孩之寶 (HAS) 2015 Q4 法說會逐字稿

Good morning, and welcome to the Hasbro fourth-quarter and full-year 2015 earnings conference call.

(Operator Instructions)

Today's conference is being recorded.

If you have any objections, you may disconnect at this time.

At this time, I would 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 Chairman, 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 performance, and then we will take your questions.

Our fourth quarter and year end 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.

Today's discussion will exclude items from both our 2015 and 2014 results that do not speak to the underlying financial performance of Hasbro.

Details on those items and a reconciliation to our reported financial results are included in the earnings release and presentation slides accompanying this call.

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.

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.

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, and thank you for joining us today.

Hasbro's record performance in 2015 reflected the strength of our global teams, and the power of our brand blueprint.

Through a focus on franchise brands and partner brands, consumer insight-led innovation and compelling storytelling, we are connecting with consumers more deeply, and across more demographics than ever before.

It has taken us 10 years and significant investment to be in the position of successfully executing our strategy.

Today we are beginning to unlock the full economic value of our brands.

The benefits of our strategy are not only delivering revenue gains, but are also driving higher levels of gross and operating margins which we believe are sustainable for the long-term.

In recognition of the strength of the year and our positive outlook, our Board recently voted to raise the quarterly dividend by 11%.

This higher dividend reinforces our commitment to enhancing shareholder value over the long-term.

Demand for Hasbro's initiatives was strong globally last year.

Revenues increased 13% absent FX, and reflected the strong demand we saw at the local level around the world.

On a reported basis, revenues grew 4% despite a significant negative impact from foreign exchange translation.

Point of sale was very strong, growing double-digits in developed economies, including the US, UK, Germany, France, Spain, Mexico and Australia, as well as in many emerging markets where we receive retail data directly from our customers.

We ended 2015 with retail inventories in very good shape, reflecting strong sell-through and high quality merchandise on shelf.

Our growth drove market share gains in the 11 major countries where we have data according to NPD.

In Europe, we took over the number two market share position.

For the full year, Hasbro franchise brands revenue grew 7%.

Including the impact of currency translation, franchise brand revenues declined 2%.

The 7% growth was led by increases in PLAY-DOH, NERF, MAGIC: THE GATHERING, MONOPOLY and MY LITTLE PONY.

Our investments in innovation, storytelling, and execution around the brand blueprint drove profitable revenue gains, while positioning us for future growth.

NERF had a record year, increasing 13% with new insight-driven innovations NERF Modulus and Rival, and growth in Zombie Strike and N-Strike Elite, NERF was the largest brand across Hasbro last year.

For the third year in a row, PLAY-DOH delivered record revenues increasing 32%.

We saw strong growth across all regions, including a 49% increase in Latin America.

While DOHVINCI contributed to growth in its first full year, we also experienced double-digit gains in core PLAY-DOH compounds and play sets.

Growth in MONOPOLY and MAGIC: THE GATHERING contributed to 8% increase in the game's category absent FX.

MAGIC had a very good fourth quarter with the release of Battle for Zendikar which had the strongest start to a set in the brand's history.

In addition to higher revenues in our franchise brands and several other Hasbro gaming brands, PIE FACE was a clear winner this holiday season, and continues to be in high demand at retail.

It was recently named Toy of the Year in the UK.

You'll learn more about the next innovation for PIE FACE later this week at Toy Fair.

As expected, TRANSFORMERS revenues declined, given the difficult comparison with the 2014 theatrical release.

The decrease was at the low end of the traditional range following a movie, and benefited from the success of TRANSFORMERS: Robots in Disguise television programming airing in markets around the world.

In 2016, the second season of program will begin airing, including on Cartoon Network in the US.

LITTLEST PET SHOP posted a small revenue decrease, despite growth in the US and Canada segment, as well as in the entertainment and licensing segment.

Outside the US, the markets are actively relaunching the brand, and we plan to extend the success we've seen in the US globally.

We believe that there is an opportunity to engage girls around a more immersive franchise story, including a new approach to multi-platform entertainment which we will be unveiling in the future.

MY LITTLE PONY remains a vibrant and growing property.

The core MY LITTLE PONY brand did extremely well in 2015, with positive revenue growth in several countries backed by strong point of sale, and the launch of the new Friendship is Magic collectible segment.

MY LITTLE PONY has established itself as a major lifestyle brand, and for 2015 was our top licensed property.

We experienced a slow down in EQUESTRIA GIRLS, that offset much of the growth we saw in other areas of the brand.

In January 2016, we launched a new mini doll EQUESTRIA GIRLS line which is off to a very good start.

Overall, MY LITTLE PONY brand engagement is very high across all lines of the business.

To maintain this momentum, we are continuing to invest in multi-channel storytelling, while evolving our entertainment strategy to more effectively deliver content.

