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 toy and game company 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 joined Hasbro from Harley Davidson, Inc., where she served as Chief Financial Officer. Prior to her time at Harley Davidson, Inc., 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, Toys, Licensing & Entertainment, effective April 24, 2023. Mr. Kilpin joined 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 revised 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, with the assistance of a third party consultant, 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, licensing and entertainment, and exiting certain non-core aspects of the business.

Sale of Non-core Film and TV Business

On August 3, 2023, the Company announced it reached a definitive agreement with Lions Gate Entertainment Corp. ("Lionsgate") to sell its non-core eOne Film and TV business for approximately $500.0 million, consisting of $375.0 million in cash, subject to certain purchase price adjustments including a net debt and working capital adjustment, and the assumption by Lionsgate of production financing loans. The sale will include a team of talented employees, a content library of approximately 6,500 titles, active productions for certain non-Hasbro owned intellectual properties such as The Rookie and Yellow Jackets franchises, and the eOne unscripted television business, which will also include rights to produce certain Hasbro-based shows like Play-Doh Squished.

The pending transaction has received required regulatory approvals and remains subject to satisfaction of customary closing conditions. The pending transaction 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.

In connection with the expected sale, to reduce the carrying value of the assets and liabilities associated with the non-core eOne Film and TV business to their estimated fair values, the Company recorded a pre-tax non-cash loss on assets held for sale of $473.0 million within the Company’s Consolidated Statement of Operations, within the Entertainment segment for the three and nine months ended October 1, 2023. In addition, for the quarter and nine month periods ended October 1, 2023, the Company recorded $16.2 million and $16.9 million, respectively, of charges associated with the sale process. These charges were recorded in Selling Distribution and Administration expense, within the Corporate and Other segment.

Following the transaction, Hasbro will maintain Hasbro brand-based created content and the capability to develop and produce entertainment including animation, digital shorts, scripted TV and theatrical films related to core Hasbro IP. Hasbro brands and the Family Brands business, including the brands PEPPA PIG and PJ MASKS, are not included in the sale transaction.

For additional information see note 15 to the consolidated financial statements included in Part I, Item 1. Financial Statements, of this Form 10-Q.

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 included the 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 estimated 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, during the second quarter 2023, within the Consolidated Statements of Operations.

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 $250.0 million to $300.0 million in run-rate cost savings by the end of 2025. During the first nine months of 2023, we realized an additional $154.0 million of cumulative gross cost savings.

Workforce Reduction

In alignment with the objectives of our Operational Excellence program as described in Note 1 of our consolidated financial statements, 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, or approximately 15% of global full-time employees. For additional information see note 14 to the consolidated financial statements included in Part I, Item 1. Financial Statements, of this Form 10-Q.

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 brand portfolio categories 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 and Entertainment segments as well as Corporate and Other. These charges are discussed below in Results of Operations - Consolidated.

Third quarter 2023 highlights*:*

• Third quarter net revenues of $1.5 billion decreased 10% compared to the third quarter of 2022 and included a favorable foreign currency translation of $22.6 million. Absent the favorable impact of foreign currency exchange, third quarter net revenues decreased 12%.

• Consumer Products segment net revenues declined 18% to $956.9 million; Wizards of the Coast and Digital Gaming segment net revenues increased 40% to $423.6 million; and Entertainment segment net revenues declined 42% to $122.9 million.

• Net revenues from Franchise Brands increased 8%; Partner Brands net revenues declined 35%; Portfolio Brands net revenues declined 19%; and Non-Hasbro Branded Film and TV net revenues declined 47%.

• Operating losses were $169.5 million, or 11.3% of net revenue in the third quarter of 2023 compared to operating profit of $194.3 million, or 11.6% of net revenue, in the third quarter of 2022.

• Operating results in the Consumer Products segment decreased 30% to an operating profit of $96.1 million; Wizards of the Coast and Digital Gaming segment operating profit increased 99% to $203.4 million; Entertainment segment operating results decreased greater than 100% to an operating loss of $468.5 million; and Corporate and Other operating results improved 97% to an operating loss of $0.5 million.

• Operating results in the third quarter of 2023 were negatively impacted by a loss on assets held for sale of $473.0 million ($369.0 million after-tax) related to the sale of the Company's non-core eOne Film and TV business, recorded within the Entertainment segment. The assets and liabilities of these businesses were revalued and disclosed separately on the balance sheet.

• Operating profit in the third quarter of 2022 was negatively impacted by charges totaling $55.3 million ($49.4 million after-tax) related to the Company's operational excellence program comprised of charges related to the exit of certain non-core businesses and discontinued projects within the Entertainment segment combined with severance and other employee charges and consultant fees within the Corporate and Other segment.

• Certain other charges impacting operating segment performance for the third 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. was $171.1 million, or $(1.23) per share, in the third quarter of 2023 compared to net earnings of $129.2 million, or $0.93 per diluted share, in the third quarter of 2022.

First nine months 2023 highlights*:*

• Net revenues decreased 11% to $3,714.4 million in the first nine months of 2023 compared to $4,178.2 million in the first nine months of 2022. Foreign currency translation did not have a material impact to net revenues in the first nine months of 2023.

• Net revenues in the Consumer Products segment decreased 17% to $2,132.5 million; Wizards of the Coast and Digital Gaming segment net revenues increased 11% to $1,094.4 million; and Entertainment segment net revenues decreased 22% to $487.5 million.

• Net revenues from Franchise Brands remained flat; Partner Brands net revenues decreased 31%; Portfolio Brands net revenues decreased 19%; and Non-Hasbro Branded Film and TV net revenues decreased 25% during the first nine months of 2023.

• Operating losses were $340.2 million, or 9.2% of net revenues, in the first nine months of 2023 compared to operating profit of $533.4 million, or 12.8% of net revenues, in the first nine months of 2022.

• Operating results in the Consumer Products segment decreased 56% to an operating loss of $61.5 million; Wizards of the Coast and Digital Gaming segment operating profit decreased 3% to $422.5 million; Entertainment segment operating results decreased greater than 100% to an operating loss of $801.4 million; and Corporate and Other operating losses decreased by 39% to an operating loss of $22.8 million.

• Operating results in the first nine months of 2023 were negatively impacted by a loss on assets held for sale of $473.0 ($369.0 after-tax), within the Entertainment segment, related to the sale of the Company's non-core eOne Film and TV business. The assets and liabilities of these businesses were revalued and disclosed separately on the balance sheet.

• Operating profit in the first nine months of 2022 was negatively impacted by charges totaling $55.3 million ($49.4 million after-tax) related to the Company’s operational excellence program comprised of charges related to the exit of certain non-core businesses and discontinued projects within the Entertainment segment combined with severance and other employee charges and consultant fees within the Corporate and Other segment.

• Operating results in the first nine months of 2023 were negatively impacted by pre-tax non-cash impairment charges of $296.2 million ($279.9 after tax) associated with the impairment review of the Company's Film and TV reporting unit, consisting of $231.2 million of goodwill impairment and $65.0 million ($48.7 million after tax) of intangible asset impairment related to the Company's definite-lived intangible eOne Trademark.

• Certain other charges impacted operating segment performance for the first nine months of 2023 and 2022, in the Company’s Consumer Products, Entertainment and Corporate and Other segments, which are discussed further below in Segment Results.

• The net loss attributable to Hasbro, Inc. was $428.2 million, or $(3.09) per share, in the first nine months of 2023 compared to net earnings attributable to Hasbro, Inc. of $332.4 million, or $2.39 per diluted share, in the first nine months 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 and nine-month periods ended October 1, 2023 and September 25, 2022.

