AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 2003
REGISTRATION NO. 333-103561
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
HASBRO, INC.
(Exact name of registrant as specified in its charter)
RHODE ISLAND 05-0155090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
---------------------
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862
(401) 431-8697
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BARRY NAGLER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
HASBRO, INC.
1027 NEWPORT AVENUE
PAWTUCKET, RHODE ISLAND 02862
(401) 431-8697
(Name and address, including zip code, and telephone number, including area
code, of agent for service of process)
---------------------
COPIES TO:
KEITH F. HIGGINS, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(617) 951-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Registration Statement is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering. [ ]
If this Registration Statement is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT OR SHARE(1) PRICE(1) REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.50 par value (including
preference stock purchase rights)..... 12,929,767 shares $17.015 $220,000,000 $17,798(2)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee and
computed pursuant to Rule 457(c). The maximum price per share information is
based on the average of the high and low sale price on June 23, 2003.
(2) Filing fee previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
[HASBRO, INC. LOGO]
HASBRO, INC.
COMMON STOCK
12,929,767 SHARES
---------------------
This prospectus will be used by selling securityholders to sell, from time
to time, 12,929,767 shares of our common stock that they may acquire under put
or call options described below.
Hasbro, Inc., or Hasbro, issued warrants to the selling securityholders in
private transactions in October 1997 and October 1998. In January 2003, we and
the holders entered into a warrant amendment agreement to grant Hasbro a right
to purchase, or "call," the warrants in exchange for, at our option, either cash
or the issuance to the warrantholders of shares of common stock having a market
value at the time of issuance of up to $220,000,000. The amendment also grants
the warrantholders a right to sell, or "put," the warrants to Hasbro in exchange
for, at our option, either cash or the issuance to the warrantholders of shares
of common stock having a market value at the time of issuance equal to
$110,000,000.
We will not receive any of the proceeds from the sale by the selling
securityholders of the common stock issued to them in satisfaction of the put or
call options.
Our common stock is quoted on the New York Stock Exchange under the symbol
"HAS." The last reported price of our common stock on June 26, 2003 was $17.64
per share.
---------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is June , 2003.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO
SELL THESE SECURITIES. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF
THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
---------------------
TABLE OF CONTENTS
PAGE
----
Company..................................................... 1
Risk Factors................................................ 2
Note Regarding Forward-Looking Statements................... 7
Use of Proceeds............................................. 9
Description of Capital Stock................................ 9
Certain Anti-Takeover Provisions............................ 10
Selling Securityholders..................................... 14
Plan of Distribution........................................ 15
Where You Can Find More Information......................... 16
Incorporation of Certain Documents by Reference............. 17
Validity of Securities...................................... 17
Experts..................................................... 17
---------------------
i
COMPANY
Except as expressly indicated or unless the context otherwise requires,
"Hasbro", "we", "our" and "us" means Hasbro, Inc., a Rhode Island corporation
organized on January 8, 1926, and its consolidated subsidiaries. Unless the
context requires otherwise, all references to "common stock" are to our common
stock, par value $0.50 per share, and the associated rights issued under our
Shareholders Rights Plan dated June 16, 1999.
Hasbro is a worldwide leader in children's and family leisure time and
entertainment products and services, including the design, manufacture and
marketing of games and toys ranging from traditional to high-tech. Both
internationally and in the United States, our widely recognized core brands such
as PLAYSKOOL, TONKA, SUPER SOAKER, MILTON BRADLEY, PARKER BROTHERS, TIGER, and
WIZARDS OF THE COAST provide what we believe to be the highest quality play
experiences in the world. We manage our business by focusing on two major areas:
Toys and Games. Our offerings include a broad variety of games, including
traditional board and card, hand-held electronic, children's consumer
electronic, trading card and roleplaying games, as well as electronic
interactive products, robotic pets, electronic learning aids and puzzles. Toy
offerings include boys' action, preschool, creative play and girls' toys, dolls
and plush products. We also license to others various trademarks, characters and
other property rights for use in connection with consumer promotions and the
sale by others of noncompeting toys and non-toy products. For the fiscal year
ended December 29, 2002, we had worldwide net revenues of $2.8 billion, net
earnings before cumulative effect of accounting change of $75.1 million, and a
net loss (after accounting change) of $170.7 million. For the quarterly period
ended March 30, 2003, we had worldwide net revenues of $461.8 million and net
earnings of $1.2 million.
In our U.S. Toys segment, we market our products as boys' toys, girls'
toys, preschool and creative play. Brands and products from the U.S. Toys
segment include: MR. POTATO HEAD, TONKA, G.I. JOE, STAR WARS, MONSTERS, INC.,
BOB THE BUILDER, TRANSFORMERS, TINKERTOY, EASY BAKE OVEN, PLAY-DOH and
PLAYSKOOL.
In our Games segment, we market our games and puzzles under several well
known core brands, including MILTON BRADLEY, PARKER BROTHERS, AVALON HILL, TIGER
and WIZARDS OF THE COAST. Brands and products from the Games segment include:
MONOPOLY, BATTLESHIP, THE GAME OF LIFE, SCRABBLE, CHUTES AND LADDERS, CANDY
LAND, TROUBLE, MOUSETRAP, OPERATION, HUNGRY HUNGRY HIPPOS, CONNECT FOUR,
TWISTER, YAHTZEE, JENGA, CLUE, SORRY!, RISK, BOGGLE, OUIJA, TRIVIAL PURSUIT,
DIPLOMACY, ACQUIRE and WHEELS ON THE BUS.
Our Tiger Electronics brand products bring innovation and technology to
entertainment and lifestyle products for the whole family, including the HIT
CLIPS micro music systems. WIZARDS OF THE COAST trading card and roleplaying
games include the popular MAGIC: THE GATHERING, DUNGEONS AND DRAGONS and HARRY
POTTER trading card game, based on The New York Times best-selling novels.
We operate in more than 25 countries, selling a representative range of the
toy and game products we market in the United States, together with some items
which are sold only internationally. In the fiscal year ended December 29, 2002,
we derived approximately 35% of our total consolidated net revenues from
international customers.
Our common stock is listed on the New York Stock Exchange under the symbol
"HAS." Our principal executive offices are located at 1027 Newport Avenue,
Pawtucket, Rhode Island, 02862. Our telephone number at that address is (401)
431-8697. For additional information about our business, please see our Form
10-K for the fiscal year ended December 29, 2002 and our other filings with the
SEC which are incorporated by reference into this document. The capitalized
terms used above are our trademarks or trade names, or those of our licensors.
1
RISK FACTORS
Investing in our common stock involves risk. Prospective investors should
carefully consider the following information in addition to the other
information contained in this prospectus and the documents incorporated by
reference into this prospectus before purchasing the common stock.
RISKS RELATING TO OUR BUSINESS
VOLATILITY OF CONSUMER PREFERENCES AND THE HIGH LEVEL OF COMPETITION IN THE
FAMILY ENTERTAINMENT INDUSTRY MAKE IT DIFFICULT TO MAINTAIN THE LONG-TERM
SUCCESS OF EXISTING PRODUCT LINES AND CONSISTENTLY INTRODUCE SUCCESSFUL NEW
PRODUCTS. IN ADDITION, OUR INABILITY TO DEVELOP AND INTRODUCE PLANNED NEW
PRODUCTS AND PRODUCT LINES IN A TIMELY MANNER MAY DAMAGE OUR BUSINESS.
