOne Trademark, recorded in Selling, Distribution and Administration costs, within the Consolidated Statements of Operations for the quarter and six months ended July 2, 2023.

D&D Beyond Acquisition

On May 19, 2022, the Company acquired D&D Beyond, a strategic, complementary acquisition of the premier digital content platform for DUNGEONS & DRAGONS.

The all-cash transaction in the purchase amount of $ 146.3 million was funded with cash on hand.

The final allocation of assets acquired included $ 81.4 million to intangible assets, $ 64.7 million to goodwill, with the remainder allocated to property, plant, and equipment, all of which are included in the Company's consolidated balance sheets as of June 26, 2022.

Blueprint 2.0 and Operational Excellence

1 unchanged sentence

During the review, with the assistance of a third party consultant, the Company identified opportunities to focus and scale its business, enhance operational excellence, including through specialized organizational programs and supply chain transformation, to drive growth and profit and enhance shareholder value.

The Company is increasing strategic investment in its most valuable and profitable franchises across toys, games, entertainment and licensing, and exiting certain non-core aspects of the business.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

Company is increasing strategic investment in its most valuable and profitable franchises across toys, games, entertainment and licensing, and exiting certain non-core aspects of the business.

Brand Portfolio Realignment

1 unchanged sentence

We are focusing on fewer, bigger, more profitable brands that showcase our leadership in preschool toys, action figures and accessories, games, arts & crafts, and outdoor action brands.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

Our new product categories beginning in the first quarter of 2023 are as follows:

10 unchanged sentences

Recently Adopted Accounting Standards

As of July 2, 2023, there were no recently adopted accounting standards that had a material effect on the Company’s financial statements.

As of October 1, 2023, there were no recently adopted accounting standards that had a material effect on the Company’s financial statements.

Issued Accounting Pronouncements

As of July 2, 2023, there were no recently issued accounting pronouncements that had a material effect on the Company’s financial statements.

As of October 1, 2023, there were no recently issued accounting pronouncements that are expected to have a material effect on the Company’s financial statements.

(2) Revenue Recognition

11 unchanged sentences

(Millions of Dollars and Shares Except Per Share Data)

The changes in carrying amounts of contract assets and liabilities for the six months ended July 2, 2023 are as follows:

The changes in carrying amounts of contract assets and liabilities for the nine months ended October 1, 2023 are as follows:

October 1, 2023

Balance at beginning of the year $ 594.4

1 unchanged sentence

Amounts reclassified to accounts receivable ( 427.4 )

Reclassified to assets held for sale (1)

Foreign currency impact ( 5.3 )

4 unchanged sentences

Current year amounts reclassified to revenue ( 156.6 )

Reclassified to liabilities held for sale (1)

Foreign currency impact ( 2.1 )

Ending Balance $ 113.0

(1) See note 15 for additional information on assets and liabilities held for sale.

Unsatisfied performance obligations

Unsatisfied performance obligations relate primarily to in-production television content to be delivered in the future under existing agreements with partnering content providers such as broadcasters, distributors, television networks and subscription video on demand services.

As of July 2, 2023, unrecognized revenue attributable to unsatisfied performance obligations expected to be recognized in the future was $ 158.6 million.

Of this amount, we expect to recognize $ 135.3 million in the remainder of 2023, $ 19.0 million in 2024, $ 4.2 million in 2025 and $ 0.1 million in 2026.

As of October 1, 2023, unrecognized revenue attributable to unsatisfied performance obligations expected to be recognized in the future was $ 137.3 million of which $ 120.5 million is attributable to the Company's non-core entertainment business, expected to be sold to Lionsgate.

Of the performance obligations expected to be retained following the pending sale, we expect to recognize $ 6.4 million in the remainder of 2023, $ 5.5 million in 2024 and $ 5.0 million in 2025.

These amounts include only fixed consideration.

Accounts Receivable and Allowance for Credit Losses

The Company’s balance for accounts receivable on the consolidated balance sheets as of July 2, 2023 and June 26, 2022 are primarily from contracts with customers.

The Company had no material expense for credit losses for the quarters ended July 2, 2023 and June 26, 2022.

The Company’s balance for accounts receivable on the consolidated balance sheets as of October 1, 2023 and September 25, 2022 are primarily from contracts with customers.

The Company had no material expense for credit losses for the quarters ended October 1, 2023 and September 25, 2022.

Disaggregation of revenues

14 unchanged sentences

(3) Earnings (Loss) Per Share

Net earnings (loss) per share data for the quarters and six months ended July 2, 2023 and June 26, 2022 were computed as follows:

Net earnings (loss) per share data for the quarters and nine months ended October 1, 2023 and September 25, 2022 were computed as follows:

Quarter Basic Diluted Basic Diluted

7 unchanged sentences

per common share $ ( 1.23 ) ( 1.23 ) $ 0.93 0.93

Six Months Basic Diluted Basic Diluted

Basic Diluted Basic Diluted

Net (loss) earnings attributable to Hasbro, Inc.

6 unchanged sentences

per common share $ ( 3.09 ) ( 3.09 ) $ 2.39 2.39

For the quarter and six months ended July 2, 2023, options and restricted stock units totaling 4.3 million and 4.2 million, respectively, were excluded from the calculation of diluted earnings per share because to include them would have been anti-dilutive.

For the quarter and six months ended June 26, 2022, options and restricted stock units totaling 3.0 million and 3.8 million, respectively, were excluded from the calculation of diluted earnings per share because to include them would have been anti-dilutive.

Of the fiscal 2023 amount, 1.2 million and 1.6 million shares, respectively, would have been included in the calculation of diluted shares had the Company not had a net loss for the quarter and six months ended July 2, 2023.

Assuming that these awards and options were included, under the treasury stock method, they would have resulted in an additional 0.2 million and 0.1 million shares, respectively, being included in the diluted earnings per share calculation for the quarter and six months ended July 2, 2023 .

Changes in the carrying amount of goodwill, by operating segment, for the six months ended July 2, 2023 and June 26, 2022 are as follows:

For the quarter and nine months ended October 1, 2023, options and restricted stock units totaling 2.1 million and 2.5 million, respectively, were excluded from the calculation of diluted earnings per share because to include them would have been anti-dilutive.

For the quarter and nine months ended September 25, 2022, options and restricted stock units totaling 2.9 million and 2.8 million, respectively, were excluded from the calculation of diluted earnings per share because to include them would have been anti-dilutive.

Of the fiscal 2023 amount, 1.9 million and 1.7 million shares, respectively, would have been included in the calculation of diluted shares had the Company not had a net loss for the quarter and nine months ended October 1, 2023.

