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 Company's 2024 Form 10-K.
Overview
Hasbro, Inc. (“Hasbro”) is a leading games, 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 groundbreaking 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 thousands of iconic marks 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
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.
In the third quarter of 2025, we announced we will relocate our Rhode Island operations to 400 Summer Street in the Seaport District of Boston, Massachusetts, which is expected to occur in the fourth quarter of 2026. This new location will be the primary headquarters for our toys, board games, and licensing businesses, and a majority of our corporate services. We believe this strategic move positions us to accelerate innovation, attract top talent, and drive
long-term growth in line with our Playing to Win strategy which emphasizes play-driven engagement and collaboration with partners.
Tariffs
Significant changes in trade policy announced by the U.S. government 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.
The Company has recognized approximately $20 million of tariff costs during the first nine months of 2025. 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
The Company experienced an increase in revenue from $1,281.3 million for the three months ended September 29, 2024 compared to $1,387.5 million for the three months ended September 28, 2025, and an increase in revenue from $3,033.9 million for the nine months ended September 29, 2024 compared to $3,255.4 million for the nine months ended September 28, 2025. The 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 had an increase in operating profit from $301.9 million for the three months ended September 29, 2024 compared to $341.1 million for the three months ended September 28, 2025. This increase in operating profit is primarily driven by the revenue growth discussed above, as well as benefits from cost savings initiatives that have occurred over the last 12 months.
The Company had an operating loss of $286.4 million for the nine months ended September 28, 2025, as compared to operating profit of $630.2 million for the nine months ended September 29, 2024, primarily driven by the $1,021.9 million non-cash goodwill impairment recorded in the Consumer Products segment in the second quarter of 2025, offset by strength within the Wizards of the Coast and Digital Gaming segment during 2025.
See below for further discussion on the consolidated and segment results of operations for the three and nine months ended September 28, 2025 and September 29, 2024.
RESULTS OF OPERATIONS
The following table presents the consolidated results of operations for the three months ended September 28, 2025 and September 29, 2024:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| September 28, 2025 | September 29, 2024 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Revenues | Amount | % of Net Revenues | ||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,387.5 | 100.0 | % | $ | 1,281.3 | 100.0 | % | |||||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
| Cost of sales | 414.3 | 29.9 | % | 378.9 | 29.6 | % | |||||||||||||||||||||||||||||
| Program cost amortization | 7.4 | 0.5 | % | 7.9 | 0.6 | % | |||||||||||||||||||||||||||||
| Royalties | 114.3 | 8.2 | % | 98.0 | 7.6 | % | |||||||||||||||||||||||||||||
| Product development | 97.6 | 7.0 | % | 76.3 | 6.0 | % | |||||||||||||||||||||||||||||
| Advertising | 108.3 | 7.8 | % | 101.9 | 8.0 | % | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 17.2 | 1.2 | % | 17.1 | 1.3 | % | |||||||||||||||||||||||||||||
| Selling, distribution and administration | 287.3 | 20.7 | % | 299.3 | 23.4 | % | |||||||||||||||||||||||||||||
| Total costs and expenses | 1,046.4 | 75.4 | % | 979.4 | 76.4 | % | |||||||||||||||||||||||||||||
| Operating profit | 341.1 | 24.6 | % | 301.9 | 23.6 | % | |||||||||||||||||||||||||||||
| Non-operating expense: | |||||||||||||||||||||||||||||||||||
| Interest expense | 40.8 | 2.9 | % | 46.2 | 3.6 | % | |||||||||||||||||||||||||||||
| Interest income | (6.3) | (0.5) | % | (14.7) | (1.1) | % | |||||||||||||||||||||||||||||
| Other expense (income), net | 1.4 | 0.1 | % | (19.9) | (1.6) | % | |||||||||||||||||||||||||||||
| Total non-operating expense, net | 35.9 | 2.6 | % | 11.6 | 0.9 | % | |||||||||||||||||||||||||||||
| Earnings before income taxes | 305.2 | 22.0 | % | 290.3 | 22.7 | % | |||||||||||||||||||||||||||||
| Income tax expense | 71.3 | 5.1 | % | 67.0 | 5.2 | % | |||||||||||||||||||||||||||||
| Net earnings | 233.9 | 16.9 | % | 223.3 | 17.4 | % | |||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interests | 0.7 | 0.1 | % | 0.1 | — | % | |||||||||||||||||||||||||||||
| Net earnings attributable to Hasbro, Inc. | $ | 233.2 | 16.8 | % | $ | 223.2 | 17.4 | % | |||||||||||||||||||||||||||
| Net earnings per common share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | 1.66 | $ | 1.60 | |||||||||||||||||||||||||||||||
| Diluted | $ | 1.64 | $ | 1.59 |
Net revenues – Net revenues for the third quarter of 2025 increased 8.3% to $1,387.5 million from $1,281.3 million for the third quarter of 2024 primarily driven by growth of $168.0 million, or 41.6%, in the Wizards of the Coast and Digital Gaming segment, as well as a $1.4 million, or 8%, increase in the Entertainment segment. This growth was offset by a $63.2 million, or 7.3%, decrease in the Consumer Products segment. See the Segment Results discussion below for further details.