Our business and operating results depend largely upon the appeal of our
family entertainment products, principally games and toys. A decline in the
popularity of our existing products and product lines or the failure of new
products and product lines to achieve and sustain market acceptance could result
in reduced overall revenues and margins, which could have a material adverse
effect on our business, financial condition and results of operations. Our
continued success will depend on our ability to redesign, restyle and extend our
existing family entertainment product lines and to develop, introduce and gain
customer acceptance of new family entertainment product lines. However, consumer
preferences with respect to family entertainment are continuously changing and
are difficult to predict. Individual family entertainment products generally,
and high technology products in particular, often have short life cycles. The
success of entertainment properties released theatrically, such as STAR WARS or
DISNEY related productions, can significantly affect revenues we derive from
licensed product related to those properties. In addition, competition in the
industry could adversely impact our ability to secure, maintain, and renew
popular licenses on beneficial terms, if at all, and to attract and retain the
talented employees necessary to design, develop and market successful products.
The loss of rights granted pursuant to any of our licensing agreements could
have a material adverse effect on our business and competitive position. We
cannot assure you that:
- any of our current products or product lines will continue to be popular
for any significant period of time;
- any property for which we have a significant license will achieve
popularity;
- any new products or product lines introduced by us will achieve an
adequate degree of market acceptance;
- any new product's life cycle or sales will be sufficient to permit us to
profitably recover development, manufacturing, marketing, royalties
(including royalty advances and guarantees) and other costs of the
product; or
- we will be able to manufacture, source and ship new or continuing
products in a timely basis to meet constantly changing consumer demands.
In developing new products and product lines, we have anticipated dates for
the associated product introductions. When we state that we will introduce, or
anticipate introducing, a particular product or product line at a certain time
in the future those expectations are based on completing the associated
development and implementation work in accordance with our currently anticipated
schedule. Unforeseen delays or difficulties in the development process, or
significant increases in the planned cost of development, may cause the
introduction date for products to be later than anticipated or, in some
situations, may cause a product introduction to be discontinued. Any delay or
cancellation of planned product development and introduction may decrease the
number of products we sell and harm our business.
Our failure to successfully anticipate, identify and react to consumer
preferences in family entertainment could have an adverse effect on our
revenues, profitability and results of operations.
2
OUR BUSINESS IS SEASONAL AND THEREFORE OUR ANNUAL OPERATING RESULTS WILL
DEPEND, IN LARGE PART, ON OUR SALES DURING THE RELATIVELY BRIEF HOLIDAY
SEASON. FURTHER, THIS SEASONALITY IS INCREASING, AS LARGE RETAILERS BECOME
MORE EFFICIENT IN THEIR CONTROL OF INVENTORY LEVELS THROUGH QUICK RESPONSE
MANAGEMENT TECHNIQUES.
Sales of our family entertainment products at retail are seasonal, with a
majority of retail sales occurring during the period from September through
December in anticipation of the holiday season, which includes Christmas. This
seasonality is increasing, as large retailers become more efficient in their
control of inventory levels through quick response management techniques. These
customers are timing reorders so that they are being filled by suppliers closer
to the time of purchase by consumers, which to a large extent occurs during
September through December, rather than maintaining large on-hand inventories
throughout the year to meet consumer demand. While these techniques reduce a
retailer's investment in inventory, they increase pressure on suppliers like us
to fill orders promptly and shift a significant portion of inventory risk and
carrying costs to the supplier. The limited inventory carried by retailers may
also reduce or delay retail sales. Additionally, the logistics of supplying more
and more product within shorter time periods will increase the risk that we fail
to achieve tight and compressed shipping schedules. This seasonal pattern
requires significant use of working capital mainly to manufacture or acquire
inventory during the year prior to the holiday season, and requires accurate
forecasting of demand for products during the holiday season. Our failure to
accurately predict and respond to consumer demand could result in our
underproducing popular items and/or overproducing less popular items which would
have an adverse effect on our sales and results of operations. In addition, as a
result of the seasonal nature of our business, we would be significantly and
adversely affected by unforeseen events, such as a terrorist attack or a
military engagement, that negatively affect the retail environment or consumer
buying patterns, if such events were to impact a key selling season.
THE CONTINUING CONSOLIDATION OF OUR RETAIL CUSTOMER BASE MEANS THAT ECONOMIC
DIFFICULTIES OR CHANGES IN THE PURCHASING POLICIES OF OUR MAJOR CUSTOMERS
COULD HAVE A SIGNIFICANT IMPACT ON US.
We depend upon a relatively small retail customer base to sell the majority
of our products. For the fiscal year ended December 29, 2002, Wal-Mart Stores,
Inc. and Toys R Us, Inc. accounted for approximately 19% and 16%, respectively,
of our consolidated net revenues and our five largest customers, including
Wal-Mart and Toys R Us, in the aggregate accounted for approximately 52% of our
consolidated net revenues. If one or more of our major customers were to
experience difficulties in fulfilling their obligations to us, cease doing
business with us, significantly reduce the amount of their purchases from us or
return substantial amounts of our products, it could have a material adverse
effect on our business, financial condition and results of operations. In
addition, the bankruptcy or other lack of success of one or more of our
significant retailers could negatively impact our revenues and bad debt expense.
WE MAY NOT REALIZE ANTICIPATED BENEFITS OF ACQUISITIONS OR THESE BENEFITS MAY
BE DELAYED OR REDUCED IN THEIR REALIZATION; OUR ABILITY TO MAKE ACQUISITIONS
IS LIMITED BY OUR CREDIT AGREEMENT.
Acquisitions have been a significant part of our growth over the years and
have enabled us to further broaden and diversify our product offerings. Although
we target companies that we believe offer attractive family entertainment
products, we cannot be certain that the products of companies we acquire will
achieve or maintain popularity with consumers. In some cases, we expect that the
integration of the product lines of the companies that we acquire into our
operations will create production, marketing and other operating synergies. We
believe that these synergies can create greater revenue growth and profitability
and, where applicable, cost savings, operating efficiencies and other
advantages. However, we cannot be certain that these synergies, efficiencies and
cost savings will be realized. Even if achieved, these benefits may be delayed
or reduced in their realization. In other cases, we acquire companies that we
believe have strong and creative management, in which case we plan to create
synergies by operating them autonomously rather than integrating them into our
operations. We cannot be certain that the key talented individuals at these
companies will continue to work for us after the acquisition or that they will
continue to develop popular and profitable products or services.
Because of limitations in our credit agreement, we are limited in our
ability to make substantial acquisitions in the near term. Although we plan to
continue our focus and expend significant resources on our
3
core owned and controlled brands, we cannot assure you that such efforts will
produce revenue growth to replace the growth historically provided by
acquisitions.
OUR SUBSTANTIAL SALES AND MANUFACTURING OPERATIONS OUTSIDE THE UNITED STATES
SUBJECT US TO RISKS NORMALLY ASSOCIATED WITH INTERNATIONAL OPERATIONS.
We operate facilities and sell products in numerous countries outside the
United States. For the fiscal year ended December 29, 2002, our net revenues
from international customers comprised approximately 35% of our total
consolidated net revenues. We expect our sales to international customers to
continue to account for a significant portion of our revenues. Additionally, we
utilize third-party manufacturers located principally in the Far East and we
have manufacturing facilities in Ireland and Spain. These sales and
manufacturing operations are subject to the risks normally associated with
international operations, including:
- currency conversion risks and currency fluctuations;
- limitations, including taxes, on the repatriation of earnings;
- political instability, civil unrest and economic instability;
- greater difficulty enforcing intellectual property rights and weaker laws
protecting such rights;
- complications in complying with laws in varying jurisdictions and changes
in governmental policies;
- natural disasters and the greater difficulty and expense in recovering
therefrom;
- transportation delays and interruptions; and
- the imposition of tariffs.