			Quarter Ended												Nine Months Ended
			October 1, 2023						September 25, 2022						October 1, 2023						September 25, 2022
Net revenues			$	1,503.4					$	1,675.9					$	3,714.4					$	4,178.2
Operating (loss) profit			(169.5)						194.3						(340.2)						533.4
(Loss) earnings before income taxes			(215.0)						165.6						(463.9)						425.7
Net (loss) earnings			(170.4)						128.2						(427.0)						331.6
Net earnings (loss) attributable to noncontrolling interests			0.7						(1.0)						1.2						(0.8)
Net (loss) earnings attributable to Hasbro, Inc.			(171.1)						129.2						(428.2)						332.4
Diluted (loss) earnings per share			(1.23)						0.93						(3.09)						2.39

RESULTS OF OPERATIONS – CONSOLIDATED

Net (loss) earnings and diluted (loss) earnings per share attributable to Hasbro, Inc. for the quarters and nine-month periods ended October 1, 2023 and September 25, 2022 include certain charges as described below.

2023

• Net charges of $381.5 million, or $2.74 per diluted share, and $382.0 million, or $2.75 per diluted share, for the quarter and nine-month periods ended October 1, 2023, respectively, of Blueprint 2.0 implementation charges, consisting of:

◦a Loss on assets held for sale of $369.0 million for the quarter and nine-month periods ended October 1, 2023 related to the sale of the non-core eOne Film and TV business within the Entertainment segment; and

◦charges of $12.5 million and $13.0 million, for the quarter and nine-month periods ended October 1, 2023, respectively, associated with the eOne Film & TV business sale process recorded in Selling, Distribution and Administration expense within the Corporate and Other segment.

• Net charges of $279.9 million or $2.01 per diluted share for the nine-month period ended October 1, 2023, recorded during the second quarter as a result of the Company's impairment review of its Film and TV reporting unit, consisting of a non-cash goodwill impairment charge of $231.2 million recorded in Impairment of Goodwill and intangible asset impairment charges of $48.7 million related to the Company's definite-lived intangible eOne Trademark, recorded within Selling, Distribution and Administration. These charges were recorded within the Entertainment segment.

• Net charges of $11.0 million, or $0.08 per diluted share, and $38.6 million, or $0.28 per diluted share, for the quarter and nine-month periods ended October 1, 2023, respectively, of intangible amortization costs related to certain 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 $6.4 million, or $0.05 per diluted share, and $22.5 million, or $0.16 per diluted share, for the quarter and nine-month periods ended October 1, 2023, respectively, of Operational Excellence program related consultant and transformation office expenses included within Selling, Distribution and Administration within Corporate and Other.

• Net charges of $1.7 million, or $0.01 per diluted share for the nine-month period ended October 1, 2023, associated with retention awards granted in connection with the eOne Acquisition. These expenses were incurred during the first quarter of 2023 and are included within Selling, Distribution and Administration within the Corporate and Other segment.

2022

• Net charges of $49.4 million, or $0.36 per diluted share for both the quarter and nine-month periods ended September 25, 2022 consisting of:

◦a Loss on Assets Held for Sale of $21.1 million comprised of a non-cash goodwill impairment loss of $11.8 million and other asset impairments of $9.3 million, related to the exit of non-core businesses within the Entertainment segment. The assets and liabilities of these businesses were revalued and disclosed separately on the balance sheet;

◦asset impairment charges of $3.7 million related to projects discontinued as part of the Company's strategic review included in Program Cost Amortization within the Entertainment segment;

◦severance and other employee charges of $19.1 million associated with cost-savings initiatives across the Company included within Selling, Distribution and Administration within the Corporate and Other segment; and,

◦program related consultant fees of $5.5 million included within Selling, Distribution and Administration within the Corporate and Other segment.

• Net charges of $14.3 million, or $0.10 per diluted share and $45.5 million, or $0.33 per diluted share, of intangible amortization costs for the quarter and nine-month periods ended September 25, 2022, respectively, related to certain 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 $3.3 million, $0.02 per diluted share and $8.9 million, or $0.06 per diluted share, for the quarter and nine-month periods ended September 25, 2022, respectively, 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.

Third Quarter 2023

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

Consolidated net revenues for the third quarter of 2023 declined 10% to $1,503.4 million from $1,675.9 million for the third quarter of 2022 and included a favorable $22.6 million impact from foreign currency translation as a result of stronger currencies, primarily in Latin America and to a lesser extent, the Company's European markets.

The operating loss for the third quarter of 2023 was $169.5 million, or 11.3% of net revenues, compared to operating profit of $194.3 million, or 11.6% of net revenues, for the third quarter of 2022. In addition to the charges described above, operating results in the third quarter of 2023 reflect the exit of certain non-core businesses during the fourth quarter of 2022 combined with lower net revenue volumes and higher closeout sales to sell through inventory within the Consumer Products segment. In addition, lower net revenues within the Entertainment segment, reflecting the impact of writers' and actors' strikes, resulted in reduced content deliveries during the third quarter of 2023, partially offset by higher digital gaming net revenues and to a lesser extent, increased tabletop gaming net revenues within the Wizards of the Coast and Digital Gaming segment. These impacts to operating results were partially offset by lower royalty expenses within the Consumer Products segment, driven by the decline of Partner Brand sales combined with the expiration of certain Partner Brand license agreements in December 2022, lower overall operating expenses as a result of the Company's ongoing cost savings initiatives, including improved supply chain management, as well as lower advertising expense and lower program amortization costs within the Entertainment segment, due to the impact of the writers' and actors' strikes.

The following table presents net revenues by product category for the quarters ended October 1, 2023 and September 25, 2022:

			Quarter Ended
			October 1, 2023						September 25, 2022						% Change
Franchise Brands			$	1,011.0					$	939.8					8		%
Partner Brands			228.2						349.9						-35		%
Portfolio Brands			170.3						209.0						-19		%
Non-Hasbro Branded Film & TV			93.9						177.2						-47		%
Total			$	1,503.4					$	1,675.9					-10		%

FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio increased 8% in the third quarter of 2023 compared to the third quarter of 2022. The net revenue increase primarily reflects higher net revenues from DUNGEONS & DRAGONS digital gaming products, most notably Baldur's Gate 3, the DUNGEONS & DRAGONS-based role-playing video game released during the third quarter 2023, as well as higher net revenues from MAGIC: THE GATHERING products, primarily due to the timing of set releases in the third quarter of 2023 compared to 2022, and to a lesser extent, higher net revenues from TRANSFORMERS products supported by the June 2023 theatrical release of Transformers: Rise of the Beasts. These net revenue increases were partially offset by lower net revenues from NERF products and to a lesser extent, lower net revenues from PEPPA PIG as well as lower net revenues from PLAY-DOH products compared to third quarter of 2022 which benefited from the release of Play-doh Squished programming.

PARTNER BRANDS: Net revenues from the Partner Brands portfolio decreased 35% in the third quarter of 2023 compared to the third 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 third 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 and STAR WARS compared to the third quarter of 2022, which benefited from a robust slate of entertainment releases without comparable releases in the third quarter of 2023 and to a lesser extent, lower net revenues from BEY BLADE products. These decreases were partially offset by net revenues from the introduction of the Company's products for INDIANA JONES supported by the June 2023 theatrical release of Indiana Jones and the Dial of Destiny.