The success of our franchise brands contributed to the 11% revenue growth in our entertainment and licensing segment.

Despite a difficult comparison with 2014's TRANSFORMERS movie, consumer product licensing revenues increased.

Over the past several years, we have built a world-class consumer products organization.

We are driving momentum across several brands, including MY LITTLE PONY, TRANSFORMERS and MONOPOLY, delivering cross-category statements at retail, while making inroads in emerging markets, including China and Thailand.

The entertainment and licensing segment is benefiting from our ongoing investment in storytelling, through episodic television programming, including a multi-year digital streaming deal.

With the continued growth, the entertaining and licensing segment increased to 6% of total revenues at 11% of operating profit.

At a 31% operating profit margin, our ongoing investments are positively contributing to the overall operating margin for Hasbro.

Shifting to our partner brands, several brands delivered strong growth last year.

STAR WARS fans around the world have embraced The Force Awakens, both in theater and in merchandise.

Hasbro's 2015 STAR WARS revenue was on par with past movie years.

Nearly half of this revenue was recorded in the fourth quarter, given the December 18 movie release.

The next wave of Hasbro STAR WARS product is on shelves today, and new product will continue to be available in 2016, supporting both the spring home entertainment window for the Force Awakens, as well as the December 16 release of Rogue One.

Given the level of entertainment and the strong global demand we are seeing, 2016 STAR WARS revenue could be on par with 2015.

Earlier in 2015, JURASSIC WORLD and MARVEL's Avengers: The Age of Ultron both established themselves as top grossing films at the global box office.

Each property made strong revenue contributions for Hasbro.

In total, our partner brand revenues were slightly higher than our previous expectation, and totalled 28% of revenues.

Strong STAR WARS results in the fourth quarter were a major contributor to the overperformance of these brands.

We continue to expect partner brand revenues to be 20% to 25% of total Hasbro revenues.

In the near-term, this number is expected to be at the higher end of this range.

In 2016, Hasbro's line of DISNEY PRINCESS and DISNEY FROZEN fashion dolls and small dolls became available.

These products are already on shelves in the US, and rolling out internationally.

We shipped a very small amount of product in the fourth quarter, given the timing of retailer plans.

Shipments are now ramping up, and early consumer indications are positive.

Great partnership with DISNEY and our global retailers is resulting in a smooth transition, with product on shelf beginning in January.

We are closely monitoring inventory at retail to ensure this continues in 2016, as revenues grow and we build greater efficiency and profitability into this new business.

This growth in our franchise and partner brands portfolio drove growth in every region on a constant dollar basis.

The US and Canada segment delivered double-digit revenue and operating profit growth.

In 2012, we reorganized our US teams, and put in place a plan to drive both top and bottom line growth.

Over the past several years, this has substantially improved profit leverage and segment operating profit margin.

The team has done a tremendous job working with our retail partners to build a robust, growing and profitable business.

The international segment revenues grew 16% absent FX, and emerging markets increased 15%.

We continue to expect modest double-digit growth in the emerging markets going forward.

Our regional teams are navigating challenging economic environments, but are successfully driving our brands, and positioning Hasbro for profitable growth over the long-term.

In closing, 2015 was a very good year for Hasbro.

Positive momentum in Hasbro franchise brands and our partner brands positions us to capitalize on the innovation and entertainment our teams are delivering in 2016 and beyond.

As Deb will discuss, Hasbro is in a very strong financial position.

We continue to strategically invest in brands and initiatives where we see additional revenue and earnings potential, while returning excess cash to shareholders.

This Friday, February 12, is our annual Toy Fair Investor event.

We look forward to seeing you in New York, and sharing with you our future brand and business initiatives.

I would like to now turn the call over to Deb.

Deb?

Thank you, Brian, and good morning, everyone.

As Brian mentioned, Hasbro's financial position is as strong as ever.

We have tremendous momentum in our brands, and we're driving profitable growth throughout our business.

Our global team has faced an extremely challenging currency environment, and delivered successful programs to manage retail, consumer and business demands, while improving the profitability of Hasbro.

In 2015, absent FX, we grew revenues across all operating segments and major geographic regions, as well in both franchise and partner brands.

We delivered cost savings, while investing in the future growth of our business.

Finally, we generated $552 million in operating cash flow, ending the year with close to $1 billion in cash on the balance sheet.

We remain committed to our capital allocation priorities and investing in our business, while returning excess cash to our shareholders through our dividend and share repurchase programs.

Today's announced 11% dividend increase, coupled with $479 million in available share repurchase authorizations enables us to continue on this path.

Look at our segments for the full year of 2015, revenues in the US and Canada segment increased 10%.

Excluding a $14 million negative impact from foreign exchange, segment revenues increased 11%.