Our reliance on external sources of manufacturing can be shifted, over a
period of time, to alternative sources of supply, should such changes be
necessary. However, if we were prevented from obtaining products or components
for a material portion of our product line due to political, labor or other
factors beyond our control, our operations would be disrupted while alternative
sources of products were secured. In addition, as many of our products are
manufactured in the People's Republic of China, the recent health conditions and
other factors affecting social and economic activity in China and affecting the
movement of people and products into and out of China could have a negative
effect on our operations. Also, the imposition of trade sanctions by the United
States or the European Union against a class of products imported by us, or the
loss of "normal trade relations" status by the People's Republic of China, could
significantly increase our cost of products imported into the United States or
Europe and harm our business. Because of the importance of our international
sales and international sourcing of manufacturing to our business, our financial
condition and results of operations could be significantly and adversely
affected if any of the risks described above were to occur.
WE MAY NOT REALIZE THE FULL BENEFIT OF OUR LICENSES IF THE LICENSED MATERIAL
HAS LESS MARKET APPEAL THAN EXPECTED OR IF SALES REVENUE FROM THE LICENSED
PRODUCTS IS NOT SUFFICIENT TO EARN OUT THE MINIMUM GUARANTEED ROYALTIES.
An important part of our business involves obtaining licenses to produce
products based on various theatrical releases, such as STAR WARS and DISNEY. The
license agreements usually require us to pay minimum royalty guarantees that may
be substantial, and in some cases may be greater than what we are able to recoup
from actual sales, which could result in write-offs of such amounts that would
adversely effect our results of operations. At December 29, 2002, we had $203.5
million of prepaid royalties, $42.5 million of which are included in prepaid
expenses and other current assets and $161 million of which are included in
other assets. Under the terms of existing contracts, we may be required to pay
future minimum guaranteed royalties totaling approximately $309 million. In
addition, acquiring or renewing licenses may require the payment of minimum
guaranteed royalties that we consider to be too high to be profitable, which may
result in losing licenses we currently hold when they become available for
renewal, or missing business opportunities for new licenses. As a licensee, we
have no guaranty that a particular brand will be a successful toy or game
product.
4
We anticipate that the continuing trend toward shorter theatrical duration for
movie releases will make it increasingly difficult for us to sell licensed
products based on these entertainment properties and may lead our customers to
reduce their demand for these products in order to minimize inventory risk.
Furthermore, there can be no assurance that a successful brand will continue to
be successful or maintain a high level of sales in the future. In the event that
we are not able to acquire or maintain advantageous licenses, our revenues and
profits may be adversely effected.
OUR BUSINESS IS DEPENDENT ON INTELLECTUAL PROPERTY RIGHTS, AND WE MAY NOT BE
ABLE TO PROTECT SUCH RIGHTS SUCCESSFULLY. IN ADDITION, WE HAVE A MATERIAL
AMOUNT OF ACQUIRED PRODUCT RIGHTS WHICH, IF IMPAIRED, WOULD RESULT IN A
REDUCTION OF OUR INCOME.
Our intellectual property, including our license agreements and other
agreements which establish our ownership rights and maintain the confidentiality
of our intellectual property, are of great value. We rely on a combination of
trade secret, copyright, trademark, patent and other proprietary rights laws to
protect our rights to this valuable intellectual property related to our brands.
From time to time, third parties have challenged, and may in the future try to
challenge, our ownership of our intellectual property. In addition, our business
is subject to the risk of third parties counterfeiting our products or
infringing on our intellectual property rights. We may need to resort to
litigation in the future to protect our intellectual property rights, which
could result in substantial costs and diversion of resources. Our failure to
protect our intellectual property rights could have a material adverse effect on
our business and competitive position. Much of our intellectual properties have
been internally developed and have no carrying value on our balance sheet. As of
December 29, 2002, we had $712 million of acquired property and licensing rights
included in other assets. Declines in the profitability of the acquired brands
or licensed products may impact our ability to recover the carrying value of the
related assets and could result in an impairment charge. Reductions in our net
income caused by impairment charges could materially and adversely affect our
results of operations.
WE ARE INVOLVED IN CERTAIN LITIGATION, ARBITRATION AND REGULATORY MATTERS
WHERE THE OUTCOME IS UNCERTAIN AND WHICH COULD ENTAIL SIGNIFICANT EXPENSE.
As is the case with many large multinational corporations, we are subject
from time to time to regulatory investigations, litigation and arbitration
disputes. Because the outcome of litigation, arbitration and regulatory
investigations is inherently difficult to predict, it is possible that the
outcome of such matters could entail significant expense.
WE RELY ON EXTERNAL FINANCING, INCLUDING OUR CREDIT FACILITY, TO MAINTAIN OUR
OPERATIONS. IF WE ARE UNABLE TO OBTAIN OR SERVICE SUCH FINANCING, OR IF THE
RESTRICTIONS IMPOSED BY SUCH FINANCING WERE TOO BURDENSOME, OUR BUSINESS WOULD
BE NEGATIVELY AFFECTED.
Due to the seasonal nature of our business, in order to meet our working
capital needs, particularly those prior to the fourth quarter, we rely on our
credit facility. In March 2002, we entered into an amended and restated secured
revolving credit agreement with existing and new lenders, which provides for a
$380 million revolving credit facility. This facility is secured by
substantially all of our domestic accounts receivable and inventory, as well as
certain of our intangible assets. The agreement contains certain restrictive
covenants setting forth minimum cash flow and coverage requirements, and a
number of other limitations, including restrictions on capital expenditures,
investments, acquisitions, share repurchases, incurrence of indebtedness and
dividend payments. These restrictive covenants may limit our future actions, and
financial, operating and strategic flexibility. In addition, our financial
covenants were set at the time we entered into our credit facility. Our
performance and financial condition may not meet our original expectations,
causing us to fail to meet such financial covenants. If we were unable to meet
our financial covenants, or if we failed to comply with other covenants in our
credit facility, we could face significant negative consequences.
We believe that our cash flow from operations, together with our cash and
access to existing credit facilities, are adequate for current and planned needs
in 2003. However, our actual experience may differ from these expectations.
Factors that may lead to a difference include, but are not limited to, the
matters discussed herein, as well as future events that might have the effect of
reducing our available cash balance, such as
5
unexpected material operating losses or increased capital or other expenditures,
as well as increases in inventory or accounts receivable or future events that
may reduce or eliminate the availability of external financial resources.
We also may choose to finance our capital needs, from time to time, through
the issuance of debt securities. Our ability to issue such securities on
satisfactory terms, if at all, will depend on the state of our business and
financial condition, any ratings issued by major credit rating agencies, market
interest rates, and the overall condition of the financial and credit markets at
the time of the offering. The condition of the credit markets and prevailing
interest rates have fluctuated in the past and are likely to fluctuate in the
future. Fluctuations in these factors could make it difficult for us to sell
debt securities or require us to offer higher interest rates in order to sell
new debt securities. The failure to receive financing on desirable terms, or at
all, could adversely affect our ability to support our future operations or
capital needs or engage in other business activities.
As of March 30, 2003, we had approximately $860.5 million of total
principal amount of indebtedness outstanding. If we are unable to generate
sufficient available cash flow to service our outstanding debt, we would need to
refinance such debt or face default. There is no guarantee that we would be able
to refinance debt on favorable terms, or at all. Our indebtedness includes the
$250 million in aggregate principal amount of convertible senior debentures
which we issued in 2001. On December 1, 2005, December 1, 2011, and December 1,
2016, and upon the occurrence of certain fundamental corporate changes, holders
of the $250 million in aggregate principal amount of convertible senior
debentures may require us to purchase their debentures. At that time, the
purchase price may be paid in cash, shares of common stock or a combination of
the two, at our discretion, provided that we will pay accrued and unpaid
interest in cash. Our current intent is to settle in cash any puts exercised in
the future. However, we may not have sufficient funds at that time to make the
required repurchases.