The following table presents net revenues by brand portfolio category:
| Three Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Grow Brands | $ | 1,006.0 | $ | 839.0 | 19.9 | % | |||||||||||
| Optimize Brands | 221.9 | 223.2 | (0.6) | % | |||||||||||||
| Reinvent Brands | 159.6 | 219.1 | (27.2) | % | |||||||||||||
| Net revenues | $ | 1,387.5 | $ | 1,281.3 | 8.3 | % |
GROW BRANDS: Net revenues in the Grow Brands portfolio increased $167.0 million, or 19.9%, in the third quarter of 2025, compared to the third quarter of 2024. The net revenue increase primarily reflects higher net revenues from MAGIC: THE GATHERING, which grew by $163.2 million, or 55.1%, driven by strong performance of the Final
Fantasy Universes Beyond set released in June, as well as Edges of Eternities and Marvel's Spider-Man Universes Beyond sets, which released during Q3.
OPTIMIZE BRANDS: Net revenues in the Optimize Brands portfolio decreased $1.3 million, or 0.6%, in the third quarter of 2025, compared to the third quarter of 2024, as moderate declines for certain brands within the category were partially offset by growth of PEPPA PIG, stemming from the launch of Baby Evie during 2025.
REINVENT BRANDS: Net revenues in the Reinvent Brands portfolio decreased $59.5 million, or 27.2%, in the third quarter of 2025 compared to the third quarter of 2024. The net revenue decrease is primarily driven by lower product sales for NERF, as well as lapping of licensing revenues for MY LITTLE PONY, which decreased $21.7 million, or 64.7%.
OPERATING COSTS AND EXPENSES
Cost of sales – Cost of sales for the third quarter of 2025 was $414.3 million, or 29.9% of net revenues, compared to $378.9 million, or 29.6% of net revenues, for the third quarter of 2024. The increase in cost of sales was primarily the result of an increase in net revenues period over period, as well as approximately $20 million of incremental cost related to the impacts of tariffs, primarily as it relates to products imported into the United States to be sold domestically.
Program cost amortization – Program cost amortization decreased slightly to $7.4 million, or 0.5% of net revenues, for the third quarter of 2025 from $7.9 million, or 0.6% of net revenues, for the third 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 – Royalties for the third quarter of 2025 increased to $114.3 million, or 8.2% of net revenues, compared to $98.0 million, or 7.6% of net revenues, for the third quarter of 2024. The increase in Royalties during the third quarter of 2025 was directly driven by an increase in sales relating to MAGIC: THE GATHERING Universes Beyond sets, including Final Fantasy and Marvel's Spider-Man, for which the Company is obligated to pay a royalty.
Product development – Product development expense for the third quarter of 2025 was $97.6 million, or 7.0% of net revenues, compared to $76.3 million, or 6.0% of net revenues, for the third quarter of 2024. The increase in Product development expense during the third 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 third quarter of 2025 was $108.3 million, or 7.8% of net revenues, compared to $101.9 million, or 8.0% of net revenues, for the third quarter of 2024. The Advertising expense increase during the third quarter of 2025 was primarily driven by additional spend necessary to support top line growth opportunities within the Grow Brands category, specifically within the Wizards of the Coast and Digital Gaming segment.
Amortization of intangible assets – Amortization of intangible assets remained flat at $17.2 million, or 1.2% of net revenues, for the third quarter of 2025, compared to $17.1 million, or 1.3% of net revenues, for the third quarter of 2024. The amortization expense was driven by the straight-line amortization of the Company's remaining definite-lived intangible assets.
Selling, distribution and administration – Selling, distribution and administration expenses decreased to $287.3 million, or 20.7% of net revenues for the third quarter of 2025, from $299.3 million, or 23.4% of net revenues, for the third quarter of 2024. The decrease in Selling, distribution and administration expenses during the third quarter of 2025 is primarily the result of benefits from cost savings initiatives that have occurred over the last 12 months.