Growth in the boys' games and preschool categories more than offset a decline in the girls category.

Hasbro franchise brand revenue increased 1% behind growth in NERF, PLAY-DOH, MAGIC: THE GATHERING and LITTLEST PET SHOP, which offset the expected decline in TRANSFORMERS.

Partner brands STAR WARS, JURASSIC WORLD, MARVEL and DISNEY'S DESCENDANTS also contributed to the segment's growth.

FURBY revenue was down as expected.

US point of sale posted double-digit growth in all categories other than girls, which declined 2%.

Retail inventory was of very good quality at year end.

Operating profit in the US and Canada segment increased 29% for the year, reflecting higher revenues, the impact of cost saving activities and a favorable product mix.

In the international segment, foreign exchange had a negative $379.4 million impact on revenues.

Absent this impact, international segment revenues grew 16%, and emerging markets increased approximately 15%.

Including the impact of FX, revenues decreased 3%, and emerging market revenues decreased 9%.

Internationally, as reported revenues in the boys and preschool categories increased, but were more than offset by declines in the games and girls categories.

Franchise brand revenues declined 6%, despite growth in PLAY-DOH, NERF and MONOPOLY.

Additionally, STAR WARS, JURASSIC WORLD, MARVEL and DISNEY'S DESCENDANTS were positive contributors.

As expected, FURBY and TRANSFORMERS each had a significant revenue decline for the year.

Absent FX, operating profit in this segment increased 12%.

On a reported basis, operating profit declined 6%, reflecting the negative foreign exchange impact.

Foreign exchange is anticipated to negatively impact 2016 as well.

At our current expected 2016 rates, our 2015 revenues would have been approximately $100 million less than what we reported.

We anticipate approximately 15% to 20% of this impact will fall to the 2016 operating profit line.

The entertainment and licensing segment revenues grew 11%.

The segment benefited from a multi-year digital streaming deal for Hasbro studios television programming signed during the first quarter of 2015.

In addition, consumer product licensing revenues increased for the year, overcoming a difficult comparison with TRANSFORMERS movie-related merchandise and revenues.

Segment operating profit increased 27%, and margin grew to 31.4%.

We continue to make investments in our consumer products team, digital gaming, and storytelling to drive future growth in these higher profit revenue sources.

Turning to overall expenses for Hasbro, growth in royalty-bearing entertainment partner revenues, and to a lesser extent the entertainment and licensing segment revenue, combined to deliver a favorable product mix.

This mix in turn, drove lower cost of sales, which were 37.7% in 2015, versus 39.7% in 2014.

In conjunction with the higher partner brand revenue mix, royalties increased to 8.5% of revenues.

Combined, cost of sales and royalties decreased approximately 60 basis points year over year.

As Brian mentioned, the execution of our strategy and our focus on improved efficiency is creating sustainably higher levels of gross margin for Hasbro.

As we look to 2016, as a percent of revenues, we anticipate cost of sales of 38%, and royalties lower at 8%.

Operating profit dollars and margin grew year over year.

Higher revenue and operating expense leverage more than offset investments we are making.

As we continue to execute our brand blueprint, we are focusing on fewer brands, expanding our licensing revenues, and improving the efficiency of our operations.

These changes in our business model are creating more innovative product, and higher growth and operating profit margins in our business.

To fully execute our strategy, investments in innovation are paramount to our long-term success.

Product development totaled 5.5% of revenues.

This includes the investment in our DISNEY PRINCESS and FROZEN offerings, for which revenues commenced in January in a more meaningful way.

We'll also continue to invest in building awareness for our brands.

In 2015, advertising declined to 9.2% of revenues.

This decline is primarily due to the higher percent of entertainment backed-revenues, which traditionally carry less advertising spend.

Intangible amortization declined for the year, as some of our assets have been fully amortized.

Program production cost amortization declined slightly to 1% of revenues.

Storytelling is an important element of our brand building, and we will continue in investing in content development for television, film, and other mediums.

SG&A increased 8% for the year.

A number of factors contributed to the growth in expenses.

As we outlined in previous calls, and in our November Investor Day, we continue to make strategic investments in our business.

This includes investing in the digital platform for MAGIC: THE GATHERING.

This is a multi-year investment program which we believe will expand the potential market for MAGIC over the long-term.

In addition, our IT expense and depreciation expense is higher, reflecting our increased investments in improving the efficiency of Hasbro going forward.

As we outlined in November, these expenses increased in 2015, and will again increase in 2016 and 2017.

In 2018, we anticipate they will begin to decline.

Compensation expense was also higher, reflecting the strength of our results.

We are able to expand operating profit while making incremental investments, given the ongoing focus of our teams on managing expenses, and the inherent financial advantages of executing our brand blueprint strategy.

Turning to our results below operating profit for the quarter.