In January 2003, we amended warrants previously granted to Lucas Licensing
Ltd. ("Lucas"). The warrant amendment agreement provides Lucas with an option
through January 2008 to sell all of these warrants to us for a price to be paid
at our election of either $100 million in cash or $110 million in our common
stock, such stock being valued at the time of the exercise of the option. Should
we be required to settle the warrants under this option, we believe that we will
have adequate funds to settle in cash if necessary. However, we may not have
sufficient funds at that time to make the required payment.
MARKET CONDITIONS, GOVERNMENT ACTIONS AND REGULATIONS AND OTHER THIRD PARTY
CONDUCT COULD NEGATIVELY IMPACT IMPLEMENTATION OF OUR CONSOLIDATION PROGRAMS,
MARGINS, AND OTHER BUSINESS INITIATIVES.
Economic and public health conditions, including factors that impact the
strength of the retail market and retail demand or our ability to manufacture
and deliver products, rising fuel and raw material prices or transportation
costs, may adversely impact our margins. In addition, general economic
conditions were significantly and negatively affected by the September 11, 2001
terrorist attacks and could be similarly affected by any future attacks.
Economic conditions may also be negatively impacted by wars and other conflicts,
or the prospect of such events. Such a weakened economic and business climate,
as well as consumer uncertainty created by such a climate, could adversely
affect our sales and profitability. Other conditions, such as the unavailability
of electrical components, may impede our ability to manufacture, source and ship
new and continuing products on a timely basis. Additional factors outside of our
control could delay or increase the cost of implementing our consolidation
programs or alter our actions and reduce actual results. Also, work stoppages,
slowdowns or strikes, or the occurrence or threat of wars or other conflicts,
could impact our ability to manufacture or deliver product.
AS A MANUFACTURER OF CONSUMER PRODUCTS AND A LARGE MULTINATIONAL CORPORATION,
WE ARE SUBJECT TO VARIOUS GOVERNMENT REGULATIONS, VIOLATION OF WHICH COULD
SUBJECT US TO SANCTIONS. IN ADDITION, WE COULD BE THE SUBJECT OF FUTURE
PRODUCT LIABILITY SUITS, WHICH COULD HARM OUR BUSINESS.
As a manufacturer of consumer products, we are subject to significant
government regulations under The Consumer Products Safety Act, The Federal
Hazardous Substances Act, and The Flammable Fabrics Act.
6
While we take all the steps we believe are necessary to comply with these acts,
there can be no assurance that we will be in compliance in the future. Failure
to comply could result in sanctions which could have a negative impact on our
business, financial condition, and results of operations.
In addition to government regulation, products that have been or may be
developed by us may expose us to potential liability from personal injury or
property damage claims by the users of such products. There can be no assurance
that a claim will not be brought against us in the future. While we currently
maintain product liability insurance coverage in amounts we believe sufficient
for our business risks, we may not be able to maintain such coverage or such
coverage may not be adequate to cover all potential claims. Moreover, even if we
maintain sufficient insurance coverage, any successful claim could materially
and adversely affect our business and financial condition and results of
operations.
As a large, multinational corporation, we are subject to a host of
governmental regulations throughout the world, including antitrust and tax
requirements, anti-boycott regulations and the Foreign Corrupt Practices Act.
Our failure to successfully comply with any such legal requirements could
subject us to monetary liabilities and other sanctions which could harm our
business and financial condition.
WE HAVE A MATERIAL AMOUNT OF GOODWILL WHICH, IF IT BECOMES IMPAIRED, WOULD
RESULT IN A REDUCTION IN OUR NET INCOME.
Goodwill is the amount by which the cost of an acquisition accounted for
using the purchase method exceeds the fair value of the net assets we acquire.
Current accounting standards require that goodwill no longer be amortized but
instead be periodically evaluated for impairment based on the fair value of the
reporting unit. In 2002, as the result of the adoption of Statement of Financial
Accounting Standard No. 142 on December 31, 2001, the first day of fiscal 2002,
the Company recorded an impairment charge, before taxes, of $296,223 that was
recorded as a cumulative effect of accounting change and reflected at $245,732,
net of tax, in our consolidated statement of operations. At December 29, 2002,
approximately $461.0 million, or 14.7%, of our total assets represented
goodwill. Declines in our profitability may impact the fair value of our
reporting units, which could result in a further write-down of our goodwill.
Reductions in our net income caused by the write-down of goodwill could
materially and adversely affect our results of operations.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in this prospectus by
reference may contain "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These statements may be identified by the use of forward-looking words or
phrases such as "anticipate," "believe," "could," "expect," "intend," "look
forward," "may," "planned," "potential," "should," "will," and "would." These
forward-looking statements reflect our current expectations and are based upon
currently available data. The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for such forward-looking statements. In order to comply
with the terms of the safe harbor, we note that a variety of factors could cause
actual results and experience to differ materially from the anticipated results
or other expectations expressed in the forward-looking statements. These factors
include, but are not limited to:
- our ability to manufacture, source and ship new and continuing products
in a timely manner and customers' and consumers' acceptance of those
products at prices that will be sufficient to profitably recover
development, manufacturing, marketing, royalty and other costs of
products;
- economic and public health conditions, including factors which impact the
strength of the retail market and retail demand or our ability to
manufacture and deliver products, higher fuel and commodity prices,
higher transportation costs, currency fluctuations, government regulation
and other conditions in the various markets in which we operate
throughout the world;
- our ability to generate sales during the fourth quarter, particularly
during the relatively brief holiday season, which is the period in which
we derive a substantial portion of our revenues;
7
- the inventory policies of retailers, including the concentration of our
revenues in the second half and fourth quarter of the year, together with
increased reliance by retailers on quick response inventory management
techniques, which increases the risk of underproduction of popular items,
overproduction of less popular items and failure to achieve tight and
compressed shipping schedules;
- work stoppages, slowdowns or strikes, which may impact our ability to
manufacture or deliver product;
- concentration of manufacturing of many of our products in the People's
Republic of China and the associated impact to us of health conditions
and other factors affecting social and economic activity in China or
affecting the movement of people and products into and out of China;
- an adverse change in purchasing policies or the bankruptcy or other lack
of success of one or more of our significant retailers comprising our
relatively concentrated retail customer base, which could negatively
impact our revenues or bad debt exposure;
- the impact of competition on revenues, margins and other aspects of our
business, including our ability to secure, maintain and renew popular
licenses and our ability to attract and retain employees in a competitive
environment;
- the risk that anticipated benefits of acquisitions may not occur or be
delayed or reduced in their realization;
- the risk that the market appeal of our licensed products will be less
than expected or that the sales revenue generated by those products will
be insufficient to cover the minimum guaranteed royalties;
- our ability to obtain and enforce intellectual property rights both in
the United States and abroad;
- the risk that any litigation or arbitration disputes or regulatory
investigations could entail significant expense and result in significant
fines or other harm to our business;
- our ability to obtain external financing on terms acceptable to us in
order to meet our working capital needs;
- our ability to generate sufficient available cash flow to service our
outstanding debt;
- restrictions we are subject to under our credit agreement;
- unforeseen circumstances, such as severe softness in or collapse of the
retail environment that may result in a significant decline in our
revenues and operating results, thereby causing us to be in non-
compliance with our debt covenants and our being unable to utilize
borrowings under our revolving credit facility, a circumstance likely to
occur when operating shortfalls would result in our being in the greatest
need of such supplementary borrowings;
- market conditions, third party actions or approvals, the impact of
competition and other factors that could delay or increase the cost of
implementation of our consolidation programs, or reduce actual results;
- the risk that we may be subject to governmental sanctions for failure to
comply with applicable regulations or to product liability suits relating
to products we manufacture and distribute;
- the risk that our reported goodwill may become impaired, requiring us to
take a charge against our income; and
- risks described from time to time in our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and other filings under the Exchange Act.
