Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

OBJECTIVE

Our objective within the following discussion is to provide an analysis of the Company’s Results of Operations, Financial Condition, and Cash Flows from management's perspective, which should be read in conjunction with the Company’s consolidated financial statements and notes thereto, included in Part I, Item 1 of this Form 10-Q.

Unless otherwise specifically indicated, all dollar or share amounts within tables herein are expressed in millions of dollars or shares, except for per share amounts.

EXECUTIVE SUMMARY

Hasbro, Inc. (“Hasbro”) is a global Branded Entertainment leader whose mission is to entertain and connect generations of fans through the wonder of storytelling and exhilaration of play. Hasbro delivers engaging brand experiences for global audiences across gaming, consumer products and entertainment, with a portfolio of iconic brands including MAGIC: THE GATHERING, DUNGEONS & DRAGONS, Hasbro Gaming, NERF, TRANSFORMERS, PLAY-DOH and PEPPA PIG, as well as premier partner brands.

Hasbro is guided by our purpose to create joy and community for all people around the world, one game, one toy, one story at a time.

For more than a decade, we have been consistently recognized for our corporate citizenship, including being named one of the 100 Best Corporate Citizens by 3BL Media, one of the World’s Most Ethical Companies by Ethisphere Institute and one of the 50 Most Community-Minded Companies in the U.S. by the Civic 50.

Recent Developments

Executive Leadership

On April 12, 2023, the Company announced the appointment of Gina Goetter as Chief Financial Officer, effective May 18, 2023, following the Company’s Annual Meeting of Shareholders. Ms. Goetter joins Hasbro from Harley Davidson, Inc., where she served as Chief Financial Officer. Prior to her time at Harley Davidson, Ms. Goetter served in senior leadership roles at Tyson Foods, Inc. and General Mills, Inc.

On April 12, 2023, the Company announced the appointment of Tim Kilpin as President, Toy, Licensing & Entertainment, effective April 24, 2023. Mr. Kilpin joins Hasbro from PlayMonster Group, LLC, where he served as Executive Chairman and Chief Executive Officer. Previously, Mr. Kilpin held senior leadership positions within the toy and entertainment industry at companies that include Activision Blizzard, Inc., Mattel, Inc. and The Walt Disney Company.

Strategic Review

On October 4, 2022, following a several months long strategic review of our business led by our CEO, we announced a go-forward strategic plan guided by our new Blueprint 2.0, a consumer-centric framework for bringing compelling and expansive brand experiences to audiences around the world. Our Blueprint 2.0 strategy focuses on what has driven our business for the past one hundred years and will serve as our foundation going forward: Play. During our review we identified opportunities to focus and scale our business, enhance operational excellence, including through specialized organizational programs and supply chain transformation, to drive growth and profit and enhance shareholder value. We are increasing strategic investment in our most valuable and profitable franchises across toys, games, entertainment and licensing, and exiting certain non-core aspects of the business.

Hasbro Transformation Office

Under our new strategic plan, we launched the Hasbro Transformation Office (HTO), a team of leaders dedicated to running a disciplined, purpose-built company that is simpler, more efficient and redesigned to drive long-term sustainable growth in markets in which we compete. Our HTO aligns and delivers on our Operational Excellence program, an enterprise-wide cost-saving initiative intended to improve our business financially, operationally and culturally from our current state and designed to deliver $250 million to $300 million in run-rate cost savings by the end of 2025. During the first quarter of 2023, we realized an additional $35 million of run-rate cost savings.

TV and Film Business

On November 17, 2022, we announced an authorization by Hasbro's Board of Directors to initiate a marketing process to explore a sale of parts of our eOne TV and film business that do not directly support the Company’s Branded Entertainment strategy. In the event a transaction were to occur, Hasbro is expected to maintain the capability to develop and produce animation, digital shorts, scripted TV and theatrical films for audiences related to core Hasbro IP. The family brands business, including the brands PEPPA PIG and PJ MASKS, is not expected to be part of any sale transaction

involving parts of the eOne film and television business. The sale process was ongoing as of the close of the first quarter of 2023 however, there can be no assurance that the process will result in a sale.

Workforce Reduction

In alignment with the objectives of our Operational Excellence program, on January 26, 2023, we announced the undertaking of certain organizational changes which will result in the elimination of approximately 1,000 positions from our global workforce in 2023, or approximately 15% of global full-time employees.

Brand Portfolio Realignment

Effective for the first quarter 2023, we realigned our brand portfolios to correspond with the evolution of our Blueprint 2.0 strategy. 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.

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

◦Franchise Brands - A refreshed group of our most profitable brands that includes DUNGEONS & DRAGONS, Hasbro Gaming, MAGIC: THE GATHERING, NERF, PEPPA PIG, PLAY-DOH, and TRANSFORMERS.

◦Partner Brands - The Partner Brands category includes those brands we license from other parties such as Disney's STAR WARS and MARVEL as well as other partners, for which we develop toy and game products, with a focus on those key Partner Brands that give us the largest growth potential and where we can lead and innovate in the category.

◦Portfolio Brands - Our Portfolio Brands category includes those brands we own or control which we feel have upside in revenue and profitability that have not yet grown to the significance of a franchise brand.

◦Non-Hasbro Branded Film & TV - The Non-Hasbro Branded Film & TV category includes non-Hasbro-branded film, TV and other entertainment related revenues. All Hasbro-branded content is included in the portfolios noted above.

During each of the periods presented in this Form 10-Q there were certain charges incurred which impacted operating segment results in the Company’s Consumer Products, Entertainment and Corporate and Other segments. These charges are discussed below in Results of Operations - Consolidated.

First quarter 2023 highlights:

• First quarter net revenues of $1.0 billion decreased 14% compared to the first quarter of 2022 and included an unfavorable foreign currency translation of $15.8 million. Absent the unfavorable impact of foreign currency exchange, first quarter net revenues decreased 13%.

• Consumer Products segment net revenues declined 23% to $520.4 million. Wizards of the Coast and Digital Gaming segment net revenues increased 12% to $295.2 million; and Entertainment segment net revenues declined 19% to $185.4 million.

• Net revenues from Franchise Brands declined 6%; Partner Brands net revenues declined 36%; Portfolio Brands net revenues declined 18%; and Other Entertainment net revenues declined 16%.

• Operating profit was $17.9 million, or 1.8% of net revenue in the first quarter of 2023 compared to operating profit of $120.0 million, or 10.3% of net revenue, in the first quarter of 2022.