PORTFOLIO BRANDS: Portfolio Brands net revenues decreased 19% in the third quarter of 2023 compared to the third quarter of 2022. Lower net revenues from FURREAL FRIENDS, MY LITTLE PONY, BABY ALIVE and PJ MASKS products were partially offset by net revenue contributions from FURBY products following the Company's reintroduction of the brand and refreshed product line during the second quarter of 2023.

NON-HASBRO BRANDED FILM & TV: Net revenues from Non-Hasbro Branded Film & TV decreased 47% in the third quarter of 2023 compared to the third quarter of 2022. The net revenue declines were driven by lower scripted programming deliveries, reflecting the impact of the five-month long worker strike by the Writers Guild of America, which ended in September 2023, as well as the ongoing strike by the American actors' union, SAG-AFTRA, which began on July 14, 2023. These actions impacted the timing of productions that include The Rookie, Rookie Feds, the Recruit, Yellowjackets and Cruel Summer. To a lesser extent, lower net revenues from unscripted programming contributed to the decrease reflecting the lower number of new deliveries during the third quarter of 2023 compared to 2022. These decreases were partially offset by net revenue increases from film deliveries, most notably, Ladybug and Cat Noir during the third quarter of 2023.

First Nine Months 2023

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

For the first nine months of 2023, consolidated net revenues decreased 11% compared to the first nine months of 2022 and reflect a favorable variance of $3.3 million of foreign currency translation due to stronger currencies across the Company's Latin American markets, partially offset by unfavorable foreign currency translation in the Company's Asia Pacific markets when compared to the first nine months of 2022.

Operating losses for the first nine months of 2023 were $340.2 million, or 9.2% of net revenues, compared to an operating profit of $533.4 million, or 12.8% of net revenues, for the first nine months of 2022. In addition to the charges to operating profit described above, the operating profit decrease was driven by lower revenue volumes and higher closeout sales to sell through inventory, higher costs to attract and retain talent combined with investments in organized play during the first nine months of 2023. These negative impacts to operating profit were partially offset by lower overall operating costs as a result of the Company's ongoing cost savings initiatives, including improved supply chain management and lower royalty expense. Lower royalty expense was driven by the decline of Partner Brand sales combined with the expiration of certain Partner Brand license agreements in December 2022, partially offset by higher royalty expense associated with The Lord of the Rings: Tales of Middle-earth card set.

The following table presents net revenues by brand and entertainment portfolio for the first nine months of 2023 and 2022:

			Nine Months Ended
			October 1, 2023						September 25, 2022						% Change
Franchise Brands			$	2,412.8					2,416.2						—		%
Partner Brands			533.8						775.8						-31		%
Portfolio Brands			369.4						457.4						-19		%
Non-Hasbro Branded Film & TV			398.4						528.8						-25		%
Total			$	3,714.4					4,178.2						-11		%

FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio remained flat in the first nine months of 2023 compared to 2022, reflecting higher net revenues from DUNGEONS & DRAGONS digital gaming products, most notably Baldur's Gate 3, the DUNGEONS & DRAGONS-based role-playing video game released during the third quarter 2023*,* the theatrical release of Dungeons & Dragons: Honor Among Thieves released in March 2023 and higher net revenues from D&D Beyond, acquired during the second quarter of 2022*.* In addition to these increases were higher net revenues from TRANSFORMERS products supported by the June 2023 theatrical release of Transformers: Rise of the Beasts and to a lesser extent, higher net revenues from MAGIC: THE GATHERING products, primarily due to the ongoing success of the Lord of the Rings: Tales of Middle-earth card set released in June 2023. These increases were offset by lower net revenues from NERF products and to a lesser extent, lower net revenues from PLAY-DOH products*.*

PARTNER BRANDS: Net revenues from the Partner Brands portfolio decreased 31% during the first nine months of 2023 compared to 2022. Partner Brands net revenue decreases were primarily 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 STAR WARS and MARVEL compared to the first nine months of 2022, which benefited from a robust slate of entertainment releases without comparable releases in the first nine months of 2023, and to a lesser extent, lower net revenues from BEYBLADE products. These decreases were partially offset by net revenues from the introduction of the Company's products for INDIANA JONES, supported by the June 2023 theatrical release of Indiana Jones and the Dial of Destiny.

PORTFOLIO BRANDS: Portfolio Brands net revenues decreased 19% for the first nine months of 2023 compared to the first nine months of 2022. Net revenue declines during the first nine months of 2023 were driven by lower sales of FURREAL FRIENDS products and to a lesser extent, lower sales of PJ MASKS, MY LITTLE PONY and BABY ALIVE products. These decreases were partially offset by net revenues from FURBY products following the Company's reintroduction of the brand and refreshed product line during the second quarter of 2023, as well as higher net revenues from GI JOE products.

NON-HASBRO BRANDED FILM & TV: Net revenues from the Non-Hasbro Branded Film & TV portfolio decreased 25% for the first nine months of 2023 compared to the first nine months of 2022. In the first nine months of 2023, net revenue declines were driven by lower scripted and unscripted television deliveries, as well as lower film deliveries in 2023 compared to 2022. These decreases were due primarily to the impact of the writers' and actors' strikes mentioned above, which disrupted the number and timing of planned program productions and deliveries in 2023 compared to 2022.

SEGMENT RESULTS

Third Quarter 2023

The following table presents net external revenues and operating profit (loss) for the Company's principal segments for the quarters ended October 1, 2023 and September 25, 2022:

			Quarter Ended
			October 1, 2023						September 25, 2022						% Change
Net revenues
Consumer Products			$	956.9					$	1,160.8					-18		%
Wizards of the Coast and Digital Gaming			423.6						303.5						40		%
Entertainment			122.9						211.6						-42		%
Operating Profit (Loss)
Consumer Products			$	96.1					$	136.8					-30		%
Wizards of the Coast and Digital Gaming			203.4						102.2						99		%
Entertainment			(468.5)						(28.9)						>-100%
Corporate and Other			(0.5)						(15.8)						97		%

Consumer Products Segment

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

			Quarter Ended
			October 1, 2023						September 25, 2022
North America			$	573.6					$	693.3
Europe			208.7						271.6
Asia Pacific			61.8						82.8
Latin America			112.8						113.1
Net revenues			$	956.9					$	1,160.8

The Consumer Products segment net revenues declined 18% to $956.9 million for the third quarter of 2023 compared to $1,160.8 million for the third quarter of 2022 reflecting a softer toy market in 2023 compared to 2022. The Consumer Products segment included the impact of a favorable $18.1 million currency translation.

Drivers of the net revenue decrease include lower sales of NERF 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 to a lesser extent, lower sales of the Company's products for MARVEL and STAR WARS compared to the third quarter of 2022, which benefited from a variety of entertainment releases without a comparable slate in 2023, and lower sales of FURREAL FRIENDS and MY LITTLE PONY products. These net revenue decreases were partially offset by higher sales of the Company's refreshed lineup of FURBY products following the reintroduction of the brand during the second quarter of 2023 and higher sales of TRANSFORMERS products supported by the theatrical release of Transformers: Rise of Beasts in June 2023. Overall segment net revenue declines were primarily attributable to North America and to a lesser extent, the Company's European and Asia Pacific markets during the third quarter of 2023.

Consumer Products segment operating profit for the third quarter of 2023 was $96.1 million or 10.0% of segment net revenues, compared to segment operating profit of $136.8 million or 11.8% of segment net revenues, for the third quarter of 2022. The decrease in operating profit in the third quarter of 2023 was driven by lower overall segment net revenues, including higher levels of closeout sales and obsolescence charges during the third quarter of 2023, partially offset by lower advertising and promotion expenses and lower royalty expenses as a result of the decline of Partner Brands sales, due primarily to the expiration of certain licenses in December 2022.