On an as-adjusted basis, other income was $2.5 million, compared to an expense of $8.5 million last year.

The improvement resulted from increased profits associated with our 40% share of the operating income in the Discovery Family channel, as well as lower losses from foreign exchange transactions.

The 2015 underlying tax rate was essentially flat with last year at 26.4% versus 26.5%.

Our 2016 tax rate is anticipated to remain in the range of 26.5% to 27%.

This will fluctuate to reflect the geographic mix of profits.

On an adjusted basis, diluted earnings per share for the year were $3.51 versus $3.15 in 2014.

Our balance sheet remains strong.

Of our nearly $1 billion in cash at year end, almost all of it is located outside the US.

We returned $310.7 million to shareholders in 2015, $225.8 million in dividends and $84.9 million in share repurchase.

We announced today that the Board has approved an 11% or $0.05 per share increase in the quarterly dividend.

The new quarterly dividend rate of $0.51 per share will be payable May 16 to shareholders of record on May 2. We will continue returning excess cash to shareholders through our dividend and share repurchase program.

Receivables at year end were up 11%, and DSOs declined 1 day to 75 days.

Absent the impact of foreign exchange, receivables increased approximately 23%, equal to the fourth quarter revenue growth, absent FX.

Inventories increased 13% versus last year.

Adjusting for a negative foreign exchange impact, inventory increased 24% in line with our growing business and entertainment schedule.

Our inventory both at retail and at Hasbro is of high quality, and we are well-positioned to meet demand in 2016.

In closing, 2015 was an extremely strong year for Hasbro.

We continued to make important advances in the execution of our strategy, and we invested in strategic initiatives to drive long-term shareholder value creation.

We have positive momentum in our business, and we are well-positioned for 2016 and beyond.

We look forward to sharing more with you on Friday at Toy Fair.

Brian and I are now happy to take your questions.

Thank you.

(Operator Instructions)

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

Please go ahead with your questions.

Thank you.

Good morning, everyone, and congratulations on a nice finish to the year.

Hi, Steph.

Hi.

Brian.

I am wondering if you can talk about the sales to cost balance?

You have seen some nice favorable increases in your gross and operating margin.

Should we continue to expect that trend line throughout the course of the next couple of years?

And then, as you are looking at some of the investment spend, I think Deb, you mentioned a few things that you still have on the docket.

How many of those will flow through the P&L, versus what would be capitalized on the balance sheet?

Thank you.

Yes, if you look at our gross and operating margins, we believe that they are sustainable at approximately the 2015 levels, and over time we would hope to continue to expand those.

We've talked about the points of leverage that we have in our business, in order to expand them over time.

Obviously, the growth of our franchise brands that enjoy a higher than average operating profit margin, the growth of our entertainment and licensing business, which as you saw has a very strong operating margin as well.

And then, of course, as we continue to grow the international markets, particularly the emerging markets, and we get greater economy of scale, those begin to approach the Company's average operating profit margin.

So those three levers broadly will enable us over time to continue to expand operating margins.

But we do believe that our operating profit margins and gross margins are at a new place, and can remain at this higher level beyond 2015.

And some of the investments that we are making, as Brian just mentioned, are things like MAGIC: THE GATHERING online, our investment in our development process, which we expect will lead to future savings in the cost of sales line a couple of years out, and we have got the higher level of depreciation coming through.

We expect to see those coming through the P&L for the next 2016, 2017, and starting to decline in 2018.

And we will begin to see revenue from some of these activities like MAGIC online beginning in 2017.

So it's a little bit of a balance.

But we expect to see some of those expenses begin to decline by 2018.

And we'll have some charts on depreciation and amortization, and some of the details behind that at Toy Fair on Friday.

Great.

Just one follow up on the DISNEY PRINCESS business.

I think, Deb, you had historically quantified that as about a 30 to 50 basis point drag.

As what you're seeing in the channel now, are you expecting to arrive at leverage a little bit sooner than you would have initially forecasted?

Or how should we think about that drag rolling off here over the next 12 months or so?

Yes, Steph, if you think about revenues this year through the first quarter, we're working through the transition.

And for the full year, we have some strong expectations, but obviously, it's a transition year.

We believe we'd get more leverage in our business over time into 2017 and 2018.

So over time, we'll build more leverage into that business, as we again, grow economy of scale and create new innovations in years out.

But we've not said, that we would get all of that leverage this year.

Thank you.

Good luck, guys.

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

Please proceed with your questions.

Okay, thanks.

Good morning, everyone.

So can you guys talk a little more about your expectations for royalties, 8.5% in 2015.

I think you suggested that in terms of mix, partner brands would be at the high end of the historical range at least over the near term, yet you expect royalties as a percentage of sales to be at about 8% in 2016.

So I just want to get some additional clarity on that?

