filings.toolsItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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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
Hasbro has continued our business transformation and we are seeing tangible results. We are focusing our efforts on strategic investments in our most valuable and profitable franchises across games, licensing, toys and entertainment. We have 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. Our objective is 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:
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Profitable Franchises:** Deliver on the fundamentals of profitable, play-focused brands, through innovation, partnership, operational excellence, managed cost-discipline and retail execution.
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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.
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Everyone Plays**: Engage across the play spectrum to where we under-index and capture new consumers across demographics and markets.
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Digital and Direct:** Embrace new ways to engage with our consumers through video games, digital technology and direct-to-consumer interactions.
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Partner Scale:** Drive profitable reach through strategic relationships and partnerships, including with retail, licensors and licensees.
As part of our Playing to Win strategy, we have realigned our brand portfolios to correspond our refreshed strategy:
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Grow Brands:** Brands representing the highest margin, highest growth opportunities in categories where we see significant share and/or underlying market growth.
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Optimize Brands**: Brands representing opportunities to maintain or grow share while improving operating profit returns.
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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 six 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 adversely impact 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, actual or potential impairments, write-downs or 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.
As a result of the estimated impact of tariffs and other macroeconomic headwinds on the Company's forward-looking forecasts, in the second quarter of 2025, the Company assessed its goodwill for potential impairment, resulting in the recognition of a non-cash goodwill impairment of $1,021.9 million in the Consumer Products segment. See further detail in Note 5, Goodwill, to the consolidated financial statements.
While the final impact of tariffs remains uncertain, the Company continues to execute decisively against the evolving tariff backdrop. The Company is forecasting a broad range of potential outcomes and based on updated trade policy developments, the Company has estimated $60 million of expense in our full year 2025 financial statements.
Summary of Results
During 2025, the Company experienced a slight decrease in revenue from $995.3 million for the three months ended June 30, 2024 to $980.8 million for the three months ended June 29, 2025. The decrease in revenue is driven by volumes declines in our Consumer Products segment, partially offset by an increase in our Wizards of the Coast and Digital Gaming segment, with an increased demand for tabletop gaming.
The Company experienced an increase in revenue from $1,752.6 million for the six months ended June 30, 2024 to $1,867.9 million for the six months ended June 29, 2025. This increase in revenue 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 volume declines in our Consumer Products segment.
The Company experienced operating loss of $798.2 million and $627.5 million for the three and six months ended June 29, 2025, respectively, as compared to operating profit of $212.1 million and $328.3 million for the three and six months ended June 30, 2024, respectively, primarily driven by the $1,021.9 million non-cash goodwill impairment recorded in the Consumer Products segment in the second quarter of 2025.
RESULTS OF OPERATIONS
The following table presents the consolidated results of operations for the three months ended June 29, 2025 and June 30, 2024:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Revenues | Amount | % of Net Revenues | ||||||||||||||||||||||||||||||||
| Net revenues | $ | 980.8 | 100.0 | % | $ | 995.3 | 100.0 | % | |||||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
| Cost of sales | 225.3 | 23.0 | % | 237.7 | 23.9 | % | |||||||||||||||||||||||||||||
| Program cost amortization | 6.2 | 0.6 | % | 8.5 | 0.9 | % | |||||||||||||||||||||||||||||
| Royalties | 84.5 | 8.6 | % | 55.3 | 5.6 | % | |||||||||||||||||||||||||||||
| Product development | 77.5 | 7.9 | % | 70.4 | 7.1 | % | |||||||||||||||||||||||||||||
| Advertising | 63.6 | 6.5 | % | 60.4 | 6.1 | % | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 17.2 | 1.8 | % | 17.1 | 1.7 | % | |||||||||||||||||||||||||||||
| Impairment of goodwill | 1,021.9 | 104.2 | % | — | — | % | |||||||||||||||||||||||||||||
| Loss on disposal of business | — | — | % | 15.3 | 1.5 | % | |||||||||||||||||||||||||||||
| Selling, distribution and administration | 282.8 | 28.8 | % | 318.5 | 32.0 | % | |||||||||||||||||||||||||||||
| Total costs and expenses | 1,779.0 | 181.4 | % | 783.2 | 78.7 | % | |||||||||||||||||||||||||||||
| Operating profit (loss) | (798.2) | (81.4) | % | 212.1 | 21.3 | % | |||||||||||||||||||||||||||||
| Non-operating expense (income): | |||||||||||||||||||||||||||||||||||
| Interest expense | 40.6 | 4.1 | % | 43.0 | 4.3 | % | |||||||||||||||||||||||||||||
| Interest income | (5.4) | (0.6) | % | (13.0) | (1.3) | % | |||||||||||||||||||||||||||||
| Other (income) expense, net | (18.7) | (1.9) | % | (0.8) | (0.1) | % | |||||||||||||||||||||||||||||
| Total non-operating expense, net | 16.5 | 1.7 | % | 29.2 | 2.9 | % | |||||||||||||||||||||||||||||
| Earnings (loss) before income taxes | (814.7) | (83.1) | % | 182.9 | 18.4 | % | |||||||||||||||||||||||||||||
| Income tax expense | 40.0 | 4.1 | % | 44.4 | 4.5 | % | |||||||||||||||||||||||||||||
| Net earnings (loss) | (854.7) | (87.1) | % | 138.5 | 13.9 | % | |||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interests | 1.1 | 0.1 | % | — | — | % | |||||||||||||||||||||||||||||
| Net earnings (loss) attributable to Hasbro, Inc. | $ | (855.8) | (87.3) | % | $ | 138.5 | 13.9 | % | |||||||||||||||||||||||||||
| Net earnings (loss) per common share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | (6.10) | $ | 0.99 | |||||||||||||||||||||||||||||||
| Diluted | $ | (6.10) | $ | 0.99 |
Net revenues - Net revenues for the second quarter of 2025 decreased 1% to $980.8 million from $995.3 million for the second quarter of 2024 primarily driven by a $82.1 million, or 16%, decrease in the Consumer Products segment, and a $2.8 million, or 15%, decrease in the Entertainment segment, offset by a $70.4 million, or 16%, increase in the Wizards of the Coast and Digital Gaming segment. See the Segment Results discussion below for further details.