Operating profit – Operating profit for the third quarter of 2025 was $341.1 million, or 24.6% of net revenues, compared to operating profit of $301.9 million, or 23.6% of net revenues, for the third quarter of 2024 driven by the factors discussed above.
NON-OPERATING EXPENSE (INCOME)
Interest expense – Interest expense for the third quarter of 2025 totaled $40.8 million compared to $46.2 million in the third quarter of 2024. The decrease in Interest expense primarily reflects lower outstanding borrowings existing as of the end of the third quarter of 2025 as compared to those outstanding as of the third quarter of 2024.
Interest income – Interest income was $6.3 million for the third quarter of 2025, compared to $14.7 million in the third quarter of 2024. Lower Interest income in 2025 primarily reflects the Company's investments in treasury bills, which were substantially higher in 2024 as compared to 2025.
Other expense (income), net – Other expense (income), net resulted in expense of $1.4 million for the third quarter of 2025, compared to income of $19.9 million in the third quarter of 2024. The change in Other expense (income), net during 2025 was driven primarily by variations in the movement of foreign currencies in the third quarter of 2025 when compared to the third quarter of 2024.
INCOME TAXES
Income tax expense totaled $71.3 million on a pre-tax income of $305.2 million in the third quarter of 2025 compared to an income tax expense of $67.0 million on pre-tax income of $290.3 million in the third quarter of 2024. Both periods were impacted by discrete tax events.
During the third quarter of 2025, the Company recorded a net discrete tax benefit of $5.7 million primarily associated with a benefit related to the impairment of goodwill, recorded in the second quarter of 2025, compared to a net discrete tax expense of $1.1 million in the third quarter of 2024 primarily associated with interest accruals on uncertain tax positions. Refer to Note 5, Goodwill, to the consolidated financial statements for further information.
Absent discrete items, the tax rates for the third quarter of 2025 and 2024 were 25.2% and 22.7%, respectively. The increase in the base rate to 25.2% for the third quarter of 2025 relative to the third 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 for the Company's reportable segments:
| Three Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Net revenues: | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 572.0 | $ | 404.0 | 41.6 | % | |||||||||||
| Consumer Products | 796.9 | 860.1 | (7.3) | % | |||||||||||||
| Entertainment | 18.6 | 17.2 | 8.1 | % | |||||||||||||
| Total net revenues | $ | 1,387.5 | $ | 1,281.3 | 8.3 | % | |||||||||||
| Operating profit: | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 251.5 | $ | 181.2 | 38.8 | % | |||||||||||
| Consumer Products | 80.1 | 121.0 | (33.8) | % | |||||||||||||
| Entertainment | 7.5 | 9.8 | (23.5) | % | |||||||||||||
| Corporate and Other | 2.0 | (10.1) | (119.8) | % | |||||||||||||
| Total Operating profit | $ | 341.1 | $ | 301.9 | 13.0 | % |
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 | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Tabletop Gaming | $ | 441.8 | $ | 296.8 | 48.9 | % | |||||||||||
| Digital and Licensed Gaming | 130.2 | 107.2 | 21.5 | % | |||||||||||||
| Net revenues | $ | 572.0 | $ | 404.0 | 41.6 | % |
Wizards of the Coast and Digital Gaming segment net revenues increased 41.6% in the third quarter of 2025 to $572.0 million from $404.0 million in the third quarter of 2024. The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the third quarter of 2025 was primarily attributable to increase in Tabletop Gaming revenue which increased 48.9% behind growth in MAGIC: THE GATHERING Universes Beyond sets, primarily due to strong demand for Final Fantasy, Edge of Eternities, and Marvel's Spider-Man, as well as other various backlist titles. This growth was accompanied by an increase in digital licensing revenue related to MONOPOLY GO!, which contributed $43.1 million of revenue during the quarter*.*
Wizards of the Coast and Digital Gaming segment operating profit was $251.5 million, or 44.0% of segment net revenues for the third quarter of 2025, compared to operating profit of $181.2 million, or 44.9% of segment net revenues, for the third quarter of 2024. Operating profit increased during the third quarter of 2025 due to increased net revenues, as discussed above, while operating margin decreased slightly as a result of an increased royalty expense, driven by the success of MAGIC: THE GATHERING Universes Beyond sets such as Final Fantasy and Marvel's Spider-Man, 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 | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| North America | $ | 483.0 | $ | 526.8 | (8.3) | % | |||||||||||
| Europe | 181.1 | 162.3 | 11.6 | % | |||||||||||||
| Asia Pacific | 61.2 | 81.9 | (25.3) | % | |||||||||||||
| Latin America | 71.6 | 89.1 | (19.6) | % | |||||||||||||
| Net revenues | $ | 796.9 | $ | 860.1 | (7.3) | % |
The Consumer Products segment net revenues decreased 7% to $796.9 million for the third quarter of 2025 compared to $860.1 million for the third quarter of 2024, primarily driven by broader industry trends and timing of retail orders. The net revenue decrease primarily reflects lower net revenues driven by declining sales volumes for certain Reinvent Brands, such as NERF, and lapping of licensing revenue related to MY LITTLE PONY, which decreased $21.7 million, or 64.7%. Declines in the North America, Asia Pacific, and Latin American geographic regions were offset by an increase of 12% across Europe, which returned to growth in the quarter.