These or other events or circumstances could cause our actual performance
or financial results in future periods to differ materially from those expressed
in the forward-looking statements. We undertake no obligation to make any
revisions to the forward-looking statements contained in this prospectus or the
documents incorporated by reference in this prospectus, or to update the
forward-looking statements to reflect events or circumstances occurring after
the date of this prospectus.
8
USE OF PROCEEDS
All of the common stock offered under this prospectus is being sold by the
selling securityholders or their pledgees, donees, transferees or other
successors in interest. We will not receive any proceeds from the sale of the
shares of our common stock sold by the selling securityholders under this
prospectus.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 600,000,000 shares of common
stock, and 5,000,000 shares of preference stock. No shares of preference stock
were issued or outstanding as of June 26, 2003. However, 60,000 shares of
preference stock (the "Junior Participating Preference Stock") have been
authorized and reserved for issuance in connection with the preference stock
purchase rights (the "Rights") described in "Certain Anti-Takeover
Provisions -- Shareholders Rights Plan" and "-- Junior Participating Preference
Stock."
VOTING RIGHTS
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by shareholders.
DIVIDEND RIGHTS
The holders of common stock, subject to the rights of holders of any
outstanding preference stock, are entitled to receive dividends as determined by
the board of directors.
LIQUIDATION RIGHTS AND OTHER PROVISIONS
Subject to the prior rights of creditors and the holders of any outstanding
preference stock, the holders of the common stock are entitled to share ratably
in our remaining assets in the event of our liquidation, dissolution or winding
up.
The common stock is fully paid and is not liable to any calls or
assessments and is not convertible into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock, and, in
accordance with the Rhode Island Business Corporation Act and our Articles of
Incorporation, there are no preemptive rights.
EquiServe Trust Company, N.A., acting directly and through EquiServe L.P.,
acts as transfer agent and registrar for our common stock.
DIRECTORS' LIABILITY
Our Articles of Incorporation provide that, to the fullest extent permitted
by the Rhode Island Business Corporation Act, a member of the board of directors
will not be personally liable to us or our shareholders for monetary damages for
breaches of his or her legal duties to us or our shareholders as a director,
except for liability:
- for any breach of the director's duty of loyalty to us or our
shareholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for unlawfully declaring dividend payments or purchasing stock; or
- for any transaction from which the director derived an improper personal
benefit, other than as permitted under Section 7-1.1-37 of the Rhode
Island Business Corporation Act.
9
In addition, we have entered into an indemnification agreement with each of
our directors, whereby we have agreed to indemnify each director for amounts
that the director is legally obligated to pay, including judgments, settlements
of fines, including certain related expenses to be advanced by us, due to any
actual or alleged breach of duty, neglect, error, misstatement, misleading
statement or other act or omission by a director in his or her capacity as a
director. This indemnification agreement excludes claims:
- covered by our directors and officers liability insurance policy;
- for which the director is otherwise indemnified or reimbursed;
- relating to certain judgments or adjudications under which the director
is liable for breaches of duty of loyalty, acts or omissions not in good
faith or involving intentional misconduct or involving knowing violations
of law, liability imposed pursuant to the provisions of Section 7-1.1-43
of the Rhode Island Business Corporation Act, actions or certain
transactions from which the director derives an improper personal
benefit;
- relating to the director's liability for accounting for profits under
Section 16 of the Exchange Act;
- in respect of remuneration, if found unlawful; and
- as to which a final and non-appealable judgment has determined that
payment to the director thereunder is unlawful.
In addition, our By-Laws include certain provisions which provide that our
directors and officers generally shall be indemnified against specific
liabilities to the fullest extent permitted or required by the Rhode Island
Business Corporation Act.
CERTAIN ANTI-TAKEOVER PROVISIONS
The provisions of our Articles of Incorporation summarized in the
succeeding paragraphs could have an anti-takeover effect. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of our Board of Directors and in their policies. They may, however,
delay, defer or prevent a tender offer or takeover attempt that a shareholder
might consider to be in his or her best interest, including those attempts that
might result in a premium over the market price for the shares held by
shareholders.
In May of 2003, our shareholders approved a proposal to eliminate the
classification of our Board of Directors. As a result, Directors elected in 2003
and thereafter are now elected to one-year terms. Directors can be removed from
office only for cause and, with certain exceptions, only with the approval of a
majority vote of the entire Board of Directors or by the affirmative vote of
holders of a majority of our then outstanding shares of capital stock entitled
to vote for these directors. Vacancies on the Board of Directors may be filled
only by the remaining directors and not by the shareholders.
Under our Articles of Incorporation, the Board of Directors by resolution
may establish one or more series of preference stock having the number of
shares, designation, relative voting rights, dividend rates, liquidation and
other rights, preferences and limitations as may be fixed by the Board of
Directors without any further shareholder approval. These rights, preferences,
privileges and limitations as may be established could have the effect of
impeding or discouraging the acquisition of control of us.
Our Articles of Incorporation also provide that any action required or
permitted to be taken by our shareholders may be effected only at an annual or
special meeting of shareholders, or by the unanimous written consent of
shareholders.
In order to approve a number of extraordinary corporate transactions, such
as a merger, consolidation or sale of all or substantially all assets, with an
Interested Person, as defined below, our Articles of Incorporation require:
- an 80% vote of all outstanding shares entitled to vote, including a
majority vote of all disinterested shareholders;
10
- the approval of a majority of the entire Board of Directors, including
the affirmative vote of a majority of the "Continuing Directors," as
defined in our Articles of Incorporation; and
- the satisfaction of procedural requirements which are intended to assure
that shareholders are treated fairly under the circumstances.
"Interested Person," as used in the preceding paragraph means:
- any person together with its "Affiliates" and "Associates," as defined in
the Exchange Act, and any person acting in concert therewith who is the
beneficial owner, directly or indirectly, of ten percent or more of the
votes held by the holders of the securities generally entitled to vote
for directors (the "Voting Stock"),
- any Affiliate or Associate of an Interested Person, including without
limitation, a Person acting in concert therewith,
- any person that at any time within the two year period immediately prior
to the date in question was the beneficial owner, directly or indirectly,
of ten percent or more of the votes held by the holders of shares of
Voting Stock, or
- an assignee of, or successor to, any shares of Voting Stock which were at
any time within the two year period prior to the date in question
beneficially owned by any Interested Person, if such assignment or
succession occurred in a transaction or series of transactions not
involving a public offering as defined by the Securities Act.
This definition of an Interested Person is subject to certain exceptions as
contained within our Articles of Incorporation.
The 80% vote will not be required and, in accordance with the Rhode Island
Business Corporation Act, only a majority vote of shareholders will generally be
required if this type of a transaction is approved by a majority of the entire
Board of Directors, including the affirmative vote of at least two-thirds of the
Continuing Directors.
SHAREHOLDERS RIGHTS PLAN
On June 16, 1999, we entered into a rights agreement with BankBoston, N.A.,
the predecessor to EquiServe Trust Company, N.A., as Rights Agent. This
agreement, as amended on December 4, 2000, replaced a previous rights agreement,
dated June 4, 1989, which expired on June 30, 1999. As with most shareholder
rights agreements, the terms of our rights agreement are complex and not easily
summarized, particularly as they relate to the acquisition of our common stock
and to exercisability of the Rights. This summary may not contain all of the
information that is important to you. Accordingly, you should carefully read our
rights agreement, which is incorporated by reference into this prospectus in its
entirety. Capitalized terms used in this summary and not otherwise defined shall
have the meanings given to them in the rights agreement.