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 October 1, 2023 and September 25, 2022:

			Quarter Ended
			October 1, 2023						September 25, 2022
Tabletop Gaming			$	290.5					$	246.3
Digital and Licensed Gaming			133.1						57.2
Net revenues			$	423.6					$	303.5

Wizards of the Coast and Digital Gaming segment net revenues increased 40% in the third quarter of 2023 to $423.6 million from $303.5 million in the third quarter of 2022 and included the impact of a favorable $3.1 million currency translation.

The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the third quarter of 2023 was primarily attributable to higher net revenues from DUNGEONS & DRAGONS digital gaming products, most notably Baldur's Gate 3, the DUNGEONS & DRAGONS-based role-playing video game released during the third quarter 2023*,* and higher digital licensing net revenues, primarily attributable to the re-negotiation of the Company's digital gaming licensing agreement for MONOPOLY GO! during the third quarter of 2023. In addition, higher net revenues from Wizards of the Coast tabletop gaming products, most notably, MAGIC: THE GATHERING, were driven by the incremental card set release during the third quarter of 2023, compared to the third quarter of 2022.

Wizards of the Coast and Digital Gaming segment operating profit was $203.4 million, or 48.0% of segment net revenues for the third quarter of 2023, compared to operating profit of $102.2 million, or 33.7% of segment net revenues, for the third quarter of 2022. The operating profit increase during the third quarter of 2023 was driven by higher net revenues from high-margin products, most notably from Baldur's Gate 3 and MONOPOLY GO!, partially offset by higher marketing and sales expenses in support of the Wizards of the Coast MagicCon event series and higher administrative expenses as we continue to invest in gaming initiatives and talent to support long-term growth in the segment.

Entertainment Segment

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

			Quarter Ended
			October 1, 2023						September 25, 2022
Film and TV			$	102.1					$	188.6
Family Brands			20.8						13.6
Music and Other			—						9.4
Net revenues			$	122.9					$	211.6

Entertainment segment net revenues declined 42% to $122.9 million for the third quarter of 2023, compared to $211.6 million for the third quarter of 2022 and included the impact of a favorable $1.3 million foreign currency translation.

The net revenue decrease during the third quarter of 2023 was driven by lower scripted programming deliveries, reflecting the impact of the five-month long worker strike by the Writers Guild of America, which ended in September 2023, as well as the ongoing strike by the American actors' union, SAG-AFTRA, which began on July 14, 2023. These actions impacted the timing of productions that include The Rookie, Rookie Feds, the Recruit, Yellowjackets and Cruel Summer. To a lesser extent, lower net revenues from unscripted programming contributed to the decrease reflecting the lower number of new deliveries during the third quarter of 2023 compared to 2022. In addition, the exit of certain non-core businesses during the fourth quarter of 2022 contributed to the decrease during the third quarter of 2023. These decreases were partially offset by net revenue increases from film deliveries, most notably Ladybug and Cat Noir, higher broadcast and licensing net revenues, primarily from Dungeons & Dragons: Honor Among Thieves and higher net revenues from the Company's Family Brands business associated with the television series Power Rangers Cosmic Fury season 30, released on the Netflix streaming platform in September 2023.

Entertainment segment operating losses were $468.5 million, or greater than -100.0% of segment net revenues for the third quarter of 2023, compared to operating losses of $28.9 million, or 13.7% of segment net revenues for the third quarter of 2022.

The decrease in Entertainment segment operating results during the third quarter of 2023 was driven by a loss on assets held for sale of $473.0 million related to the sale of the non-core eOne Film and TV business, and to a lesser extent, the exit of certain non-core businesses during the fourth quarter of 2022 and lower segment net revenues as previously discussed. These impacts to operating profit in the third quarter of 2023 were partially offset by lower program amortization costs reflecting lower content deliveries during the third quarter of 2023, and lower intangible asset amortization reflecting the discontinuation of amortization expense associated with certain assets classified as held for sale, and lower managed expenses including lower incentive compensation expenses.

Corporate and Other

Corporate and Other operating losses were $0.5 million for the third quarter of 2023 compared to operating losses of $15.8 million for the third quarter of 2022. Operating results in the third quarter of 2023 reflect charges of $16.2 million associated with the eOne Film and TV business sale process, as well as lower administrative expenses compared to the third quarter of 2022. In 2022, Corporate and Other operating losses were driven by severance and other employee charges associated with Company's strategic review and related cost-savings initiatives, and expense associated with retention awards granted in connection with the eOne Acquisition.

First Nine Months 2023

The following table presents net revenues and operating profit (loss) for the Company's principal segments for each of the nine-month periods ended October 1, 2023 and September 25, 2022:

			Nine Months Ended
			October 1, 2023						September 25, 2022						% Change
Net revenues
Consumer Products			$	2,132.5					$	2,567.8					-17		%
Wizards of the Coast and Digital Gaming			1,094.4						986.1						11		%
Entertainment			487.5						624.3						-22		%
Operating Profit (Loss)
Consumer Products			$	61.5					$	138.9					-56		%
Wizards of the Coast and Digital Gaming			422.5						434.2						-3		%
Entertainment			(801.4)						(2.4)						>-100%
Corporate and Other			(22.8)						(37.3)						39		%

Consumer Products Segment

The following table presents the Consumer Products segment net revenues by major geographic region for the nine-month periods ended October 1, 2023 and September 25, 2022:

			Nine Months Ended
			October 1, 2023						September 25, 2022
North America			$	1,234.7					$	1,531.8
Europe			472.2						610.4
Asia Pacific			191.5						201.6
Latin America			234.1						224.0
Net Revenues			$	2,132.5					$	2,567.8

The Consumer Products segment net revenues decreased 17% to $2,132.5 million for the first nine months of 2023 compared to $2,567.8 million for the first nine months of 2022 and included the impact of a favorable $8.7 million currency translation.

Consumer Products net revenue declines during the first nine months of 2023 were driven primarily by lower sales of NERF 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 to a lesser extent, lower sales of the Company's products for MARVEL and STAR WARS compared to the first nine months of 2022, which benefited from a variety of entertainment releases without a comparable slate in the first nine months of 2023. In addition, lower net revenues from FURREAL FRIENDS products, contributed to the decrease. These decreases were partially offset by net revenue increases from TRANSFORMERS products, supported by the theatrical release of Transformers: Rise of Beasts in June 2023, and to a lesser extent, sales of the Company's refreshed lineup of FURBY products following the reintroduction of the brand during the second quarter of 2023. In addition to these increases, net revenue increases from GI JOE products and higher consumer products licensing revenues, reflecting certain licensing agreements entered during the first nine months of 2023, contributed to segment net revenues. Overall, segment net revenue declines were primarily attributable to North America as and to a lesser extent, the Company's European markets, partially offset by higher net revenues from the Company's Latin American markets during the first nine months of 2023.

Consumer Products segment operating profit for the first nine months of 2023 was $61.5 million or 2.9% of segment net revenues, compared to segment operating profit of $138.9 million or 5.4% of segment net revenues, for the first nine months of 2022. The decrease in operating results in the first nine months of 2023 was driven by lower sales volumes and higher sales allowances and closeout sales, primarily across North America and Europe, reflecting efforts to reduce retail inventory levels. These impacts to operating profit were partially offset by lower product costs associated with improved inventory management including supply chain improvements, lower royalty expenses as a result of the decline of Partner Brands sales during the first nine months of 2023, as well as lower advertising and promotion costs and lower product development and lower administrative expenses reflecting focused cost savings initiatives and savings realized from the Company's Operational Excellence program.