Assuming that these awards and options were included, under the treasury stock method, they would have resulted in an additional 0.4 million and 0.2 million shares, respectively, being included in the diluted earnings per share calculation for the quarter and nine months ended October 1, 2023 .

Changes in the carrying amount of goodwill, by operating segment, for the nine months ended October 1, 2023 and September 25, 2022 are as follows:

Consumer Products Wizards of the Coast and Digital Gaming Entertainment Total

Balance at December 25, 2022 $ 1,584.7 371.5 1,513.9 $ 3,470.1

Balance as of December 25, 2022 $ 1,584.7 371.5 1,513.9 $ 3,470.1

Foreign exchange translation ( 0.1 ) — — ( 0.1 )

Impairment during the period (1)

Balance at July 2, 2023 $ 1,584.8 371.7 1,282.7 $ 3,239.2

— — ( 231.2 ) ( 231.2 )

Balance as of October 1, 2023 $ 1,584.6 371.5 1,282.7 $ 3,238.8

(1) See note 1 for discussion of goodwill impairment recorded during the second quarter of 2023.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

See note 1 for discussion of goodwill impairment recorded during the second quarter of 2023.

Consumer Products Wizards of the Coast and Digital Gaming Entertainment Total

Balance at December 26, 2021 $ 1,584.9 307.3 1,527.4 $ 3,419.6

Balance as of December 26, 2021 $ 1,584.9 307.3 1,527.4 $ 3,419.6

Acquired during the period — 64.7 — 64.7

Foreign exchange translation ( 0.4 ) ( 0.5 ) ( 1.8 ) ( 2.7 )

Balance at June 26, 2022 $ 1,584.7 371.9 1,526.6 $ 3,483.2

See note 1 for discussion of D&D Beyond acquisition completed in the second quarter of 2022.

Impairment during the period

— — ( 11.8 ) ( 11.8 )

Balance as of September 25, 2022

$ 1,584.5 371.5 1,513.8 $ 3,469.8

During the third quarter of 2022, the Company determined to exit certain non-core businesses within the Entertainment segment resulting in the classification of certain assets as Assets held for sale.

A revaluation of the effected businesses resulted in a pre-tax non-cash goodwill impairment charge of $ 11.8 million, recorded within Loss on assets held for sale in the Consolidated Statement of Operations, and within the Entertainment segment for the quarter ended September 25, 2022.

On May 19, 2022, the Company completed its acquisition of D&D Beyond for $ 146.3 million, which was funded with cash on hand.

Based on the valuation of these assets, $ 64.7 million was allocated to goodwill within the Wizards of the Coast and Digital Gaming segment during the second quarter of 2022.

(5) Other Comprehensive Earnings (Loss)

Components of other comprehensive earnings (loss) are presented within the consolidated statements of comprehensive earnings (loss).

The following table presents the related tax effects on changes in other comprehensive earnings (loss) for the quarters and six months ended July 2, 2023 and June 26, 2022.

Quarter Ended Six Months Ended

2023 June 26,

The following table presents the related tax effects on changes in other comprehensive earnings (loss) for the quarters and nine months ended October 1, 2023 and September 25, 2022.

Quarter Ended Nine Months Ended

2023 September 25,

2022 October 1,

2023 September 25,

Other comprehensive earnings (loss), tax effect:

Tax benefit on unrealized holding losses $ — $ 0.1 $ — 0.1

Tax benefit (expense) on cash flow hedging activities 1.2 ( 1.3 ) 2.3 ( 0.4 )

Tax expense on unrealized holding losses

$ — $ — $ — 0.1

Tax (expense) benefit on cash flow hedging activities

( 0.7 ) ( 1.7 ) 1.6 ( 2.1 )

Reclassifications to earnings, tax effect:

5 unchanged sentences

(Millions of Dollars and Shares Except Per Share Data)

Changes in the components of accumulated other comprehensive earnings (loss), net of tax for the six months ended July 2, 2023 and June 26, 2022 are as follows:

Changes in the components of accumulated other comprehensive earnings (loss), net of tax for the nine months ended October 1, 2023 and September 25, 2022 are as follows:

Postretirement

6 unchanged sentences

Current period other comprehensive earnings (loss) ( 0.2 ) 0.3 — 46.4 46.5

Balance at July 2, 2023 $ ( 3.2 ) ( 19.6 ) ( 0.1 ) ( 190.6 ) $ ( 213.5 )

Balance at October 1, 2023 $ ( 3.2 ) ( 11.7 ) ( 0.1 ) ( 193.4 ) $ ( 208.4 )

Balance at December 26, 2021 $ ( 35.1 ) ( 6.0 ) 0.2 ( 194.4 ) $ ( 235.3 )

Current period other comprehensive earnings (loss) 0.3 13.4 ( 0.3 ) ( 103.0 ) ( 89.6 )

Balance at June 26, 2022 $ ( 34.9 ) 0.6 0.1 ( 225.4 ) $ ( 259.6 )

Balance at September 25, 2022 $ ( 34.8 ) 7.4 ( 0.1 ) ( 297.4 ) $ ( 324.9 )

Gains (Losses) on Derivative Instruments

At July 2, 2023, the Company had remaining net deferred losses on foreign currency forward contracts, net of tax, of $ 5.0 million in accumulated other comprehensive earnings (loss) ("AOCE").

These instruments hedge payments related to inventory purchased in the second quarter of 2023 or forecasted to be purchased during the remainder of 2023 and throughout 2024, intercompany expenses expected to be paid or received during 2023, television and movie production costs paid in 2023 or expected to be paid in 2024, and cash receipts for sales made at the end of the first quarter of 2023 or forecasted to be made in the remainder of 2023 and throughout 2024.

At October 1, 2023, the Company had remaining net deferred gains on foreign currency forward contracts, net of tax, of $ 2.7 million in accumulated other comprehensive earnings (loss) ("AOCE").

These instruments hedge payments related to inventory purchased in the third quarter of 2023 or forecasted to be purchased during the remainder of 2023 and throughout 2024, intercompany expenses expected to be paid or received during 2023, television and movie production costs paid in 2023 or expected to be paid in 2024, and cash receipts for sales made at the end of the third quarter of 2023 or forecasted to be made in the remainder of 2023 and throughout 2024.

These amounts will be reclassified into the consolidated statements of operations upon the sale of the related inventory, the recognition of the related production costs or the recognition of the related sales or intercompany expenses to be paid or received.

1 unchanged sentence

At the date of debt issuance, these contracts were terminated and the fair value on the date of settlement was deferred in AOCE and is being amortized to interest expense over the life of the related notes using the effective interest rate method.

At July 2, 2023, deferred losses, net of tax of $ 14.6 million related to these instruments remained in AOCE.