Yes.

Hi, Drew.

It's Deb.

Hi, Deb.

I think it's really just a mix, we had such a strong entertainment driven mix of revenue this year.

As our franchise brands continue to grow, we do expect that royalty number to come in closer to our five-year average, which was around that 8%.

So that's why as we look forward, we believe we have good sustainability, and our growth margin, as our consumers are paying for innovation in our product, and we have built some cost savings measures in there that we are realizing now.

And our royalties will be closer to 8% than 8.5%.

We think this year was, just given the strength of STAR WARS, as well as JURASSIC WORLD and MARVEL, they were just higher than we expected they would be.

Got it.

Okay.

And then, Brian, can you comment on the performance of MAGIC during the quarter?

Any quantification in terms of sales growth, and any noteworthy changes or variances in terms of the content strategy in 2016, relative to this past year?

Yes, it -- MAGIC had a great year.

It grew for the full year, it grew very strongly in the fourth quarter.

We talked about Battle for Zendikar being the most successful set launch.

Just to remind everyone that MAGIC is really story-led, it's much less responsive to quarters or holiday seasonality.

It's really about the stories that we are telling.

We think the transition the team has taken the brand through this year, and how we tell stories is very helpful to the brand as we go forward.

So we continue to invest to improve, and drive our online business.

As Deb said, we would expect to see some revenues from the new MAGIC next platform in 2017.

But MAGIC is a long-term growth driver for us, and we're very happy to have a brand like that.

Also, and we'll talk more about this on Friday, that talks to and appeals to a different demographic and psychographic that helps the Company to expand our portfolio, and deliver value and brands across a number of different demographics.

Okay.

And then, just one last question from me.

Are you willing to share what the profitability or margin was for your emerging markets business in 2015?

Emerging markets absent FX grew 15%, and operating margin was a little bit lower mostly because of China, as we are investing in that business.

And then, of course, impacted by FX.

Yes, two of our biggest growth markets this year absent FX, continue to be Brazil and Russia, both growing -- (multiple speakers)

20% and 25%.

Yes, over 20% absent FX.

But the pressure of FX on those markets -- if you think about the precipitous drop in their currencies that kept going all year long, it really put a lot of pressure on our emerging market operating profit.

Okay.

Thanks, guys.

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

Please proceed with your question.s

Hi, good morning.

I have a quick clarification actually.

I think you guys had said that FX would be 15% to 20% of 2015 levels, if those levels were at current rates.

So is that right to think of that as 15% to 20% of the $100 million incremental change?

Yes, I think what we were trying to highlight, Jaime, is that we don't see the precipitous currency drops that we saw at the end of 2014 into 2015.

So our expectation of what our current rates are, we think they'll continue to have an impact.

Again, particularly in countries like Brazil, which continue to have pressure on their currency of about $100 million to revenue, and about 15% to 20% of that would drop through to operating profit.

Okay.

And then, are you willing to comment on advertising, the advertising spend outlook in the year ahead, with royalties ticking up a little bit higher, what the offset might be?

Yes, 2016 and 2017 are both great entertainment years.

In fact, we are sitting here today with more visibility into great entertainment and storytelling, both from our own brands and partner's brands, than ever before.

And so, we think advertising will remain below the 10% range that we've talked about historically.

But it will probably be in a range between where we ended last year and 10%.

Thank you.

Our next question is from the line of Taposh Bari with Goldman Sachs.

Please go ahead with your questions.

Hi, everybody.

Good morning, and congrats on a well-executed year.

Brian, I guess, just a follow-up on STAR WARS.

I appreciate the color in terms of contextualizing this year versus past movie years.

Last, we heard you were expecting a 50/50 mix from Episode 7 between 2015 and 2016.

Is that still the case?

And can you remind us, or can you give us an update on how the US mix versus the international mix of that property is trending versus the prior movie?

Sure.

So what we talked was, in 2015 STAR WARS performed like a movie year, like other movie years, so it was very strong for us.

And we also believe that STAR WARS can be equal in 2016, obviously, rolling through The Force Awakens home entertainment window, and then into Rogue One.

So we believe similar revenues.

And we also -- I was looking at some of the details of STAR WARS -- and I think it's rather interesting that prior to the movie release, or if you take the full year numbers for STAR WARS, the US was 56% -- US and Canada segment if you will -- 56% of revenues and international was 44%.

However, if you look at the fourth quarter, or more the movie-related revenues, the international segment revenues as a percent go to 54%, and the US is 46%.

So what we've said all along is that, as the brand benefits from more entertainment, and benefits from more global movie releases that we would see a growth in that footprint, the global footprint of the brand.

And we are in fact, seeing that.

Great.

That's helpful.

And then just the other question I had was on capital allocation, and M&A in particular.

Can you just remind us what your criteria are for M&A, as you think about acquisitions?