• Operating results in the Consumer Products segment decreased greater than 100% to an operating loss of $46.0 million; Wizards of the Coast and Digital Gaming segment operating profit decreased 28% to $76.8 million; Entertainment segment operating results decreased greater than 100% to an operating loss of $8.7 million; and Corporate and Other operating losses improved 42% to an operating loss of $4.2 million.

• Certain charges impacting operating segment performance for the first quarter of 2023 and 2022, in the Company’s Consumer Products, Entertainment and Corporate and Other segments, are discussed below in Results of Operations - Consolidated.

• The net loss attributable to Hasbro, Inc. of $22.1 million, or $(0.16) per share, in the first quarter of 2023 compared to net earnings of $61.2 million, or $0.44 per diluted share, in the first quarter of 2022.

The impact of changes in foreign currency exchange rates used to translate the consolidated statements of operations is quantified by translating the current period revenues at the prior period exchange rates and comparing this amount to the prior period reported revenues. The Company believes that the presentation of the impact of changes in exchange rates, which are beyond the Company’s control, is helpful to an investor’s understanding of the performance of the underlying business.

SUMMARY OF FINANCIAL PERFORMANCE

A summary of the results of operations is illustrated below for the quarters ended April 2, 2023 and March 27, 2022.

			Quarter Ended
			April 2, 2023						March 27, 2022
Net revenues			$	1,001.0					$	1,163.1
Operating profit			17.9						120.0
(Loss) earnings before income taxes			(21.0)						80.2
Net (loss) earnings			(21.7)						62.9
Net earnings attributable to noncontrolling interests			0.4						1.7
Net (loss) earnings attributable to Hasbro, Inc.			(22.1)						61.2
Diluted (loss) earnings per share			(0.16)						0.44

RESULTS OF OPERATIONS – CONSOLIDATED

Net (loss) earnings and diluted (loss) earnings per share attributable to Hasbro, Inc. for the quarters ended April 2, 2023 and March 27, 2022 include certain charges as described below.

2023

• Net charges of $13.3 million, or $0.10 per diluted share, of intangible amortization costs related to the intangible assets acquired in the eOne Acquisition. These expenses are allocated between the Consumer Products and Entertainment segments, to match the revenue generated from such intangible assets.

• Net charges of $8.1 million, or $0.06 per diluted share, of Operational Excellence program related consultant and transformation office expenses included within Selling, Distribution and Administration within the Corporate and Other segment.

• Net charges of $1.7 million, or $0.01 per diluted share, of expense associated with retention awards granted in connection with the eOne Acquisition. These expenses are included within Selling, Distribution and Administration within the Corporate and Other segment.

2022

• Net charges of $15.9 million, or $0.11 per diluted share of intangible amortization costs related to the intangible assets acquired in the eOne acquisition. These expenses are allocated between the Consumer Products and Entertainment segments, to match the revenue generated from such intangible assets.

• Net charges of $2.3 million, $0.02 per diluted share of expense associated with retention awards granted in connection with the eOne acquisition. These expenses are included within Selling, Distribution and Administration within the Corporate and Other segment.

The quarters ended April 2, 2023 and March 27, 2022 were 14-week and 13-week periods, respectively.

Consolidated net revenues for the first quarter of 2023 declined 14% to $1,001.0 million from $1,163.1 million for the first quarter of 2022 and included an unfavorable $15.8 million impact from foreign currency translation as a result of weakening currencies, primarily in Europe.

Operating profit for the first quarter of 2023 was $17.9 million, or 1.8% of net revenues, compared to operating profit of $120.0 million, or 10.3% of net revenues, for the first quarter of 2022. In addition to the charges described above, operating results in the first quarter of 2023 reflect lower revenue volumes, primarily within the Consumer Products segment and to a lesser extent, within the Entertainment segment, higher sales allowances and closeout sales to sell through inventory, higher product development costs due to increased investments within the Wizards of the Coast business, higher advertising costs associated with the release of the Dungeons & Dragons: Honor Among Thieves motion picture and higher marketing and sales expenses. These impacts to operating results were partially offset by lower royalty expenses as result of the decline of Partner Brand sales, during the first quarter of 2023 due in part to the Company's strategic decision to exit certain licenses.

The following table presents net revenues by product category for the quarters ended April 2, 2023 and March 27, 2022.

			Quarter Ended
			April 2, 2023						March 27, 2022						% Change
Franchise Brands			$	613.4					$	650.4					-6		%
Partner Brands			132.7						206.5						-36		%
Portfolio Brands			92.0						112.6						-18		%
Non-Hasbro Branded Film & TV			162.9						193.6						-16		%
Total			$	1,001.0					$	1,163.1					-14		%

FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio decreased 6% in the first quarter of 2023 compared to the first quarter of 2022. Drivers of the net revenue decrease include lower net revenues from NERF products, lower net revenues from certain Hasbro Gaming brands, most notably MONOPOLY, and to a lesser extent, lower net revenues from PLAY-DOH and PEPPA PIG products as retailers focused on reducing inventory. These net revenue decreases were partially offset by higher net revenues from MAGIC: THE GATHERING which grew 16% driven by the first quarter 2023 set release of Phyrexia: All Will Be One, as well as from sustained demand for previously released sets, and to a lesser extent, higher net revenues from DUNGEONS & DRAGONS and TRANSFORMERS products.

PARTNER BRANDS: Net revenues from the Partner Brands portfolio decreased 36% in the first quarter of 2023 compared to the first quarter of 2022. Within the Partner Brands portfolio, there are a number of brands which are reliant on related entertainment, including television and movie releases. As such, net revenues from partner brands fluctuate depending on entertainment popularity, release dates and related product line offerings. Historically these entertainment-based brands experience higher revenues during years in which new content is released in theaters, for broadcast, and on streaming platforms.

During the first quarter of 2023, Partner Brands net revenue decreases were driven by lower sales of the Company's products for DISNEY FROZEN and DISNEY PRINCESS due to the expiration of the related license agreements in December 2022, lower net revenues from the Company's products for MARVEL compared to the first quarter of 2022, which benefited from a robust slate of entertainment releases without comparable releases in the first quarter of 2023, and to a lesser extent, lower net revenues from the Company's products for STAR WARS and BEYBLADE.