For the quarters ended July 2, 2023 and June 26, 2022, previously deferred losses of $ 0.2 million related to these instruments were reclassified from AOCE to net earnings.

For the six months ended July 2, 2023 and June 26, 2022, previously deferred losses of $ 0.3 million and $ 0.4 million were reclassified from AOCE to net earnings, respectively.

Of the net deferred losses included in AOCE at July 2, 2023, the Company expects net losses of approximately $ 4.8 million to be reclassified to the consolidated statements of operations within the next 12 months.

At October 1, 2023, deferred losses, net of tax of $ 14.4 million related to these instruments remained in AOCE.

For the quarters ended October 1, 2023 and September 25, 2022, previously deferred losses of $ 0.2 million related to these instruments were reclassified from AOCE to net earnings.

For the nine months ended October 1, 2023 and September 25, 2022, previously deferred losses of $ 0.5 million were reclassified from AOCE to net earnings, respectively.

Of the net deferred losses included in AOCE at October 1, 2023, the Company expects net losses of approximately $ 0.4 million to be reclassified to the consolidated statements of operations within the next 12 months.

However, the amount ultimately realized in earnings is dependent on the fair value of the hedging instruments on the settlement dates.

3 unchanged sentences

(6) Accrued Liabilities

Components of accrued liabilities for the periods ended July 2, 2023, June 26, 2022 and December 25, 2022 were as follows:

June 26, 2022

Components of accrued liabilities for the periods ended October 1, 2023, September 25, 2022 and December 25, 2022 were as follows:

October 1, 2023

September 25, 2022

December 25, 2022

Participations and residuals $ 287.0 $ 302.3 $ 300.2

Royalties $ 148.9 $ 238.4 $ 195.4

2 unchanged sentences

Cancellation charges 83.0 65.5 89.2

Severance 70.7 27.5 100.3

Other taxes 63.8 69.2 82.1

Accrued expenses - IIP & IIC 57.3 34.8 80.8

Payroll and management incentives 62.9 98.4 66.7

General vendor accruals 57.9 44.1 44.3

Severance 55.5 39.1 100.3

Advertising 52.3 103.5 53.2

Accrued income taxes 50.8 59.5 44.8

Lease liability - current 35.2 44.0 39.6

Interest 38.1 38.7 31.0

Payroll and management incentives 31.2 52.1 66.7

Freight 32.3 47.7 28.5

Participations and residuals 30.4 266.7 300.2

Lease liability - current 28.1 40.4 39.6

Accrued income taxes 27.3 58.6 44.8

Defined contributions plans 27.3 26.7 30.0

Accrued expenses - IIP & IIC 2.7 51.9 80.8

Production payables 0.9 23.8 23.8

Other 64.8 95.9 88.9

Total accrued liabilities (1)

$ 985.4 $ 1,537.5 $ 1,506.8

(1) For the nine-month period ended October 1, 2023, liabilities of $ 607.4 million attributable to the Film & TV business, which were previously classified within Accrued liabilities, have been transferred to Liabilities held for sale.

For the nine-month period ended September 25, 2022, liabilities of $ 15.0 million attributable to non-core entertainment businesses, which were previously classified within Accrued liabilities, were transferred to Liabilities held for sale.

Condensed Notes to Consolidated Financial Statements

2 unchanged sentences

The Company's financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities.

At July 2, 2023, June 26, 2022 and December 25, 2022, the carrying cost of these instruments approximated their fair value.

The Company's financial instruments at July 2, 2023, June 26, 2022 and December 25, 2022 also include certain assets and liabilities measured at fair value (see notes 10 and 11) as well as long-term borrowings.

The carrying costs, which are equal to the outstanding principal amounts, and fair values of the Company's long-term borrowings as of July 2, 2023, June 26, 2022 and December 25, 2022 are as follows:

July 2, 2023 June 26, 2022 December 25, 2022

At October 1, 2023, September 25, 2022 and December 25, 2022, the carrying cost of these instruments approximated their fair value.

The Company's financial instruments at October 1, 2023, September 25, 2022 and December 25, 2022 also include certain assets and liabilities measured at fair value (see notes 10 and 11) as well as long-term borrowings.

The carrying costs, which are equal to the outstanding principal amounts, and fair values of the Company's long-term borrowings as of October 1, 2023, September 25, 2022 and December 25, 2022 are as follows:

October 1, 2023 September 25, 2022 December 25, 2022

Value Carrying

16 unchanged sentences

Production Financing Facilities (1)

— 62.6 62.6 53.2 53.2

Total long-term debt $ 3,734.9 3,463.1 $ 3,872.5 3,638.4 $ 3,848.1 3,626.3

2 unchanged sentences

Long-term debt $ 3,654.6 3,463.1 $ 3,725.1 3,638.4 $ 3,711.2 3,626.3

(1) During the third quarter of 2023, all production financing facilities attributable to the non-core eOne Film and TV business, which were previously classified within Current portion of long-term debt, have been transferred to Liabilities held for sale.

In November 2019, in conjunction with the Company's acquisition of eOne, the Company issued an aggregate of $ 2.4 billion of senior unsecured debt securities (the "Notes") consisting of the following tranches:

9 unchanged sentences

In addition, on and after October 19, 2024 for the 2024 Notes, September 19, 2026 for the 2026 Notes and August 19, 2029 for the 2029 Notes, such series of Notes will be redeemable, in whole at any time or in part from time to time, at the Company's option at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed plus any accrued and unpaid interest.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

In September 2019, the Company entered into a $ 1.0 billion Term Loan Agreement (the "Term Loan Agreement”) with Bank of America N.A.

5 unchanged sentences

$ 87.5 million in 2022;

and $ 45.0 million of principal amortization payments in the first six months of 2023.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

and $ 60.0 million of principal amortization payments in the first nine months of 2023.

Loans under the remaining Five-Year Tranche bear interest at the Company’s option, at either the adjusted Term Secured Overnight Financing Rate ("SOFR"), plus an applicable margin, or the Base Rate, plus a per annum applicable rate that fluctuates between 100.0 basis points and 187.5 basis points, in the case of loans priced at the SOFR, and between 0.0 basis points and 87.5 basis points, in the case of loans priced at the Base Rate, in each case, based upon the non-credit enhanced, senior unsecured long-term debt ratings of the Company by Fitch Ratings Inc., Moody’s Investor Service, Inc.