Consumer Products segment operating profit for the third quarter of 2025 was $80.1 million, or 10.1% of segment net revenues, compared to a segment operating profit of $121.0 million, or 14.1% of segment net revenues, for the third quarter of 2024. The decrease in operating profit in the third quarter of 2025 was driven by a decrease in net revenues, as well as increased costs associated with tariffs of approximately $20 million.
Entertainment Segment
The following table presents Entertainment segment net revenues by category:
| Three Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Film and TV | $ | 1.9 | $ | 1.6 | 18.8 | % | |||||||||||
| Family Brands | 16.7 | 15.6 | 7.1 | % | |||||||||||||
| Net revenues | $ | 18.6 | $ | 17.2 | 8.1 | % |
Entertainment segment net revenues increased 8.1% to $18.6 million for the third quarter of 2025, compared to $17.2 million for the third quarter of 2024. The net revenue increase in the Entertainment segment during the third quarter of 2025 was driven primarily by the timing of entertainment streaming renewals and momentum relating to investments in the PEPPA PIG brand.
Entertainment segment operating profit was $7.5 million, or 40.3% of segment net revenues for the third quarter of 2025, compared to an operating profit of $9.8 million, or 57.0% of segment net revenues for the third quarter of 2024. The decrease in operating profit in Entertainment segment operating results during the third quarter of 2025 was driven by a decrease in royalty income allocated to the Entertainment segment, driven by the decreased sales volumes within the Consumer Products segment as discussed above.
Corporate and Other
Corporate and Other operating profit was $2.0 million for the third quarter of 2025 compared to an operating loss of $10.1 million for the third quarter of 2024. The increase in operating profit in the third quarter of 2025 as compared to the third quarter of 2024 primarily reflects the impacts of cost saving initiatives at the Company.
RESULTS OF OPERATIONS
The following table presents the consolidated results of operations for the nine months ended September 28, 2025 and September 29, 2024:
| Nine Months Ended | |||||||||||||||||||||||||||||||||||
| September 28, 2025 | September 29, 2024 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Revenues | Amount | % of Net Revenues | ||||||||||||||||||||||||||||||||
| Net revenues | $ | 3,255.4 | 100.0 | % | $ | 3,033.9 | 100.0 | % | |||||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
| Cost of sales | 844.1 | 25.9 | % | 820.8 | 27.1 | % | |||||||||||||||||||||||||||||
| Program cost amortization | 21.0 | 0.6 | % | 24.5 | 0.8 | % | |||||||||||||||||||||||||||||
| Royalties | 255.8 | 7.9 | % | 204.2 | 6.7 | % | |||||||||||||||||||||||||||||
| Product development | 255.6 | 7.9 | % | 212.2 | 7.0 | % | |||||||||||||||||||||||||||||
| Advertising | 227.3 | 7.0 | % | 213.8 | 7.0 | % | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 51.4 | 1.6 | % | 51.2 | 1.7 | % | |||||||||||||||||||||||||||||
| Impairment of goodwill | 1,021.9 | 31.4 | % | — | — | % | |||||||||||||||||||||||||||||
| Loss on disposal of business | 25.0 | 0.8 | % | 24.4 | 0.8 | % | |||||||||||||||||||||||||||||
| Selling, distribution and administration | 839.7 | 25.8 | % | 852.6 | 28.1 | % | |||||||||||||||||||||||||||||
| Total costs and expenses | 3,541.8 | 108.8 | % | 2,403.7 | 79.2 | % | |||||||||||||||||||||||||||||
| Operating (loss) profit | (286.4) | (8.8) | % | 630.2 | 20.8 | % | |||||||||||||||||||||||||||||
| Non-operating expense: | — | % | |||||||||||||||||||||||||||||||||
| Interest expense | 123.0 | 3.8 | % | 127.7 | 4.2 | % | |||||||||||||||||||||||||||||
| Interest income | (20.6) | (0.6) | % | (36.0) | (1.2) | % | |||||||||||||||||||||||||||||