PORTFOLIO BRANDS: Portfolio Brands net revenues decreased 18% in the first quarter of 2023 compared to the first quarter of 2022. Lower net revenues from PJ MASKS and BABY ALIVE products as well as lower net revenues from certain other Portfolio Brands products were partially offset by higher net revenue from GI JOE products.

NON-HASBRO BRANDED FILM & TV: Net revenues from Non-Hasbro Branded Film & TV decreased 16% in the first quarter of 2023 compared to the first quarter of 2022 driven by lower net revenues from film production deliveries reflecting fewer new entertainment releases in 2023 compared to 2022. In addition, lower net revenues from unscripted programming, due to the timing of deliveries, contributed to the decrease in the first quarter of 2023 compared to the first quarter of 2022. These decreases were partially offset by higher net revenues from scripted programming deliveries that include The Rookie season five, The Rookie: Feds, and A Gentleman in Moscow.

SEGMENT RESULTS

The following table presents net external revenues and operating profit (loss) for the Company's principal segments for the quarters ended April 2, 2023 and March 27, 2022:

			Quarter Ended
			April 2, 2023						March 27, 2022						% Change
Net revenues
Consumer Products			$	520.4					$	672.8					-23		%
Wizards of the Coast and Digital Gaming			295.2						262.8						12		%
Entertainment			185.4						227.5						-19		%
Operating Profit (Loss)
Consumer Products			$	(46.0)					$	8.6					>-100%
Wizards of the Coast and Digital Gaming			76.8						106.4						-28		%
Entertainment			(8.7)						12.2						>-100%
Corporate and Other			(4.2)						(7.2)						42		%

Consumer Products Segment

The following table presents the Consumer Products segment net revenues by major geographic region for the quarters ended April 2, 2023 and March 27, 2022.

			Quarter Ended
			April 2, 2023						March 27, 2022
North America			$	279.1					$	405.2
Europe			131.6						176.7
Asia Pacific			63.3						52.2
Latin America			46.4						38.7
Net revenues			$	520.4					$	672.8

The Consumer Products segment net revenues declined 23% to $520.4 million for the first quarter of 2023 compared to $672.8 million for the first quarter of 2022 and included the impact of an unfavorable $8.4 million currency translation, most notably from the Company's European markets, reflecting efforts to reduce retail inventory levels. Absent the impact of foreign currency exchange, Consumer Products segment net revenues declined $144.1 million or 21% during the first quarter of 2023.

Drivers of the net revenue decrease include lower sales of NERF and PLAY-DOH products, lower sales of the Company's products for DISNEY PRINCESS and DISNEY FROZEN, following the expiration of associated license agreements in December 2022, and lower sales of the Company's products for MARVEL and STAR WARS compared to the first quarter of 2022, which benefited from a variety of entertainment releases without a comparable slate in the first quarter of 2023. To a lesser extent, lower net revenues from BEYBLADE and certain Hasbro Gaming tabletop products contributed to the decrease. These net revenue decreases were partially offset by higher sales of TRANSFORMERS, GI JOE and DUNGEON & DRAGONS products, higher sales of the Company's products for GHOSTBUSTERS as well as the introduction of the Company's products for INDIANA JONES ahead of the film Indiana Jones and the Dial of Destiny, expected in June 2023. Overall segment net revenue declines were primarily attributable to North America and to a lesser extent, the Company's European markets, partially offset by higher net revenues from the Company's Asia Pacific and Latin American markets during the first quarter of 2023.

The Consumer Products segment operating loss for the first quarter of 2023 was $46.0 million or 8.8% of segment net revenues, compared to segment operating profit of $8.6 million or 1.3% of segment net revenues, for the first quarter of 2022. The decrease in operating results in the first quarter of 2023 was driven by lower net revenues, including higher levels of closeout sales and sales allowances combined with increased obsolescence charges associated with inventory management initiatives implemented primarily in North America and Europe. These negative impacts were partially offset by savings realized from the Company's Operational Excellence program, lower royalty expenses reflecting the mix of products sold, lower advertising and promotion expense and lower freight costs during the first quarter of 2023, due to the trending improvements in global supply

chain and distribution, as well as overall improvements to managed expenses in the Company's Asia Pacific and Latin American regions.

Wizards of the Coast and Digital Gaming Segment

The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category for the quarters ended April 2, 2023 and March 27, 2022.

			Quarter Ended
			April 2, 2023						March 27, 2022
Tabletop Gaming			$	217.9					$	192.2
Digital and Licensed Gaming			77.3						70.6
Net revenues			$	295.2					$	262.8

Wizards of the Coast and Digital Gaming segment net revenues increased 12% in the first quarter of 2023 to $295.2 million from $262.8 million in the first quarter of 2022 and included the impact of an unfavorable $3.1 million foreign currency translation. Absent the impact of foreign currency exchange, Wizards of the Coast and Digital Gaming segment net revenues increased $35.5 million or 14% during the first quarter of 2023.

The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the first quarter of 2023 was attributable to higher net revenues from Wizards of the Coast tabletop gaming products, most notably, MAGIC: THE GATHERING, driven by the number and timing of set releases compared to the first quarter of 2022. In addition, higher digital gaming net revenues contributed to the increase, primarily reflecting the addition of net revenues from D&D Beyond, acquired during the second quarter of 2022. These increases were partially offset by lower net revenues from Dungeons & Dragons: Dark Alliance, launched during the first half of 2021, and lower licensing net revenues from certain of the Company's licensed digital gaming brands.

Wizards of the Coast and Digital Gaming segment operating profit was $76.8 million, or 26.0% of segment net revenues for the first quarter of 2023, compared to operating profit of $106.4 million, or 40.5% of segment net revenues, for the first quarter of 2022. The operating profit decrease during the first quarter of 2023 was driven by higher product development costs, higher administrative expenses and higher advertising expense as we continue to invest in Wizards of the Coast and Digital Gaming initiatives, including in talent, to support long-term growth within the segment. In addition, higher product costs and intangible asset amortization expense related to the acquisition of D&D Beyond contributed to the operating profit decrease during the first quarter of 2023.

Entertainment Segment

The following table presents Entertainment segment net revenues by category for the quarters ended April 2, 2023 and March 27, 2022.

			Quarter Ended
			April 2, 2023						March 27, 2022
Film and TV			$	168.4					$	190.2
Family Brands			17.0						23.2
Music and Other			—						14.1
Net revenues			$	185.4					$	227.5

Entertainment segment net revenues declined 19% to $185.4 million for the first quarter of 2023, compared to $227.5 million for the first quarter of 2022 and included the impact of an unfavorable $4.3 million foreign currency translation. Absent the impact of foreign currency exchange, Entertainment segment net revenues declined $37.6 million or 17% during the first quarter of 2023.