3 unchanged sentences

(i) restrictions on the Company’s and its domestic subsidiaries’ ability to allow liens on their assets, (ii) restrictions on the incurrence of indebtedness, (iii) restrictions on the Company’s and certain of its subsidiaries’ ability to engage in certain mergers, (iv) the requirement that the Company maintain a Consolidated Interest Coverage Ratio of no less than 3.00 :1.00 as of the end of any fiscal quarter and (v) the requirement that the Company maintain a Consolidated Total Leverage Ratio of no more than, depending on the gross proceeds of equity securities issued after the effective date of the acquisition of eOne, 5.65 :1.00 or 5.40 :1.00 for each of the first, second and third fiscal quarters ended after the funding of the Term Loan Facilities, with periodic step downs to 3.50 :1.00 for the fiscal quarter ending December 31, 2023 and thereafter.

As of July 2, 2023, the Company was in compliance with the financial covenants contained in the Term Loan Agreement.

As of October 1, 2023, the Company was in compliance with the financial covenants contained in the Term Loan Agreement.

The Company may redeem its 5.10 % notes due in 2044 (the "2044 Notes") at its option, at the greater of the principal amount of the notes or the present value of the remaining scheduled payments, discounted using the effective interest rate on applicable U.S.

Treasury bills at the time of repurchase.

Current portion of long-term debt at July 2, 2023 of $ 69.4 million, as shown on the consolidated balance sheet, represents the current portion of required quarterly principal amortization payments for the Five-Year Tranche of the Term Loan Facilities and production financing facilities.

All of the Company’s other long-term borrowings have contractual maturities that occur subsequent to 2023 with the exception of certain of the Company's production financing facilities and annual principal payments related to the Term Loan Facilities.

Current portion of long-term debt at October 1, 2023 of $ 60.0 million, as shown on the consolidated balance sheet, represents the current portion of required quarterly principal amortization payments for the Five-Year Tranche of the Term Loan Facilities.

All of the Company’s other long-term borrowings have contractual maturities that occur subsequent to 2023 with the exception of annual principal payments related to the Term Loan Facilities.

The fair values of the Company's long-term debt are considered Level 3 fair values (see note 10 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method.

2 unchanged sentences

The Company believes that this is the best information available for use in the fair value measurement.

Financing Arrangements

In September 2023, the Company entered into a third amended and restated revolving credit agreement with Bank of America, as administrative agent, swing line lender, a letter of credit issuer and a lender and certain other financial institutions, as lenders thereto (the "Amended Revolving Credit Agreement"), which provides the Company with commitments having a maximum aggregate principal amount of $ 1.25 billion.

The Amended Revolving Credit Agreement contains certain financial covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment grade facility, including with respect to liens, mergers and incurrence of indebtedness.

It also provides for a potential additional incremental commitment increase of up to $ 500.0 million subject to agreement of the lenders.

Loans under the revolving credit facility bear interest, at the Company’s option, at either the Adjusted Term Benchmark Rate (determined in accordance with the Amended Revolving Credit Agreement), the Base Rate (determined in accordance with the Amended Revolving Credit Agreement) or the Daily Benchmark Rate (determined in accordance with the Amended Revolving Credit Agreement).

In each case there is also a spread added to the rate, which fluctuates based upon the more favorable of the Company’s long-term debt ratings and the Company’s leverage.

The Company is also required to pay a commitment fee in

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

respect to the unused commitments under the facility, the rate for which is also determined based upon the more favorable of the Company's long-term debt ratings and leverage.

The Amended Revolving Credit Agreement contains affirmative and negative covenants typical of this type of facility, including:

(a) restrictions on the Company’s and its domestic subsidiaries’ ability to allow liens on their assets, (b) restrictions on the incurrence of indebtedness, (c) restrictions on the Company’s and certain of its subsidiaries’ ability to engage in certain mergers, (d) the requirement that the Company maintain a Consolidated Interest Coverage Ratio of no less than 3.00 :1.00 as of the end of any fiscal quarter and (e) the requirement that the Company maintain:

prior to the date on which the disposition of the Company’s eOne film and television business pursuant to the Equity Purchase Agreement, dated as of August 3, 2023, by and among the Company, Lions Gate Entertainment Corp., Lions Gate Entertainment Inc.

and Lions Gate International Motion Pictures S.À.R.L.

is consummated (the “EOne Disposition Date”), a Consolidated Total Leverage Ratio of no more than (1) 4.10 :1.00 for the quarter ended September 30, 2023 and (2) 3.50 :1.00 for the quarter ended December 31, 2023 and thereafter and on and after the EOne Disposition Date, a Consolidated Net Total Leverage Ratio of no more than (1) 4.00 :1.00 for each of the quarters ended September 30, 2023 and December 31, 2023, (2) 3.75 :1.00 for each of the first, second and fourth fiscal quarters of each year (other than 2023) and (3) 4.00 :1:00 for the third fiscal quarter of each year (other than 2023).

Production Financing

7 unchanged sentences

Production financing facilities typically have maturities of less than two years , while the titles are in production, and are repaid once delivered and all credits, broadcaster pre-sales and international sales have been received.

The production financing facilities as of July 2, 2023, June 26, 2022 and December 25, 2022 are as follows:

June 26, 2022 December 25, 2022

The production financing facilities as of October 1, 2023, September 25, 2022 and December 25, 2022 are as follows:

October 1, 2023

September 25, 2022 December 25, 2022

Production financing facilities included in the consolidated balance sheet as:

Current liabilities (1)

Interest is charged at bank prime rate plus a margin based on the risk of the respective production.

The weighted average interest rate on all production financing as of July 2, 2023 was 6.8 %.

The Company has Canadian dollar and U.S.

dollar production financing loans with various banks.

The carrying amounts are denominated in the following currencies:

Canadian Dollars U.S.

Dollars Total

As of July 2, 2023

$ — $ 184.9 $ 195.6

The following table represents the movements in production financing loans during the first six months of 2023:

(1) During the third quarter of 2023, production financing facilities of $ 150.9 million attributable to the non-core eOne Film and TV business, which were previously classified within Current portion of long-term debt, have been transferred to Liabilities held for sale.

The following table represents the movements in production financing loans during the first nine months of 2023:

Production Financing

2 unchanged sentences

Repayments ( 162.0 )

Reclass to Liabilities held for sale (2)

Foreign exchange differences ( 0.6 )

Balance at July 2, 2023

The Company expects to repay all of its currently outstanding production financing loans by the second quarter of 2024.

Balance at October 1, 2023

(2) See note 15 for additional information on assets and liabilities held for sale.

(8) Investments in Productions and Investments in Acquired Content Rights

Investments in productions and investments in acquired content rights are predominantly monetized on a title-by-title basis and are recorded within other assets in the Company's consolidated balance sheets, to the extent they are considered recoverable against future revenues.

These amounts are being amortized to program cost amortization using a model that reflects the consumption of the asset as it is released through various channels including broadcast licenses, theatrical release and home entertainment.

Amounts capitalized are reviewed periodically on an individual title basis and any portion of the unamortized amount that appears not to be recoverable from future net revenues is expensed as part of program cost amortization during the period the loss becomes evident.