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 nine-month periods ended October 1, 2023 and September 25, 2022:

			Nine Months Ended
			October 1, 2023						September 25, 2022
Tabletop Gaming			$	806.9					$	800.3
Digital and Licensed Gaming			287.5						185.8
Net revenues			$	1,094.4					$	986.1

Wizards of the Coast and Digital Gaming segment net revenues increased 11% in the first nine months of 2023 to $1,094.4 million from $986.1 million in the first nine months of 2022. Currency translation did not have a material impact on Wizards of the Coast and Digital Gaming segment net revenues during the first nine months of 2023.

The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the first nine months of 2023 was driven by higher net revenues from Digital Gaming, most notably from Baldur's Gate 3, a DUNGEONS & DRAGONS-based digital game released during the third quarter 2023*,* higher net revenues from D&D Beyond, reflecting a full nine months of net revenues in 2023 compared to a partial period in 2022 as it was acquired by the Company during the second quarter, and to a lesser extent, higher net revenues from certain other digital gaming initiatives. In addition, higher digital licensing net revenues, and higher net revenues from MAGIC: THE GATHERING tabletop gaming products, most notably, The Lord of the Rings: Tales of Middle-earth card set released in June 2023, were partially offset by lower tabletop gaming sales in North America compared to the first nine months of 2022.

Wizards of the Coast and Digital Gaming segment operating profit was $422.5 million, or 38.6% of segment net revenues for the first nine months of 2023, compared to operating profit of $434.2 million, or 44.0% of segment net revenues for the first nine months of 2022. The operating profit decrease during the first nine months of 2023 was driven primarily by higher product costs including higher inventory obsolescence charges, higher royalty expenses attributable the Lord of the Rings: Tales of Middle-earth release, higher product development costs as the Company continues to invest in Wizards of the Coast and Digital Gaming initiatives, as well as higher administrative expenses including costs to attract and retain talent and higher marketing and sales expenses in support of D&D Beyond and the Wizards of the Coast MagicCon event series. These impacts to operating profit were partially offset by a favorable mix of digital gaming products driven by Baldur's Gate 3 and certain other licensed digital gaming products.

Entertainment Segment

The following table presents Entertainment segment net revenues by category for the nine-month periods ended October 1, 2023 and September 25, 2022:

			Nine Months Ended
			October 1, 2023						September 25, 2022
Film and TV			$	423.8					$	527.0
Family Brands			63.7						59.6
Music and Other			—						37.7
Net revenues			$	487.5					$	624.3

Entertainment segment net revenues for the nine months ended October 1, 2023 decreased 22% to $487.5 million from $624.3 million for the nine months ended September 25, 2022, and included the impact of an unfavorable $5.1 million foreign currency translation.

The segment net revenue decrease during the first nine months of 2023 was driven by lower scripted television content deliveries and lower film deliveries, due primarily to the impact of the writers' and actors' strikes mentioned above, which disrupted the number and timing of planned program productions and deliveries in 2023 compared to 2022. To a lesser extent, lower net revenues from unscripted programming contributed to the decrease due to the lower number of new deliveries during the first nine months of 2023 compared to 2022, reflecting overall industry contraction. To a lesser extent, the exit of certain non-core businesses during the fourth quarter of 2022 contributed to segment net revenue declines during the first nine months of 2023. These decreases were partially offset by higher net revenues from the Company's Family Brands business, due to the renewal of certain streaming content agreements during the first nine months of 2023 related to programs featuring the Company's brands.

Entertainment segment operating losses were $801.4 million, or greater than -100% of net revenues, for the nine months ended October 1, 2023, compared to operating losses of $2.4 million, or 0.4% of segment net revenues, for the nine months ended September 25, 2022. The Entertainment segment operating loss during the first nine months of 2023 was driven by a loss on assets held for sale of $473.0 million related to the sale of the non-core eOne Film and TV business, a non-cash goodwill impairment charge of $231.2 million and intangible asset impairment charges of $65.0 million, associated with the impairment review of the Company's Film and TV reporting unit. In addition, Entertainment segment operating losses were attributable to lower segment net revenues as previously discussed and higher program amortization costs due to production asset impairment charges recorded during the third quarter of 2023 associated with Dungeons & Dragons: Honor Among Thieves. These increases were partially offset by lower operating expenses as a result of the exit of certain non-core businesses during the fourth quarter of 2022 and lower royalty expenses within the Company's film and TV business due to the volume and mix of content delivered during the first nine months of 2023, compared to the first nine months of 2022.

Corporate and Other

Operating losses in Corporate and Other for the first nine months of 2023 were $22.8 million, compared to operating losses of $37.3 million for the first nine months of 2022. Improved operating results in the third quarter of 2023 reflect lower administrative expenses, including lower compensation costs associated with headcount reductions, partially offset by Operational Excellence program related consultant and transformation office expenses of $29.4 million and charges of $16.9 million associated with the non-core eOne Film and TV business sale process as well as higher marketing and sales costs compared to the third quarter of 2022. In the first nine months of 2022, Operating losses in Corporate and Other segment included severance and other employee charges associated with the Company's strategic review and expense associated with retention awards granted in connection with the eOne Acquisition.

OPERATING COSTS AND EXPENSES

Third Quarter 2023

The Company's costs and expenses, stated as percentages of net revenues, are illustrated below for the quarters ended October 1, 2023 and September 25, 2022.

			Quarter Ended
			October 1, 2023						September 25, 2022
Cost of sales			32.9		%				35.0		%
Program cost amortization			4.5		%				8.7		%
Royalties			7.1		%				8.1		%
Product development			5.1		%				4.9		%
Advertising			5.4		%				6.9		%
Amortization of intangible assets			1.3		%				1.6		%
Loss on assets held for sale			31.5		%				1.4		%
Selling, distribution and administration			23.4		%				21.8		%

Cost of sales for the third quarter of 2023 was $494.5 million, or 32.9% of net revenues, compared to $586.6 million, or 35.0% of net revenues, for the third quarter of 2022. The cost of sales decrease in dollars was driven primarily by lower sales volumes and cost savings realized from the exit of certain non-core business within the Entertainment segment as well as cost savings from the Company's Operational Excellence Program. These decreases were partially offset by the impact of higher closeout sales as well as higher inventory costs during the third quarter of 2023 compared to the third quarter of 2022. As a percent of net revenues, the cost of sales decrease was primarily the result of the mix of net revenues, due to higher digital gaming revenues related to Baldur's Gate 3, partially offset by higher inventory obsolescence charges during the third quarter of 2023 compared to the third quarter of 2022.

Program cost amortization decreased to $68.4 million, or 4.5% of net revenues, for the third quarter of 2023 from $146.5 million, or 8.7% of net revenues, for the third 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 and as a percent of net revenues during the third quarter of 2023 was driven by the impact of the writers' and actors' strikes discussed previously, which disrupted the number and timing of planned productions and led to reduced deliveries during the third quarter of 2023, compared to the third quarter of 2022.

Royalty expense for the third quarter of 2023 decreased to $106.9 million, or 7.1% of net revenues, compared to $135.1 million, or 8.1% of net revenues, for the third 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 in dollars and as a percent of net revenues during the third quarter of 2023 reflects lower sales of Partner Brands products, driven by the exit of certain license agreements in December 2022, partially offset by the impact of royalty rates associated with the release of the Lord of the Rings: Tales of Middle-earth and Doctor Who card sets.