The following table presents net revenues by brand portfolio category:
| Three Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Grow Brands | $ | 732.2 | $ | 704.3 | 4 | % | |||||||||||
| Optimize Brands | 155.5 | 165.0 | (6) | % | |||||||||||||
| Reinvent Brands | 93.1 | 126.0 | (26) | % | |||||||||||||
| Net revenues | $ | 980.8 | $ | 995.3 | (1) | % |
GROW BRANDS: Net revenues in the Grow Brands portfolio increased $27.9 million, or 4%, in the second quarter of 2025, compared to the second quarter of 2024. The net revenue increase primarily reflects higher net revenues from MAGIC: THE GATHERING, which was partially offset by lower net revenues from PLAY-DOH and MARVEL products. The lower net revenues from MARVEL are attributed to the timing of movie and content releases.
OPTIMIZE BRANDS: Net revenues in the Optimize Brands portfolio decreased $9.5 million, or 6%, in the second quarter of 2025, compared to the second quarter of 2024. The net revenue decrease is primarily driven by lower net revenues from STAR WARS and PEPPA PIG products, partially offset by an increase in revenue from DUEL MASTERS products.
REINVENT BRANDS: Net revenues in the Reinvent Brands portfolio decreased $32.9 million, or 26%, in the second quarter of 2025 compared to the second quarter of 2024. The net revenue decrease is primarily driven by lower net revenues from NERF, partially offset by an increase in revenue from BEYBLADE and MY LITTLE PONY products.
OPERATING COSTS AND EXPENSES
Cost of sales - Cost of sales for the second quarter of 2025 was $225.3 million, or 23.0% of net revenues, compared to $237.7 million, or 23.9% of net revenues, for the second quarter of 2024. The decrease in cost of sales 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, offset by a non-recurring $26.7 million benefit related to a historical over-accrual of vendor commitment liabilities that was recorded during the second quarter of 2024.
Program cost amortization - Program cost amortization decreased slightly to $6.2 million, or 0.6% of net revenues, for the second quarter of 2025 from $8.5 million, or 0.9% of net revenues, for the second 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 second quarter of 2025 increased to $84.5 million, or 8.6% of net revenues, compared to $55.3 million, or 5.6% of net revenues, for the second 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 second quarter of 2025 was directly driven by an increase in sales from MAGIC: THE GATHERING, primarily due to strong demand for Final Fantasy, for which the Company is obligated to pay a royalty.
Product development - Product development expense for the second quarter of 2025 was $77.5 million, or 7.9% of net revenues, compared to $70.4 million, or 7.1% of net revenues, for the second quarter of 2024. The increase in Product development expense during the second quarter of 2025 was primarily due to higher incremental investment in the development of Grow Brands under the Company's "Playing to Win" strategy.
Advertising - Advertising expense for the second quarter of 2025 was $63.6 million, or 6.5% of net revenues, compared to $60.4 million, or 6.1% of net revenues, for the second quarter of 2024. The Advertising expense increase during the second quarter of 2025 was primarily driven by the timing of sales initiatives in the Consumer Products segment.
Amortization of intangible assets - Amortization of intangible assets remained flat at $17.2 million, or 1.8% of net revenues, for the second quarter of 2025, compared to $17.1 million, or 1.7% of net revenues, for the second quarter of 2024. The amortization expense was driven by the straight-line amortization of the Company's remaining definite-lived intangible assets.
Impairment of Goodwill - During the second quarter of 2025, the Company recorded a $1,021.9 million non-cash goodwill impairment charge associated with goodwill assigned to reporting units within the Company's Consumer Products segment. There were no goodwill impairment charges in the second quarter of 2024. See further detail in Note 5, Goodwill, to the consolidated financial statements for further information.
Loss on disposal of business - During the second quarter of 2025, the Company did not recognize a Loss on disposal of business. During the second quarter of 2024, the Company recorded a $15.3 million Loss on disposal of business from certain purchase price and related adjustments relating to the divestiture of the eOne Film and TV business.
Selling, distribution and administration - Selling, distribution and administration expenses decreased to $282.8 million, or 28.8% of net revenues for the second quarter of 2025, from $318.5 million, or 32.0% of net revenues, for the second quarter of 2024. The decrease in Selling, distribution and administration expenses during the second quarter of 2025 is primarily the result of a non-recurring $31.1 million expense related to historical environmental liabilities recorded during the second quarter of 2024 and benefits from cost savings initiatives.