These amounts are being amortized to program cost amortization using a model that reflects the

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

The Company's unamortized investments in productions and investments in acquired content rights consisted of the following at July 2, 2023, June 26, 2022, and December 25, 2022:

June 26, 2022 December 25, 2022

consumption of the asset as it is released through various channels including broadcast licenses, theatrical release and home entertainment.

The Company's unamortized investments in productions and investments in acquired content rights consisted of the following at October 1, 2023, September 25, 2022, and December 25, 2022:

October 1, 2023 (1)

September 25, 2022 December 25, 2022

Investment in Films and Television Programs:

1 unchanged sentence

Released, net of amortization (2)

$ 78.3 $ 486.3 $ 584.5

Completed and not released — 1.2 23.3

13 unchanged sentences

Total Program Investments $ 196.5 $ 846.2 $ 921.4

The Company recorded $ 256.9 million of program cost amortization related to released programming in the six months ended July 2, 2023, consisting of the following:

Investment in Production Investment in Content Total

Program cost amortization $ 234.2 $ 22.7 $ 256.9

(1) During the third quarter of 2023, investments in productions and investments in acquired content rights of $ 734.5 million, net of accumulated amortization, attributable to the non-core eOne Film and TV business, which were previously classified within Other assets, were transferred to Assets held for sale.

(2) During the second quarter of 2023, the Company recorded film production cost impairment charges of $ 25.0 million associated with Dungeons & Dragons:

1 unchanged sentence

The film impairment charges reflected the excess of the unamortized costs of the impaired film over its estimated fair value using estimated discounted future cash flows.

The Company recorded $ 325.3 million of program cost amortization related to released programming in the nine months ended October 1, 2023, consisting of the following:

Investment in Production Investment in Content Total

Program cost amortization $ 294.5 $ 30.8 $ 325.3

(9) Income Taxes

2 unchanged sentences

federal, state and local, and international tax authorities in various tax jurisdictions.

Our effective tax rate ("ETR") from continuing operations was ( 3.1 )% for the six months ended July 2, 2023 and 21.8 % for the six months ended June 26, 2022.

Our effective tax rate ("ETR") from continuing operations was 8.0 % for the nine months ended October 1, 2023 and 22.1 % for the nine months ended September 25, 2022.

The following items caused the year-to-date ETR to be significantly different from the prior year ETR:

• during the six months ended July 2, 2023, the Company recorded an impairment of goodwill related to the Film and TV reporting unit of $ 231.2 million with no tax benefit.

The Company also recorded a net discrete tax benefit of $ 8.9 million, exclusive of the goodwill impairment, primarily associated with a tax benefit on the impairment of trade names in the Entertainment segment, offset by stock-based compensation and net activity related to uncertain tax

• during the nine months ended October 1, 2023, the Company recorded an impairment of goodwill related to the Film and TV reporting unit of $ 231.2 million with no tax benefit.

The Company also recorded a net discrete tax benefit of

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

positions, primarily interest accruals, combined with the phasing of the Company's income earned throughout 2023, and;

• during the six months ended June 26, 2022, the Company recorded a net discrete tax benefit of $ 3.2 million, primarily associated with the release of certain valuation allowances during the first quarter.

$ 113.3 million, exclusive of the goodwill impairment, primarily associated with tax benefits on the impairment of trade names in the Entertainment segment during the second quarter and the $ 473.0 million loss on assets held for sale in the third quarter, and;

• during the nine months ended September 25, 2022, the Company recorded a net discrete tax benefit of $ 6.7 million, primarily associated with (i) the release of certain valuation allowances during the first quarter;

(ii) the decrease to our liability for uncertain tax positions that resulted from statutes of limitations expiring in certain jurisdictions;

and (iii) a benefit on the loss of assets held for sale in the third quarter.

The Company is no longer subject to U.S.

16 unchanged sentences

(Millions of Dollars and Shares Except Per Share Data)

At July 2, 2023, June 26, 2022 and December 25, 2022, the Company had the following assets and liabilities measured at fair value in its consolidated balance sheets (excluding assets for which the fair value is measured using net asset value per share):

At October 1, 2023, September 25, 2022 and December 25, 2022, the Company had the following assets and liabilities measured at fair value in its consolidated balance sheets (excluding assets for which the fair value is measured using net asset value per share):

Fair Value Measurements Using:

1 unchanged sentence

(Level 2) Significant

October 1, 2023

Available-for-sale securities (1)

$ 1.2 1.2 — —

Derivatives (2)

1 unchanged sentence

Derivatives (2)

$ 2.1 — 2.1 —

Option agreement 1.7 — — 1.7

Total liabilities $ 3.8 — 2.1 1.7

June 26, 2022

September 25, 2022

Available-for-sale securities $ — — — —

12 unchanged sentences

(1) Available-for-sale securities include equity securities of one company quoted on an active public market.

(2) These balances include certain amounts attributable to the non-core eOne Film and TV business that were reclassified to Assets held for sale and Liabilities held for sale at October 1, 2023.

See note 15 for additional information.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

The Company's derivatives consist of foreign currency forward and option contracts.

1 unchanged sentence

The Company’s option agreement relates to an equity method investment in Discovery Family Channel ("Discovery").

The option agreement is included in other liabilities at July 2, 2023, June 26, 2022 and December 25, 2022, and is valued using an option pricing model based on the fair value of the related investment.

The option agreement is included in other liabilities at October 1, 2023, September 25, 2022 and December 25, 2022, and is valued using an option pricing model based on the fair value of the related investment.

Inputs used in the option pricing model include the volatility and fair value of the underlying company which are considered unobservable inputs as they reflect the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability.

The Company believes that this is the best information available for use in the fair value measurement.

There were no changes in these valuation techniques during the quarter ended July 2, 2023.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

There were no changes in these valuation techniques during the quarter ended October 1, 2023.

The following is a reconciliation of the beginning and ending balances of the fair value measurements of the Company's financial instruments which use significant unobservable inputs (Level 3):

Balance at beginning of year $ ( 1.7 ) $ ( 1.7 )

Balance at end of second quarter $ ( 1.7 ) $ ( 1.7 )

Balance at end of third quarter

$ ( 1.7 ) $ ( 1.7 )

(11) Derivative Financial Instruments

Hasbro uses foreign currency forward contracts and foreign exchange option contracts to mitigate the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions.

These over-the-counter contracts, which hedge future currency requirements related to purchases of inventory, product sales, television and film production cost and production financing loans (see note 7) as well as other cross-border transactions not denominated in the functional currency of the business unit, are primarily denominated in United States and Hong Kong dollars, and Euros.