| Other income, net | (15.9) | (0.5) | % | (15.7) | (0.5) | % | |||||||||||||||||||||||||||||
| Total non-operating expense, net | 86.5 | 2.7 | % | 76.0 | 2.5 | % | |||||||||||||||||||||||||||||
| (Loss) earnings before income taxes | (372.9) | (11.5) | % | 554.2 | 18.3 | % | |||||||||||||||||||||||||||||
| Income tax expense | 148.4 | 4.6 | % | 133.3 | 4.4 | % | |||||||||||||||||||||||||||||
| Net (loss) earnings | (521.3) | (16.0) | % | 420.9 | 13.9 | % | |||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interests | 2.7 | 0.1 | % | 1.0 | — | % | |||||||||||||||||||||||||||||
| Net (loss) earnings attributable to Hasbro, Inc. | $ | (524.0) | (16.1) | % | $ | 419.9 | 13.8 | % | |||||||||||||||||||||||||||
| Net (loss) earnings per common share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | (3.74) | $ | 3.01 | |||||||||||||||||||||||||||||||
| Diluted | $ | (3.74) | $ | 3.00 |
Net revenues – Net revenues for the first nine months of 2025 increased 7.3% to $3,255.4 million from $3,033.9 million for the first nine months of 2024, primarily driven by a $384.2 million, or 32.8%, increase in the Wizards of the Coast and Digital Gaming segment, partially offset by a $160.0 million, or 8.9%, decrease in the Consumer Products segment and a $2.7 million, or 4.2%, decrease in the Entertainment segment. See the Segment Results discussion below for further details.
The following table presents net revenues by brand portfolio category:
| Nine Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Grow Brands | $ | 2,391.6 | $ | 2,065.0 | 15.8 | % | |||||||||||
| Optimize Brands | 509.5 | 530.0 | (3.9) | % | |||||||||||||
| Reinvent Brands | 354.3 | 438.9 | (19.3) | % | |||||||||||||
| Net revenues | $ | 3,255.4 | $ | 3,033.9 | 7.3 | % |
GROW BRANDS: Net revenues in the Grow Brands portfolio increased $326.6 million, or 15.8%, in the first nine months of 2025, compared to the first nine months of 2024. The net revenue increase primarily reflects higher net revenues from MAGIC: THE GATHERING, which grew by $347.6 million, or 39.9%, driven by strong performance of Universes Beyond sets such as Final Fantasy, Edges of Eternities and Marvel's Spider-Man. This growth was accompanied by an increase in MONOPOLY product sales and digital game licensing revenues related to MONOPOLY GO!, offset by lower net revenues from PLAY-DOH and other Hasbro Gaming products.
OPTIMIZE BRANDS: Net revenues in the Optimize Brands portfolio decreased $20.5 million, or 3.9%, in the first nine months of 2025, compared to the first nine 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 products.
REINVENT BRANDS: Net revenues in the Reinvent Brands portfolio decreased $84.6 million, or 19.3%, in the first nine months of 2025 compared to the first nine months of 2024. The net revenue decrease is primarily driven by lower product sales for NERF, as well as lapping of licensing revenues for MY LITTLE PONY of $12.6 million, or 24.6%, partially offset by an increase in net revenues from BEYBLADE products, following the Company's successful reintroduction of the brand.
OPERATING COSTS AND EXPENSES
Cost of sales – Cost of sales for the first nine months of 2025 was $844.1 million, or 25.9% of net revenues, compared to $820.8 million, or 27.1% of net revenues, for the first nine months of 2024. The increase in Cost of sales was driven by increased sales volumes, as well as approximately $20 million of tariff costs, offset by the 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. Cost of sales as a percentage of net revenues decreased as a result of supply chain efficiencies and favorable product mix.
Program cost amortization – Program cost amortization decreased to $21.0 million, or 0.6% of net revenues, for the first nine months of 2025 from $24.5 million, or 0.8% of net revenues, for the first nine months of 2024.