Product development expense for the third quarter of 2023 was $76.7 million, or 5.1% of net revenues, compared to $82.4 million, or 4.9% of net revenues, for the third quarter of 2022. The decrease in product development expense during the third quarter of 2023 was driven by reduced costs, most notably lower personnel costs within the Company's Consumer Products segment as a result of the focus on fewer, bigger, more profitable brands in alignment with the Company's consumer-centric Blueprint 2.0 strategy.

Advertising expense for the third quarter of 2023 was $81.9 million, or 5.4% of net revenues, compared to $115.2 million, or 6.9% of net revenues, for the third quarter of 2022. Advertising spend is generally impacted by revenue mix and the number and type of entertainment releases delivered. The advertising expense decrease during the third quarter of 2023 was driven by lower advertising expenses within the Consumer Products segment, primarily due to lower revenues in 2023.

Amortization of intangible assets decreased to $19.2 million, or 1.3% of net revenues, for the third quarter of 2023, compared to $26.9 million, or 1.6% of net revenues, for the third quarter of 2022. The decrease in 2023 reflects the discontinuation of amortization expense associated with intangible assets classified as held for sale, lower expense due to the impairment of the Company's definite-lived intangible asset, eOne Trademark and lower expense due to the partial impairment of the Company's definite-lived POWER RANGERS intangible assets during the fourth quarter of 2022, as well as lower expense due to certain classic gaming properties becoming fully amortized during the first quarter of 2023.

The loss on assets held for sale in the third quarter of 2023 of $473.0 million, or 31.5% of net revenues, represents non-cash impairment charges and foreign currency translation losses reclassified from accumulated other comprehensive losses to current earnings, associated with the pending sale of the Company's non-core eOne Film and TV business within the Entertainment segment. The loss on assets held for sale in the third quarter of 2022 of $23.1 million, or 0.6% of net revenues, represents non-cash impairment charges associated with the exit of other non-core businesses within the Entertainment segment.

Selling, distribution and administration expenses decreased to $352.3 million, or 23.4% of net revenues for the third quarter of 2023, from $365.8 million, or 21.8% of net revenues, for the third quarter of 2022. The decrease in selling, distribution and administration expenses during the third quarter of 2023 primarily reflects lower administrative expenses due to savings realized from the Company's ongoing cost savings initiatives, lower costs for professional services and lower freight and warehousing expenses as a result of lower shipments during 2023, as well as lower severance and other employee charges compared to expenses recorded the third quarter of 2022 related to the Company's 2022 restructuring actions. These decreases to selling, distribution and administration expense were partially offset by charges of $16.9 million associated with the non-core eOne Film and TV business sale process, consultant and transformation office charges totaling $8.4 million associated with the Company's Operational Excellence program, as well as higher marketing and sales costs within the Wizards of the Coast and Digital Gaming segment and higher expense for bad debt recorded during the third quarter of 2023.

First Nine Months 2023

The Company's costs and expenses, stated as percentages of net revenues, are illustrated below for the nine-month periods ended October 1, 2023 and September 25, 2022.

			Nine Months Ended
			October 1, 2023						September 25, 2022
Cost of sales			30.5		%				31.9		%
Program cost amortization			8.8		%				8.8		%
Royalties			8.0		%				8.0		%
Product development			6.3		%				5.5		%
Advertising			6.7		%				6.6		%
Amortization of intangible assets			1.8		%				1.9		%
Impairment of goodwill			6.2		%				—		%
Loss on assets held for sale			12.7		%				0.6		%
Selling, distribution and administration			28.3		%				23.9		%

Cost of sales for the nine months ended October 1, 2023 decreased to $1,132.0 million, or 30.5% of net revenues, from $1,331.2 million, or 31.9% of net revenues for the nine months ended September 25, 2022. The cost of sales decrease was driven primarily by lower sales volumes and lower product input costs, most notably within the Consumer Products segment as well as cost savings realized from the Company's Operational Excellence Program combined with the impact of the exit of certain non-core business. These decreases were partially offset by higher closeout sales during the first nine months of 2023 compared to the first nine months of 2022. As a percent of net revenues, the cost of sales decrease was primarily the result of the mix of net revenues, partially offset by higher inventory obsolescence charges during the third quarter of 2023 compared to the third quarter of 2022.

Program cost amortization decreased in the first nine months of 2023 to $325.3 million, or 8.8% of net revenues, from $365.7 million, or 8.8% of net revenues, in the first nine months of 2022. The program cost amortization decrease during the first nine months of 2023 reflects the impact of the writers' and actors' strikes during 2023, which disrupted the number and timing of planned productions and led to reduced deliveries. This decrease was partially offset by production asset impairment charges of $25.0 million associated with Dungeons & Dragons: Honor Among Thieves, recorded during the second quarter of 2023.

Royalty expense for the nine months ended October 1, 2023 was $295.8 million, or 8.0% of net revenues, compared to $335.3 million, or 8.0% of net revenues, for the nine months ended September 25, 2022. The decrease in royalty expense during the first nine months of 2023 reflects lower sales of Partner Brands products and the exit of certain license agreements in December 2022, partially offset by the impact of royalty rates associated with the 2023 card set releases, Lord of the Rings: Tales of Middle-earth and Doctor Who.

Product development expense for the nine months ended October 1, 2023 was $232.4 million, or 6.3% of net revenues, compared to $231.2 million, or 5.5% of net revenues, for the nine months ended September 25, 2022. Product development expense in the first nine months of 2023 was driven by continued investments and costs to support the Company's Wizards of the Coast tabletop and digital gaming initiatives, partially offset by lower personnel costs with the Consumer Products segment.

Advertising expense for the nine months ended October 1, 2023 was $249.8 million, or 6.7% of net revenues, compared to $277.0 million, or 6.6% of net revenues, for the nine months ended September 25, 2022. The advertising expense decrease during the first nine months of 2023 was driven by lower expense within the Consumer Products segment, due to the volume and mix of product sales and timing of advertising expenditures during the first nine months of 2023, partially offset by higher expense 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.

Amortization of intangible assets was $65.1 million, or 1.8% of net revenues, for the nine months ended October 1, 2023 compared to $81.2 million, or 1.9% of net revenues, in the first nine months of 2022. The decrease in 2023 reflects the discontinuation of amortization expense associated with intangible assets classified as held for sale, lower expense due to the impairment of the Company's definite-lived intangible asset, eOne Trademark, lower expense due to the partial impairment of the Company's definite-lived Power Rangers intangible assets during the fourth quarter of 2022, as well as lower expense due to certain classic gaming properties becoming fully amortized during the first quarter of 2023. These decreases were partially offset by additional expense associated with assets acquired through the D&D Beyond Acquisition during the second quarter of 2022.

Impairment of goodwill of $231.2 million, or 6.2% of net revenues for the first nine months of 2023 reflects non-cash goodwill impairment charges recorded during the second quarter, within the Entertainment segment, associated with the impairment review of the Company's Film and TV reporting unit. The loss on assets held for sale in the first nine months of 2022 of $23.1 million, or 0.6% of net revenues, represents non-cash impairment charges associated with the exit of certain non-core businesses within the Entertainment segment.

The loss on assets held for sale of $473.0 million, or 12.7% of net revenues, represents non-cash impairment charges and foreign currency translation losses reclassified from accumulated other comprehensive losses to current earnings, associated with the sale of the Company's non-core eOne Film and TV business within the Entertainment segment.