And what your appetite is, in terms of making a transformational deal?

We are focused on executing our brand blueprint strategy.

We, obviously, have looked from time to time at opportunities to help us round that out, to build our capabilities, and we've spent the last ten years doing that.

So acquisitions, like 70% of Backflip, our joint venture with the television network that's continuing to improve its financial position, and we continue to remain open to ideas that enhance our strategic brand blueprint, and the strategy that we're executing.

But we're very focused on executing our own strategy, and really focusing in on how we build our business over time.

We have great brands in our portfolio, and believe there is lots of headroom for growth in our franchise brands.

And you will also see us introducing some new brands out of the vault, and new original brands over the next couple of years.

So we think we are well-positioned from a brand standpoint, but we do remain open to add-on acquisitions that would help to enhance the strategic platform that we're running, our brand blueprint strategy.

From a capital standpoint -- (multiple speakers)

Sounds good.

We also remain committed to returning our excess cash to our shareholders.

Indeed, we're very pleased that our Board voted, and we're able to report today an 11% increase in our dividend, because we do remain very committed to getting excess cash back to our shareholders.

Great.

Thanks, and best of luck in 2016.

Thanks.

Thanks.

Our next question is coming from the line of Felicia Hendrix of Barclays.

Please proceed with your questions.

Good morning.

Thank you.

Brian, if we could just go back to STAR WARS for a second, because I just want to make sure I'm understanding what you are saying correctly.

You said STAR WARS was on par with prior years.

So according to our notes, that's depending on you how far back you look, somewhere between $500 million and $600 million.

And then, you said half of that was in 2015.

So I'm just wondering, when you think about the blending 2015 and 2016 together, is that what's equating to the $500 million to $600 million?

Or are we looking at the total, and just splitting it -- it's just a little confusing to me?

Thanks.

Okay.

Sure.

Yes.

So what I was saying is that -- just to give you a sense on an annual basis, that STAR WARS for us in 2015 for the full year was comparable to prior movie years, and I might point you to years like 2005, for example.

Okay.

Then I was talking about the fact that, if you took the full year number, you would see that the US was more represented in terms of sales.

So said differently, sales before the launch of the film were more oriented towards US segment, and less in international.

As the movie entered the market in the fourth quarter, we talked about how the fourth quarter was about half of the total year's revenues.

And that was more internationally oriented at about 54% versus the 46% for the US.

We're also seeing in 2015, Hasbro's market share of STAR WARS grow fairly dramatically, because people are really responding to the innovation that we have brought to the product lines, to our role play products which are selling incredibly well, all the lightsabers of different kinds, including Kylo Ren's lightsaber.

And then, of course, 3-3/4 inch scale action figure, and then, of course, our Black Series.

Those are some of our top sellers.

We are rolling out new products, and already have for 2016.

We'll continue to roll out new products throughout 2016, and we'll make a transition more towards Rogue One for the back half of 2016, given the December movie release for Rogue One.

And we do believe that 2016 can be comparable sized to 2015.

Okay.

Okay, so that's helpful.

Deb, just quickly, can you help us -- I know it's is such a moving target, but you have given us some FX guidance in the past, can you help us think this through for 2016?

You might have said that.

I might have missed it.

Sure.

We are thinking that based on our current expected rates, that we would have about a $100 million negative impact to 2015 revenues, if you just applied those same rates, with about 15% to 20% of that flowing through to operating profit.

Okay, I apologize.

You did say that then (multiple speakers)

So a much less significant impact than 2015 versus 2014.

Okay.

Thanks.

I apologize for making you repeat that.

And then I'm just -- I'm -- you guys beat EPS nicely, but if you look at the reconciliation in your release your EBITDA seemed to have come in lighter than consensus EBITDA.

So I was just wondering how to reconcile that?

EBITDA, I think was in line with consensus, $856 million.

For the quarter?

Oh, for the quarter?

Yes, I don't know -- we were very -- actually very pleased with our results for the quarter and for the year.

So given our expectations, they were in line.

Yes.

I think -- as we think about building our business, we really do think more annually, and over a three-year basis than in any given quarter.

But there wouldn't be like a [strange] -- like line item or something that would make that difference, right?

Because you beat on earning -- okay, I mean, consensus EBIT -- (multiple speakers)

Not that we are aware of, no.

No.

Okay.

Final question, just on SG&A, it looks like it grew 18% year-over-year in the quarter.

So just wondering how should we think about, maybe what -- how we should think about SG&A in 2016?

Well, on the full year basis we've said we have got a couple of these investments, which I indicated earlier we'll outline a bit more on Friday at our meeting at Toy Fair -- but a quite a few more of these investments that are continuing for the next few years before we start to see the revenue from it.