These over-the-counter contracts, which hedge future currency requirements related to purchases of inventory, product sales and television and film production costs (see note 7), as well as other cross-border transactions not denominated in the functional currency of the business unit, are primarily denominated in United States and Hong Kong dollars, and Euros.

All contracts are entered into with a number of counterparties, all of which are major financial institutions.

3 unchanged sentences

All of the Company's designated foreign currency forward contracts are considered to be cash flow hedges.

These instruments hedge a portion of the Company's currency requirements associated with anticipated inventory purchases, product sales, certain production financing loans and other cross-border transactions, primarily for the remainder of 2023, and to a lesser extent, into 2024.

At July 2, 2023, June 26, 2022 and December 25, 2022, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:

July 2, 2023 June 26, 2022 December 25, 2022

These instruments hedge a portion of the Company's currency requirements associated with anticipated inventory purchases, product sales, certain production expenses and other cross-border transactions, primarily for the remainder of 2023, and into 2024.

At October 1, 2023, September 25, 2022 and December 25, 2022, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:

October 1, 2023 (1)

September 25, 2022 December 25, 2022

Hedged transaction Notional

5 unchanged sentences

Total $ 378.3 3.3 $ 353.3 25.0 $ 382.3 —

(1) Includes certain cash flow hedges attributable to the non-core eOne Film and TV business, which were reclassified to Assets held for sale and Liabilities held for sale at October 1, 2023.

See note 15 for additional information.

Condensed Notes to Consolidated Financial Statements

1 unchanged sentence

The Company has a master agreement with each of its counterparties that allows for the netting of outstanding forward contracts.

The fair values of the Company's foreign currency forward contracts designated as cash flow hedges are recorded in the consolidated balance sheets at July 2, 2023, June 26, 2022 and December 25, 2022 as follows:

2023 June 26,

The fair values of the Company's foreign currency forward contracts designated as cash flow hedges are recorded in the consolidated balance sheets at October 1, 2023, September 25, 2022 and December 25, 2022 as follows:

October 1, 2023 (1)

September 25,

2022 December 25,

10 unchanged sentences

Net unrealized losses $ ( 2.0 ) $ ( 0.1 ) $ ( 2.8 )

Other liabilities

Unrealized losses ( 0.4 ) — —

Net unrealized losses $ ( 0.4 ) $ — $ —

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters and six months ended July 2, 2023 and June 26, 2022 as follows:

Quarter Ended Six Months Ended

2023 June 26,

(1) Includes certain balances attributable to the non-core eOne Film and TV business which were reclassified to Assets held for sale and Liabilities held for sale at October 1, 2023.

See note 15 for additional information.

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters and nine months ended October 1, 2023 and September 25, 2022 as follows:

Quarter Ended Nine Months Ended

2023 September 25,

2022 October 1,

2023 September 25,

Statements of Operations Classification

8 unchanged sentences

The Company does not use hedge accounting for these contracts as changes in the fair values of these contracts are offset by changes in the fair value of the balance sheet items.

As of July 2, 2023, June 26, 2022 and December 25, 2022 the total notional amounts of the Company's undesignated derivative instruments were $ 810.4 million, $ 464.7 million and $ 765.6 million, respectively.

As of October 1, 2023, September 25, 2022 and December 25, 2022 the total notional amounts of the Company's undesignated derivative instruments were $ 807.5 million, $ 601.3 million and $ 765.6 million, respectively.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

At July 2, 2023, June 26, 2022 and December 25, 2022, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:

2023 June 26,

At October 1, 2023, September 25, 2022 and December 25, 2022, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:

October 1, 2023

September 25,

2022 December 25,

7 unchanged sentences

Total unrealized gains, net $ 2.9 $ 13.4 $ 5.0

The Company recorded net gains of $ 6.8 million and $ 11.2 million on these instruments to other (income) expense, net for the quarter and six months ended July 2, 2023, respectively, and net gains of $ 16.7 million and $ 20.5 million for the quarter and six months ended June 26, 2022, respectively, relating to the change in fair value of such derivatives, substantially offsetting gains and losses from the change in fair value of intercompany loans to which the contracts relate.

The Company recorded net gains of $ 15.1 million and $ 26.4 million on these instruments to other (income) expense, net for the quarter and nine months ended October 1, 2023, respectively, and net gains of $ 28.7 million and $ 49.2 million for the quarter and nine months ended September 25, 2022, respectively, relating to the change in fair value of such derivatives, substantially offsetting gains and losses from the change in fair value of intercompany loans to which the contracts relate.

For additional information related to the Company's derivative financial instruments (see notes 5 and 10).

8 unchanged sentences

The Company capitalizes non-lease components for equipment leases, but expenses non-lease components as incurred for real estate leases.

The rent expense under such arrangements and similar arrangements that do not qualify as leases under ASU 2016-02, net of sublease income amounted to $ 24.8 million and $ 48.3 million for the quarter and six months ended July 2, 2023, respectively, and $ 20.9 million and $ 43.2 million for the quarter and six months ended June 26, 2022, respectively, and was not material to the Company's financial statements.

Expenses related to short-term leases (expected terms less than 12 months) or variable lease payments was not material in the quarters or six months ended July 2, 2023 or June 26, 2022.

The rent expense under such arrangements and similar arrangements that do not qualify as leases under ASU 2016-02, net of sublease income amounted to $ 21.7 million and $ 70.0 million for the quarter and nine months ended October 1, 2023, respectively, and $ 24.2 million and $ 67.4 million for the quarter and nine months ended September 25, 2022, respectively, and was not material to the Company's financial statements.

Due to the held for sale criteria being met as of October 1, 2023, certain lease assets attributable to the non-core eOne Film and TV businesses are no longer being depreciated.

Expenses related to short-term leases (expected terms less than 12 months) or variable lease payments were not material in the quarters or nine months ended October 1, 2023 or September 25, 2022.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

Information related to the Company’s leases for the quarters and six months ended July 2, 2023 and June 26, 2022 is as follows:

Quarter Ended Six Months Ended

2023 June 26,

Information related to the Company’s leases for the quarters and nine months ended October 1, 2023 and September 25, 2022 is as follows:

Quarter Ended Nine Months Ended

October 1, 2023 (1)

September 25,

2022 October 1, 2023 (1)

September 25,

Cash paid for amounts included in the measurement of lease liabilities:

6 unchanged sentences

Operating leases 3.8 % 3.4 % 3.8 % 3.4 %

The following is a reconciliation of future undiscounted cash flows to the operating liabilities, and the related right of use assets, included in our consolidated balance sheets as of July 2, 2023:

2023 (excluding the six months ended July 2, 2023) $ 21.9

(1) Includes certain amounts attributable to the non-core eOne Film and TV businesses, which were transferred to Assets held for sale and Liabilities held for sale as of October 1, 2023.