The Rights attach to all certificates representing shares of common stock
outstanding at the close of business on June 30, 1999 and will attach to any
shares of common stock issued by us, including upon the exercise of any warrants
and options or upon conversion of any convertible debt securities, after this
date and prior to the Distribution Date, as defined below. The Rights will
become exercisable and will separate from the common stock and be represented by
separate certificates on the Distribution Date, the date which is approximately
10 days after anyone acquires or commences a tender offer to acquire 15% of more
of our outstanding common stock (an "Acquiring Person"). The Rights will not be
exercisable until such date, if any, and will expire on June 30, 2009, unless
this date is extended or unless the Rights are earlier exchanged or redeemed by
us. Upon the Distribution Date, the Rights will initially be exercisable, at a
price of $140, for one ten-thousandth of a share of our Junior Participating
Preference Stock, although the terms of the exercise are
11
subject to adjustment under the rights agreement. Under the rights agreement,
the following are not Acquiring Persons:
- Hasbro;
- any of our subsidiaries;
- employee benefit plans of ours or any of our subsidiaries;
- individuals and entities connected with the Hassenfeld family, as
described in the rights agreement;
- any person who becomes the owner of 15% or more of the common stock by
virtue of a repurchase of our common stock, unless after becoming aware
of this fact, such person acquires an additional 1%; and
- any person who reports the ownership of 15% or more of the common stock
in a filing under the Exchange Act, who does not state any intention to
control our management and who, upon request, certifies to us that the
15% threshold was crossed inadvertently and with no knowledge of the
terms of the Rights.
Upon any person becoming an Acquiring Person, subject to the exception
noted below in this paragraph, each Right will entitle the holder to purchase a
number of shares of our common stock having a then current market value of twice
the exercise price of the Right. For example, at the initial exercise price of
$140, upon exercise, each Right would entitle its holder to receive $280 worth
of common stock or other consideration, as described below. A holder of a Right
will not be entitled to purchase shares if any person becomes an Acquiring
Person in a tender offer or exchange offer for all outstanding shares that has
been determined by our Board of Directors, after receiving advice from one or
more investment banking firms, to be at a price which is fair to and otherwise
in the best interests of the shareholders.
In addition, each Right will entitle the holder to purchase a number of
shares of common stock of the acquiring company having a current market value of
twice the exercise price of the Right, if, after the date upon which someone has
become an Acquiring Person:
- we are party to a merger or another business combination transaction in
which we are not the surviving corporation;
- we are the surviving corporation in a merger or other business
combination, but all or part of our common stock is changed into or
exchanged for stock or other securities of another person, cash, or any
other property; or
- we sell 50% or more of our consolidated assets, cash flow or earning
power.
If any of the above events occurs, the acquiring company shall assume all
of our obligations under the rights agreement.
From and after the occurrence of the event which triggers the exercise of
the Rights, any Rights that are or were acquired or beneficially owned by any
Acquiring Person, any Associate or any Affiliate shall be void and any holder of
these Rights shall thereafter have no right to exercise these Rights.
At any time prior to the earlier of ten business days following the date
upon which someone has become an Acquiring Person and the expiration date of the
Rights, our Board of Directors may redeem all, but not less than all, of the
outstanding Rights at a price of $.01 per Right, subject to adjustment, payable
in cash, shares of common stock or other consideration. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate, and
the only right of the holders of Rights will be to receive the redemption price.
The exercisability of the Rights triggered by someone becoming an Acquiring
Person, as described above, will not occur until after the expiration of this
redemption right.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by a person or group of 50% or more of our outstanding common stock,
our Board of Directors may exchange the Rights, other than
12
those Rights owned by the person or group which have become void. This exchange
may be in whole or in part, at a ratio of one share of common stock per Right,
subject to adjustment.
In the event that, after the Rights become exercisable for shares of our
common stock, there is an insufficient number of shares of our common stock
available to permit the full exercise of Rights, our Board of Directors has the
ability to substitute an equivalent value in:
- cash;
- a reduction in the exercise price of the Rights;
- shares of preference stock with an equivalent value to our common stock;
- debt securities;
- other assets; or
- any combination of the foregoing.
Prior to the Distribution Date, the rights agreement may be amended by our
Board of Directors without the consent of the holders of the Rights. After the
Distribution Date, the rights agreement may only be amended by our Board of
Directors, without the consent of the holders of the Rights, as follows:
- to cure any ambiguity;
- to correct any provisions which are defective or inconsistent;
- to shorten or lengthen any time period, though any lengthening must be
for the purpose of protecting the interests of the holders of the Rights;
or
- to make changes which do not adversely affect the interests of the
holders of the Rights.
The rights agreement may not be amended, however, at any time when the
Rights are not redeemable.
Until a holder of a Right exercises the Right, the holder will have no
rights as our shareholder, including, without limitation, the right to vote or
to receive dividends.
While the distribution of the Rights will not be taxable to shareholders or
to us, shareholders may, depending on the circumstances, recognize taxable
income in the event that the Rights become exercisable for our common stock, or
other consideration, or in the event the Rights are redeemed by us.
The Rights may have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire us in a
manner which causes the Rights to become exercisable. We do not believe,
however, that the Rights would affect any prospective offeror willing to make an
offer at a price that is fair and otherwise in the best interests of the
shareholders, since the Board of Directors would be required by its fiduciary
duties under applicable law to consider the offer. If the offer were fair and
otherwise in the best interests of the shareholders, the Board could, at its
option, exercise its right to redeem the Rights as described above. In
considering the merits of a proposed offer and pursuant to Rhode Island law and
our Articles of Incorporation, however, our directors are authorized to take
into account our interests in addition to the interests of our shareholders. In
considering our interests, our directors may evaluate the effect of the proposed
offer on our employees, suppliers, creditors and customers. Our directors may
also consider the effect of the proposed offer on the communities in which we
operate as well as our long and short term interests, including the possibility
that these interests may be best served by our continued independence. If in
considering any of these factors, the Board of Directors determines the proposed
offer is not in our best interests, the Board may reject the offer and has no
obligation to facilitate or refrain from impeding the proposed offer. Because of
the redemption right, the Rights should also not interfere with any merger or
business combination approved by our Board of Directors.
13
JUNIOR PARTICIPATING PREFERENCE STOCK
In connection with the rights agreement, 60,000 shares of Junior
Participating Preference Stock have been reserved and authorized for issuance by
our Board of Directors. No shares of Junior Participating Preference Stock were
outstanding as of June 26, 2003. The following statements with respect to the
Junior Participating Preference Stock are subject to, and are qualified in their
entirety by reference to, the detailed provisions of our Articles of
Incorporation, including the Certificate of Designation relating to the Junior
Participating Preference Stock (the "Certificate of Designation"), which is
incorporated herein by reference.
Shares of Junior Participating Preference Stock purchasable upon exercise
of the Rights will not be redeemable. Each share of Junior Participating
Preference Stock will be entitled to a minimum preferential quarterly dividend
payment of $10 per share but will be entitled to an aggregate dividend of 10,000
times the dividend declared per share of common stock. In the event of
liquidation, the holders of the Junior Participating Preference Stock will be
entitled to a minimum preferential liquidation payment of $10,000 per share,
plus accrued and unpaid dividends, and will also be entitled to preferential
treatment on the distribution of any remaining assets. Each share of Junior
Participating Preference Stock will have 10,000 votes, voting together with the
common stock. In the event of any merger, consolidation or other transaction in
which shares of common stock are exchanged, each share of Junior Participating
Preference Stock will be entitled to receive 10,000 times the amount received
per share of common stock. These Rights are subject to proportionate adjustment
in the event of certain stock splits, recombinations and other events.