The net revenue decrease during the first quarter of 2023 was primarily the result of lower unscripted television net revenues due to the timing of deliveries compared to the first quarter of 2022, and lower film production net revenues reflecting fewer film deliveries in the first quarter of 2023 compared to the first quarter of 2022 which included films such as Deep Water and Clifford the Big Red Dog. These net revenue declines were partially offset by higher scripted net revenues from deliveries that include, The Rookie season five; The Rookie: Feds; and A Gentleman in Moscow. In addition, lower entertainment content sales within the Family Brands category contributed to the decline in the first quarter of 2023, due to the renewal of certain multi-year content deals in the first quarter of 2022, with no comparable activity in 2023.

Entertainment segment operating losses were $8.7 million, or 4.7% of segment net revenues for the first quarter of 2023, compared to operating profit of $12.2 million, or 5.4% of segment net revenues for the first quarter of 2022.

The decrease in Entertainment segment operating results during the first quarter of 2023 primarily reflects lower net revenues, driven by the timing and volume of programming delivered, and higher advertising expense, driven by support for the theatrical release of Dungeons & Dragons: Honor Among Thieves in March 2023. These impacts to operating results were partially offset by lower royalty expense due to the decrease in entertainment deliveries during the first quarter of 2022.

Corporate and Other Segment

The Corporate and Other segment operating losses were $4.2 million for the first quarter of 2023 compared to operating losses of $7.2 million for the first quarter of 2022. The improvement in operating results in the first quarter of 2023 was primarily the result of lower administrative expenses, partially offset by Operational Excellence program related consultant fees and transformation office expenses associated with Company's cost-savings initiatives described above, as well as higher marketing and sales expenses within the segment.

OPERATING COSTS AND EXPENSES

The Company's costs and expenses, stated as percentages of net revenues, are illustrated below for the quarters ended April 2, 2023 and March 27, 2022.

			Quarter Ended
			April 2, 2023						March 27, 2022
Cost of sales			28.5		%				28.6		%
Program cost amortization			12.2		%				11.9		%
Royalties			6.9		%				7.7		%
Product development			8.3		%				6.0		%
Advertising			8.3		%				6.7		%
Amortization of intangibles			2.3		%				2.3		%
Selling, distribution and administration			31.7		%				26.4		%

Cost of sales for the first quarter of 2023 was $285.3 million, or 28.5% of net revenues, compared to $333.1 million, or 28.6% of net revenues, for the first quarter of 2022. The cost of sales decrease in dollars was driven primarily by lower sales volumes and cost savings realized from the Company's Operational Excellence Program, partially offset by the impact of higher closeout sales and higher sales allowances during the first quarter of 2023 compared to the first quarter of 2022. Cost of sales remained consistent as a percent of net revenues.

Program cost amortization decreased to $122.5 million, or 12.2% of net revenues, for the first quarter of 2023 from $138.5 million, or 11.9% of net revenues, for the first quarter of 2022. Program costs are capitalized as incurred and amortized primarily using the individual-film-forecast method which matches costs to the related recognized revenue. The decrease in dollars during the first quarter of 2023 was driven by lower sales within the Entertainment segment, due primarily to the timing of deliveries compared to the first quarter of 2022. As a percent of net revenues, the increase in program cost amortization during the first quarter of 2023 was driven by the mix of entertainment content delivered.

Royalty expense for the first quarter of 2023 decreased to $69.0 million, or 6.9% of net revenues, compared to $90.1 million, or 7.7% of net revenues, for the first quarter of 2022. Fluctuations in royalty expense are generally related to the volume of content releases and deliveries and entertainment-driven products sold. The decrease in royalty expense during the first quarter of 2023 reflects lower sales of Partner Brands products, the exit of certain licenses and the lower number and mix of film and television deliveries compared to the first quarter of 2022.

Product development expense for the first quarter of 2023 was $83.3 million, or 8.3% of net revenues, compared to $69.6 million, or 6.0% of net revenues, for the first quarter of 2022. The increase was driven by higher investments and costs to support the Company's Wizards of the Coast tabletop and digital gaming initiatives.

Advertising expense for the first quarter of 2023 was $82.8 million, or 8.3% of net revenues, compared to $77.6 million, or 6.7% of net revenues, for the first quarter of 2022. Advertising spend is generally impacted by revenue mix and the number and type of entertainment releases delivered. The advertising expense increase during the first quarter of 2023 was driven by advertising costs within the Entertainment and Wizards of the Coast and Digital Gaming segments, in support of the theatrical release of Dungeons & Dragons: Honor Among Thieves and advertising costs associated with D&D Beyond, acquired during the second quarter of 2022, as well as higher advertising expense in support of certain other Wizards of the Coast and Digital

Gaming initiatives. These increases were partially offset by lower advertising expenses within the Consumer Products segment, primarily due to lower revenues and mix of sales during the first quarter of 2023.

Amortization of intangible assets decreased to $23.1 million, or 2.3% of net revenues, for the first quarter of 2023, compared to $27.1 million, or 2.3% of net revenues, for the first quarter of 2022. The decrease in 2023 reflects lower expense due to the partial impairment of the Company's definite-lived Power Rangers intangible assets during the fourth quarter of 2022, partially offset by additional expense associated with assets acquired through the D&D Beyond Acquisition during the second quarter of 2022.

Selling, distribution and administration expenses increased to $317.1 million, or 31.7% of net revenues for the first quarter of 2023, from $307.1 million, or 26.4% of net revenues, for the first quarter of 2022. The increase in selling, distribution and administration expenses primarily reflects consultant and transformation office charges totaling $10.6 million associated with the Company's Operational Excellence program. In addition to these charges, higher personnel costs and higher marketing and sales costs within the Wizards of the Coast and Digital Gaming segment contributed to the increase. These increases were partially offset by lower compensation expense combined with lower shipping costs compared to the first quarter of 2022 where costs were higher due to global supply chain disruptions.

NON-OPERATING EXPENSE (INCOME)

Interest expense for the first quarter of 2023 totaled $46.3 million compared to $41.6 million in the first quarter of 2022. The increase in interest expense during the first quarter of 2023 reflects higher interest expense related to borrowings from the Company's production financing credit facilities.