Royalties – Royalties for the first nine months of 2025 increased to $255.8 million, or 7.9% of net revenues, compared to $204.2 million, or 6.7% of net revenues, for the first nine months of 2024. Fluctuations in Royalties are generally related to the volume of content releases and deliveries and entertainment-driven products sold. The increase in Royalties for the first nine months of 2025 was directly driven by an increase in sales relating to MAGIC: THE GATHERING Universes Beyond sets, such as Final Fantasy and Marvel's Spider-Man, for which the Company is obligated to pay a royalty.
Product development – Product development expense for the first nine months of 2025 was $255.6 million, or 7.9% of net revenues, compared to $212.2 million, or 7.0% of net revenues, for the first nine months of 2024. The increase in Product development expense during the first nine 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 nine months of 2025 was $227.3 million, or 7.0% of net revenues, compared to $213.8 million, or 7.0% of net revenues, for the first nine months of 2024. The increase in Advertising expense during the first nine months of 2025 was primarily driven by additional spend necessary to support top line growth opportunities within the Grow Brands category, specifically within the Wizards of the Coast and Digital Gaming segment.
Amortization of intangibles – Amortization of intangible assets remained flat at $51.4 million, or 1.6% of net revenues, for the first nine months of 2025, as compared to $51.2 million, or 1.7% of net revenues, for the first nine 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 nine 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 nine 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 nine months of 2025 was $25.0 million, or 0.8% of net revenues, as compared to $24.4 million, or 0.8% of net revenues, for the first nine 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 $839.7 million, or 25.8% of net revenues for the first nine months of 2025, from $852.6 million, or 28.1% of net revenues, for the first nine months of 2024. The decrease in Selling, distribution and administration expenses during the first nine months of 2025 was primarily due to cost savings initiatives and 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 (Loss) Profit – Operating loss for the first nine months of 2025 was $286.4 million, or 8.8% of net revenues, compared to an operating profit of $630.2 million, or 20.8% of net revenues, for the first nine months of 2024 driven by the factors discussed above.
NON-OPERATING EXPENSE (INCOME)
Interest expense – Interest expense for the first nine months of 2025 totaled $123.0 million compared to $127.7 million in the first nine months of 2024. The decrease in Interest expense primarily reflects lower average borrowings as of the end of the third quarter of 2025 as compared to those outstanding as of the third quarter of 2024, partially offset by a higher average interest rate on the outstanding borrowings .
Interest income – Interest income was $20.6 million for the first nine months of 2025, compared to $36.0 million in the first nine months of 2024. Lower Interest income in 2025 primarily reflects the Company's investments in treasury bills, which were substantially higher in 2024 as compared to 2025.
Other income, net – Other income, net remained relatively flat and resulted in income of $15.9 million for the first nine months of 2025, compared to income of $15.7 million in the first nine months of 2024. The change in Other income, net during 2025 was driven primarily by foreign currency exchange gains and losses during the first nine months of 2025 as compared to the foreign currency exchange gains and losses experienced during the first nine months of 2024.
INCOME TAXES
Income tax expense totaled $148.4 million on a pre-tax loss of $372.9 million in the first nine months of 2025 compared to an income tax expense of $133.3 million on pre-tax income of $554.2 million in the first nine months of 2024. Both periods were impacted by discrete tax events. During the first nine months of 2025, the Company recorded a non-cash goodwill impairment within the Consumer Products segment of $1,021.9 million with a tax benefit of $5.4 million and an unfavorable adjustment to the Loss on disposal of the eOne Film and TV business of $25.0 million with no tax benefit. The first nine months of 2024 includes a $24.4 million unfavorable adjustment to the Loss on disposal of the eOne Film and TV business with no tax benefit.
During the first nine months of 2025, exclusive of the impairment of goodwill and the unfavorable adjustment to the Loss on disposal of the eOne Film and TV business, the Company recorded a net discrete tax benefit of $6.5 million compared to a net discrete tax expense, exclusive of the Loss on disposal of the eOne Film and TV business, of $1.8 million in the first nine months of 2024.
The net discrete tax benefit recorded in the first nine months of 2025, exclusive of the tax benefit related to the goodwill impairment, is primarily associated with the release of a valuation allowance. The net discrete tax expense recorded in the first nine months of 2024 is primarily associated with stock-based compensation offset by the release of uncertain tax positions.
