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

(Dollar and share amounts in tables presented in millions, unless otherwise noted)

The following discussion and analysis should be read together with the accompanying unaudited consolidated financial statements and the notes thereto included in this Quarterly Report and the audited consolidated financial statements and the notes thereto in the 2024 Annual Report.

Overview

Hasbro, Inc. (“Hasbro”) is a leading game, intellectual property ("IP"), and toy company whose mission is to create joy and community through the magic of play. With over 100 years of expertise, we deliver play experiences to kids, families, and fans around the world, through physical and digital games, video games, toys, licensed consumer products, location-based entertainment, film, TV and more.    

Through our franchise-first approach, we unlock value from both new and legacy IP, including MAGIC: THE GATHERING, DUNGEONS & DRAGONS, MONOPOLY, HASBRO GAMES, NERF, TRANSFORMERS, PLAY-DOH and PEPPA PIG, as well as premier partner brands. Powered by our portfolio of iconic brands and a diversified network of partners and subsidiary studios, we bring fans together wherever they are, from tabletop to screen. 

For more than a decade, Hasbro has been consistently recognized for its corporate citizenship, including being named one of the 100 Best Corporate Citizens by 3BL Media, a 2025 JUST Capital Industry Leader, one of the 50 Most Community-Minded Companies in the U.S. by the Civic 50, and a Brand that Matters by Fast Company.

Recent Developments

Over the last several years, Hasbro has continued our transformation for our business and we began to see tangible results from our initiatives. Specifically, we focused our efforts on strategic investments in our most valuable and profitable franchises across games, licensing, toys and entertainment. We also made significant progress in our cost-savings initiatives and further strengthened our leadership team with industry veterans and turnaround experts.

In the first quarter of 2025, we launched our refreshed strategy "Playing to Win" to refocus the Company on play and partnership. Through play fueled brand engagement and partner scaled co-investment, we plan to expand our consumer reach as a games, IP, and toy company. We have set goals and objectives to be one of the most profitable and diverse toy and game companies globally, powered by multi-segment and multi-generational franchises. Playing to Win includes five strategic building blocks:

• Profitable Franchises:** Focus on improving the fundamentals of profitable, play-focused brands, through innovation, partnership, operational excellence, managed cost-discipline and retail execution.

• Aging Up**: Expand our consumer base and drive play and collectible experiences for fans of all ages, recognizing that consumers aged 13 and above are gaining purchase share.

• Everyone Plays**: Engage across the play spectrum to where we under-index and capture new consumers across demographics and markets.

• Digital and Direct:** Embrace new ways to engage with our consumers through video games, digital technology and direct-to-consumer interactions.

• Partner Scale:** Capitalize on our partners’ investments and scale to enhance our brands through strategic relationships and licensing arrangements.

As part of our Playing to Win strategy, we have realigned our brand portfolios to correspond our refreshed strategy:

• Grow Brands:** Brands representing the highest margin, highest growth opportunities in categories where we see significant share and/or underlying market growth.

• Optimize Brands**: Brands representing opportunities to maintain or grow share while improving operating profit returns.

• Reinvent Brands**: Brands representing opportunities to reinvent or restructure to drive innovation and improved operating profit returns.

Brands periodically are reclassified, based on changes in growth, profitability or other characteristics, and when those changes occur, the respective portfolio historical revenue is included within the new classification.

Tariffs

The impact of tariffs on the Company's business operations was not significant during the first three months of 2025 and throughout 2024; however significant changes in trade policy announced by the U.S. government during the

second quarter of 2025 could result in material adverse impacts to our forward-looking financial results. The Company monitors the impact of tariffs to its business operations on an ongoing basis and may need to implement actions such as imposing price adjustments or making changes in our supply chain sourcing strategies in order to mitigate the impact of tariffs in future periods. The impacts of tariffs may lead to reduced economic activity, increased costs, reduced demand and changes in purchasing behaviors for some or all of our products, potential unrealizability of some of our existing assets, or other economic outcomes that could have a material adverse impact on our sales volumes, prices, and our financial results.

Although the final impact of tariffs is uncertain, from the Company’s scenario planning, assuming tariffs on imports from China to the United States ranging from 50% to 145%, and tariffs on imports from the rest of the world at 10%, we currently estimate between $100 million and $300 million of negative gross impact to operating profit in 2025, before any mitigation measures. Factoring in all mitigating levers, we currently estimate a negative net profit impact to the Company between $60 million and $180 million for 2025. The range of outcomes is dependent on final trade policy, customer order patterns, and impacts on consumer purchasing from tariffs and related economic conditions. The impact may be greater than set forth above. The Company also currently anticipates that tariffs will result in purchasing shifting later in the year, with a negative impact to second quarter revenues.

Summary of Results

During 2025, the Company experienced an increase in revenue from $757.3 million for the three months ended March 31, 2024 to $887.1 million for the three months ended March 30, 2025. The increase in revenue for the three months ended March 30, 2025 from the three months ended March 31, 2024 is driven primarily by growth in our Wizards of the Coast and Digital Gaming segment, inclusive of increased demand for both tabletop and licensed digital gaming, partially offset by a decrease in our Consumer Products segment related to volume declines.

The Company has made strong progress towards its ongoing transformation efforts while achieving an operating profit of $170.7 million during the three months ended March 30, 2025 as compared to $116.2 million for the three months ended March 31, 2024, respectively. See the below discussion for the consolidated and segment results of operations.

RESULTS OF OPERATIONS

The following table presents the consolidated results of operations for the three months ended March 30, 2025 and March 31, 2024:

			Three Months Ended
			March 30, 2025												March 31, 2024
			Amount						% of Net Revenues						Amount						% of Net Revenues
Net revenues			$	887.1					100.0		%				$	757.3					100.0		%
Costs and expenses:
Cost of sales			204.5						23.1		%				204.2						27.0		%
Program cost amortization			7.4						0.8		%				8.1						1.1		%
Royalties			57.0						6.4		%				50.9						6.7		%
Product development			80.5						9.1		%				65.5						8.6		%
Advertising			55.4						6.2		%				51.5						6.8		%
Amortization of intangible assets			17.0						1.9		%				17.0						2.2		%
Loss on disposal of business			25.0						2.8		%				9.1						1.2		%
Selling, distribution and administration			269.6						30.4		%				234.8						31.0		%
Total costs and expenses			716.4						80.8		%				641.1						84.7		%
Operating profit			170.7						19.2		%				116.2						15.3		%
Non-operating expense (income):
Interest expense			41.6						4.7		%				38.5						5.1		%
Interest income			(8.9)						(1.0)		%				(8.3)						(1.1)		%
Other expense, net			1.4						0.2		%				5.0						0.7		%
Total non-operating expense, net			34.1						3.8		%				35.2						4.6		%
Earnings before income taxes			136.6						15.4		%				81.0						10.7		%
Income tax expense			37.1						4.2		%				21.9						2.9		%
Net earnings			99.5						11.2		%				59.1						7.8		%
Net earnings attributable to noncontrolling interests			0.9						0.1		%				0.9						0.1		%
Net earnings attributable to Hasbro, Inc.			$	98.6					11.1		%				$	58.2					7.7		%
Net earnings per common share:
Basic			$	0.71											$	0.42
Diluted			$	0.70											$	0.42

Net revenues - Net revenues for the first quarter of 2025 increased 17% to $887.1 million from $757.3 million for the first quarter of 2024 primarily driven by a $145.8 million, or 46%, increase in the Wizards of the Coast and Digital Gaming segment, offset by a $14.7 million, or 4%, decline in the Consumer Products segment, and a $1.3 million, or 5%, decline in the Entertainment segment. See the Segment Results discussion below for further details.

The following table presents net revenues by brand portfolio category:

			Three Months Ended
			March 30, 2025						March 31, 2024						% Change
Grow Brands			$	653.4					$	521.7					25		%
Optimize Brands			132.1						141.8						(7)		%
Reinvent Brands			101.6						93.8						8		%
Net revenues			$	887.1					$	757.3					17		%

GROW BRANDS: Net revenues in the Grow Brands portfolio increased $131.7 million, or 25%, in the first quarter of 2025, compared to the first quarter of 2024. The net revenue increase primarily reflects higher net revenues from MAGIC: THE GATHERING, MONOPOLY, and MARVEL product sales and digital game licensing related to MONOPOLY GO!, which were partially offset by lower net revenues from GI JOE products.

OPTIMIZE BRANDS: Net revenues in the Optimize Brands portfolio decreased $9.7 million, or 7%, in the first quarter of 2025, compared to the first quarter of 2024. The net revenue decrease is primarily driven by lower net revenues from PEPPA PIG products, partially offset by an increase in revenue from TRANSFORMERS products, which was driven by increased consumer demand stemming from the September 2024 theatrical release of Transformers One with our partners at Paramount.

REINVENT BRANDS: Net revenues in the Reinvent Brands portfolio increased $7.8 million, or 8%, in the first quarter of 2025 compared to the first quarter of 2024. Higher net revenues from BEY BLADE products, following the Company's successful reintroduction of the brand, as well as higher consumer product licensing revenues relating to MY LITTLE PONY, which were partially offset by decreases in revenue from NERF.

OPERATING COSTS AND EXPENSES

Cost of sales - Cost of sales for the first quarter of 2025 was $204.5 million, or 23.1% of net revenues, compared to $204.2 million, or 27.0% of net revenues, for the first quarter of 2024. The decrease in cost of sales as a percent of net revenues was primarily the result of a shift in product mix, driven by an increase in both digital and consumer product licensing revenue during the quarter.

Program cost amortization - Program cost amortization decreased slightly to $7.4 million, or 0.8% of net revenues, for the first quarter of 2025 from $8.1 million, or 1.1% of net revenues, for the first quarter of 2024. Program costs are capitalized as incurred and amortized primarily using the individual-film-forecast method which matches costs to the related recognized revenue and is based upon the current slate of entertainment projects.

Royalties - Royalty expense for the first quarter of 2025 increased to $57.0 million, or 6.4% of net revenues, compared to $50.9 million, or 6.7% of net revenues, for the first quarter of 2024. Fluctuations in Royalty expense are generally related to the volume of content releases and deliveries and entertainment-driven products sold. The increase in Royalty expense during the first quarter of 2025 was directly driven by an increase in sales for partner brands such as MARVEL, for which the Company is obligated to pay a royalty.

Product development - Product development expense for the first quarter of 2025 was $80.5 million, or 9.1% of net revenues, compared to $65.5 million, or 8.6% of net revenues, for the first quarter of 2024. The increase in Product development expense during the first quarter of 2025 was primarily due to higher incremental investment in the development of Grow Brands under the Company's new "Playing to Win" strategy.

Advertising - Advertising expense for the first quarter of 2025 was $55.4 million, or 6.2% of net revenues, compared to $51.5 million, or 6.8% of net revenues, for the first quarter of 2024. The Advertising expense increase during the first quarter of 2025 was primarily driven by the timing of sales initiatives in Consumer Products segment.

Amortization of intangible assets - Amortization of intangible assets remained flat at $17.0 million, or 1.9% of net revenues, for the first quarter of 2025, compared to $17.0 million, or 2.2% of net revenues, for the first quarter of 2024. The amortization expense was driven by the straight-line amortization of the Company's remaining definite-lived intangible assets.

Loss on disposal of business - Loss on disposal of business for the first quarter of 2025 was $25.0 million, or 2.8% of net revenues, compared to $9.1 million, or 1.2% of net revenues, for the first quarter of 2024. The increase in Loss on disposal of business was driven by the settlement of a holdback provision relating to the divestiture of the eOne Film and TV business.

Selling, distribution and administration - Selling, distribution and administration expenses increased to $269.6 million, or 30.4% of net revenues for the first quarter of 2025, from $234.8 million, or 31.0% of net revenues, for the first quarter of 2024. The increase in Selling, distribution and administration expenses during the first quarter of 2025 is primarily the result of a non-recurring stock-compensation benefit of $18.1 million recorded during the first quarter of 2024, as well as an increase in the Company's bad debt provision, partially offset by benefits from cost savings initiatives.

Operating Profit - Operating profit for the first quarter of 2025 was $170.7 million, or 19.2% of net revenues, compared to an operating profit of $116.2 million, or 15.3% of net revenues, for the first quarter of 2024 driven by the factors discussed above.

NON-OPERATING EXPENSE (INCOME)

Interest expense - Interest expense for the first quarter of 2025 totaled $41.6 million compared to $38.5 million in the first quarter of 2024. The increase in Interest expense primarily reflects a higher average interest rate on the outstanding borrowings existing as of the end of the first quarter of 2025 as compared to those outstanding as of the first quarter of 2024.

Interest income - Interest income was $8.9 million for the first quarter of 2025, compared to $8.3 million in the first quarter of 2024. Higher Interest income in 2025 primarily reflects higher cash balances in 2025 compared to 2024, partially offset by lower average interest rates.

Other expense, net - Other expense, net was $1.4 million for the first quarter of 2025, compared to Other expense, net of $5.0 million in the first quarter of 2024. The change in Other expense, net during 2025 was driven primarily by variations in the movement of foreign currencies in the first quarter of 2025 when compared to the first quarter of 2024.

INCOME TAXES

Income tax expense totaled $37.1 million on pre-tax income of $136.6 million in the first quarter of 2025 compared to income tax expense of $21.9 million on pre-tax income of $81.0 million in the first quarter of 2024. Both periods were impacted by discrete tax events including the accrual of potential interest and penalties on uncertain tax positions. During the first quarter of 2025, the Company recorded a net discrete tax benefit of $0.3 million compared to a net discrete tax expense of $1.8 million in the first quarter of 2024.

The net discrete tax benefit for the first quarter of 2025 is primarily associated with stock-based compensation offset by activity related to uncertain tax benefits. The net discrete tax expense for the first quarter of 2024 is primarily associated with stock-based compensation. Absent discrete items, the tax rates for the first quarter of 2025 and 2024 were 23.1% and 22.4%, respectively. The increase in the base rate of 23.1% for the first quarter of 2025, relative to the first quarter of 2024, is primarily due to the mix of jurisdictions where the Company earned its profits.

SEGMENT RESULTS

The following table presents net external revenues and operating profit (loss) for the Company's reportable segments:

			Three Months Ended
			March 30, 2025						March 31, 2024						% Change
Net revenues:
Wizards of the Coast and Digital Gaming			$	462.1					$	316.3					46		%
Consumer Products			398.3						413.0						(4)		%
Entertainment			26.7						28.0						(5)		%
Total net revenues			$	887.1					$	757.3					17		%
Operating profit (loss):
Wizards of the Coast and Digital Gaming			$	230.0					$	122.8					87		%
Consumer Products			(43.9)						(46.9)						(6)		%
Entertainment			(11.2)						5.8						(293)		%
Corporate and Other			(4.2)						34.5						(112)		%
Total Operating profit (loss)			$	170.7					$	116.2					47		%

Wizards of the Coast and Digital Gaming Segment

The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category:

			Three Months Ended
			March 30, 2025						March 31, 2024						% Change
Tabletop Gaming			$	343.8					$	228.2					51		%
Digital and Licensed Gaming			118.3						88.1						34		%
Net revenues			$	462.1					$	316.3					46		%

Wizards of the Coast and Digital Gaming segment net revenues increased 46.1% in the first quarter of 2025 to $462.1 million from $316.3 million in the first quarter of 2024. The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the first quarter of 2025 was primarily attributable to revenue contributions from higher digital licensing related to MONOPOLY GO!, as well as an increase in Tabletop Gaming revenue which increased 50.7% behind growth in MAGIC: THE GATHERING, primarily due to strong demand for Aetherdrift and Tarkir Dragonstorm, as well as other various Backlist sets.

Wizards of the Coast and Digital Gaming segment operating profit was $230.0 million, or 49.8% of segment net revenues for the first quarter of 2025, compared to operating profit of $122.8 million, or 38.8% of segment net revenues, for the first quarter of 2024. Operating profit increased during the first quarter of 2025 driven by increased net revenues and continued growth in digital licensing.

Consumer Products Segment

The following table presents the Consumer Products segment net revenues by major geographic region:

			Three Months Ended
			March 30, 2025						March 31, 2024						% Change
North America			$	231.4					$	239.1					(3)		%
Europe			85.0						87.5						(3)		%
Asia Pacific			53.8						48.8						10		%
Latin America			28.1						37.6						(25)		%
Net revenues			$	398.3					$	413.0					(4)		%

The Consumer Products segment net revenues decreased 4% to $398.3 million for the first quarter of 2025 compared to $413.0 million for the first quarter of 2024 primarily driven by broader industry trends and shifts in product mix. The net revenue decrease primarily reflects lower net revenues from NERF, GI JOE and PLAY-DOH products. These declines in revenue were partially offset by revenue growth from BEY BLADE, MARVEL, and TRANSFORMERS products, as well as an increase in consumer product licensing revenue from MY LITTLE PONY.

Consumer Products segment operating loss for the first quarter of 2025 was $43.9 million or 11.0% of segment net revenues, compared to a segment operating loss of $46.9 million or 11.4% of segment net revenues, for the first quarter of 2024. The decrease in operating loss in the first quarter of 2025 was driven by savings realized from the Company's cost savings and transformation initiatives, offset by a decrease in net revenues, higher royalty expenses, reflecting the mix of products sold, and higher advertising costs.

Entertainment Segment

The following table presents Entertainment segment net revenues by category:

			Three Months Ended
			March 30, 2025						March 31, 2024						% Change
Film and TV			$	4.3					$	—					>100%
Family Brands			22.4						28.0						(20)		%
Net revenues			$	26.7					$	28.0					(5)		%

Entertainment segment net revenues decreased 5% to $26.7 million for the first quarter of 2025, compared to $28.0 million for the first quarter of 2024. The net revenue decrease in the Entertainment segment during the first quarter of 2025 was driven primarily by the timing of entertainment streaming renewals.

Entertainment segment operating loss was $11.2 million, or 41.9% of segment net revenues for the first quarter of 2025, compared to an operating profit of $5.8 million, or 21% of segment net revenues for the first quarter of 2024. The decrease in operating profit in Entertainment segment operating results during the first quarter of 2025 was driven by a non-recurring Loss on disposal of business of $25.0 million recorded during the quarter.

Corporate and Other

Corporate and Other operating loss was $4.2 million for the first quarter of 2025 compared to an operating profit of $34.5 million for the first quarter of 2024. The decrease in operating profit in the first quarter of 2025 as compared to the first quarter of 2024 primarily reflects a non-recurring benefit from the reversal of stock compensation expense recorded in the first quarter of 2024. Refer to Note 1, Basis of Presentation, to the consolidated financial statements for further information on the stock compensation adjustment.

OTHER INFORMATION

Commitments and Contingencies

The Company enters into purchase orders with vendors and other parties in the ordinary course of business. Refer to Item 7 of our 2024 Annual Report for additional information regarding the Company’s cash obligations and commitments as of the end of fiscal year 2024. Additionally, refer to Note 14, Commitments and Contingencies, to the consolidated financial statements for a discussion of the Company’s commitments and contingencies. Contractual obligations and commercial commitments, as detailed in the Company's 2024 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.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically generated a significant amount of cash from operations. The Company primarily funds 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.

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, are adequate to meet its working capital needs for the next twelve months. 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.

The impact of tariffs on the Company's business operations was not significant during the first three months of 2025 and throughout 2024; however significant changes in trade policy announced by the U.S. government during the second quarter of 2025 could result in material adverse impacts to our forward-looking financial results, including the timing and extent of cash flows based upon timing in customer buying patterns and changes in our supply chain sourcing strategies.

As of March 30, 2025, the Company's cash and cash equivalents totaled $621.1 million. The majority of the Company’s cash and cash equivalents held outside of the United States as of March 30, 2025 are denominated in the U.S. dollar.

Under the Company’s commercial paper program, at the request of the Company and subject to market conditions, 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 Company intends to use the commercial paper program as its primary short-term borrowing facility. As of March 30, 2025, the Company had no outstanding borrowings related to the commercial paper program.

The Company’s revolving credit facility with Bank of America, provides the Company with commitments having a maximum aggregate principal amount of $1.25 billion. The revolving credit facility also provides for a potential additional incremental commitment increase of up to $500.0 million subject to agreement of the lenders. The Company's revolving credit facility 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 Company was in compliance with all covenants as of March 30, 2025. The Company had no borrowings outstanding under its revolving credit facility as of March 30, 2025. However, letters of credit outstanding under this facility as of March 30, 2025 were approximately $3.7 million. Amounts available and unused under the revolving credit facility at March 30, 2025 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 $7.8 million was utilized as of March 30, 2025. Of the amount utilized under, or supported by, the uncommitted lines, the full $7.8 million represented letters of credit.

As of March 30, 2025, the Company had $3,331.5 million of Long-term debt due at varying times from 2026 through 2044. From time to time, the Company or its affiliates may seek to retire or purchase outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. During 2025, the Company repurchased $50.4 million of its outstanding debt.

The Company has a supplier finance program which provides participating suppliers the option of receiving payment in advance of an invoice due date, to be paid by certain administering banks, on the basis of invoices that the Company has confirmed as valid and approved. The Company’s obligation is to make payment in the invoice amount negotiated with participating suppliers, to the administering banks on the invoice due date. The Company’s suppliers are not required to participate in the supplier finance program. The early payment transactions between the Company’s supplier and the administering bank are subject to an agreement between those parties, and the Company does not participate in any financial aspect of the agreements between the Company’s suppliers and the administering banks. The Company has not pledged any assets to the administering bank under the supplier financing program. The Company or the administering bank may terminate the agreement upon at least 30 days’ written notice.

The amount of obligations confirmed under the supplier finance program that remain unpaid by the Company were $51.2 million, $47.7 million, and $66.2 million as of March 30, 2025, March 31, 2024 and December 29, 2024, respectively. These obligations are presented within Accounts payable in the Company's Consolidated Balance Sheets. The activity related to this program is reflected within the operating activities section of the Consolidated Statements of Cash Flows.

Cash Flow

The following table summarizes the changes in the Consolidated Statement of Cash Flows:

			Three Months Ended
			March 30, 2025						March 31, 2024
Net cash provided by (utilized for):
Operating activities			$	138.1					$	177.8
Investing activities			(52.4)						(48.1)
Financing activities			(162.4)						(108.9)

Net cash provided by Operating activities in the first three months of 2025 was $138.1 million compared to $177.8 million in the first three months of 2024. The $39.7 million decrease in net cash provided by Operating activities after adjusting for non-cash items, was primarily attributable to changes in net working capital primarily the timing of accounts receivable in the first three months of 2024, partially offset by improved net income in the first three months of 2025 compared to first three months of 2024.

Net cash utilized for Investing activities was $52.4 million in the first three months of 2025 compared to net cash utilized for Investing activities of $48.1 million in the first three months of 2024. Additions to property, plant and equipment and software were $13.8 million and $29.4 million, respectively, in the first three months of 2025 compared to $22.1 million and $23.7 million, respectively, in the first three months of 2024. Additionally, a purchase of Long-term Investments of $10.0 million occurred in the first three months of 2025 with no similar activity in the first three months of 2024.

Net cash utilized by Financing activities was $162.4 million in the first three months of 2025 compared to net cash utilized of $108.9 million in the first three months of 2024. Financing activities in the first three months of 2025 primarily include dividends paid of $97.9 million, repayments of long-term debt of $49.2 million, and $17.7 million of payments related to tax withholdings for stock compensation coinciding with equity award vesting activity. Financing activities in the first three months of 2024 included $97.2 million of dividends paid and $10.2 million of payments related to tax withholdings for stock compensation coinciding with equity award vesting activity.

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 recoverability of goodwill and intangible assets and income taxes. These critical accounting policies are detailed in the Company's 2024 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. See Note 12, Derivative Financial Instruments, to the Company’s consolidated financial statements for further details on the Company's derivatives.

As of March 30, 2025, the Company had fixed-rate debt of $3.4 billion. The Company may from time to time assess interest rate swaps related to its outstanding debt. The Company did not have any outstanding swaps as of March 30, 2025, March 31, 2024, or December 29, 2024.

INFLATION

The impact of inflation on the Company's business operations was significant during the first three months of 2025 and throughout 2024. The Company monitors the impact of inflation to its business operations on an ongoing basis and may need to implement actions such as price adjustments 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.