Operating profit (loss) - Operating loss for the second quarter of 2025 was $798.2 million, or 81.4% of net revenues, compared to an operating profit of $212.1 million, or 21.3% of net revenues, for the second quarter of 2024 driven by the factors discussed above.
NON-OPERATING EXPENSE (INCOME)
Interest expense - Interest expense for the second quarter of 2025 totaled $40.6 million compared to $43.0 million in the second quarter of 2024. The decrease in Interest expense primarily reflects lower outstanding borrowings existing as of the end of the second quarter of 2025 as compared to those outstanding as of the second quarter of 2024.
Interest income - Interest income was $5.4 million for the second quarter of 2025, compared to $13.0 million in the second quarter of 2024. Lower Interest income in 2025 primarily reflects the Company's investments in treasury bills that were higher in 2024 as compared to 2025.
Other (income) expense, net - Other (income) expense, net was net income of $18.7 million for the second quarter of 2025, compared to net income of $0.8 million in the second quarter of 2024. The change in Other (income) expense, net during 2025 was driven primarily by variations in the movement of foreign currencies in the second quarter of 2025 when compared to the second quarter of 2024.
INCOME TAXES
Income tax expense totaled $40.0 million on a pre-tax loss of $814.7 million in the second quarter of 2025 compared to an income tax expense of $44.4 million on pre-tax income of $182.9 million in the second quarter of 2024. Both periods were impacted by discrete tax events. During the second quarter of 2025, the Company recorded a non-cash goodwill impairment within the Consumer Products segment of $1,021.9 million with no corresponding tax benefit. The second quarter of 2024 included a $15.3 million unfavorable adjustment to the 2023 Loss on disposal of the eOne Film and TV business with no corresponding tax benefit.
During the second quarter of 2025, exclusive of the impairment of goodwill, the Company recorded a net discrete tax benefit of $5.9 million compared to a net discrete tax benefit, exclusive of the adjustment to the Loss on disposal of the eOne Film and TV business, of $1.1 million in the second quarter of 2024.
The net discrete tax benefit recorded in the second quarter of 2025 is primarily associated with the release of a valuation allowance. The net discrete tax benefit recorded in the second quarter of 2024 is primarily associated with the release of various uncertain tax positions.
Absent discrete items, the tax rates for the second quarter of 2025 and 2024 were 22.1% and 22.9%, respectively. The decrease in the base rate to 22.1% for the second quarter of 2025 relative to the second 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 | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Net revenues: | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 522.4 | $ | 452.0 | 16 | % | |||||||||||
| Consumer Products | 442.4 | 524.5 | (16) | % | |||||||||||||
| Entertainment | 16.0 | 18.8 | (15) | % | |||||||||||||
| Total net revenues | $ | 980.8 | $ | 995.3 | (1) | % | |||||||||||
| Operating profit (loss): | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 241.9 | $ | 247.1 | (2) | % | |||||||||||
| Consumer Products | (1,029.5) | (9.3) | 10,970 | % | |||||||||||||
| Entertainment | 6.1 | (1.0) | (710) | % | |||||||||||||
| Corporate and Other | (16.7) | (24.7) | (32) | % | |||||||||||||
| Total Operating profit (loss) | $ | (798.2) | $ | 212.1 | (476) | % |
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 | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Tabletop Gaming | $ | 406.3 | $ | 307.6 | 32 | % | |||||||||||
| Digital and Licensed Gaming | 116.1 | 144.4 | (20) | % | |||||||||||||
| Net revenues | $ | 522.4 | $ | 452.0 | 16 | % |
Wizards of the Coast and Digital Gaming segment net revenues increased 16% in the second quarter of 2025 to $522.4 million from $452.0 million in the second quarter of 2024. The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the second quarter of 2025 was primarily attributable to increase in Tabletop Gaming revenue which increased 32.1% behind growth in MAGIC: THE GATHERING, primarily due to strong demand for Final Fantasy as well as other various Backlist sets. This was offset in a decrease in digital licensing revenue related to MONOPOLY GO! and Baldur's Gate 3. The higher net revenues for Baldur's Gate 3 in the second quarter of 2024 was due primarily to the release of the game during the third quarter of 2023*.*
Wizards of the Coast and Digital Gaming segment operating profit was $241.9 million, or 46.3% of segment net revenues for the second quarter of 2025, compared to operating profit of $247.1 million, or 54.7% of segment net revenues, for the second quarter of 2024. Operating profit decreased during the second quarter of 2025 due to increased royalty expense, driven by an increase in sales of MAGIC: THE GATHERING, primarily due to strong demand for Final Fantasy, for which the Company is obligated to pay a royalty.
Consumer Products Segment
The following table presents the Consumer Products segment net revenues by major geographic region:
| Three Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| North America | $ | 236.0 | $ | 306.1 | (23) | % | |||||||||||
| Europe | 95.7 | 92.0 | 4 | % | |||||||||||||
| Asia Pacific | 63.6 | 62.6 | 2 | % | |||||||||||||
| Latin America | 47.1 | 63.8 | (26) | % | |||||||||||||
| Net revenues | $ | 442.4 | $ | 524.5 | (16) | % |
The Consumer Products segment net revenues decreased 16% to $442.4 million for the second quarter of 2025 compared to $524.5 million for the second 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, PLAY-DOH, STAR WARS, and MARVEL products. These declines in revenue were partially offset by revenue growth in consumer product licensing revenue. The lower net revenues from STAR WARS and MARVEL products are attributed to the timing of movie and content releases.