Selling, distribution and administration expenses were $1,050.0 million, or 28.3% of net revenues for the nine months ended October 1, 2023, compared to $1,000.1 million, or 23.9% of net revenues, for the nine months ended September 25, 2022. During the first nine months of 2023, selling, distribution and administration expenses included $65.0 million of intangible asset impairment charges related to the Company's definite-lived intangible eOne Trademark, consultant and transformation office charges totaling $29.4 million related to the Company's Operational Excellence program, and charges totaling $16.9 million incurred by the Company associated with the process to sell the eOne Film and TV business. In addition, higher marketing and sales costs, most notably within the Wizards of the Coast and Digital Gaming Segment in support of digital gaming and location based entertainment initiatives, were partially offset by lower compensation expense associated with workforce reductions, and lower freight and warehousing expenses during the first nine months of 2023.

NON-OPERATING EXPENSE (INCOME)

Interest expense for the third quarter and first nine months of 2023 totaled $47.1 million and $140.0 million, respectively, compared to $41.9 million and $125.2 million in the third quarter and first nine months of 2022, respectively. The increase in interest expense for the third quarter and first nine months of 2023 primarily reflects higher interest expense related to the Company's variable term loan facilities, due to higher interest rates in 2023 compared to 2022, and to a lesser extent, higher interest expense related to borrowings from the Company's production financing credit facilities.

Interest income was $3.8 million and $15.6 million for the third quarter and first nine months of 2023, respectively, compared to $3.2 million and $8.0 million in the third quarter and first nine months of 2022, respectively. Higher interest income in 2023 primarily reflects higher average interest rates in 2023 compared to 2022.

Other expense (income), net was $2.2 million and $(0.7) million for the third quarter and first nine months of 2023, respectively, compared to other income, net of $10.0 million and $9.5 million in the third quarter and first nine months of 2022, respectively. The decrease in other income during 2023 was driven primarily by foreign currency exchange losses in 2023 compared to foreign currency exchange gains in 2022.

INCOME TAXES

Income tax benefit totaled $44.6 million on pre-tax loss of $215.0 million in the third quarter of 2023 compared to income tax expense of $37.4 million on pre-tax income of $165.6 million in the third quarter of 2022. For the nine month period, the income tax benefit totaled $36.9 million on pre-tax loss of $463.9 million compared to an income tax expense of $94.1 million on pre-tax income of $425.7 million in 2022. Both periods were impacted by discrete tax events including the accrual of potential interest and penalties on uncertain tax positions. The nine month period in 2023 includes an impairment of goodwill in the Film and TV reporting unit of $231.2 million, recorded during the second quarter, with no tax benefit. During the first nine months of 2023, the Company recorded favorable discrete tax adjustments exclusive of the goodwill impairment of a net benefit

of $113.3 million compared to a net benefit of $6.7 million in the first nine months of 2022. The favorable discrete tax adjustments for the first nine months of 2023 are primarily associated with tax benefits on the impairment of trade names in our Film and TV reporting unit, recorded in the second quarter, and the loss on assets held for sale of $473.0 million, recorded in the third quarter. The favorable discrete tax adjustments for the first nine months of 2022 were 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 on assets held for sale in the third quarter. Absent discrete items, the tax rates for the first nine months of 2023 and 2022 were 25.0% and 22.3% respectively. The increase in the base rate of 25.0% for the first nine months of 2023 is primarily due to the mix of jurisdictions where the Company earned its profits combined with phasing of when the Company will earn its income throughout the year in 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 into the second half of 2022. In response to these disruptions, the Company accelerated certain inventory purchases during the first half of 2022, 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 has continued to closely manage its inventory levels through closeout sales and by monitoring consumer purchase patterns, resulting in lower inventory balances as of the third quarter of 2023, compared to the third quarter of 2022, while ensuring adequate supply of new product despite 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, neither of which are material to our total revenue or 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 October 1, 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 October 1, 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 nine 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, borrowings under its commercial paper program and 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 $60.0 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 October 1, 2023, the Company's cash and cash equivalents totaled $185.5 million, of which $1.1 million is restricted under the Company’s production financing facilities. In connection with the planned sale of the Company's Film and TV business, as of October 1, 2023, $70.4 million of cash and cash equivalents attributable to non-core entertainment businesses were reclassified to assets held for sale on the Company's consolidated balance sheets included in Part I of this Form 10-Q. Of the reclassified amount, $4.1 million is restricted under the Company’s production financing facilities. The net cash 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.

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 October 1, 2023, the Company had a total liability of $103.3 million related to this tax, $45.9 million is reflected in current liabilities while the remaining long-term payable related to the Tax Act of $57.4 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 October 1, 2023, are denominated in the U.S. dollar.

Due to 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.

			**October 1, 2023 ***						September 25, 2022						% Change
Cash and cash equivalents (including restricted cash of $1.1 and $6.1)			$	185.5					$	551.6					-66		%
Accounts receivable, net			1,102.0						1,188.8						-7		%
Inventories			617.7						844.5						-27		%
Prepaid expenses and other current assets			286.2						658.8						-57		%
Other assets			731.6						1,404.3						-48		%
Accounts payable and accrued liabilities			1,356.8						2,097.0						-35		%
Other liabilities			438.2						545.1						-20		%

*During the third quarter of 2023, the Company reached a definitive agreement to sell its non-core eOne Film and TV business to Lionsgate. Accordingly, the Company reclassified the related assets and liabilities within Assets Held for Sale and Liabilities Held for Sale, respectively, on the Consolidated Balance Sheets as of October 1, 2023. For additional information on assets and liabilities held for sale, see note 15 to the consolidated financial statements included in Part I, Item 1. Financial Statements, of this Form 10-Q.

Accounts receivable decreased 7% to $1,102.0 million as of October 1, 2023, compared to $1,188.8 million as of September 25, 2022. The decrease in accounts receivable was driven primarily by the reclassification of $85.2 million of account receivable balances to assets held for sale during the third quarter of 2023. Absent the impact of this reclassification, Account receivable balances were consistent with the third quarter of 2022. Days sales outstanding increased from 65 days as of September 25, 2022 to 67 days as of October 1, 2023.

Inventories decreased 27% to $617.7 million as of October 1, 2023, compared to $844.5 million as of September 25, 2022. The decrease during the first nine months of 2023 was driven primarily by lower inventory balances within the Consumer Products segment reflecting both reduced in transit times due to supply chain management improvements compared to 2022, and efforts to reduce retail inventory levels, most notably in North America and Europe. In addition, $2.7 million of inventory balances were reclassified to assets held for sale during the third quarter of 2023. These decreases were partially offset by higher inventory balances within the Wizards of the Coast and Digital Gaming segment.

Prepaid expenses and other current assets decreased 57% to $286.2 million as of October 1, 2023, from $658.8 million as of September 25, 2022. The decrease was driven primarily by the reclassification of $402.6 million of prepaid expense and other current asset balances to assets to assets held for sale during the third quarter of 2023. Absent the impact of this reclassification, Prepaid expenses and other current assets remained consistent with the first nine months of 2022, reflecting higher accrued income balances due to higher accrued royalty and licensing balances, primarily attributable to the Company's Entertainment business and higher prepaid royalty balances, primarily associated with the timing of payments made within the Company's Consumer Products business. These increases were offset by lower unrealized gains on foreign exchange contracts during the first nine months of 2023.