Interest income was $6.0 million for the first quarter of 2023 compared to $2.1 million in the first quarter of 2022. Higher interest income in 2022 primarily reflects higher average interest rates in 2023 compared to 2022.

Other (income), net was $(1.4) million for the first quarter of 2023 compared to other expense, net of $0.3 million in the first quarter of 2022. The increase in 2023 was driven primarily by the revaluation of certain contingent consideration liability balances and higher earnings from the Company's joint venture with Discovery, partially offset by higher foreign exchange losses during the first quarter of 2023 compared to the first quarter of 2022.

INCOME TAXES

Income tax expense totaled $0.7 million on pre-tax loss of $21.0 million in the first quarter of 2023, compared to income tax expense of $17.3 million on pre-tax income of $80.2 million in the first quarter of 2022. Both periods were impacted by discrete tax events including the accrual of potential interest and penalties on uncertain tax positions. During the first quarter of 2023, unfavorable discrete tax adjustments were a net expense of $3.3 million, compared to a net benefit of $2.3 million in the first quarter of 2022. The unfavorable discrete tax adjustments for the first quarter of 2023 are primarily associated with stock-based compensation. The favorable discrete tax adjustments for the first quarter of 2022 were primarily associated with the release of certain valuation allowances in the quarter. Absent discrete items, the tax rates for the first quarter of 2023 and 2022 were 12.2% and 24.4%, respectively. The decrease in the base rate of 12.2% for the first quarter of 2023 is primarily due to the mix of jurisdictions in which the Company earned its profits and lower overall earnings in the first quarter of 2023.

OTHER INFORMATION

Business Seasonality and Shipments

Within the retail sector, the Company’s revenue pattern from toys and games and licensed consumer products continues to indicate the second half of the year to be more significant to its overall business for the full year. The Company expects that this concentration will continue. The concentration of sales in the second half of the year increases the risk of (a) underproduction of popular items, (b) overproduction of less popular items, and (c) failure to achieve tight and compressed shipping schedules.

The business of the Company is characterized by customer order patterns which vary from year to year largely because of differences in the degree of consumer acceptance of a product line, product availability, marketing strategies, inventory levels, policies of retailers and differences in overall economic conditions. Larger retailers generally maintain lower inventories throughout the year and purchase a greater percentage of product within or close to the fourth quarter holiday consumer buying season, which includes Christmas.

Quick response inventory management practices being used by retailers, along with growth in ecommerce result in the increasing trend of order placement for immediate delivery and fewer orders being placed well in advance of shipment. Retailers prefer timing their orders for fulfillment by suppliers closer to the time of purchase by consumers. To the extent that retailers do not sell as much of their year-end inventory purchases during the holiday selling season as they anticipate, their demand for additional product earlier in the following fiscal year could be curtailed, thus negatively impacting the Company’s future revenues. In 2022, the Company's inventory levels and retailer order patterns reflected the impact of global consumer

demand as it began to outpace the capacity of the global supply chain infrastructure. Supply chain constraints, including overcrowding of cargo ports and shipping container and truck transportation shortages led to higher costs for ocean, air and over the road freight and delays in the availability of products, due to extended inventory transit times. These and other disruptions continued to some extent through the third quarter of 2022. During the first half of 2022, the Company accelerated certain inventory purchases, to ensure sufficient finished goods and raw material availability ahead of expected periods of high consumer demand. However, during the second half of 2022, the effects of supply chain disruptions began to subside, most notably the U.S, and Europe, leading to higher inventory levels heading into fiscal 2023, as compared to prior years. The Company is continuing to closely manage its inventory levels through closeout sales and by monitoring consumer purchase patterns, to ensure adequate supply of new product while clearing excess supply to mitigate the risk of inventory obsolescence.

Unlike the Company's retail sales patterns, revenue patterns from the Company's entertainment businesses fluctuate based on the timing and popularity of television, film, streaming and digital content releases. Release dates are determined by factors including the timing of holiday periods, geographical release dates and competition in the market.

Russian Sanctions

As a result of the military conflict in Ukraine, which has led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, the Company paused all shipments and new content distribution into Russia. The impact to the Company’s operating results includes a loss of both revenue and operating profit. As of December 25, 2022, the Company had exhausted all locally held inventories, recovered all receivables and released all reserves in Russia. Any longstanding disruptions may magnify the impact of other risks described in this Quarterly Report on Form 10-Q and in the Company's Annual Report on Form 10-K for the year ended December 25, 2022.

Accounting Pronouncement Updates

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

Recently Issued Accounting Pronouncements

As of April 2, 2023, there were no recently issued accounting pronouncements that are expected to have a material impact on the Company's consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically generated a significant amount of cash from operations. In the first three months of 2023 and 2022, the Company primarily funded its operations and liquidity needs through cash on hand and from cash flows from operations, and when needed, used borrowings under its available lines of credit. In addition, the Company’s Entertainment operating segment used production financing to fund certain of its television and film productions which are typically arranged on an individual production basis by using either the Company's revolving film and television production credit facility or through special purpose production subsidiaries. For more information on the Company's production financing facilities, including expected future repayments, see note 7 to the consolidated financial statements included in Part I, Item 1. Financial Statements, of this Form 10-Q.

During the remainder of 2023, the Company expects to continue to fund its working capital needs primarily through available cash, cash flows from operations and from production financing facilities and, if needed, by issuing commercial paper or borrowing under its revolving credit agreement. In the event that the Company is not able to issue commercial paper, the Company intends to utilize its available lines of credit. The Company believes that the funds available to it, including cash expected to be generated from operations, funds available through its commercial paper program or its available lines of credit and production financing, are adequate to meet its working capital needs for the remainder of 2023, including the repayment of the current portion of long-term debt of $109.0 million, as shown on the consolidated balance sheets which represents the current portion of required quarterly principal amortization payments for our term loan facilities and other production financing facilities, each as described below. The Company may also issue debt or equity securities from time to time, to provide additional sources of liquidity when pursuing opportunities to enhance our long-term competitive position, while maintaining a strong balance sheet. However, unexpected events or circumstances such as material operating losses or increased capital or other expenditures, or the inability to otherwise access the commercial paper market, may reduce or eliminate the availability of external financial resources. In addition, significant disruptions to credit markets may also reduce or eliminate the availability of external financial resources. Although the Company believes the risk of nonperformance by the counterparties to its financial facilities is not significant, in times of severe economic downturn in the credit markets, it is possible that one or more sources of external financing may be unable or unwilling to provide funding to the Company.