Consumer Products segment operating loss for the second quarter of 2025 was $1,029.5 million, or 232.7% of segment net revenues, compared to a segment operating loss of $9.3 million, or 1.8% of segment net revenues, for the second quarter of 2024. The increase in operating loss in the second quarter of 2025 was driven by decrease in net revenues and a non-cash goodwill impairment charge of $1,021.9 million recorded during the second quarter of 2025. This was partially offset by savings realized from the Company's cost savings and transformation initiatives.
Entertainment Segment
The following table presents Entertainment segment net revenues by category:
| Three Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Film and TV | $ | 1.5 | $ | 1.8 | (17) | % | |||||||||||
| Family Brands | 14.5 | 17.0 | (15) | % | |||||||||||||
| Net revenues | $ | 16.0 | $ | 18.8 | (15) | % |
Entertainment segment net revenues decreased 15% to $16.0 million for the second quarter of 2025, compared to $18.8 million for the second quarter of 2024. The net revenue decrease in the Entertainment segment during the second quarter of 2025 was driven primarily by the timing of entertainment streaming renewals.
Entertainment segment operating profit was $6.1 million, or 38.1% of segment net revenues for the second quarter of 2025, compared to an operating loss of $1.0 million, or 5% of segment net revenues for the second quarter of 2024. The increase in operating profit in Entertainment segment operating results during the second quarter of 2025 was driven by a non-recurring Loss on disposal of business of $15.3 million recorded during the second quarter of 2024.
Corporate and Other
Corporate and Other operating loss was $16.7 million for the second quarter of 2025 compared to an operating loss of $24.7 million for the second quarter of 2024. The decrease in operating loss in the second quarter of 2025 as compared to the second quarter of 2024 primarily reflects the net impact of the two prior period non-recurring adjustments recorded during the second quarter of 2024. Refer to Note 1, Basis of Presentation, to the consolidated financial statements for further information on the two non-recurring adjustments.
RESULTS OF OPERATIONS
The following table presents the consolidated results of operations for the six months ended June 29, 2025 and June 30, 2024:
| Six Months Ended | |||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Revenues | Amount | % of Net Revenues | ||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,867.9 | 100.0 | % | $ | 1,752.6 | 100.0 | % | |||||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
| Cost of sales | 429.8 | 23.0 | % | 441.9 | 25.2 | % | |||||||||||||||||||||||||||||
| Program cost amortization | 13.6 | 0.7 | % | 16.6 | 0.9 | % | |||||||||||||||||||||||||||||
| Royalties | 141.5 | 7.6 | % | 106.2 | 6.1 | % | |||||||||||||||||||||||||||||
| Product development | 158.0 | 8.5 | % | 135.9 | 7.8 | % | |||||||||||||||||||||||||||||
| Advertising | 119.0 | 6.4 | % | 111.9 | 6.4 | % | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 34.2 | 1.8 | % | 34.1 | 1.9 | % | |||||||||||||||||||||||||||||
| Impairment of goodwill | 1,021.9 | 54.7 | % | — | — | % | |||||||||||||||||||||||||||||
| Loss on disposal of business | 25.0 | 1.3 | % | 24.4 | 1.4 | % | |||||||||||||||||||||||||||||
| Selling, distribution and administration | 552.4 | 29.6 | % | 553.3 | 31.6 | % | |||||||||||||||||||||||||||||
| Total costs and expenses | 2,495.4 | 133.6 | % | 1,424.3 | 81.3 | % | |||||||||||||||||||||||||||||
| Operating profit (loss) | (627.5) | (33.6) | % | 328.3 | 18.7 | % | |||||||||||||||||||||||||||||
| Non-operating expense (income): | — | % | |||||||||||||||||||||||||||||||||
| Interest expense | 82.2 | 4.4 | % | 81.5 | 4.7 | % | |||||||||||||||||||||||||||||
| Interest income | (14.3) | (0.8) | % | (21.3) | (1.2) | % | |||||||||||||||||||||||||||||
| Other (income) expense, net | (17.3) | (0.9) | % | 4.2 | 0.2 | % | |||||||||||||||||||||||||||||
| Total non-operating expense, net | 50.6 | 2.7 | % | 64.4 | 3.7 | % | |||||||||||||||||||||||||||||
| Earnings (loss) before income taxes | (678.1) | (36.3) | % | 263.9 | 15.1 | % | |||||||||||||||||||||||||||||
| Income tax expense | 77.1 | 4.1 | % | 66.3 | 3.8 | % | |||||||||||||||||||||||||||||
| Net earnings (loss) | (755.2) | (40.4) | % | 197.6 | 11.3 | % | |||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interests | 2.0 | 0.1 | % | 0.9 | 0.1 | % | |||||||||||||||||||||||||||||
| Net earnings (loss) attributable to Hasbro, Inc. | $ | (757.2) | (40.5) | % | $ | 196.7 | 11.2 | % | |||||||||||||||||||||||||||
| Net earnings (loss) per common share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | (5.41) | $ | 1.41 | |||||||||||||||||||||||||||||||
| Diluted | $ | (5.41) | $ | 1.41 |
Net revenues - Net revenues for the first six months of 2025 increased 7% to $1,867.9 million from $1,752.6 million for the first six months of 2024 primarily driven by a $216.2 million, or 28%, increase in the Wizards of the Coast and Digital Gaming segment, partially offset by a $96.8 million, or 10%, decrease in the Consumer Products segment and a $4.1 million, or 9%, decrease in the Entertainment segment. See the Segment Results discussion below for further details.
The following table presents net revenues by brand portfolio category:
| Six Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Grow Brands | $ | 1,385.6 | $ | 1,226.0 | 13 | % | |||||||||||
| Optimize Brands | 287.6 | 306.8 | (6) | % | |||||||||||||
| Reinvent Brands | 194.7 | 219.8 | (11) | % | |||||||||||||
| Net revenues | $ | 1,867.9 | $ | 1,752.6 | 7 | % |
GROW BRANDS: Net revenues in the Grow Brands portfolio increased $159.6 million, or 13%, in the first six months of 2025, compared to the first six months of 2024. The net revenue increase primarily reflects higher net revenues from MAGIC: THE GATHERING, and MONOPOLY product sales and digital game licensing related to MONOPOLY GO!, which were partially offset by lower net revenues from PLAY-DOH and GI JOE products.
OPTIMIZE BRANDS: Net revenues in the Optimize Brands portfolio decreased $19.2 million, or 6%, in the first six months of 2025, compared to the first six months of 2024. The net revenue decrease is primarily driven by lower net revenues from PEPPA PIG and STAR WARS products, partially offset by an increase in net revenue from DUEL MASTERS and TRANSFORMERS products. TRANSFORMERS products were 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 decreased $25.1 million, or 11%, in the first six months of 2025 compared to the first six months of 2024. The net revenue decrease is primarily driven by lower net revenues from NERF products, partially offset by an increase in 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.
OPERATING COSTS AND EXPENSES
Cost of sales - Cost of sales for the first six months of 2025 was $429.8 million, or 23.0% of net revenues, compared to $441.9 million, or 25.2% of net revenues, for the first six months of 2024. The Cost of sales decrease was driven primarily by lower sales volumes, supply chain productivity, and cost savings initiatives, offset by a 2024 recording of a non-recurring $26.7 million benefit related to a historical over-accrual of vendor commitment liabilities as discussed in Note 1, Basis of Presentation, to the consolidated financial statements.
Program cost amortization - Program cost amortization decreased to $13.6 million, or 0.7% of net revenues, for the first six months of 2025 from $16.6 million, or 0.9% of net revenues, for the first six months 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 six months of 2025 increased to $141.5 million, or 7.6% of net revenues, compared to $106.2 million, or 6.1% of net revenues, for the first six months 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 for the first six months of 2025 was directly driven by an increase in sales from MAGIC: THE GATHERING, primarily due to strong demand for Final Fantasy, for which the Company is obligated to pay a royalty.
Product development - Product development expense for the first six months of 2025 was $158.0 million, or 8.5% of net revenues, compared to $135.9 million, or 7.8% of net revenues, for the first six months of 2024. The increase in Product development expense during the first six months of 2025 was primarily due to higher incremental investment in the development of Grow Brands under the Company's "Playing to Win" strategy.
Advertising - Advertising expense for the first six months of 2025 was $119.0 million, or 6.4% of net revenues, compared to $111.9 million, or 6.4% of net revenues, for the first six months of 2024. The Advertising expense increase during the first six months of 2025 was primarily driven by the timing of sales initiatives in the Consumer Products segment.
Amortization of intangibles - Amortization of intangible assets remained flat at $34.2 million, or 1.8% of net revenues, for the first six months of 2025, as compared to $34.1 million, or 1.9% of net revenues, for the first six months of 2024. The amortization expense was driven by the straight-line amortization of the Company's remaining definite-lived intangible assets.
Impairment of goodwill - During the first six months of 2025, the Company recorded a $1,021.9 million non-cash goodwill impairment charge associated with goodwill assigned to reporting units within the Company's Consumer Products segment. There were no goodwill impairment charges during the first six months of 2024. See further detail in Note 5, Goodwill, to the consolidated financial statements for further information.
Loss on disposal of business - Loss on disposal of business for the first six months of 2025 was $25.0 million, or 1.3% of net revenues, as compared to $24.4 million, or 1.4% of net revenues, for the first six months of 2024. The Loss on disposal of business relates to the divestiture of the eOne Film and TV business. See further detail in Note 3, Sale of Non-Core Entertainment One Film and TV Business, to the consolidated financial statements for further information.
Selling, distribution and administration - Selling, distribution and administration expenses decreased to $552.4 million, or 29.6% of net revenues for the first six months of 2025, from $553.3 million, or 31.6% of net revenues, for the first six months of 2024. The decrease in Selling, distribution and administration expenses during the first six months of 2025 primarily due to cost savings initiatives, a non-recurring $31.1 million expense related to historical environmental liabilities during the second quarter of 2024, partially offset by a non-recurring stock-compensation adjustment of $18.1 million recorded during the first quarter of 2024, as discussed in Note 1, Basis of Presentation, to the consolidated financial statements.
Operating Profit (Loss) - The operating loss for the first six months of 2025 was $627.5 million, or 33.6% of net revenues, compared to an operating profit of $328.3 million, or 18.7% of net revenues, for the first six months of 2024 driven by the factors discussed above.
NON-OPERATING EXPENSE (INCOME)
Interest expense - Interest expense for the first six months of 2025 totaled $82.2 million compared to $81.5 million in the first six months of 2024. The slight increase in Interest expense primarily reflects a higher average interest rate on the outstanding borrowings existing partially offset by lower average borrowings as of the end of the second quarter of 2025 as compared to those outstanding as of the second quarter of 2024.
Interest income - Interest income was $14.3 million for the first six months of 2025, compared to $21.3 million in the first six months of 2024. Lower Interest income in 2025 primarily reflects the Company's investments in treasury bills that were higher in 2024 as compared to 2025.
Other (income) expense, net - Other (income) expense, net was net income of $17.3 million for the first six months of 2025, compared to net expense of $4.2 million in the first six months of 2024. The change in Other (income) expense, net during 2025 was driven primarily by an increase in foreign currency exchange gains the first six months of 2025 as compared to foreign currency exchange losses for the first six months of 2024.
INCOME TAXES
Income tax expense totaled $77.1 million on a pre-tax loss of $678.1 million in the first six months of 2025 compared to an income tax expense of $66.3 million on pre-tax income of $263.9 million in the first six months of 2024. Both periods were impacted by discrete tax events. During the first six months of 2025, the Company recorded a non-cash goodwill impairment within the Consumer Products segment of $1,021.9 million with no corresponding tax benefit.
During the first six months of 2024, the Company recorded a $24.4 million unfavorable adjustment to the 2023 Loss on disposal of the eOne Film and TV business with no corresponding tax benefit. During the first six months of 2025, exclusive of the impairment of goodwill, the Company recorded a net discrete tax benefit of $6.2 million compared to a net discrete tax expense, exclusive of the Loss on disposal of the eOne Film and TV business, of $0.7 million in the first six months of 2024.
The net discrete tax benefit recorded in the first six months of 2025 is primarily associated with the release of a valuation allowance. The net discrete tax expense recorded in the first six months of 2024 is primarily associated with stock-based compensation.
Absent discrete items, the tax rates for the first six months of 2025 and 2024 were 22.6% and 22.7%, respectively. The decrease in the base rate to 22.6% for the first six months of 2025 relative to the first six months 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 for the six months ended June 29, 2025 and June 30, 2024:
| Six Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Net revenues: | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 984.5 | $ | 768.3 | 28 | % | |||||||||||
| Consumer Products | 840.7 | 937.5 | (10) | % | |||||||||||||
| Entertainment | 42.7 | 46.8 | (9) | % | |||||||||||||
| Total net revenues | $ | 1,867.9 | $ | 1,752.6 | 7 | % | |||||||||||
| Operating profit (loss): | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 471.8 | $ | 369.9 | 28 | % | |||||||||||
| Consumer Products | (1,073.5) | (56.2) | 1,810 | % | |||||||||||||
| Entertainment | (4.9) | 4.8 | (202) | % | |||||||||||||
| Corporate and Other | (20.9) | 9.8 | (313) | % | |||||||||||||
| Total Operating profit (loss) | $ | (627.5) | $ | 328.3 | (291) | % |
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 six months ended June 29, 2025 and June 30, 2024:
| Six Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Tabletop Gaming | $ | 750.1 | $ | 535.8 | 40 | % | |||||||||||
| Digital and Licensed Gaming | 234.4 | 232.5 | 1 | % | |||||||||||||
| Net revenues | $ | 984.5 | $ | 768.3 | 28 | % |
Wizards of the Coast and Digital Gaming segment net revenues increased 28% in the first six months of 2025 to $984.5 million from $768.3 million in the first six months of 2024. Tabletop Gaming revenue increased 40% behind growth in MAGIC: THE GATHERING primarily due to strong demand for Final Fantasy, Tarkir, Dragon Storm and Aetherdrift. The net revenue increase in Digital and Licensed Gaming during the first six months of 2025 was primarily attributable to revenue contributions from higher digital licensing of MONOPOLY GO!.
Wizards of the Coast and Digital Gaming segment operating profit was $471.8 million, or 47.9% of segment net revenues for the first six months of 2025, compared to operating profit of $369.9 million, or 48.1% of segment net revenues, for the first six months of 2024. The operating profit increase during the first six months of 2025 was driven by increased net revenues, contributions from higher digital licensing revenue mix and cost savings initiatives, offset by higher royalty expense related to the strong demand for Final Fantasy for which the Company is obligated to pay a royalty.
Consumer Products Segment
The following table presents the Consumer Products segment net revenues by major geographic region for the six months ended June 29, 2025 and June 30, 2024:
| Six Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| North America | $ | 467.4 | $ | 545.2 | (14) | % | |||||||||||
| Europe | 180.7 | 179.5 | 1 | % | |||||||||||||
| Asia Pacific | 117.4 | 111.4 | 5 | % | |||||||||||||
| Latin America | 75.2 | 101.4 | (26) | % | |||||||||||||
| Net revenues | $ | 840.7 | $ | 937.5 | (10) | % |
The Consumer Products segment net revenues decreased 10% to $840.7 million for the first six months of 2025 compared to $937.5 million for the first six months of 2024 primarily driven by broader industry trends and shifts in product mix. The net revenue decrease primarily reflects lower net revenues from NERF, PLAY-DOH, Hasbro Gaming, GI JOE and STAR WARS products. These declines in revenue were partially offset by revenue growth from BEY BLADE 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 six months of 2025 was $1,073.5 million, or 127.7% of segment net revenues, compared to a segment operating loss of $56.2 million, or 6.0% of segment net revenues, for the first six months of 2024. The increase in operating loss in the first six months of 2025 was driven by decrease in net revenues and a non-cash goodwill impairment charge of $1,021.9 million recorded during 2025. This was offset by savings realized from the Company's cost savings and transformation initiatives.
Entertainment Segment
The following table presents Entertainment segment net revenues by category for the six months ended June 29, 2025 and June 30, 2024:
| Six Months Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | % Change | |||||||||||||||
| Film and TV | $ | 5.8 | $ | 1.8 | 222 | % | |||||||||||
| Family Brands | 36.9 | 45.0 | (18) | % | |||||||||||||
| Net revenues | $ | 42.7 | $ | 46.8 | (9) | % |
Entertainment segment net revenues decreased 9% to $42.7 million for the first six months of 2025, compared to $46.8 million for the first six months of 2024. The net revenue decrease in the Entertainment segment during the first six months of 2025 was driven primarily by timing of entertainment streaming renewals.
Entertainment segment operating loss was $4.9 million, or 11% of segment net revenues, for the first six months of 2025, compared to an operating profit of $4.8 million, or 10% of segment net revenues, for the first six months of 2024. The decrease in Entertainment segment operating results during the first six months of 2025 was primarily driven by a decrease in net revenues, along with a non-recurring Loss on disposal of business of $25.0 million during the first six months of 2025, that was offset by a non-recurring Loss on disposal of business of $24.4 million during the first six months of 2024. Refer to Note 3, Sale of Non-Core Entertainment One Film and TV Business, to the consolidated financial statements for further information on the non-recurring Loss on disposal of business.
Corporate and Other
Corporate and Other operating loss was $20.9 million for the first six months of 2025 compared to an operating profit of $9.8 million for the first six months of 2024. The operating loss in the first six months of 2025 as compared to the operating income in the first six months of 2024 was due to the net impact of the two prior period non-recurring adjustments recorded during the second quarter of 2024 partially offset by a benefit from a non-recurring adjustment for stock compensation expense reversal recorded in the first quarter of 2024. Refer to Note 1, Basis of Presentation, to the consolidated financial statements for further information on these non-recurring adjustments.
OTHER INFORMATION
Commitments and Contingencies
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 six 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 adversely impact 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 June 29, 2025, the Company's cash and cash equivalents totaled $546.9 million. The majority of the Company’s cash and cash equivalents held outside of the United States as of June 29, 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 June 29, 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 June 29, 2025. The Company had no borrowings outstanding under its revolving credit facility as of June 29, 2025. However, letters of credit outstanding under this facility as of June 29, 2025 were approximately $3.7 million. Amounts available and unused under the revolving credit facility at June 29, 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 $8.4 million was utilized as of June 29, 2025. Of the amount utilized under, or supported by, the uncommitted lines, the full $8.4 million represented letters of credit.
As of June 29, 2025, the Company had $3,320.9 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 $61.9 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.
In June 2025, the Company entered into a money market line of credit agreement (the “Money Market Credit Facility”) to provide the Company with access to uncommitted, short-term cash advances with an aggregate principal amount of up to $100.0 million. The Money Market Credit Facility is intended to support the Company’s short-term liquidity needs, including working capital and general corporate purposes. As of June 29, 2025, the Company did not have any outstanding credit under the Money Market Credit Facility. See note 8, Long-Term Debt and Other Financing, to the consolidated financial statements for further information.
The amount of obligations confirmed under the supplier finance program that remain unpaid by the Company were $67.8 million, $72.4 million, and $66.2 million as of June 29, 2025, June 30, 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:
| Six Months Ended | |||||||||||
| June 29, 2025 | June 30, 2024 | ||||||||||
| Net cash provided by (utilized for): | |||||||||||
| Operating activities | $ | 209.4 | $ | 365.1 | |||||||
| Investing activities | (89.2) | (575.4) | |||||||||
| Financing activities | (274.6) | 288.5 |
Net cash provided by Operating activities in the first six months of 2025 was $209.4 million compared to $365.1 million in the first six months of 2024. The $155.7 million decrease in net cash provided by Operating activities after adjusting for non-cash items, was primarily attributable to changes in net working capital including the timing of inventory and payment of the net deemed repatriation tax, in the first six months of 2025 compared to first six months of 2024.
Net cash utilized for Investing activities was $89.2 million in the first six months of 2025 compared to net cash utilized for Investing activities of $575.4 million in the first six months of 2024. Additions to property, plant and equipment and software were $29.9 million and $61.8 million, respectively, in the first six months of 2025 compared to $49.5 million and $48.2 million, respectively, in the first six months of 2024. Additionally, a purchase of Long-term Investments of $10.0 million occurred in the first six months of 2025 with compared to the purchase of Short-term Investments of $480.1 million in the first six months of 2024.
Net cash utilized by Financing activities was $274.6 million in the first six months of 2025 compared to net cash utilized of $288.5 million in the first six months of 2024. Financing activities in the first six months of 2025 primarily include dividends paid of $196.0 million, repayments of long-term debt of $60.5 million, and $19.9 million of payments related to tax withholdings for stock compensation coinciding with equity award vesting activity. Financing activities in the first six months of 2024 include $500.0 million of proceeds from issuance of the 2034 Notes, $194.6 million of dividends paid and $11.9 million of payments related to tax withholdings for stock compensation coinciding with equity award vesting activity.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
We have prepared the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. These estimates are based on our best judgment about current and future conditions, but actual results could differ from those estimates. Information with respect to accounting estimates that are the most critical to the understanding of our financial statements as they could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024. We believe that at June 29, 2025, there has been no material change to this information except as noted below.
Recoverability of Goodwill and Intangible Assets
The quantitative test of goodwill for impairment requires us to estimate the fair value of our reporting units. We test goodwill at the reporting unit level, which we define as one level below the operating segment. Our reporting units are aligned with our product lines that are separately managed and reviewed. During the second quarter of 2025, we performed a quantitative impairment test for certain of our reporting units within the Consumer Products and Entertainment segments. The reporting units within the Consumer Products segment subject to the quantitative test included North America, Europe, Asia Pacific, and Latin America as well as the Family Brands reporting unit within the Entertainment segment. We have concluded that North America, Europe, Asia Pacific, and Latin America reporting units have similar economic characteristics and should be aggregated for purposes of testing goodwill for impairment. Our conclusion was based on a detailed analysis of the aggregation criteria set forth in FASB ASC Topic 280, Segment Reporting, and in FASB ASC Topic 350, Intangibles - Goodwill and Other. These reporting units serve similar clients and have similar products, including similar sourcing and distribution methods and they have similar economic characteristics.
We determined that the carrying values of our regional consumer products reporting units, and when aggregated during the second quarter of 2025 based upon similar economic characteristics, exceeded their respective fair values and recorded aggregate pre-tax non-cash impairment charges of $1,021.9 million. Specifically, the fair values of North America and Europe reporting units were determined considering a discounted cash flow model which is primarily based on management’s future revenue and cost estimates, which included the estimated impact of tariff policies in effect and the related macroeconomic environment, and discount rate. The fair value of the Asia Pacific and Latin America reporting units was determined considering a discounted cash flow model weighted equally with the market approach which is primarily based on multiples of comparable public companies.
The fair value of our Family Brands reporting unit, within the Entertainment segment, exceeded the carrying value of that reporting unit by approximately 15%. $325.2 million of goodwill is allocated to the Family Brands reporting unit. The fair value of the Family Brands reporting unit was determined considering a discounted cash flow model weighted equally with the market approach which is primarily based on multiples of comparable public companies. Management closely monitors the operating results of all reporting units in addition to macroeconomic conditions and trade policy developments. Further volatility of trade, geopolitical tensions, or negative global economic developments could cause significant further decreases in the operating results of our reporting units, which may result in a recognition of a goodwill impairment that could be material to the Consolidated Financial Statements in future periods.
Critical assumptions used in the determination of the reporting units’ fair value included management’s estimated future revenue growth rates, estimated future margins, and discount rate. Estimated future revenue growth and margins are based on management’s best estimate about current and future conditions. During the second quarter of 2025, the regional consumer products reporting units included discount rates ranging from 10.5% to 14.0% and a terminal value revenue growth rate of 3.0%. Additionally, the forecasted growth in operating profit margins towards the terminal value operating profit is aligned with industry averages. For the Family Brands reporting unit, critical assumptions included a discount rate approximating 9.5%, a terminal value revenue growth rate of 3.0%, and a terminal operating profit margin consistent with levels achieved in recent historical periods when excluding one-time impairment and disposal charges. Although we believe the assumptions and estimates made were reasonable and appropriate, these estimates are based on a number of factors including historical experience and information obtained from reporting unit management. Actual results could differ from these estimates, especially given uncertainty related to tariffs, global trade policy, and global macroeconomic conditions. We determined the discount rate using our weighted average cost of capital adjusted for risk factors specific to the reporting unit, with comparison to market and industry data.
We proceeded to perform sensitivities in our impairment testing of the Family Brands reporting unit by (i) increasing the discount rate 250 basis points, (ii) decreasing the expected long-term growth rate 750 basis points, (iii) decreasing the annual revenue projections 400 basis points, and (iv) decreasing projected gross margins 1,000 basis points. None of these sensitivities individually would have resulted in a conclusion that the goodwill in our Family Brands reporting unit were impaired.
More information regarding goodwill is contained in Note 5, Goodwill, in the consolidated financial statements.
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 June 29, 2025, the Company had fixed-rate debt of $3.3 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 June 29, 2025, June 30, 2024, or December 29, 2024.
INFLATION
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.
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