Hasbro (HAS)

Part of our strategy for remaining relevant to older children is to offer innovative children’s toy and game electronic products. The margins on many of these products are lower than more traditional toys and games and such products may have a shorter lifespan than more traditional toys and games. As a result, increasing sales of children’s toy and game electronic products may lower our overall operating margins and produce more volatility in our business.

 

As children have grown “older younger” and have become interested in more and more sophisticated and adult products, such as videogames and consumer electronics, at younger and younger ages, we have needed to work even harder to keep our products relevant for these consumers. One initiative we have been pursuing to capture the interest of older children is to offer innovative children’s electronic toys and games. Examples of such products in the last few years include VIDEONOW, CHATNOW, ZOOMBOX, our I-branded products such as I-DOG and I-CAT, and our FURREAL FRIENDS line of products, including BUTTERSCOTCH. These products, if successful, can be an effective way for us to connect with consumers and increase sales. However, children’s electronics, in addition to the risks associated with our other family entertainment products, also face certain additional risks.

 

Our costs for designing, developing and producing electronic products tend to be higher than for many of our other more traditional products, such as board games and action figures. The ability to recoup these higher costs through sufficient sales quantities and to reflect higher costs in higher prices is constrained by heavy competition in consumer electronics. As a consequence, our margins on the sales of electronic products tend to be lower than for more traditional products and we can face increased risk of not achieving sales sufficient to recover our costs. In addition, the pace of change in product offerings and consumer tastes in the electronics area is potentially even greater than for our other products. This pace of change means that the window in which a product can achieve and maintain consumer interest may be even shorter.

 

As a manufacturer of consumer products and a large multinational corporation, we are subject to various government regulations and may be subject to additional regulations in the future, violation of which could subject us to sanctions or otherwise harm our business. In addition, we could be the subject of future product liability suits or product recalls, which could harm our business.

 

As a manufacturer of consumer products, we are subject to significant government regulations, including, in the United States, under The Consumer Products Safety Act, The Federal Hazardous Substances Act, and The Flammable Fabrics Act, as well as under product safety and consumer protection statutes in our international markets. In addition, certain of our products are subject to regulation by the Food and Drug Administration or similar international authorities. While we take all the steps we believe are necessary to comply with these acts, there can be no assurance that we will be in compliance in the future. Failure to comply could result in sanctions which could have a negative impact on our business, financial condition and results of operations. We may also be subject to involuntary product recalls or may voluntarily conduct a product recall. While costs associated with product recalls have generally not been material to our business, the costs associated with future product recalls individually and in the aggregate in any given fiscal year, could be significant. In addition, any product recall, regardless of direct costs of the recall, may harm consumer perceptions of our products and have a negative impact on our future sales and results of operations.

 

Governments and regulatory agencies in the markets where we manufacture and sell products may enact additional regulations relating to product safety and consumer protection in the future, and may also increase the penalties for failure to comply with product safety and consumer protection regulations. In addition, one or more of our customers might require changes in our products, such as the non-use of certain materials, in the future. Complying with any such additional regulations or requirements could impose increased costs on our business. Similarly, increased penalties for non-compliance could subject us to greater expense in the event any of our products were found to not comply with such regulations. Such increased costs or penalties could harm our business.

 

In addition to government regulation, products that have been or may be developed by us may expose us to potential liability from personal injury or property damage claims by the users of such products. There can

be no assurance that a claim will not be brought against us in the future. Any successful claim could significantly harm our business, financial condition and results of operations.

 

As a large, multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust, customs and tax requirements, anti-boycott regulations and the Foreign Corrupt Practices Act. Our failure to successfully comply with any such legal requirements could subject us to monetary liabilities and other sanctions that could harm our business and financial condition.

 

 

Economic and public health conditions, including factors that
impact the strength of the retail market and retail demand, or
our ability to manufacture and deliver products in a timely and
cost-effective manner, can have a significant impact on our
business. The success of our family entertainment products is
dependent on consumer purchasing of those products. Consumers
may not purchase our products because the products do not
capture consumer interest and imagination or because competitor
family entertainment offerings are deemed more attractive. But
consumer spending on our products can also be harmed by factors
that negatively impact consumers’ budgets generally, and
which are not due to our product offerings.

 

Significant increases in the costs of other products which are
required by consumers, such as gasoline and home heating fuels,
may reduce household spending on discretionary entertainment
products we offer. In addition, weakened economic conditions,
lowered employment levels or recessions in any of our major
markets may significantly reduce purchases of our products.
Economic conditions may also be negatively impacted by terrorist
attacks, wars and other conflicts, increases in critical
commodity prices, or the prospect of such events. Such a
weakened economic and business climate, as well as consumer
uncertainty created by such a climate, could harm our sales and
profitability.