As of April 2, 2023, the Company's cash and cash equivalents totaled $386.2 million, of which $13.4 million is restricted under the Company’s production financing facilities. Prior to 2017, deferred income taxes had not been provided on the majority of

undistributed earnings of international subsidiaries as such earnings were indefinitely reinvested by the Company. Accordingly, such international cash balances were not available to fund cash requirements in the United States unless the Company was to change its reinvestment policy. The Company has maintained sufficient sources of cash in the United States to fund cash requirements without the need to repatriate any funds. The Tax Cuts and Jobs Act of 2017 ("the Tax Act") provided significant changes to the U.S. tax system including the elimination of the ability to defer U.S. income tax on unrepatriated earnings by imposing a one-time mandatory deemed repatriation tax on undistributed foreign earnings. As of April 2, 2023, the Company had a total liability of $137.7 million related to this tax, $34.4 million is reflected in current liabilities while the remaining long-term payable related to the Tax Act of $103.3 million is presented within other liabilities, non-current on the consolidated balance sheets included in Part I, Item 1. Financial Statements, of this Form 10-Q. As permitted by the Tax Act, the Company will pay the transition tax in annual interest-free installments through 2025. As a result, in the future, the related earnings in foreign jurisdictions will be made available with greater investment flexibility. The majority of the Company’s cash and cash equivalents held outside of the United States as of April 2, 2023 are denominated in the U.S. dollar.

Because of the seasonality in the Company's cash flow, management believes that on an interim basis, rather than discussing only its cash flows, a better understanding of its liquidity and capital resources can be obtained through a discussion of the various balance sheet categories. Also, as several of the major categories, including cash and cash equivalents, accounts receivable, inventories and short-term borrowings, fluctuate significantly from quarter to quarter, due to the seasonality of its business, management believes that a comparison to the comparable period in the prior year is generally more meaningful than a comparison to the prior year-end.

The table below outlines key financial information (in millions of dollars) pertaining to our consolidated balance sheets including the period-over-period changes.

			April 2, 2023						March 27, 2022						% Change
Cash and cash equivalents (including restricted cash of $13.4 and $38.8)			$	386.2					$	1,057.9					-63		%
Accounts receivable, net			685.2						931.7						-26		%
Inventories			713.4						644.3						11		%
Prepaid expenses and other current assets			754.4						621.4						21		%
Other assets			1,604.3						1,284.9						25		%
Accounts payable and accrued liabilities			1,653.9						1,783.1						-7		%
Other liabilities			585.2						633.6						-8		%

Accounts receivable decreased 26% to $685.2 million as of April 2, 2023, compared to $931.7 million as of March 27, 2022. The decrease in accounts receivable was driven by lower sales during the first three months of 2023. Days sales outstanding decreased from 73 days at March 27, 2022 to 67 days at April 2, 2023.

Inventories increased 11% to $713.4 million as of April 2, 2023, compared to $644.3 million as of March 27, 2022. The increase in during the first quarter of 2023 was driven primarily by higher inventory balances within the Wizards of the Coast and Digital Gaming segment, most notably in anticipation of several upcoming MAGIC: THE GATHERING set releases, due to release schedule timing differences compared to the first quarter of 2022 and to a lesser extent, DUNGEONS & DRAGONS product as well as TRANSFORMERS product ahead of the Transformers: Rise of the Beasts film expected in June 2023.

Prepaid expenses and other current assets increased 21% to $754.4 million as of April 2, 2023 from $621.4 million as of March 27, 2022. The increase was driven by higher accrued royalty and licensing balances, primarily attributable to the Company's Entertainment business, as well as the reclassification of certain accrued income balances from long-term to current and higher indirect tax receivable balances for certain tax jurisdictions. These increases were partially offset by lower accrued tax credit balances related to film and television production costs, due to decreased productions and timing of tax credit claims.

Other assets increased 25% to $1,604.3 million as of April 2, 2023 from $1,284.9 million as of March 27, 2022. The increase was primarily driven by higher capitalized film and television production balances due to increased investments in productions compared to the first quarter of 2022, increased investments in film and television development as well as higher deferred tax balances and higher non-current receivable balances within the Entertainment segment. These increases were partially offset by a lower balance for the Company's investment in Discovery Family Channel due to distributions received during 2022.

Accounts payable and accrued liabilities decreased 7% to $1,653.9 million as of April 2, 2023 from $1,783.1 million as of March 27, 2022 driven by lower accounts payable balances associated with the Company's global cost savings initiatives and the timing of payments, lower accrued royalty balances as a result of partner brand product sales declines, including the

expiration of certain partner brand licensing agreements, lower accrued freight balances as a result of improved supply chain conditions compared to the first quarter of 2022 as well as lower accrued advertising and lower incentive bonus accrual balances. These decreases were partially offset by higher severance accrual balances related to the Company's cost savings initiatives mentioned above.

Other liabilities decreased 8% to $585.2 million as of April 2, 2023 from $633.6 million as of March 27, 2022. The decrease was primarily driven by a lower transition tax liability balance reflecting the reclassification of the 2022 installment payment due April 2023 and lower long-term pension liability balances. These decreases were partially offset by an increase to the liability for uncertain tax positions and a higher long-term lease liability balance.

Cash Flow

The following table summarizes the changes in the Consolidated Statement of Cash Flows, expressed in millions of dollars, for the three-month periods ended April 2, 2023 and March 27, 2022.

			April 2, 2023						March 27, 2022
Net cash provided by (utilized for):
Operating activities			$	88.8					$	134.7
Investing activities			(55.6)						(23.9)
Financing activities			(156.6)						(77.5)

Net cash provided by operating activities in the first three months of 2023 was $88.8 million compared to $134.7 million in the first three months of 2022. The $45.9 million decrease in net cash provided by operating activities was primarily attributable to lower earnings during the first quarter of 2023.

Net cash utilized for investing activities was $55.6 million in the first three months of 2023 compared to net cash utilized for investing activities of $23.9 million in the first three months of 2022. Additions to property, plant and equipment were $53.2 million in the first three months of 2023 compared to $29.2 million in the first three months of 2022, reflecting increased investments in the Company's digital gaming initiatives within the Wizards of the Coast and Digital Gaming segment.