And that includes depreciation, which is going to ramp down coming in 2018 from these new systems that we've put in.

So we will highlight more of that.

I mean, the other item that impacted us of significance in the SG&A line was compensation because of the performance of the year.

But again, we'll outline more about that on Friday.

And would you say that compensation accounted for most of the year-over-year increase in this quarter?

I would have to go back and look at the quarter.

However, again on a full-year basis, we are in line, from a percent of revenue standpoint of where we thought we would be at the beginning of the year.

Okay.

Thank you.

Thanks.

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

Please proceed with your questions.

Yes, thanks for taking my question.

Deb, wonder if you could walk through the puts and takes we might see in the entertainment and licensing business in 2016, how it differs from 2015?

In the first quarter I'm assuming you're not going to have the Netflix bump.

But like for like, how we might look at the two years?

Well, that's very good that you picked up on that, Eric, because as you know, it's like my favorite term, and I get teased about it a bit, but it is a bit lumpy in that business because of that.

And I believe having the Netflix in the first quarter would have an impact to that.

However, we continue to invest in that business, and we saw good growth not just in the studio and Netflix business, but in our consumer product licensing business.

And the strength of our brands and the licensing is more -- is much more stable than that entertainment driven revenue, or those large deals that you can see from time to time.

So overall, as we -- one of the reasons why we've expanded our operating profit is because of the expansion in our entertainment and licensing business.

And we continue to invest in that business for the long term, because we see not just the revenue growth, but the operating profit expansion opportunities for the Company as a whole.

And on Friday, we'll outline for you as well our efforts in digital, particularly in digital gaming.

We're going to talk about some of the new titles that are around Hasbro brands coming from Backflip Studios, as well as some of our other digital gaming efforts.

And that's all resident in that segment as well.

Okay.

Thank you.

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

Please go ahead with your questions.

Thank you, and congrats again on a great year.

A couple here, any quantification, Brian, that you can give us on NERF?

Again, you said it was -- that it was your largest revenue producer.

Just any type of quantification there?

And then, as it relates to DISNEY PRINCESS, was a little bit of this faster than anticipated?

Again, I think it was touched on a little bit earlier here, the international shipments that you did in Q4.

It seemed like at the Analyst meeting in November that you said, hey, we're going to let the channel clear, and the material shipments would start in Q2.

So just any additional color there?

And then finally, a capital allocation question here.

You guys have executed well on a strategy over the last several years.

Cash flow is good, and you gave a very good outline here with the partner businesses staying sustainable, and then what you are doing on the licensing and your own brands.

Can that operating cash flow number of approximating $500 million, should that expand in the not too distant future, given the visibility and sustainability?

As we look at our cash flow number, we'll talk more about that on Friday, so we look forward to see you then, and talking more about that then.

With respect to the DISNEY PRINCESS and FROZEN business, we began very small shipments in the fourth quarter.

I think we did talk about DISNEY'S DESCENDANTS being a good contributor to 2015.

However, we have been working very closely with DISNEY, and our retail partners to ensure the channels are in good shape for everyone, and our expectation is we will begin to ship that in a more meaningful way in 2016.

But we only had very, very small shipments in 2015.

Yes.

In the first quarter, we'll work through the transition in PRINCESS.

So we will be shipping PRINCESS product, and you're starting to see displays up and rolling the product out around the world.

We are very happy with the transition and working with DISNEY and our retailers.

They have been incredibly supportive, and we are seeing some good early indications of how our product is selling.

It's selling quite well.

And then if we talk about NERF, the brand was both up in the quarter as well as full-year double-digits, and the sell-through was very strong.

And it's really around among Modulus, around N-Strike, and around Zombie Strike are kind of the top performers for the year.

And then, of course, NERF Rival, which is launched in a couple of countries, and we will roll that out in a few more as we move forward -- that more -- this is a little bit more of the paintball-like play pattern that we're rolling out in markets around the world.

So again, the brand is our top brand at the Company.

And we just wanted to give that perspective, because as we had created the franchise brand strategy many years ago, we believed that those brands were capable of growing to first, hundreds of millions of dollars, and then, over time even larger.

And NERF and PLAY-DOH are great examples of brands that have grown significantly over the last few years, and they are among the top brands at the Company.

So clearly over -- a double-digit percent of revenues?

Yes.

Yes.

Double-digit percent of revenues.

Great.

Okay.

Thank you.

See you Friday.

Our next question comes from the line of Gerrick Johnson with BMO Capital.

Please go ahead with your question.

Hey, good morning.

In the past, you weren't shy about giving us the actual STAR WARS revenue numbers.

So maybe you can give us that, as opposed to close to what it used to be?

NERF, just clarification, is that your largest owned brand, or is it the largest brand in the portfolio, if you include partner brands?

And then lastly, on entertainment and licensing, I think you commented that MY LITTLE PONY is biggest licensed brand.