 

Our success and profitability not only depend on consumer demand
for our products, but also on our ability to produce and sell
those products at costs which allow for profitable sales. Rising
fuel and raw material prices, for components such as resin used
in plastics, increased transportation costs, and increased labor
costs in the markets in which our products are manufactured all
may increase our costs for producing and transporting our
products, which in turn may reduce our margins, reduce our
profitability and harm our business.

 

Other conditions, such as the unavailability of electrical
components, may impede our ability to manufacture, source and
ship new and continuing products on a timely basis. Additional
factors outside of our control could delay or increase the cost
of implementing our business initiatives and product plans or
alter our actions and reduce actual results. For example, work
stoppages, slowdowns or strikes, a severe public health pandemic
or the occurrence or threat of wars or other conflicts, could
impact our ability to manufacture or deliver product, resulting
in increased costs
and/or lost
sales for our products.

Part
of our strategy for remaining relevant to older children is to
offer innovative children’s toy and game electronic
products. The margins on many of these products are lower than
more traditional toys and games and such products may have a
shorter lifespan than more traditional toys and games. As a
result, increasing sales of children’s toy and game
electronic products may lower our overall operating margins and
produce more volatility in our business.

 

As children have grown “older younger” and have become
interested in more and more sophisticated and adult products,
such as videogames and consumer electronics, at younger and
younger ages, we have needed to work even harder to keep our
products relevant for these consumers. One initiative we have
been pursuing to capture the interest of older children is to
offer innovative children’s electronic toys and games.
Examples of such products in the last few years include
VIDEONOW, CHATNOW, ZOOMBOX, our I-branded products such as I-DOG
and I-CAT, and our FURREAL FRIENDS line of products, including
BUTTERSCOTCH. These products, if successful, can be an effective
way for us to connect with consumers and increase sales.
However, children’s electronics, in addition to the risks
associated with our other family entertainment products, also
face certain additional risks.

 

Our costs for designing, developing and producing electronic
products tend to be higher than for many of our other more
traditional products, such as board games and action figures.
The ability to recoup these higher costs through sufficient
sales quantities and to reflect higher costs in higher prices is
constrained by heavy competition in consumer electronics. As a
consequence, our margins on the sales of electronic products
tend to be lower than for more traditional products and we can
face increased risk of not achieving sales sufficient to recover
our costs. In addition, the pace of change in product offerings
and consumer tastes in the electronics area is potentially even
greater than for our other products. This pace of change means
that the window in which a product can achieve and maintain
consumer interest may be even shorter.

 

As a
manufacturer of consumer products and a large multinational
corporation, we are subject to various government regulations
and may be subject to additional regulations in the future,
violation of which could subject us to sanctions or otherwise
harm our business. In addition, we could be the subject of
future product liability suits or product recalls, which could
harm our business.

 

As a manufacturer of consumer products, we are subject to
significant government regulations, including, in the United
States, under The Consumer Products Safety Act, The Federal
Hazardous Substances Act, and The Flammable Fabrics Act, as well
as under product safety and consumer protection statutes in our
international markets. In addition, certain of our products are
subject to regulation by the Food and Drug Administration or
similar international authorities. While we take all the steps
we believe are necessary to comply with these acts, there can be
no assurance that we will be in compliance in the future.
Failure to comply could result in sanctions which could have a
negative impact on our business, financial condition and results
of operations. We may also be subject to involuntary product
recalls or may voluntarily conduct a product recall. While costs
associated with product recalls have generally not been material
to our business, the costs associated with future product
recalls individually and in the aggregate in any given fiscal
year, could be significant. In addition, any product recall,
regardless of direct costs of the recall, may harm consumer
perceptions of our products and have a negative impact on our
future sales and results of operations.

 

Governments and regulatory agencies in the markets where we
manufacture and sell products may enact additional regulations
relating to product safety and consumer protection in the
future, and may also increase the penalties for failure to
comply with product safety and consumer protection regulations.
In addition, one or more of our customers might require changes
in our products, such as the non-use of certain materials, in
the future. Complying with any such additional regulations or
requirements could impose increased costs on our business.
Similarly, increased penalties for non-compliance could subject
us to greater expense in the event any of our products were
found to not comply with such regulations. Such increased costs
or penalties could harm our business.

 

In addition to government regulation, products that have been or
may be developed by us may expose us to potential liability from
personal injury or property damage claims by the users of such
products. There can

be no assurance that a claim will not be brought against us in
the future. Any successful claim could significantly harm our
business, financial condition and results of operations.

 

As a large, multinational corporation, we are subject to a host
of governmental regulations throughout the world, including
antitrust, customs and tax requirements, anti-boycott
regulations and the Foreign Corrupt Practices Act. Our failure
to successfully comply with any such legal requirements could
subject us to monetary liabilities and other sanctions that
could harm our business and financial condition.

 

actions and reduce actual results. For example, work stoppages, slowdowns or strikes, a severe public health pandemic or the occurrence or threat of wars or other conflicts, could impact our ability to manufacture or deliver product, resulting in increased costs and/or lost sales for our products.