See note 15 for additional information.

The following is a reconciliation of future undiscounted cash flows to the operating liabilities, and the related right of use assets, included in our consolidated balance sheets as of October 1, 2023:

October 1, 2023 (1)

2023 (excluding the nine months ended October 1, 2023) $ 11.0

2028 and thereafter 69.8

5 unchanged sentences

Operating lease right-of-use assets, net (4)

(1) Includes certain assets and liabilities attributable to the non-core eOne Film and TV businesses, which were transferred to Assets held for sale and Liabilities held for sale as of October 1, 2023.

See note 15 for additional information.

(2) Included in Accrued liabilities on the consolidated balance sheets.

12 unchanged sentences

The significant accounting policies of the Company's segments are the same as those referenced in note 1.

Results shown for the quarter ended July 2, 2023 are not necessarily representative of those which may be expected for the full year 2023, nor were those of the comparable 2022 periods representative of those actually experienced for the full year 2022.

Results shown for the quarter ended October 1, 2023 are not necessarily representative of those which may be expected for the full year 2023, nor were those of the comparable 2022 periods representative of those actually experienced for the full year 2022.

Similarly, such results are not necessarily those which would be achieved were each segment an unaffiliated business enterprise.

Information by segment and a reconciliation to reported amounts for the quarters and six months ended July 2, 2023 and June 26, 2022 are as follows:

Information by segment and a reconciliation to reported amounts for the quarters and nine months ended October 1, 2023 and September 25, 2022 are as follows:

Quarter Ended

July 2, 2023 June 26, 2022

October 1, 2023 September 25, 2022

Net revenues External Affiliate (b)

5 unchanged sentences

$ 1,503.4 $ — $ 1,675.9 $ —

Six Months Ended

July 2, 2023 June 26, 2022

Nine Months Ended

October 1, 2023 September 25, 2022

Net revenues External Affiliate (b)

7 unchanged sentences

(Millions of Dollars and Shares Except Per Share Data)

Quarter Ended Six Months Ended

Operating profit (loss) July 2,

2023 June 26,

Quarter Ended Nine Months Ended

Operating profit (loss) October 1,

2023 September 25,

2022 October 1,

2023 September 25,

Consumer Products $ 96.1 $ 136.8 $ 61.5 $ 138.9

7 unchanged sentences

Interest income ( 3.8 ) ( 3.2 ) ( 15.6 ) ( 8.0 )

Other non-operating (income) expense ( 1.5 ) 0.2 ( 2.9 ) 0.5

Other non-operating expense (income)

2.2 ( 10.0 ) ( 0.7 ) ( 9.5 )

Earnings (loss) before income taxes $ ( 215.0 ) $ 165.6 $ ( 463.9 ) $ 425.7

Total assets July 2,

2023 June 26,

Total assets October 1,

2023 September 25,

2022 December 25,

12 unchanged sentences

(b) Amounts represent revenues from transactions with other operating segments that are included in the operating profit (loss) of the segment.

(c) Corporate and Other Operating profit (loss) includes Operational Excellence related transformation office and consulting fees of $ 10.4 million and $ 21.0 million, for the quarter and six-month periods ended July 2, 2023, respectively, which are recorded within Selling, Distribution and Administration costs within the Consolidated Statements of Operations.

(c) Corporate and Other Operating profit (loss) includes Operational Excellence related transformation office and consulting fees of $ 8.4 million and $ 29.4 million, for the quarter and nine-month periods ended October 1, 2023, respectively, which are recorded within Selling, distribution and administration costs within the Consolidated Statements of Operations.

Third party consultants were engaged to assist the Company in performing a comprehensive review of operations and developing a transformation plan designed to support the organization in identifying, realizing, and capturing savings through the identification of organizational initiatives intended to create efficiencies and improve business processes and operations.

1 unchanged sentence

The Company expects this consulting assistance to conclude in 2023 in line with the planning stages of the final components of the transformation plan.

Corporate and Other Operating Profit (loss) includes other consulting expense of $ 19.1 million and $ 21.5 million for the quarter and six month periods ended June 26, 2022, respectively, as well as incentive compensation for all periods presented.

Corporate and Other Operating Profit (loss) includes other consulting expense of $ 2.8 million and $ 24.3 million for the quarter and nine month periods ended September 25, 2022, respectively, as well as incentive compensation for all periods presented.

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

The following table represents consolidated Consumer Products segment net revenues by major geographic region for the quarters and six months ended July 2, 2023 and June 26, 2022:

Quarter Ended Six Months Ended

2023 June 26,

The following table represents consolidated Consumer Products segment net revenues by major geographic region for the quarters and nine months ended October 1, 2023 and September 25, 2022:

Quarter Ended Nine Months Ended

2023 September 25,

2022 October 1,

2023 September 25,

North America $ 573.6 $ 693.3 $ 1,234.7 $ 1,531.8

3 unchanged sentences

Net revenues $ 956.9 $ 1,160.8 $ 2,132.5 $ 2,567.8

The following table represents consolidated Wizards of the Coast and Digital Gaming segment net revenues by category for the quarters and six months ended July 2, 2023 and June 26, 2022:

Quarter Ended Six Months Ended

2023 June 26,

The following table represents consolidated Wizards of the Coast and Digital Gaming segment net revenues by category for the quarters and nine months ended October 1, 2023 and September 25, 2022:

Quarter Ended Nine Months Ended

2023 September 25,

2022 October 1,

2023 September 25,

Tabletop Gaming $ 290.5 $ 246.3 $ 806.9 $ 800.3

1 unchanged sentence

Net revenues $ 423.6 $ 303.5 $ 1,094.4 $ 986.1

The following table represents consolidated Entertainment segment net revenues by category for the quarters and six months ended July 2, 2023 and June 26, 2022:

Quarter Ended Six Months Ended

2023 June 26,

The following table represents consolidated Entertainment segment net revenues by category for the quarters and nine months ended October 1, 2023 and September 25, 2022:

Quarter Ended Nine Months Ended

2023 September 25,

2022 October 1,

2023 September 25,

Film and TV $ 102.1 $ 188.6 $ 423.8 $ 527.0

7 unchanged sentences

(Millions of Dollars and Shares Except Per Share Data)

The following table presents consolidated net revenues by brand portfolio for the quarters and six months ended July 2, 2023 and June 26, 2022:

Quarter Ended Six Months Ended

Net revenues July 2,

2023 June 26,

The following table presents consolidated net revenues by brand portfolio for the quarters and nine months ended October 1, 2023 and September 25, 2022:

Quarter Ended Nine Months Ended

Net revenues October 1,

2023 September 25,

2022 October 1,

2023 September 25,

Franchise Brands $ 1,011.0 $ 939.8 $ 2,412.8 $ 2,416.2

4 unchanged sentences

Net revenues from Hasbro's Total Gaming category, including all gaming revenue, most notably DUNGEONS & DRAGONS, MAGIC:

THE GATHERING and Hasbro Gaming, totaled $ 491.2 million and $ 528.3 million for the quarters ended July 2, 2023 and June 26, 2022, respectively, of which MAGIC:

THE GATHERING and Hasbro Gaming, totaled $ 628.0 million and $ 508.6 million for the quarters ended October 1, 2023 and September 25, 2022, respectively, of which MAGIC:

THE GATHERING contributed $ 287.4 million and $ 239.3 million, respectively.