Absent discrete items, the tax rates for the first nine months of 2025 and 2024 were 23.8% and 22.7%, respectively. The increase in the base rate to 23.8% for the first nine months of 2025 relative to the first nine 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 (loss) profit for the Company's reportable segments for the nine months ended September 28, 2025 and September 29, 2024:
| Nine Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Net revenues: | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 1,556.5 | $ | 1,172.3 | 32.8 | % | |||||||||||
| Consumer Products | 1,637.6 | 1,797.6 | (8.9) | % | |||||||||||||
| Entertainment | 61.3 | 64.0 | (4.2) | % | |||||||||||||
| Total net revenues | $ | 3,255.4 | $ | 3,033.9 | 7.3 | % | |||||||||||
| Operating (loss) profit: | |||||||||||||||||
| Wizards of the Coast and Digital Gaming | $ | 723.3 | $ | 551.1 | 31.2 | % | |||||||||||
| Consumer Products(1) | (993.4) | 64.8 | NM | ||||||||||||||
| Entertainment | 2.6 | 14.6 | (82.2) | % | |||||||||||||
| Corporate and Other(1) | (18.9) | (0.3) | NM | ||||||||||||||
| Total Operating (loss) profit | $ | (286.4) | $ | 630.2 | (145.4) | % |
(1) % Change is not meaningful ("NM") for these segments.
Wizards of the Coast and Digital Gaming Segment
The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category for the nine months ended September 28, 2025 and September 29, 2024:
| Nine Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Tabletop Gaming | $ | 1,191.9 | $ | 832.6 | 43.2 | % | |||||||||||
| Digital and Licensed Gaming | 364.6 | 339.7 | 7.3 | % | |||||||||||||
| Net revenues | $ | 1,556.5 | $ | 1,172.3 | 32.8 | % |
Wizards of the Coast and Digital Gaming segment net revenues increased 32.8% in the first nine months of 2025 to $1,556.5 million from $1,172.3 million in the first nine months of 2024. Tabletop Gaming revenue increased 43.2% behind growth in MAGIC: THE GATHERING primarily due to strong demand for Universes Beyond sets such as Final Fantasy, Edge of Eternities, and Marvel's Spider-Man. The net revenue increase in Digital and Licensed Gaming during the first nine months of 2025 was primarily attributable to revenue contributions from higher digital licensing of MONOPOLY GO!, which has contributed $125.8 million of revenue year-to-date.
Wizards of the Coast and Digital Gaming segment operating profit was $723.3 million, or 46.5% of segment net revenues for the first nine months of 2025, compared to operating profit of $551.1 million, or 47.0% of segment net revenues, for the first nine months of 2024. The operating profit increase during the first nine months of 2025 was primarily driven by increased net revenues, as discussed above, while operating margin as a percentage of segment net revenue decreased slightly as a result of an increased royalty expense, driven by the success of MAGIC: THE GATHERING Universes Beyond sets such as Final Fantasy and Marvel's Spider-Man, 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 nine months ended September 28, 2025 and September 29, 2024:
| Nine Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| North America | $ | 950.4 | $ | 1,072.0 | (11.3) | % | |||||||||||
| Europe | 361.8 | 341.8 | 5.9 | % | |||||||||||||
| Asia Pacific | 178.6 | 193.3 | (7.6) | % | |||||||||||||
| Latin America | 146.8 | 190.5 | (22.9) | % | |||||||||||||
| Net revenues | $ | 1,637.6 | $ | 1,797.6 | (8.9) | % |
The Consumer Products segment net revenues decreased 9% to $1,637.6 million for the first nine months of 2025 compared to $1,797.6 million for the first nine months of 2024 primarily driven by broader industry trends and timing of retail orders. The net revenue decrease primarily reflects lower net revenues driven by declining sales volumes for brands such as NERF, PLAY-DOH, and Hasbro Gaming, offset by growth from BEYBLADE, MONOPOLY, and TRANSFORMERS products.
Consumer Products segment operating loss for the first nine months of 2025 was $993.4 million, or 60.7% of segment net revenues, compared to a segment operating profit of $64.8 million, or 3.6% of segment net revenues, for the first nine months of 2024. The increase in operating loss in the first nine 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 nine months ended September 28, 2025 and September 29, 2024:
| Nine Months Ended | |||||||||||||||||
| September 28, 2025 | September 29, 2024 | % Change | |||||||||||||||
| Film and TV | $ | 7.7 | $ | 3.4 | 126.5 | % | |||||||||||
| Family Brands | 53.6 | 60.6 | (11.6) | % | |||||||||||||
| Net revenues | $ | 61.3 | $ | 64.0 | (4.2) | % |
Entertainment segment net revenues decreased 4.2% to $61.3 million for the first nine months of 2025, compared to $64.0 million for the first nine months of 2024. The net revenue decrease in the Entertainment segment during the first nine months of 2025 was driven primarily by timing of entertainment streaming renewals.