Other assets decreased 48% to $731.6 million as of October 1, 2023, from $1,404.3 million as of September 25, 2022. The decrease was primarily driven by the reclassification of $891.5 million of other assets balances to assets held for sale during the third quarter of 2023. Absent the impact of this reclassification, Other assets remained consistent with the first nine months of 2022 and reflect higher deferred tax balances related to the capitalization of research and experimentation costs and the recognition of deferred tax assets associated with the partial impairment of the Company's definite-lived Power Rangers intangible asset. These increases were offset by a lower balance for the Company's investment in Discovery Family Channel due to distributions received during the fourth quarter of 2022 and the first nine months of 2023.

Accounts payable and accrued liabilities decreased 35% to $1,356.8 million as of October 1, 2023, from $2,097.0 million as of September 25, 2022, driven by the reclassification of $404.4 million of accounts payable and accrued liability balances to liabilities held for sale during the third quarter of 2023. Absent the impact of this reclassification, the decrease to Accounts payable and accrued liabilities was 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 sales declines of the Company's partner brands reflecting the expiration of certain partner brand licensing agreements, lower accrued income tax balances as

well as lower accrued advertising and incentive bonus accrual balances. These decreases were partially offset by higher severance accrual balances related to the Company's cost savings initiatives mentioned above and a higher short-term transition tax liability balance reflecting the increase to the Company's 2023 installment payment due April 2024.

Other liabilities decreased 20% to $438.2 million as of October 1, 2023, from $545.1 million as of September 25, 2022. The decrease was primarily driven by the reclassification of $52.1 million of other liability balances to liabilities held for sale during the third quarter of 2023. Absent this reclassification, the decrease in Other liabilities was driven by a lower transition tax liability balance reflecting the reclassification of the 2023 installment payment due April 2024, lower long-term pension liability balances and lower long-term deferred tax balances reflecting the amortization of deferred tax liabilities. These decreases were partially offset by a higher long-term lease liability balance attributable to a lease entered during the first nine months of 2023 in support of the Wizards of the Coast and Digital Gaming segment.

Cash Flow

The following table summarizes the changes in the Consolidated Statement of Cash Flows, expressed in millions of dollars, for the nine-month periods ended October 1, 2023 and September 25, 2022.

			October 1, 2023						September 25, 2022
Net cash provided by (utilized for):
Operating activities			$	334.9					$	262.2
Investing activities			(162.6)						(265.8)
Financing activities			(418.0)						(443.0)

Net cash provided by operating activities in the first nine months of 2023 was $334.9 million compared to $262.2 million in the first nine months of 2022. The $72.7 million increase in net cash provided by operating activities after adjusting for non-cash items, was primarily attributable to lower investments in entertainment content and production during the first nine months of 2023.

Net cash utilized for investing activities was $162.6 million in the first nine months of 2023 compared to net cash utilized for investing activities of $265.8 million in the first nine months of 2022. Additions to property, plant and equipment were $160.4 million in the first nine months of 2023 compared to $130.7 million in the first nine months of 2022, reflecting increased investments in the Company's digital gaming initiatives as well as right of use asset additions and leasehold improvements within the Wizards of the Coast and Digital Gaming segment. In 2022, net cash utilized for investing activities reflects a cash payment of $146.3 million made during the second quarter, related to the D&D Beyond Acquisition.

Net cash utilized for financing activities was $418.0 million in the first nine months of 2023 compared to $443.0 million in the first nine months of 2022. Financing activities in the first nine months of 2023 include $60.0 million of principal amortization payments toward the Five-Year Tranche loan described below, as well as drawdowns of $117.9 million and repayments of $162.0 million, related to production financing loans. Financing activities in the first nine months of 2022 include payments totaling $72.5 million toward the Five-Year Tranche loan consisting of $50.0 million principal and a quarterly principal amortization payment of $22.5 million, in addition to drawdowns of $204.5 million and repayments of $189.2 million, related to production financing loans, as well as cash payments of $125.0 million to repurchases the Company's common stock.

Dividends paid in the first nine months of 2023 totaled $290.9 million, compared to $288.6 million in the first nine months of 2022.

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 typically increase during the third and fourth quarters 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 nine months of 2023 and 2022, the Company primarily used cash from operations and, to a lesser extent, borrowings under its commercial program in addition to borrowings under its 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. During the second quarter of 2023, to meet certain of its short-term liquidity needs, the Company issued commercial paper notes under the Program, all of which were repaid by the Company prior to the close of the second quarter. As of October 1, 2023, the Company had no outstanding borrowings related to the Program.

During September 2023, the Company entered into a third 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 $1.25 billion, effective as of September 5, 2023. 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 was extended through September 5, 2028. Prior to the September 2023 amendment, the Amended Revolving Credit Agreement provided for a $1.5 billion revolving credit facility. The Company was in compliance with all covenants as of October 1, 2023. The Company had no borrowings outstanding under its committed revolving credit facility as of October 1, 2023. However, letters of credit outstanding under this facility as of October 1, 2023 were approximately $4.0 million. Amounts available and unused under the committed line, at October 1, 2023 were approximately $1.25 billion, inclusive of borrowings under the Company’s commercial paper program. The Company also has other uncommitted lines from various banks, of which approximately $9.3 million was utilized as of October 1, 2023. Of the amount utilized under, or supported by, the uncommitted lines, the full $9.3 million represented letters of credit.

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 October 1, 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 $350.0 million in the following increments: $22.5 million in 2020; $180.0 million in 2021; $87.5 million in 2022; and, $60.0 million during the first nine months of 2023. The Company is subject to certain financial covenants contained in this agreement and as of October 1, 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. During the first nine months of 2023, the Company had total drawdowns of $117.9 million and repayments of $162.0 million towards these production financing facilities. As of October 1, 2023, the Company had outstanding production financing borrowings related to these facilities of $150.9 million, all of which were reclassified to Liabilities held for sale in the Company's consolidated balance sheets, included in Part I of this Form 10-Q. For additional information on Assets and Liabilities held for sale, see note 15 to the consolidated financial statements included in Part I, Item 1. Financial Statements, of this Form 10-Q.

The Company has principal amounts of long-term debt as of October 1, 2023 of $3.7 billion, due at varying times from 2024 through 2044. Of the total principal amount of long-term debt, $68.2 million is current as of October 1, 2023 of which $60.0 million is related to principal amortization of the 5-year term loans due December 2024 and $8.2 million, which was reclassified to Liabilities held for sale, represents the Company's outstanding production financing facilities at October 1, 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 purchase commitments of approximately $240.9 million outstanding at October 1, 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. In 2023 Hasbro maintained its quarterly dividend rate of $0.70 per share for the dividends paid in February, May and August and has declared a fourth cash dividend of $0.70 per share payable on November 15, 2023 to shareholders of record as of November 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 October 1, 2023, $241.6 million remained available under these share repurchase authorizations. There were no share repurchases made during the first nine months 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 America 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. As of October 1, 2023, these contracts had net unrealized gains of $6.1 million, of which $6.8 million of unrealized gains are recorded in prepaid expenses and other current assets, $1.4 million of unrealized gains are recorded in other assets and $2.1 million of unrealized losses are recorded in accrued liabilities. Included in accumulated other comprehensive loss at October 1, 2023 are deferred gains, net of tax, of $2.7 million, related to these derivatives.

As of October 1, 2023, the Company had fixed-rate long-term debt of $3.7 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 October 1, 2023 are deferred losses, net of tax, of $14.4 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 and specialized organizational cost-savings programs including supply chain management improvements, 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.