Net cash utilized for financing activities was $156.6 million in the first three months of 2023 compared to $77.5 million in the first three months of 2022. Financing activities in the first three months of 2023 include a $30.0 million principal amortization payment toward the Five-Year Tranche loan described below, as well as drawdowns of $42.8 million and repayments of $54.8 million related to production financing loans. Financing activities in the first quarter of 2022 include payments totaling $57.5 million related to the $1.0 billion in term loans consisting of $50.0 million principal and a quarterly principal amortization payment of $7.5 million toward the Five-Year Tranche loan, in addition to drawdowns of $112.2 million and repayments of $84.0 million, related to production financing loans.

Dividends paid in the first three months of 2023 totaled $96.7 million, compared to $94.5 million in the first three months of 2022 reflecting a higher dividend rate during the first three months of 2023.

Sources and Uses of Cash

The Company commits to inventory production, advertising and marketing expenditures in support of its consumer products business, prior to the peak fourth quarter retail selling season. Accounts receivable increase during the third and fourth quarter as customers increase their purchases to meet expected consumer demand in the holiday selling season. Due to the concentrated timeframe of this selling period, payments for these accounts receivable are generally not due until the fourth quarter or early in the first quarter of the subsequent year. This timing difference between expenditures and cash collections on accounts receivable sometimes makes it necessary for the Company to borrow amounts during the latter part of the year. In the Company's entertainment business, cash expenditures for productions are often made well in advance of sale and delivery of the content produced whereas trading card and digital gaming revenues have shorter collection periods, but product development expense often occurs years prior to release and revenue generation. During the first three months of 2023 and 2022, the Company primarily used cash from operations and, to a lesser extent, borrowings under available lines of credit, in particular production financing vehicles, to fund its working capital.

The Company has an agreement with a group of banks which provides for a commercial paper program (the "Program"). Under the Program, at the request of the Company and subject to market conditions, the banks may either purchase from the Company, or arrange for the sale by the Company, of unsecured commercial paper notes. The Company may issue notes from time to time up to an aggregate principal amount outstanding at any given time of $1.0 billion. The maturities of the notes may vary but may not exceed 397 days. The notes are sold under customary terms in the commercial paper market and are issued at

a discount to par, or alternatively, sold at par and bear varying interest rates based on a fixed or floating rate basis. The interest rates vary based on market conditions and the ratings assigned to the notes by the credit rating agencies at the time of issuance. Subject to market conditions, the Company intends to utilize the Program as its primary short-term borrowing facility and does not intend to sell unsecured commercial paper notes in excess of the available amount under the revolving credit agreement discussed below. If, for any reason, the Company is unable to access the commercial paper market, the Company intends to use the revolving credit agreement to meet the Company's short-term liquidity needs. At April 2, 2023, the Company had no outstanding borrowings related to the Program.

The Company has a second amended and restated revolving credit agreement with Bank of America, N.A., as administrative agent, swing line lender and a letter of credit issuer and 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 $1.5 billion. The Amended Revolving Credit Agreement also provides for a potential additional incremental commitment increase of up to $500.0 million subject to agreement of the lenders. 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. The Amended Revolving Credit Agreement extends through September 20, 2024. The Company was in compliance with all covenants as of April 2, 2023. The Company had no borrowings outstanding under its committed revolving credit facility as of April 2, 2023. However, letters of credit outstanding under this facility as of April 2, 2023 were approximately $4.0 million. Amounts available and unused under the committed line, at April 2, 2023 were approximately $1.5 billion, inclusive of borrowings under the Company’s commercial paper program. The Company also has other uncommitted lines from various banks, of which approximately $12.2 million was utilized at April 2, 2023. Of the amount utilized under, or supported by, the uncommitted lines, approximately $9.4 million and $2.8 million represent letters of credit and outstanding short-term borrowings, respectively.

In September of 2019, the Company entered into a $1.0 billion Term Loan Agreement (the "Term Loan Agreement") with Bank of America N.A. (“Bank of America”), as administrative agent, and certain financial institutions as lenders, pursuant to which such lenders committed to provide, contingent upon the completion of the eOne Acquisition and certain other customary conditions to funding, (1) a three-year senior unsecured term loan facility in an aggregate principal amount of $400.0 million (the “Three-Year Tranche”) and (2) a five-year senior unsecured term loan facility in an aggregate principal amount of $600.0 million (the “Five-Year Tranche” and together with the Three-Year Tranche, the “Term Loan Facilities”). On December 30, 2019, the Company completed the acquisition of eOne and on that date, borrowed the full amount of $1.0 billion under the Term Loan Facilities. As of April 2, 2023, the Company has fully repaid the Three-Year Tranche $400.0 million principal term loan, and of the Five-Year Tranche $600.0 million principal balance, the Company has repaid a total of $320.0 million in the following increments: $22.5 million in 2020; $180.0 million in 2021; $87.5 million in 2022; and, $30.0 million during the first three months of 2023. The Company is subject to certain financial covenants contained in this agreement and as of April 2, 2023, the Company was in compliance with these covenants. The terms of the Term Loan Facilities are described in note 7 to the consolidated financial statements included in Part I of this Form 10-Q.

During 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 (collectively, the "Notes") consisting of the following tranches: $300 million of notes due 2022 (the "2022 Notes") that bear interest at a fixed rate of 2.60%; $500 million of notes due 2024 (the "2024 Notes") that bear interest at a fixed rate of 3.00%; $675 million of notes due 2026 (the "2026 Notes") that bear interest at a fixed rate of 3.55%; and $900 million of notes due 2029 (the "2029 Notes") that bear interest at a fixed rate of 3.90%. During the third quarter of 2021 the Company repaid in full, its 2022 Notes in the aggregate principal amount of $300.0 million, including early redemption premiums and accrued interest of $10.8 million. The terms of the Notes are described in note 7 to the consolidated financial statements in Part I of this Form 10-Q.