Net revenues from Hasbro's Total Gaming category totaled $ 877.7 million and $ 907.1 million for the six months ended July 2, 2023 and June 26, 2022, respectively, of which MAGIC:

Net revenues from Hasbro's Total Gaming category totaled $ 1,505.7 million and $ 1,415.7 million for the nine months ended October 1, 2023 and September 25, 2022, respectively, of which MAGIC:

THE GATHERING contributed $ 827.5 million and $ 802.0 million, respectively.

1 unchanged sentence

During 2018 and 2020, the Company took certain restructuring actions including headcount reduction aimed at right-sizing the Company’s cost-structure and integration actions related to the acquisition of eOne.

As of July 2, 2023, the Company had a remaining balance of $ 7.1 million in severance and other employee expenses related to these programs included within other accrued liabilities in the Consolidated Balance Sheets, after making payments of $ 2.0 million in fiscal 2023.

As of October 1, 2023, the Company had a remaining balance of $ 6.7 million in severance and other employee expenses related to these programs included within other accrued liabilities in the Consolidated Balance Sheets, after making payments of $ 2.3 million in fiscal 2023.

Substantially all of the remaining cash payments related to these programs are expected to be made by the end of 2024.

During 2022, in support of Blueprint 2.0, Hasbro announced an Operational Excellence program ("the Program"), an ongoing enterprise-wide initiative intended to improve our business through specialized organizational programs that include targeted cost-savings, supply chain transformation and certain other restructuring actions designed to drive growth and enhance shareholder value.

In January 2023, in connection the Program we announced the elimination of approximately 1,000 positions from our global workforce, or approximately 15 % of global full-time employees.

Charges related to the Program were recorded in Selling, Distribution and Administration within Corporate and Other.

1 unchanged sentence

Going forward, the Company may implement further cost-saving initiatives under the Program that could result in additional restructuring charges including severance and other employee charges.

As of July 2, 2023, the liability balance included within other accrued liabilities in the Consolidated Balance Sheets for the restructuring actions associated with the Program is as follows:

As of October 1, 2023, the liability balance included within other accrued liabilities in the Consolidated Balance Sheets for the restructuring actions associated with the Program is as follows:

Operational Excellence Severance Total

2 unchanged sentences

2023 payments ( 33.9 ) ( 33.9 )

Balance at July 2, 2023 $ 58.8 $ 58.8

The following table presents the restructuring charges incurred to date under the Program, along with the estimated charges expected to be incurred on approved initiatives under the plan as of July 2, 2023:

Balance at October 1, 2023

$ 51.0 $ 51.0

Operational Excellence Severance Total

2 unchanged sentences

Total expected charges on approved initiatives $ 94.1 $ 94.1

(15) Subsequent Event

Sale of Non-core Film and TV Business

On August 3, 2023, the Company announced it reached a definitive agreement with Lionsgate Entertainment Corp.

to sell its eOne Film and TV business for approximately $ 500.0 million, consisting of $ 375.0 million in cash, subject to certain purchase

Condensed Notes to Consolidated Financial Statements

(Millions of Dollars and Shares Except Per Share Data)

price adjustments, and the assumption by Lionsgate of production financing loans.

The sale will include a team of employees, a content library of approximately 6,500 titles, active productions for certain non-Hasbro owned intellectual properties, and the eOne unscripted television business which will also include rights to produce certain Hasbro-based shows.

The pending transaction is subject to receipt of regulatory approvals and satisfaction of customary closing conditions and is expected to close before the end of fiscal 2023.

The Company intends to use the net proceeds from the sale to retire floating rate debt and for other general corporate purposes.

Following the transaction, Hasbro will maintain the capability to develop and produce entertainment including animation, digital shorts, scripted TV and theatrical films related to core Hasbro IP.

The Family Brands business, including the brands PEPPA PIG and PJ MASKS, are not included in the sale transaction.

(15) Assets Held for Sale

In connection with Blueprint 2.0, and after evaluating its portfolio of businesses, the Company determined that its non-core eOne Film and TV business, which is included within the Entertainment segment, is no longer aligned with its current long-term strategy and during the third quarter of 2023, the Company entered into a definitive agreement to sell its non-core eOne Film and TV business to Lions Gate Entertainment.

The pending transaction is subject to the satisfaction of customary closing conditions and is expected to close before the end of fiscal 2023.

The Company determined that the carrying value of the non-core eOne Film and TV business was greater than its fair value and, accordingly, recorded a pre-tax non-cash loss on assets held for sale of $ 473.0 million for the quarter and nine months ended October 1, 2023, in the Company’s consolidated statements of operations, within the Entertainment segment.

The Company determined that the non-core eOne Film and TV business met the criteria to be classified as held for sale at October 1, 2023, but did not meet the criteria to be classified as discontinued operations.

As a result, the related assets and liabilities were included in the separate held-for-sale line items of the asset and liability sections of the consolidated balance sheets.

The following table summarizes the assets and liabilities held for sale at October 1, 2023:

October 1, 2023

Cash and cash equivalents including restricted cash of $ 4.1 million (1)

Accounts receivable, less allowance for doubtful accounts of $ 1.4 million

Prepaid expenses and other current assets

Property, plant and equipment, less accumulated depreciation of $ 21.3 million

Write-down loss allowance (2)

Total assets held for sale

Short-term borrowings

Current portion of long-term debt

Accounts payable and accrued liabilities

Long-term debt

Other liabilities

Total liabilities held for sale

(1) The net cash and cash equivalents attributable to the non-core entertainment business will be paid for by Lionsgate under the agreement between the Company and Lionsgate dated August 3, 2023 as part of the purchase price adjustment for net debt.

(2) In addition to the write-down loss allowance of $ 457.3 million, the Company also recognized $ 15.7 million of currency translation losses on the classification of held for sale.

The pre-tax non-cash loss on assets held for sale of $ 473.0 million includes both the write-down allowance and the currency translation losses.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements