孩之寶 (HAS) 2014 Q1 法說會逐字稿

Greetings.

Welcome to the Hasbro first quarter 2014 earnings conference call.

At this time, all participants are in a listen-only mode.

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded.

At this time, I'd like to turn the call over to Ms. Debbie Hancock, Vice President of Investor Relations.

Please go ahead.

Thank you and good morning, everyone.

Joining me this morning are Brian Goldner, Hasbro's President and Chief Executive Officer; and Deb Thomas, Hasbro's Chief Financial Officer.

Today, we will begin with Brian and Deb providing commentary on the Company's quarterly performance, and then we will take your questions.

Our first quarter earnings release was issued this morning, and is available on our website.

Additionally, presentation slides containing information covered in today's earnings release and call are also available on our site.

The press release and presentation include information regarding non-GAAP financial measures.

Please note that whenever we discuss earnings per share or EPS we are referring to earnings per diluted share.

Before we begin, I would like to remind you that during this call and the question-and-answer session that follows, members of Hasbro Management may make forward-looking statements concerning Management's expectations, goals, objectives, and similar matters.

These forward-looking statements may include comments concerning our product and entertainment plans, anticipated product performance, business opportunities, plans and strategies, costs and cost saving initiatives, financial goals, and expectations for our future financial performance.

There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward-looking statements.

Some of those factors are set forth in our annual report on Form 10-K, our most recent 10-Q, in today's press release, and in our other public disclosures.

You should review such factors together with any forward-looking statements made on today's call.

We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call.

I would now like to introduce Brian Goldner.

Brian?

Thank you, Debbie.

Good morning, everyone.

Thank you for joining us today.

In February at Toy Fair, we shared with you how Hasbro is creating a revolution in play, across geographies, consumer engagement, and Hasbro brands.

Hasbro franchise brands, emerging markets, and our entertainment and licensing segment revenues grew year-over-year.

In total, first-quarter revenues increased 2%, despite Easter happening in the second quarter of 2014 versus the first quarter of 2013, and ahead of most of our major movie shipments for the year.

Geographically, the revolution in play is based on the premise that the emerging markets will deliver the fastest growth in our industry.

Hasbro's emerging market revenue grew 15% in the first quarter.

Within the international segment, Latin America was our fastest growing region, up 17% as reported and up 27% excluding foreign exchange.

All major countries within the region grew, including Mexico, as well as the emerging market countries of Brazil, Chile, Peru, and Colombia.

Additionally, Europe increased 8%, with growth in several mature countries, including the UK, Italy, and Spain, plus strong growth in our emerging-market eastern European countries, which include Russia.

As we said in February, we are poised for improvement in the US and Canada segment.

The US business did improve in the first quarter behind new initiatives like Hero Masters, continued momentum in franchise brands My Little Pony, My Little Pony Equestria Girls, Nerf, and Nerf Rebelle, as well as movie launches including Captain America: The Winter Soldier, out in theaters now.

Several major films, notably Transformers: Age of Extinction and The Amazing Spiderman II, are launching in a significant way in the second quarter.

In addition in the first quarter, Canada, Australia, and France continue to present challenging economic conditions for our business.

Overall, the US and Canada segment declined slightly in the quarter.

International segment revenues increased 5%, and entertainment and licensing revenues grew 13%.

Within the entertainment and licensing segment, we had a contribution from Backflip Studios, which was not in our results during the first quarter of last year.

In addition, lifestyle licensing revenues grew, driven by our franchise brands -- in particular, My Little Pony.

In 2014, we have strong retailer support, both in-store and online, for Hasbro product and licensing initiatives, as we drive the revolution in consumer engagement with content, licensing, and in partnership with our global retailers.

From a brand perspective, Hasbro franchise brands grew 15% in the first quarter, with growth in all our segments.

Five of our seven franchise brands grew year over year -- specifically Magic: The Gathering, Monopoly, My Little Pony, Nerf, and play Play-Doh.

The remaining franchise brands, Littlest Pet Shop and Transformers, have significant new initiatives slated for the remainder of the year, backed by strong global retailer and entertainment support.

This strong franchise brand performance helped deliver growth in our boys and girls categories.

Boys category revenues increased 2%, with growth in Marvel, Nerf, and Super Soaker.

Transformers revenues declined slightly in the first quarter, as we shifted focus and geared up for shipments tied to the movie in the second quarter.

We have strong global retail support for Transformers: Age of Extinction product, as well as licensing programs, as we activate the brand globally across our brand blueprint.

Girls category revenues grew again this quarter, increasing 21% year over year.

Our franchise brand initiatives for My Little Pony and the addition of My Little Pony Equestria Girls and Nerf Rebelle delivered strong year-over-year gains for the girls category in the quarter.

Our games revenues declined 4%.

Both franchise brands, Magic: The Gathering and Monopoly, increased.

With respect to Magic: The Gathering, the timing of releases can impact quarterly performance.

While the brand grew, this year's first-quarter release was planned as a lighter release, with fewer cards than the 2013 first-quarter release.

This change in release size had the biggest impact on the US and Canada segment.

Several other games mega-brands grew this quarter, including Operation, Jenga, and Elefun and Friends.

These gains did not offset declines in our action battling initiatives and in Duel Masters, a Japanese trading card game.

Finally, preschool category revenues declined 4%, though Play-Doh continued to be a strong performer globally.

Doh Vinci will launch later this year, and will be reported in the girls category.

Transformers Rescue Bots and Marvel's Superhero Adventures also grew slightly in the quarter, but were more than offset by declines in core Playskool initiatives.

In closing, the first quarter was a solid start to the year, a year which we feel very good about from an innovation, entertainment, and execution standpoint.

We are focused on driving our franchise and key partner brand, growing profits faster than revenues, and delivering on creating a global revolution in play.

Now I'd like to turn the call over to Deb.

Deb?

Thank you, Brian, and good morning, everyone.

As Brian stated, the first quarter was a solid beginning to 2014.

Revenues, operating profit, and earnings per share increased year over year, reflecting good momentum in Hasbro franchise brands and key partner brands, combined with the benefit of cost savings.

Before we review our results, please note that the first quarter 2014 as reported had a $13.5-million, or $0.10-per-share, favorable tax adjustment related to discrete items.

Additionally, in the first quarter 2013 we had pre-tax charges of $28.9 million, or $0.14 per share, associated with restructuring and related pension actions, as well as favorable tax adjustments of $5.5 million, or $0.04 per share.

We've included a reconciliation to reported amounts in today's release.

During the rest of my discussion of our business, I will exclude these items, as they do not speak to the underlying performance of Hasbro.

Looking at our segments, the US and Canada segment first-quarter revenues declined slightly, down 1%.

The girls category grew, but was offset by declines in the boys, games and preschool categories.

Segment operating profit declined 5% in the quarter, primarily resulting from lower revenue and product mix.

In the international segment, the first-quarter revenues increased 5%, with Europe growing 8%, and Latin America up 17%.

Additionally, emerging-market revenues increased 15% in the quarter.

Boys and girls category revenue growth more than offset revenue declines in the games and preschool categories.

Revenue growth in the international segment drove significant operating profit growth in the quarter, as the segment posted an operating profit of $2.4 million, versus an operating loss of $4.5 million last year.

Entertainment and licensing segment revenues grew 13% in the first quarter.

The segment benefited from the revenue contribution of Backflip Studios.

Revenue growth in lifestyle licensing was offset by lower entertainment revenues.

Segment operating profit was $6 million, compared to $7 million a year ago.

Looking at our overall expenses, we continue to make progress and remain on track toward our goal of achieving $100 million in underlying cost savings by 2015.

We continue to lower our costs, while investing in areas of the business to drive long-term growth, including Backflip Studios, Magic: The Gathering, and our IT and digital infrastructure.

Cost of sales as a percentage of revenue in the quarter declined, and continued to benefit from improved inventory management and favorable revenue mix, including higher entertainment and licensing segment revenues.

Royalty expense in the quarter was close to flat with last year, but as we've discussed, 2014 is an entertainment-rich year for both Hasbro and our partners.

Product development increased, mainly due to the addition of Backflip Studios, and incremental investments in Magic: The Gathering.

Intangible amortization increased year over year, due to incremental expense associated with Backflip.

SG&A in the first quarter increased $7 million, reflecting the items we discussed at Toy Fair, including inflation, higher compensation, and investments, such as Backflip and Magic: The Gathering, partially offset by cost savings.

Turning to our results below operating profit for the year, other income was $5 million versus other expense of $4.1 million in 2013.

Our 50% share in the Hub Network improved to a profit of $1.3 million in 2014, versus a loss of $1.1 million in 2013.

The Hub Network remains on track to achieve its plan of pre-tax profitability in 2014.

Additionally, we had a $3.4-million gain from the sale of an asset, lower foreign-exchange losses, and improved investment returns in 2014.

The first quarter underlying tax rate declined to 26.1%, versus 26.4% in the first quarter 2013.

We continue to expect our full-year tax rate to be in the range of 26% to 27%.

For the quarter, average diluted shares were 132.7 million shares, compared to 129.3 million in 2013.

This increase is due to the appreciation in Hasbro's stock price, which resulted in higher stock-option exercises.

The actual amount of shares outstanding at the end of the first quarter 2014 was 130.2 million shares.

Diluted earnings per share, absent charges and the favorable tax adjustments, were $0.14 in the first quarter 2014, versus $0.05 in 2013.

Our business continued to generate strong cash flows from operations.

During the quarter, we generated $242 million of operating cash flow.

For the trailing 12 months, operating cash flow was $345.7 million.

At quarter end, cash totaled $792.2 million.

Our capital deployment commitments remain intact.

Our first priority is investing back into Hasbro for the long-term profitable growth of the business.

The second is returning cash to our shareholders in the form of dividends and share repurchases.

Finally, we remain committed to executing against these priorities in a manner consistent with maintaining our solid investment grade rating.

In the first quarter, we returned $132.9 million to shareholders, $52.4 million in cash dividends and $80.5 million in share repurchases.

At quarter end, $444.3 million remained available in our current share repurchase authorization.

Our first-quarter repurchases were consistent with our stated objective to increase the pace of our share repurchases in 2014.

We have $425 million of long-term debt which is current, and matures in May of 2014.

Given current interest rates, our plan is to refinance all of this amount.

Receivables at quarter end increased 8% versus 2013.

DSOs were 73 days, compared to 69 days last year, reflecting the timing of collections and the mix of revenue.

Inventories increased $67.1 million versus last year, ahead of our major movie launches in the second quarter.

Additionally, international inventory growth was primarily in support of emerging markets.

Our inventory at US retail was down slightly at quarter end, and internationally, our inventory at retail is healthy.

Overall, retail and Hasbro-owned inventory is of good quality.

In closing, with most of the year still ahead of us, Q1 was a solid start to 2014, with good momentum in our franchise brands and more major entertainment launches beginning in the second quarter.

Brian and I are now happy to take your questions.

Thank you.

We will now be conducting a question-and-answer session.

(Operator Instructions)

Thank you.

Our first question is from the line of Stephanie Wissink with Piper Jaffray.

We have two questions, if we can.

One Deb, for you, just on clarification around the inventory.

I think you mentioned that the US inventory at retail down slightly.

How should we think about inventory pacing through the second quarter as you move into some of the major movie releases?

Then a question as well for the group, just on broadly if you think about the year, how should we also think about first half versus second half in terms of kind of the pacing of revenue?

Thank you.

Great.

Well, good morning, Steph.

As far as inventory at retail, we did say it was down slightly at the end of the first quarter, but you'll notice our inventory was up.

As we put some color around that, we said it's really in light of our major movie and entertainment launches that are coming in the second quarter and beyond this year.

Also in support of our emerging-market business, where we continue to build in inventory to support the full year.

So while it's down a bit at retail, it's all of good quality here and internationally, and we're gearing up for more major entertainment releases later in the year.

Yes, hi Steph.

If you look at the inventory increase year on year, you'll see that two-thirds of that inventory is in support of our international and emerging market business, and about a third is focused around the US business, and the fact that we have so many significant entertainment launches and momentum in several of our franchise brands.

That's really helpful.

If you look at the full year, we've talked about boys business.

Clearly, we have some great start to the year in several of our boys brands, particularly the Marvel business.

We've seen growth in Nerf in the first quarter.

But if you look at boys action properties, even with movies that occur in the second quarter, the template for the year-long sales still remains more back-end loaded.

We've talked about that before, as is true with the rest of our business and certainly true around the world.

I think you'd see gating that is similar to prior years, as you look at the four quarters of revenues.

Thank you.

Our next question is from the line of James Hardiman of Longbow Research.

Please proceed with your question.

Hi, good morning, thanks for taking my call.

I guess two questions.

On Marvel, certainly encouraged by the fact that it was a positive contributor in the quarter.

Obviously that was one of the biggest drivers of the decline from the boys business last year.

Is it too early to say that Marvel will be a positive contributor for the year, or is it more of a function of movie timing?

How should we think about that?

I think overall if you look at the boys first quarter, what you see is clearly Marvel has moved ahead.

We have a number of initiatives there, both some great innovations with Hero Masters that really began the new year in a great way, and a product line that's all about customization for boys.

Captain America in the quarter.

Then as you move into the second quarter, clearly you really get into Spiderman in earnest, as well as Transformers -- non-Marvel, but Transformers, as we look at the major launches for the year.

Clearly, this is a great year for the Marvel business.

There's a lot of new entertainment coming, and Guardians of the Galaxy coming later in the year.

If you look at our first quarter, again, you talked about some of the challenges up against boys comps a year ago.

Our biggest challenge in the first quarter in boys comps is actually in Beyblade and that's there.

This is probably one of the biggest quarters a year ago that we had for Beyblade, so that represents a challenge this year versus last year.

But as we move forward, we're not going to give you the specifics, except to say we are absolutely excited about the plans for Marvel this year, and going into the future.

Great.

Then a couple just quick housekeeping questions.

Deb, the $3.4-million gain -- was there a tax benefit associated with that, or was that a net number?

Then I guess in terms of the balance sheet cash flow, it sounds like there was some timing things associated with inventory and accounts receivable.

Once those sort of work their way through during 2Q, should cash be more at sort of historical levels.

They were obviously lower than a year ago coming out of 1Q.

Are those going to get back to sort of normal, or how should we think about that?

Sure.

Well, if you recall, we made a large payment to Disney toward the end of last year in connection with extending our -- and harmonizing our agreement to have everything go through 2020.

If you look at the trailing 12 months, if you add that payment back in, you're getting close to the $500 million.

There were some timing issues of payments with inventory and receivables, but really nothing unusual in connection with that.

Great, and the $3.4-million gain -- was that a net number?

No, that was actually a gross number.

If you think about that, that was something that occurred in the US.

If you use really a US tax rate, it really shows it wasn't as big a number net as it looks on a gross basis, but we wanted to give that to you.

Other than that, our other income included better investment returns, lower foreign-exchange losses, kind of the things that ebb and flow from year to year.

But that was unusual, so we wanted to call that out.

Also, within other income and expense as we were saying, the Hub remains on track to pre-tax profitability, and in fact had profit of $1.3 million versus a loss of a year ago.

Excellent.

Thanks.

Thanks.

Our next question is from the line of Sean McGowan of Needham & Company.

Please go ahead with your question.

Good morning, thank you.

I wanted to focus on the Magic release, a couple questions about that.

First, are you planning that there won't be any larger packs released later this year, or is it really just timing, there will be some later?

In fact, Sean, it's just timing.

They go up and down through years, not really calendar-oriented, but really around the storyline the teams work on and then put out to our players.

Yes, there's larger and smaller releases planned throughout this year, and that's been true throughout time.

Okay.

I think you said, Brian, that that was the major -- that had the major impact on the US, or maybe it was Deb who said it.

Would it be fair to infer that it also had a major impact on the overall games business?

If you look at games, remember games -- particularly more traditional face-to-face gaming -- is a very responsive category to Easter.

The fact that Easter is three weeks later this year does have an impact on what we see in terms of games shipments and sell-through more than other categories.

If you look at Magic, the fact is, it was a lighter release this quarter.

We saw, if you look within the US and Canada segment, that Canada was more challenging.

We saw momentum in the US business.

Canada, as we change over some retailers, as well just the economic environment.

I would say overall it was Magic impact first, and then the Canadian business second, as impact.

Okay.

Since we're now past Easter, can you say that the retail performance suggested that whatever you -- whatever negative impact there was on the timing in the first quarter has been made up in the second quarter?

We really saw that over the last few weeks leading up to this weekend -- and we're still digesting some of the data from the last day or two -- but we've seen significant increases in US POS that's improved.

We finished the Easter season with very good momentum to start Q2.

Okay, a couple of others.

Deborah, is there any change in your guidance on expenses, that highly detailed breakdown that you gave at Toy Fair?

Any change directionally in some of the key drivers there?

No, no change directionally.

I think you're seeing some of that in the first quarter, where we're seeing cost savings offset a bit by some of the investments we're making.

Overall we may have some timing impact, but no change to the guidance we gave at Toy Fair.

Okay.

Last question, that is I didn't hear anything about Furby.

Was Furby a net negative in the girls category?

Furby is rolling out in the non-English speaking markets -- Furby Boom, the second generation of Furby.

Furby was down in the quarter.

I mentioned back at Toy Fair that we thought Furby would be our most challenging comp for the year.

But in fact, in the first quarter it was Beyblade.

So Furby has performed relatively well, although down in the quarter.

It continues to have very strong POS in a number of markets around the world, and we are launching Furby Boom in non-English-speaking markets this year.

Okay, great.

Thank you very much.

Next question comes from the line of Mike Swartz of SunTrust Robinson.

Good morning, everyone.

Quick question with the girls business, up 21%.

That's a pretty big number coming on top of a pretty nice comp from last year.

Could you maybe talk about that in terms of how much of that's being driven by POS, versus maybe some larger product shipments in the quarter?

In fact, POS in the girls business across the board is very strong.

We're really seeing that both My Little Pony core, as well as Equestria Girls as an additional line, is very positive to the brand, and additive overall.

Nerf Rebelle has been a great launch for us.

It continues to have great momentum, and we're rolling that out around the world.

We saw growth in a couple other of our brands within the girls business.

Remember that Nerf Rebelle and Equestria Girls began shipping late in Q2 last year, so this is a quarter where we're clearly clear-air versus a year ago, really adding to our position in the girls business.

We're also seeing our market share in girls, particularly in dolls, grow in the US and around the world.

We're also seeing that growth in outdoor activities where Nerf Rebelle has scored on NPD data.

Overall, I would say that it is a good start to the year, and we have lots of new initiatives coming for girls.

In the fall we launch the Littlest Pet Shop initiative.

The TV show is now out around the world in about 140 countries, and we are really looking forward to getting Littlest Pet Shop launched again.

Great, that was helpful.

Then maybe looking at the Asia-Pacific business, and just talking around it -- I know down 13%.

One of your competitors pointed out Australia as being pretty weak.

Could you maybe flesh out what's going on there?

Is this a temporary issue, or just any color you can give us?

Sure.

It is -- Australia is a market that had been more challenged from an economic situation.

You look at consumer debt and a number of other indications over the past year, clearly it's been a market with more of a consumer malaise, and we're working through that.

We don't view it as a permanent position, but rather something we're addressing, a new leadership in there as of about 10 months ago.

And a team on the field that's doing a great job in helping to turn that business around.

That really had the dominant impact on the Asia-Pac results.

There are some timing issues related to some shipments in China and other Asian countries in the first quarter, but we view those as very temporary.

Okay, thanks for the color.

Thank you.

The next question will be coming from the line of Felicia Hendrix of Barclays.

Please go ahead with your question.

Brian, thanks for the POS data on the girls side of your business.

I was wondering if you could give us that for games?

Yes, the POS in games for the first quarter was down.

If you look -- as I said, we've got that three-week difference.

We saw overall as a Company in our games business the POS really accelerating later into right before this Easter, and we're still digesting this past weekend's data.

But the fact is, we've seen some really good improvements in POS across the Company.

We do see in our franchise brands strong POS growth, whether it's Nerf or in our girls business, obviously Marvel's a contributor in POS as well as in shipments.

We have a number of big launches coming in our games business in the remainder of the year -- a number across the Monopoly brand, including My Monopoly this fall, and the House Rules Monopoly, as you know.

Then in girls, a number of new gaming initiatives coming -- in particular the Disney Princess line within the girls' games business.

In boys, one of the biggest contributors to the decline in the first quarter in games was in our boys and action battling, as we're shifting out of one form of action battling games, and we're launching this year something called Battle Masters, which you may have seen at Toy Fair, which features both Marvel as well as Transformers characters.

That's coming.

We have a number of things coming in our preschool area of games as well, including a brand-new MouseTrap, Play-Doh games, and also a lineup of Disney junior games.

Then in teens we've got that new Simon Swipe game.

We feel again, as you look broadly for the year we've got a lot of great new initiatives in games and our Magic business.

Again, I think that Easter did have an impact on the games business.

Okay.

It sounds like you would expect games to generate growth, year-over-year growth, this year.

I don't want to forecast specifically, but I would tell you that we have a lot lined up in our games business.

We certainly feel as good about games this year as we did last year this time.

The team's done a really good job of creating new innovations in our games business.

That's true both in the core games business, as well as in Magic: The Gathering and other games.

Okay, and then other than that shift in the new introduction in Magic, are you seeing any kind of other issues, competitively or anything like that?

No, I think that again, the games business overall is certainly holiday-oriented, and that's true of both Easter as well as obviously Christmas.

We've got a number of new initiatives launching that are in support of a number of new games across categories.

Okay, I guess I was specifically talking about the timing of the release of the new release for Magic?

Oh, well we have -- sorry, I didn't understand.

We have releases that come throughout the year, so there's not just one more.

There will be a couple more.

They just vary in size and they're all related to new story lines.

The team swears me to secrecy as they take us through this, because obviously each of the new releases is met with great excitement and buzz, and there's a lot of buzz out there for some of the new releases that are coming among the fans.

But there will be a number of new releases this year in Magic.

Okay.

When are you planning on starting to ship the Transformers product?

Transformers ships in this quarter, in time for the movie.

As you know, typically we have product merchandise anywhere from four to six weeks before the movie launches around the world, and we work with our global retailers to ensure that both our toys and games product, as well as great licensing initiatives, are set for that time period, as marketing builds and interest in the film builds.

Okay, great.

Thank you so much.

Our next question comes from the line of Greg Badishkanian with Citigroup.

Please go ahead with your question.

Great, thanks.

Just a follow-up on the movie shipments.

For Spiderman, you shipped a little bit of that out in the first quarter, and most of it will come in the second quarter?

Yes, Spiderman shipped a little bit more than Transformers.

Transformers only shipped a very little bit at the end of the quarter.

Predominantly second quarter and obviously it will follow the DNA of most boys' properties, where still the second quarter will not be probably as big as the third and fourth quarters for those properties -- a bit more in Spiderman, but still not the pre-movie set.

Right, okay.

Then internationally, maybe just POS for Europe and Latin America, just generally speaking, or if anything stood out to you?

If we look around the world at the industry growth, as well as POS, and you look at Latin America, where we have third party data in Brazil and Mexico the industry is up, and our POS is up very strongly.

As you look around the rest of Latin America, we have our own proprietary data and work with retailers to see where the market is.

We believe the industry is up, and our business is up with very strong POS and growth market for market.

In Europe, we're seeing some POS growth, but also a few declines in a couple countries where, again, we've got differences in timing, and also our new initiatives are garnering very strong POS relative to the underlying business.

Whether that's My Little Pony or Equestria Girls or Rebelle or Marvel, which has had a great start internationally, that's all being borne out.

Thank you.

Our next question comes from the line of Eric Handler of MKM Partners.

Please proceed with your question.

Good morning.

Thanks for taking my question.

I wonder if you could talk a little bit about Transformers -- go back a little bit in history and talk about the international growth that you've seen with the brand with the last couple movies, and how much more developed your sort of emerging markets are now versus the last film?

Sure.

If you go back and look at the first three films, the first film our sales were about -- we released those numbers -- were about $492 million.

The second film was $592 million.

The third film was something like $482 million.

If you look at the growth, just look at the growth in global box office, which is benefiting all these entertainment initiatives -- the first Transformers movie's entire box office is not as big as our international box office for the third movie.