The Company uses production financing facilities to fund its film and television productions which are arranged on an individual production basis by either special purpose production subsidiaries, each secured by the assets and future revenues of such production subsidiaries, which are non-recourse to the Company's assets, or through a senior revolving credit facility obtained in November 2021, dedicated to production financing. The Company's senior revolving film and television production credit facility (the “RPCF”) with MUFG Union Bank, N.A., as administrative agent and lender and certain other financial institutions, as lenders thereto (the “Revolving Production Financing Agreement”) provides the Company with commitments having a maximum aggregate principal amount of $250.0 million. The Revolving Production Financing Agreement also provides the Company with the option to request a commitment increase up to an aggregate additional amount of $150.0 million subject to agreement of the lenders. The Revolving Production Financing Agreement extends through November 22, 2024. The Company uses the RPCF to fund certain of the Company’s original film and TV production costs. Borrowings under the RPCF are non-recourse to the Company's assets. The Company expects to utilize the revolving production financing facility for the majority of its future production financing needs. During the first three months of 2023, the Company had total drawdowns of $42.8 million and repayments of $54.8 million towards these production financing facilities. As of April 2, 2023, the Company had outstanding production financing borrowings related to these facilities of $183.5 million, $49.0 million of

which are recorded within the current portion of long-term debt and $134.5 million are recorded within short-term borrowings in the Company's consolidated balance sheets, included in Part I of this Form 10-Q.

The Company has principal amounts of long-term debt as of April 2, 2023 of $3.8 billion, due at varying times from 2024 through 2044. Of the total principal amount of long-term debt, $109.0 million is current at April 2, 2023 of which $60.0 million is related to principal amortization of the 5-year term loans due December 2024 and $49.0 million represents the Company's outstanding production financing facilities at April 2, 2023. In addition to the early repayment of the 2022 Notes described above, during the first quarter of 2021, the Company repaid in full, its 3.15% Notes in the aggregate principal amount of $300.0 million due in May 2021, including accrued interest. See note 7 to the Company’s consolidated financial statements in Part I of this Form 10-Q for additional information on long-term debt and long-term debt interest repayment, respectively.

The Company also had letters of credit and other similar instruments of approximately $13.4 million and purchase commitments of approximately $331.7 million outstanding at April 2, 2023.

Other contractual obligations and commercial commitments, as detailed in the Company's 2022 Form 10-K, did not materially change outside of certain payments made in the normal course of business and as otherwise set forth in this report.

The Company has a long history of returning cash to its shareholders through quarterly dividends and share repurchases. Hasbro's next quarterly dividend of $0.70 per share is payable on May 15, 2023 to shareholders of record as of May 1, 2023. In addition to the dividend, the Company periodically returns cash to shareholders through its share repurchase program. As part of this initiative, since 2005 the Company's Board of Directors (the "Board") adopted numerous share repurchase authorizations with a cumulative authorized repurchase amount of $4.3 billion. The most recent authorization was approved in May 2018 for $500 million. At April 2, 2023, $241.6 million remained available under these share repurchase authorizations. There were no share repurchases made during the first quarter of 2023. The Company has no obligation to repurchase shares under the authorization, and the timing, actual number, and value of the shares that are repurchased, if any, will depend on a number of factors, including the price of the Company’s stock and the Company's generation of, and uses for, cash.

The Company believes that cash from operations, and, if necessary, its committed line of credit and other borrowing facilities, will allow the Company to meet its obligations over the next twelve months.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating the Company's reported financial results include film and television production costs, recoverability of goodwill and intangible assets and income taxes. Additionally, the Company identified the valuation of the Company’s equity method investment in Discovery Family Channel as a significant accounting estimate. These critical accounting policies are the same as those detailed in the Company's 2022 Form 10-K.

FINANCIAL RISK MANAGEMENT

The Company is exposed to market risks attributable to fluctuations in foreign currency exchange rates primarily as the result of sourcing products priced in U.S. dollars, Hong Kong dollars and Euros while marketing and selling those products in more than twenty currencies. Results of operations may be affected primarily by changes in the value of the U.S. dollar, Euro, British pound sterling, Canadian dollar, Japanese Yen, Brazilian real and Mexican peso and, to a lesser extent, other currencies in Latin American and Asia Pacific countries.

To manage this exposure, the Company has hedged a portion of its forecasted foreign currency transactions using foreign exchange forward contracts and foreign exchange option contracts. The Company is also exposed to foreign currency risk with respect to its net cash and cash equivalents or short-term borrowing positions in currencies other than the U.S. dollar. The Company believes, however, that the on-going risk on the net exposure should not be material to its financial condition. In addition, the Company's revenues and costs have been, and will likely continue to be, affected by changes in foreign currency rates. A significant change in foreign exchange rates can materially impact the Company's revenues and earnings due to translation of foreign-denominated revenues and expenses. The Company does not hedge against translation impacts of foreign exchange. From time to time, affiliates of the Company may make or receive intercompany loans in currencies other than their functional currency. The Company manages this exposure at the time the loan is made by using foreign exchange contracts.

The Company reflects derivatives at their fair value as an asset or liability on the consolidated balance sheets. The Company does not speculate in foreign currency exchange contracts. At April 2, 2023, these contracts had net unrealized losses of $2.0 million, of which $3.1 million of unrealized gains are recorded in prepaid expenses and other current assets, $0.1 million of unrealized gains are recorded in other assets and $5.2 million of unrealized losses are recorded in accrued liabilities. Included in accumulated other comprehensive loss at April 2, 2023 are deferred losses, net of tax, of $4.0 million, related to these derivatives.

At April 2, 2023, the Company had fixed-rate long-term debt of $3.8 billion. In May 2014, the Company issued an aggregate $600.0 million of long-term debt which consisted of $300.0 million of 3.15% Notes, subsequently repaid in 2021, and $300.0 million of 5.10% Notes due 2044. Prior to the May 2014 debt issuance, the Company entered into forward-starting interest rate swap agreements with a total notional value of $500.0 million to hedge the anticipated underlying U.S. Treasury interest rate. These interest rate swaps were matched with this debt issuance and were designated and effective as hedges of the change in future interest payments. At the date of issuance, the Company terminated these swap agreements and their fair value at the date of issuance was recorded in accumulated other comprehensive loss and is being amortized through the consolidated statements of operations using an effective interest rate method over the life of the related debt. Included in accumulated other comprehensive loss at April 2, 2023 are deferred losses, net of tax, of $14.7 million related to these derivatives.

INFLATION

The Company's business operations for the periods presented have been impacted by inflationary pressures however, due to mitigating actions taken by the Company, such as price increases implemented during 2022, the impact of general price inflation on our financial position and results of operations has been reduced. The Company continues to monitor the impact of inflation to its business operations on an ongoing basis and may need to adjust prices further to mitigate the impact of changes to the rate of inflation in future periods. However, future volatility of general price inflation could affect consumer purchases of our products and spending on entertainment. Additionally, the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead, could adversely affect the Company's financial results.