So is that the largest contributor to entertainment and licensing revenue, and what's the percentage of the total there?

Thank you.

Yes.

So on STAR WARS, I think I gave some pretty good guidance that STAR WARS was very similar to 2005 last movie year.

We used to give out specific percentage of revenues.

For a whole host of reasons, we no longer feel that that's specifically required.

So I'd rather just give you some guidance up against the prior movie year.

NERF, it is the largest brand at Hasbro if you include all brands, including franchise and partner brands, every brand.

It's the largest brand in our portfolio.

And -- (multiple speakers)

Okay.

And MY LITTLE PONY entertainment?

And MY LITTLE PONY, we're talking about the licensing income -- so this is in our -- within the entertainment and licensing segment, our new rebranded team of consumer products personnel generated the largest amount of revenues from MY LITTLE PONY business, up significantly versus year ago, and that's what we were referring to.

And I am not going to give you a percent as it relates to E&L.

All right.

Thank you very much.

Thank you.

Our next question is from the line of Jim Chartier with Monness Crespi.

Please go ahead with your question.

Good morning.

I just want to talk about the segment operating margins.

You guys have made really good progress in North America over the last couple of years, and recognizing that international has been impacted by FX.

A couple of years ago, international was pretty similar to North America.

Can you bridge the gap between international and North America at current exchange rates?

Is the North America margin sustainable, and what will the drivers be between getting international closer to North America?

Thanks.

Yes, we made changes in our North American operation back in 2012, and reorganized that business, and working with our retail partners.

We believe that North American profitability is now at a new level, and it's a relatively sustainable level.

Obviously, there will be some ups and downs over time by bits, but over time it can also grow, as we continue to leverage our brands.

I think international is just impacted by FX.

And maybe Deb, do you want to talk absent ex-FX, where those margins were, because they were very healthy margins absent FX?

Yes, absolutely.

I mean, every one of our components of our international segment were up, absent FX, and operating profit was negatively impacted because of the FX impact.

But again, so much of this year in the segments as well, product mix had a big impact on operating profit for the segments, as well as the cost savings.

And we continue to get cost savings through our ongoing initiatives.

As you know, we don't -- we had a $100 million cost saving initiative a few years back, which we completed in 2015.

But really ongoing cost savings has always been a part of our business.

And many of things you've see us invest in, and are running through some of the lines like product development and SG&A, are ongoing investments to further decrease costs throughout our business, including in our international segment.

In the past, international has been about 300 basis points lower than North America.

Now it's over 600 basis points lower.

Again, if FX rates stay where they are, do you believe you can get that margin close to a 300 basis point differential in the future?

We continue to make investments in the business to really reflect things in the currencies, and to take costs out of the business of where we're actually incurring our revenues.

So over time, our expectation is that you'll see more -- our margins in the different operating segments come closer to each other.

Now if you think about international, you have lot of different markets [in those].

So just by their own nature, they are going to have a slightly higher administrative expenses.

So will they ever be 100% the same?

I don't know.

But they will move closer over time, based on all the initiatives we are undertaking in the Company.

Yes, and we have seen some great growth in several of the emerging markets.

We talked about north of 20% growth in Russia and Brazil.

In China, this past year, our largest brand in China continues to be TRANSFORMERS, so you are up against a movie year.

I think that has more of a temporal impact in the year.

And over time, I would expect the trends that we've seen in our emerging market business and profitability to continue, continued improvement toward the Company average operating profit margin.

And as Deb said, there is some puts and takes over time, as we continue to expand our capabilities, but we're trend right.

Thank you.

Best of luck.

Our next question is from the line of Lee Giordano with CRT.

Thanks, good morning, everybody.

Can you talk a little bit more about your expectations for TRANSFORMERS?

And how the content cycle for that brand looks in the coming years?

Thanks.

Well, the brand performed very well for us in a non-movie year, coming off of 2014's movie.

It was down much less than one expects.

We've talked a lot about what brands do in the years following movies, and TRANSFORMERS really bucked that trend for the full year, being down about one-third versus a typical more closer to 50%.

So the television and other entertainment has really helped to support the brand, and to help drive our brand globally.

And I'll give you some more color on our entertainment plans, what's coming out of the writer's room, and plans for TRANSFORMERS theatrically by Friday.

Great.

Thank you.

Thank you.

(Operator Instructions)

Thank you.

There are no additional questions at this time.

I'll turn it back to Ms. Debbie Hancock for closing remarks.

Thank you, Rob, and thank you 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 Investor event at Toy Fair is being held this Friday, February 12, and our first quarter 2016 earnings release is tentatively scheduled for Monday, April 18.

Thank you.

This concludes today's conference.

You may disconnect your lines at this time.

We thank you for your participation.