We're really seeing the growth around the world, particularly in emerging markets.

You're seeing people building malls and multiplexes, and consumers in the developing economies emerging middle classes wanting to go out to the movies.

It's great to see how global movie initiatives can take hold and help to support and drive the growth of those brands.

We've certainly seen that.

We have historically strong brand presence and legacy for Transformers around the world, particularly in Asia.

It's been on the air in markets around the world in 180 territories in our television over the last couple of years.

We, Hasbro, are running the biggest footprint we've run in the history of the Company.

In all the markets we now enjoy having our teams on the ground and are doing a great job.

Again, I think that as we look go-forward, part of the building of the brand blueprint was the idea of running a bigger global footprint with Hasbro's own marketing and sales personnel, and then executing that blueprint in immersive experiences, either our own films or great partners films from Marvel and from over time LucasFilm, coming over the next couple years.

Great.

As a quick follow-up, out of those totals that you gave for the first three films, what percentage of your business was international from those three films?

How has that increased as a percentage of revenue?

Yes, I don't have that specific number in front of me, but it's always been -- the first film obviously more North-American focus, and the third film more internationally-focused.

You've seen a bit of a shift, but it's not gotten to 70%-30%.

It's a bit over-pronounced in terms of in the international business relative to the domestic business, just like the rest of our business.

Okay, thank you.

Our next question is from the line of Jaime Katz of Morningstar.

Please proceed with your question.

Good morning.

Thanks for taking my call.

I just have one housekeeping question.

Can you guys talk about refinancing that debt, and how you plan on managing to your leverage targets, and if those maybe have changed?

Sure.

No, we did say at Toy Fair and continue to state today that given current interest rates, we would expect to refinance all of that debt.

We have $425 million due mid-May.

That's kind of the timing of it.

As we think about our debt targets, they're pretty consistent with what we've said before.

First and foremost, we want to maintain our solid investment grade rating.

As we look at our targets of debt to EBITDA, I think we're about 2.0 something this quarter, debt to EBITDA.

But our target remains in that 2 to 2.5 range.

EBITDA to interest, our target remains at 8 times.

I think we were 6.5 or 7 for the quarter.

But our intent is to refinance that debt.

Thank you.

The next question is from the line of Gerrick Johnson of BMO Capital Markets.

Please proceed with your question.

Good morning.

We've heard a lot of commentary on POS for different segments.

I was hoping you would give us an overall US retail POS, and the actual international if possible?

Thanks.

Hello, Gerrick.

The overall US POS was down in the quarter relative to quarter on quarter, comparatively.

You have to look at the difference between the three weeks -- three weeks difference to Easter in order to see that -- as I said, we've had significant improvement in POS over the last few weeks as we head toward the Easter week.

That's true in the US and several countries around the world where Easter's meaningful.

Sorry, I didn't get the second part of your question.

It was just a follow-up on international POS, and what that looked like.

I understand the whole Easter shift, but this is for our modeling purposes.

It helps to know what the actual POS was in the quarter?

Thanks.

Yes.

Overall, POS was down in first quarter in toys and games compared to a year ago.

As I said, you look at through this past weekend and we're still digesting the last few days of data.

We've made up a lot of that ground, so I would say Easter to Easter looks relatively good, and we certainly have great momentum going into second quarter.

Clearly, Latin America is a particularly strong region for us market to market, where we have both third-party data as well as our own data.

In Europe, we've seen some good growth in the UK.

POS down in a few other countries where we have data.

We mentioned Australia.

In France, we talked about challenges in France and down a bit in Germany.

Then if you look at the franchise brands, we talked about franchise brands growth of 15%.

We've also seen great growth in POS against those brands, whether it's Nerf, exclusive, and then inclusive of Nerf Rebelle; My Little Pony and then the inclusion of Equestria Girls, but core My Little Pony; the Marvel business all showing good growth and growth in POS.

Okay, that's very helpful.

I guess that covers all POS questions.

Maybe you could give us an idea of what Backflip contributed in the quarter?

Also, just to get back to Wizards of the Coast, understand -- and you were very clear about the release impact on magic, but I was hoping you could give us an actual shipment numbers on Wizards?

It's a metric you've given us in the past.

Thanks.

Overall, Wizards, we've never really given you a number, but overall WotC business was slightly down in the quarter.

But we talked about Duel Masters, which is obviously a Wizards initiative, a Japanese trading card brand.

Again, it's in that area where we saw some of the changes going on in the Japanese trading card market.

That's where we are with that.

Okay.

On the Backflip, Backflip contributed in revenues and EBITDA, if you take out amortization -- but with amortization was a bit dilutive.

Okay.

Any idea how much it did contribute in revenue?

Yes, we're not reporting it.

We're not breaking it out separately.

But clearly, I'll tell you our overall digital gaming business was up nicely in the quarter.

That includes Backflip as well as some other categories of digital gaming.

Okay, great.

Thanks.

Our next question comes from the line of Tim Conder with Wells Fargo.

Please go ahead with your question.

Thank you.

On Furby, you mentioned that that was down, and obviously you expect that to be down versus difficult comparisons this year.

Can you just outline what quarters will be the most difficult comparisons in Furby?

Then on Playskool, a little bit more color there.

Any impact you're seeing from the broad category having, I guess, some challenges?

In the Playskool numbers, if you look Playskool and look at the overall preschool business, the core preschool business, we have the January and February NPD data.

Clearly the industry category was down.

What we're really seeing is the character-led preschool initiatives are clearly working.

We saw growth in our Marvel preschool business as well as Transformers preschool business.

Then our Play-Doh business is performing nicely globally, and really growing as one of our newest franchise brands, and taking hold.

The core Playskool business was down in the category, and that's consistent with what we've seen in some of the industry trends.

If you look at Furby, clearly Furby biggest impact would be in the third and fourth quarter of the year, consistent with holiday sales.

Okay.

That is it.

Most of my other questions have been answered.

Thank you.

Our next question is from the line of Drew Crum with Stifel.

Please go ahead with your question.

I wonder if you guys could comment on mix and its impact on gross margin in the quarter, and how you see that playing out going forward?

This is a big year for the boys business, which tends to carry lower gross margin than games.

That's the first question.

Secondly, one of your competitors is entering the shooter outdoor category with a new line.

I wonder if you could comment on conversations you're having with retailers in terms of anticipated shelf space for Nerf?

Those two questions.

Sure, well let me take the gross margin question, and then we'll talk about -- Brian can talk about the other question.

From a gross margin standpoint, we are benefiting from mix, and a lot of that's really coming from the growth in our franchise brands.

We talked about our franchise brands have grown 15% in the quarter, and that mix is impacting us positively, as well.

We're also benefiting from cost savings in the quarter in that gross margin line.

As we said at Toy Fair, we expected to be able to maintain gross margins around levels consistent with full year a year ago, and that still remains our guidance for the full year.

Drew, if you look at the Nerf business, in the first quarter Nerf's momentum was both in shipments as well as strong POS, and that's within the boys arena.

The addition of Nerf Rebelle was also significant over and above those increases.

The POS there has been great in that part of our business.

The new Nerf Rebelle brand is rolling out around the world and is merchandised primarily in the girls' aisles of global retail.

We're seeing great new innovations coming from Nerf throughout the year, and feel very strongly that our Nerf business from an innovation and marketing standpoint is in a very good place.

Okay, got it.

Just one more question from me.

As far as Beyblade is concerned, when does that no longer become a factor, in terms of comps for the boys business?

I think you'll really see it diminish, particularly as we get to the second half of the year, as a significant comparison, Drew.

Got it.

Thanks.

Thank you.

At this time, we've reached the end of our question-and-answer session.

I'll turn the floor back to Brian Goldner for any additional comments.

Thank you.

Before Debbie makes her closing remarks, I wanted to take a moment and recognize that shortly the Boston Marathon will begin taking place.

We want to wish all of the runners, spectators, and the City of Boston a successful and safe day.

Regardless of where you live, we are all Boston strong today.

Debbie?

Thank you, Brian, and thank you to everyone for joining the call today.

The replay will be available on our website in approximately two hours.

Additionally, Management's prepared remarks will be posted on our website following this call.

Our next earnings call is tentatively scheduled for Monday, July 21.

Thank you.

Thank you.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.