SELLING SECURITYHOLDERS
All of the 12,929,767 shares of common stock covered by this prospectus are
issuable to the selling securityholders under put or call options described in
the paragraph following the table below. The table sets forth information
regarding the identity of the selling securityholders, the amount and percentage
of their beneficial ownership of our common stock as of June 25, 2003 and the
shares of common stock that they may offer or sell under this prospectus.
A selling securityholder may offer all or some portion of the shares of the
common stock covered by this prospectus. The table below assumes that each
selling securityholder sells all the securities covered by this prospectus.
SHARES OF COMMON PERCENTAGE OF SHARES OF COMMON
STOCK BENEFICIALLY OUTSTANDING COMMON SHARES OF STOCK BENEFICIALLY
OWNED PRIOR TO STOCK OWNED PRIOR COMMON STOCK OWNED AFTER THE
SELLING SECURITYHOLDER THE OFFERING TO THE OFFERING BEING OFFERED OFFERING
---------------------- ------------------ ------------------ ------------- ------------------
Lucasfilm Ltd. ........ 15,750,000(2) 8.3% 12,929,767 0(3)
Lucas Licensing
Ltd. ................ 9,450,000(4) 5.0% 7,757,860 0(3)
---------------
(1) Calculated based on 173,654,447 shares of common stock outstanding on June
25, 2003. In calculating this percentage amount, we also treat as
outstanding that number of shares of common stock underlying currently
exercisable warrants that are deemed to be beneficially owned by the selling
securityholder.
(2) Consists entirely of currently exercisable common stock purchase warrants,
of which warrants to purchase 6,300,000 shares of common stock are held
directly by the selling securityholder and warrants to purchase 9,450,000
shares are held by Lucas Licensing Ltd., of which the selling securityholder
is the controlling shareholder.
(3) The issuance of the shares registered hereunder upon the exercise of the put
or call provisions of the common stock purchase warrants held by the selling
securityholders requires the cancellation of those warrants and therefore
upon an exercise the selling securityholders shall cease to be the
beneficial owners of the common stock issuable under the warrants' standard
exercise features, as reflected in the current ownership columns of the
table.
(4) Consists entirely of currently exercisable common stock purchase warrants.
14
The common stock purchase warrants held by the selling securityholders are
subject to a warrant amendment agreement between us and the selling
securityholders. Under that agreement, the selling securityholders currently
have the right through January 30, 2008 to sell, or "put," all, but not less
than all, of the warrants to Hasbro in exchange for, at our option, either
$100,000,000 in cash or the issuance to the warrantholders of shares of common
stock having a market value, as of the second business day prior to the sale,
equal to $110,000,000. Also under that agreement, we currently have the right
through October 13, 2016 to purchase, or "call," all, but not less than all, of
the warrants in exchange for, at our option, either $200,000,000 in cash or the
issuance to the warrantholders of shares of common stock having a market value,
as of the second business day prior to the purchase, of up to $220,000,000,
reduced pro rata if any portion of the warrants had previously been exercised by
the holder. The number of shares that may be issued under either the put or call
exercises, and that therefore may be offered and sold under this prospectus,
cannot be presently determined. If the put or call option is exercised with
respect to the warrants, the warrants will be cancelled and consequently any
shares underlying the unexercised warrants will cease to be issuable to and
beneficially owned by the selling securityholders.
Hasbro and the selling securityholders are parties to licensing and other
arrangements with respect to intellectual property rights owned by the selling
securityholders as described more fully in our periodic and other filings with
the SEC. Except as otherwise described in this prospectus, to our knowledge, no
selling securityholder nor any of its affiliates has held any position or office
with, been employed by or otherwise has had any material relationship with us or
our affiliates during the three years prior to the date of this prospectus. The
address for each of selling securityholders is 5858 Lucas Valley Road, Nicasio,
California 94946.
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the common stock
offered by this prospectus. The common stock may be sold from time to time to
purchasers:
- directly by the selling securityholders; or
- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling securityholders or the purchasers of the common stock (which
discounts, concessions or commissions as to particular underwriters,
broker-dealers or agents may be in excess of those customary in the types
of transactions involved).
The selling securityholders and any such broker-dealers or agents who
participate in the distribution of the common stock may be deemed to be
"underwriters." As a result, any profits on the sale of the common stock by
selling securityholders and any discounts, commissions or concessions received
by any such broker-dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. If the selling
securityholders were deemed to be underwriters, the selling securityholders may
be subject to certain statutory liabilities as underwriters under the Securities
Act.
If the common stock is sold through underwriters or broker-dealers, the
selling securityholders will be responsible for underwriting discounts or
commissions or agent's commissions.
The common stock may be sold in one or more transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of the sale, including
the New York Stock Exchange;
15
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market;
- through the writing of options, whether or not the options are listed on
an options exchange;
- through the distribution of the securities by any selling securityholder
to its stockholders; or
- through any combination of the above.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with the sales of the common stock or otherwise, the selling
securityholders may enter into hedging transactions with broker-dealers. These
broker-dealers may in turn engage in short sales of the common stock in the
course of hedging their positions. The selling securityholders may also sell the
common stock short and deliver common stock to close out short positions, or
loan or pledge the common stock to broker-dealers that in turn may sell the
common stock.
The selling securityholders may pledge or grant a security interest in some
or all of the common stock owned by them and, if any selling securityholders
default in the performance of such secured obligations, the pledgees or secured
parties may offer and sell the relevant common stock pursuant to this
prospectus.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the common stock by the selling
securityholders. There can be no assurance that any selling securityholders will
sell any or all of the common stock pursuant to this prospectus. In addition,
the selling securityholders may transfer or donate the common stock by other
means not described in this prospectus.
Our common stock trades on the New York Stock Exchange under the symbol
"HAS."
Any common stock covered by this prospectus that qualifies for sale
pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule
144 or Rule 144A rather than under this prospectus.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the common stock by the selling securityholders
and any such other person. In addition, Regulation M of the Exchange Act may
restrict the ability of any person engaged in the distribution of the common
stock to engage in market-making activities with respect to the particular
common stock being distributed for a period of up to five business days prior to
the commencement of such distribution. This may affect the marketability of the
common stock and the ability of any person or entity to engage in market-making
activities with respect to the common stock.
Under the warrant amendment agreement, which is an exhibit to this
registration statement, we and the selling securityholders have each agreed to
indemnify the other against certain liabilities, including certain liabilities
under the Securities Act, or that each party will be entitled to contribution in
connection with these liabilities.
We have agreed to pay all expenses incidental to registering the common
stock, which does not include any commissions, underwriting fees, stock transfer
taxes or fees or disbursements of counsel for the selling securityholders.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available over the Internet at the SEC's web site at
16
http://www.sec.gov. You may also read and copy any document we file with the SEC
at its public reference facility:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, DC 20549. Please call 1-800 SEC-0330 for further information on the
operations of the public reference facilities and copying charges. Our SEC
filings are also available at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We incorporate by reference in this prospectus the following documents
filed by us with the SEC:
- Our Annual Report on Form 10-K for the fiscal year ended December 29,
2002;
- Our Quarterly Report on Form 10-Q for the quarter ended March 30, 2003;
- Our Current Reports on Form 8-K filed January 30, 2003, February 13, 2003
and April 21, 2003; and
- Our Registration Statement on Form 8-A registering our common stock as
filed with the SEC on June 4, 1999.
Any statement made in a document incorporated by reference or deemed
incorporated herein by reference is deemed to be modified or superseded for
purposes of this prospectus if a statement contained in this prospectus or in
any other subsequently filed document which also is incorporated or deemed
incorporated by reference herein modifies or supersedes that statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus. We also incorporate by
reference all documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and prior to the termination
of this offering.