Entertainment segment operating profit was $2.6 million, or 4.2% of segment net revenues, for the first nine months of 2025, compared to an operating profit of $14.6 million, or 22.8% of segment net revenues, for the first nine months of 2024. The decrease in Entertainment segment operating results during the first nine months of 2025 was primarily caused by a decrease in royalty income allocated to the Entertainment segment, driven by the decreased sales volumes within the Consumer Products segment as discussed above, along with a non-recurring Loss on disposal of business of $25.0 million during the first nine months of 2025, that was offset by a non-recurring Loss on disposal of business of $24.4 million during the first nine 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 $18.9 million for the first nine months of 2025 compared to an operating loss of $0.3 million for the first nine months of 2024. The operating loss in the first nine months of 2025 was higher when compared to the operating loss in the first nine months of 2024 primarily due to the net impact of three prior period non-recurring adjustments recorded during 2024 that provided a combined income statement benefit of approximately $13.7 million. 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
During the three and nine months ended September 28, 2025, the Company entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $207.3 million. These leases are expected to commence between the fourth quarter of 2025 through 2026, with initial lease terms ranging from 10 years to 12 years.
Refer to Item 7 of our 2024 Form 10-K 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. With the exception of the above, 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 approximately $20 million during the first nine months of 2025. Significant changes in trade policy announced by the U.S. government 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 September 28, 2025, the Company's cash and cash equivalents totaled $620.9 million. The majority of the Company’s cash and cash equivalents held outside of the United States as of September 28, 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 September 28, 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 September 28, 2025. The Company had no borrowings outstanding under its revolving credit facility as of September 28, 2025. However, letters of credit outstanding under this facility as of September 28, 2025 were approximately $3.7 million. Amounts available and unused under the revolving credit facility at September 28, 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 September 28, 2025. Of the amount utilized under, or supported by, the uncommitted lines, the full $8.4 million represented letters of credit.
As of September 28, 2025, the Company had $3.3 billion 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 has repurchased $65.0 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 September 28, 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 $100.1 million, $118.7 million, and $66.2 million as of September 28, 2025, September 29, 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:
| Nine Months Ended | |||||||||||
| September 28, 2025 | September 29, 2024 | ||||||||||
| Net cash provided by (utilized for): | |||||||||||
| Operating activities | $ | 490.0 | $ | 587.6 | |||||||
| Investing activities | $ | (191.8) | $ | (635.4) | |||||||
| Financing activities | $ | (375.1) | $ | 190.8 |
Net cash provided by Operating activities in the first nine months of 2025 was $490.0 million compared to $587.6 million in the first nine months of 2024. The $97.6 million decrease in net cash provided by Operating activities after adjusting for non-cash items, was primarily attributable to changes in net working capital, specifically inventory purchases, which have increased period over period as the result of a strategic decision to build increased flexibility to better match product demand during higher seasonal periods, along with the impact of tariffs. Operating cash flow was also impacted by the timing and magnitude of tax payments, including the payment of the net deemed repatriation tax, in the first nine months of 2025 when compared to first nine months of 2024.
Net cash utilized for Investing activities was $191.8 million in the first nine months of 2025 compared to net cash utilized for Investing activities of $635.4 million in the first nine months of 2024. Additions to property, plant and equipment and software were $49.6 million and $98.6 million, respectively, in the first nine months of 2025 compared to $67.9 million and $78.3 million, respectively, in the first nine months of 2024. Additionally, purchases of Long-term Investments of $55.2 million, which represent prefunding of future debt maturities with U.S. Treasury bills, occurred in the first nine months of 2025, compared to net purchases of Short-term Investments of $480.0 million in the first nine months of 2024. The level of purchases during 2024 was impacted by the intent to utilize the investments, together with available cash, to repay indebtedness of the Company that was due in November 2024.
Net cash utilized by Financing activities was $375.1 million in the first nine months of 2025 compared to net cash provided by Financing activities of $190.8 million in the first nine months of 2024. Financing activities in the first nine months of 2025 primarily include dividends paid of $294.2 million, repayments of long-term debt of $63.5 million, and $21.8 million of payments related to tax withholdings for stock compensation coinciding with equity award vesting activity. Financing activities in the first nine months of 2024 include approximately $500.0 million of proceeds from issuance of the 2034 Notes, $292.2 million of dividends paid and $13.0 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 September 28, 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, 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%. At September 28, 2025, $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 September 28, 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 September 28, 2025, September 29, 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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