Statements made in this prospectus or in any document incorporated by
reference in this prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the documents incorporated by reference, each such statement
being qualified in all material respects by such reference.
We will provide a copy of these filings and any exhibits specifically
incorporated by reference in these filings and a copy of the warrant amendment
agreement referred to herein at no cost by request (written or oral) directed to
us at the following address and telephone number: Hasbro, Inc., 1027 Newport
Avenue, Pawtucket, Rhode Island, 02862, Attention: Investor Relations, or by
telephone to Investor Relations at (401) 431-8697.
VALIDITY OF SECURITIES
The validity of the shares of common stock issued upon exercise of the
warrants' put and call options has been passed on for us by Ropes & Gray,
Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Hasbro as of December 29, 2002 and
December 30, 2001 and for each of the fiscal years in the three-year period
ended December 29, 2002 incorporated by reference in this prospectus have been
audited by KPMG LLP, independent certified public accountants, as stated in
their reports thereon.
17
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[HASBRO, INC. LOGO]
HASBRO, INC.
COMMON STOCK
12,929,767 SHARES
-------------------------
PROSPECTUS
-------------------------
Dated June , 2003
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the distribution of the securities being registered. All of the amounts
shown are estimates, except the Securities and Exchange Commission registration
fee.
Securities and Exchange Commission registration fee......... $17,798
Printing and engraving fees................................. 10,000
Accountant's fees and expenses.............................. 15,000
Legal fees and expenses..................................... 15,000
Transfer Agent fees and expenses............................ 2,000
Miscellaneous expenses...................................... 5,002
-------
Total.................................................. $64,800
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is incorporated in Rhode Island. Under Section 7-1.1-4.1 of
the Rhode Island Business Corporation Act, a Rhode Island corporation has the
power, under specified circumstances, to indemnify its officers, directors,
employees and agents against judgments, penalties, fines, settlements and
reasonable expenses, including attorneys' fees, actually incurred by them in
connection with any proceeding to which these persons were made parties by
reason of the fact that these persons are or were directors, officers, employees
or agents, if:
- these persons shall have acted in good faith,
- they reasonably believed that their actions were in the best interests of
the corporation, if the proceeding involves conduct in an official
capacity with the corporation, or not opposed to the best interests of
the corporation, if the proceeding involves conduct other than in an
official capacity with the corporation, and
- in criminal proceedings, they had no reasonable cause to believe that
their conduct was unlawful.
The foregoing statement is subject to the detailed provisions of 7-1.1-4.1
of the Rhode Island Business Corporation Act.
Article X of the By-Laws of the Registrant provides that the Registrant
shall indemnify its directors and officers to the full extent permitted by
Section 7-1.1-4.1 of the Rhode Island Business Corporation Act.
Section 7-1.1-48 of the Rhode Island Business Corporation Act provides that
articles of incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director provided that the
provision shall not eliminate or limit the liability of a director:
- for any breach of the director's duty of loyalty to the corporation or
its shareholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- under Section 7-1.1-43 of the Rhode Island Business Corporation Act,
which relates to liability for unauthorized acquisitions or redemptions
of, or dividends or distribution on, capital stock, or
- for any transaction from which the director derived an improper personal
benefit, unless said transaction is permitted by Section 7-1.1-37.1 of
the Rhode Island Business Corporation Act, which relates to director
conflicts of interest.
II-1
Article Thirteenth of the Registrant's Articles of Incorporation contains
such a provision.
Section 7-1.1-4.1(j) of the Rhode Island Business Corporation Act empowers
a Rhode Island corporation to purchase and maintain insurance on behalf of its
current and prior directors, officers, employees and agents against any
liability incurred or asserted against them as a result of their official
capacities, whether or not the corporation would have the power to indemnify
such person against the insured liability under the provisions of such Section.
The Registrant has a directors and officers liability insurance policy.
The Registrant has entered into an indemnification agreement with each of
its directors, whereby the Registrant has agreed to indemnify each such director
for amounts which the director is legally obligated to pay, including judgments,
settlements of fines, including certain related expenses to be advanced by the
Registrant, due to any actual or alleged breach of duty, neglect, error,
misstatement, misleading statement or other act or omission by a director in his
capacity as a director. This indemnification excludes claims:
- covered by the Registrant's directors and officers liability insurance
policy,
- for which the director is otherwise indemnified or reimbursed,
- relating to certain judgments or adjudications under which the director
is liable for breaches of duty of loyalty, acts or omissions not in good
faith or involving intentional misconduct or involving knowing violations
of law, actions or certain transactions from which the director derives
an improper personal benefit,
- relating to the director's liability for accounting for profits under
Section 16 of the Securities Exchange Act of 1934, as amended,
- in respect of remuneration, if found unlawful, and
- as to which a final and non-appealable judgment has determined that
payment to the director thereunder is unlawful.
ITEM 16. EXHIBITS
4.1 Warrant Amendment Agreement, dated as of January 30, 2003,
by and among Hasbro, Inc., Lucasfilm Ltd., and Lucas
Licensing Ltd. (filed as Exhibit 1 to Amendment No. 1 to
Statement on Schedule 13D filed with the SEC with respect to
the securities of Hasbro, Inc. on February 10, 2003 and
incorporated herein by reference)
5.1 Opinion of Ropes & Gray. (filed herewith)
23.1 Consent of KPMG LLP. (filed herewith)
23.2 Consent of Ropes & Gray. (see Exhibit 5.1)
24.1 Powers of Attorney. (previously filed)
ITEM 17. UNDERTAKINGS
a. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase and decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
II-2
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
b. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
c. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the financial
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Pre-Effective
Amendment No. 1 to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Pawtucket, State of Rhode
Island.
HASBRO, INC.
By: /s/ DAVID D. R. HARGREAVES
------------------------------------
David D. R. Hargreaves
Senior Vice President and Chief
Financial Officer
Dated: June 27, 2003
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to this Registration Statement has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the date indicated.
* /s/ DAVID D. R. HARGREAVES
-------------------------------------------- --------------------------------------------
Alfred J. Verrecchia David D. R. Hargreaves
President, Chief Executive Officer and Senior Vice President and
Director Chief Financial Officer
(Principal Executive Officer) (Principal Financial and Accounting Officer)
* *
-------------------------------------------- --------------------------------------------
Alan G. Hassenfeld Basil L. Anderson
Chairman of the Board Director
* *
-------------------------------------------- --------------------------------------------
Alan R. Batkin Frank J. Biondi, Jr.
Director Director
* *
-------------------------------------------- --------------------------------------------
E. Gordon Gee Claudine B. Malone
Director Director
* *
-------------------------------------------- --------------------------------------------
Edward M. Philip E. John Rosenwald, Jr.
Director Director
* *
-------------------------------------------- --------------------------------------------
Eli J. Segal Carl Spielvogel
Director Director
*
--------------------------------------------
Paula Stern
Director
Dated: June 27, 2003
* By: /S/ DAVID D. R. HARGREAVES
------------------------------------------------
Attorney in Fact
II-4
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1 Warrant Amendment Agreement, dated as of January 30, 2003,
by and among Hasbro, Inc., Lucasfilm Ltd., and Lucas
Licensing Ltd. (filed as Exhibit 1 to Amendment No. 1 to
Statement on Schedule 13D filed with the SEC with respect to
the securities of Hasbro, Inc. on February 10, 2003 and
incorporated herein by reference)
5.1 Opinion of Ropes & Gray. (filed herewith)
23.1 Consent of KPMG LLP. (filed herewith)
23.2 Consent of Ropes & Gray. (see Exhibit 5.1)
24.1 Powers of Attorney. (previously filed)
II-5