HASBRO, INC. - Quarter Report: 2015 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.   20549

_________________

FORM 10-Q

______________

(Mark One)

For the quarterly period ended September 27, 2015

Commission File Number 1-6682

_______________

HASBRO, INC.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes R No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes R No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes ☐ No  R

The number of shares of Common Stock, par value $.50 per share, outstanding as of October 19, 2015 was 124,623,554.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Thousands of Dollars Except Share Data)

(Unaudited)

 

HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

(Thousands of Dollars Except Share Data)

(Unaudited)

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Thousands of Dollars Except Per Share Data)

(Unaudited)

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Earnings

(Thousands of Dollars)

(Unaudited)

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Thousands of Dollars)

(Unaudited)

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements

(Thousands of Dollars and Shares Except Per Share Data)

(Unaudited)

(1) Basis of Presentation

In the opinion of management, the accompanying unaudited interim financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of Hasbro, Inc. and all majority-owned subsidiaries ("Hasbro" or the "Company") as of September 27, 2015 and September 28, 2014, and the results of its operations and cash flows for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Actual results could differ from those estimates.

The quarters ended September 27, 2015 and September 28, 2014 are each 13-week periods. The nine-month periods ended September 27, 2015 and September 28, 2014 are each 39-week periods.

The results of operations for the quarter and nine-month periods ended September 27, 2015 are not necessarily indicative of results to be expected for the full year, nor were those of the comparable 2014 periods representative of those actually experienced for the full year 2014.

These condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.  The Company filed audited consolidated financial statements for the fiscal year ended December 28, 2014 in its Annual Report on Form 10-K, which includes all such information and disclosures and, accordingly, should be read in conjunction with the financial information included herein.

The Company's accounting policies are the same as those described in Note 1 to the Company's consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended December 28, 2014.

 

(2) Earnings Per Share

Net earnings per share data for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014 were computed as follows:

For the quarter ended September 27, 2015, no options or restricted stock units were excluded from the calculation of diluted earnings per share as none were antidilutive.  For the quarter ended September 28, 2014, options and restricted stock units totaling 675 were excluded from the calculation of diluted earnings per share because to include them would have been antidilutive. For the nine-month periods ended September 27, 2015 and September 28, 2014, options and restricted stock units totaling 261 and 675, respectively, were excluded from the calculation of diluted earnings per share because to include them would have been antidilutive.

 

(3) Other Comprehensive Earnings (Loss)

Components of other comprehensive earnings (loss) are presented within the consolidated statements of comprehensive earnings. The following table presents the related tax effects on changes in other comprehensive earnings (loss) for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014.

 

Changes in the components of accumulated other comprehensive loss for the nine months ended September 27, 2015 and September 28, 2014 are as follows:

At September 27, 2015, the Company had remaining net deferred gains on foreign currency forward contracts, net of tax, of $111,798 in accumulated other comprehensive loss ("AOCE"). These instruments hedge payments related to inventory purchased in the third quarter of 2015 or forecasted to be purchased during the remainder of 2015 and, to a lesser extent, 2016 through 2020, intercompany expenses expected to be paid or received during 2015 and 2016, cash receipts for sales made at the end of the third quarter of 2015 or forecasted to be made in the remainder of 2015 and, to a lesser extent, 2016 through 2017. These amounts will be reclassified into the consolidated statements of operations upon the sale of the related inventory or recognition of the related sales or expenses.

In addition to foreign currency forward contracts, the Company entered into hedging contracts on future interest payments related to the long-term notes due 2021 and 2044.  At the date of debt issuance, these contracts were terminated and the fair value on the date of settlement was deferred in AOCE and is being amortized to interest expense over the life of the related notes using the effective interest rate method. At September 27, 2015, deferred losses, net of tax, of $19,650 related to these instruments remained in AOCE. For the quarter and nine months ended September 27, 2015, losses of $450 and $1,349, respectively, were reclassified from AOCE to net earnings.  For the quarter and nine months ended September 28, 2014, losses of $450 and $707, respectively, were reclassified from AOCE to net earnings.

Of the amount included in AOCE at September 27, 2015, the Company expects approximately $64,807 to be reclassified to the consolidated statements of operations within the next 12 months. However, the amount ultimately realized in earnings is dependent on the fair value of the hedging instruments on the settlement dates.

(4) Financial Instruments

The Company's financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities. At September 27, 2015, September 28, 2014 and December 28, 2014, the carrying cost of these instruments approximated their fair value. The Company's financial instruments at September 27, 2015, September 28, 2014 and December 28, 2014 also include certain assets and liabilities measured at fair value (see Notes 6 and 8) as well as long-term borrowings. The carrying costs of the long-term borrowings are equal to the outstanding principal amounts, and fair values of the Company's long-term borrowings as of September 27, 2015, September 28, 2014 and December 28, 2014 are as follows:

 

In May 2014, the Company issued $600,000 in long-term debt consisting of $300,000 of 3.15% Notes Due in 2021 and $300,000 of 5.10% Notes Due in 2044 (collectively, the "Notes").  The Company may redeem the Notes at its option at the greater of the principal amount of the Notes or the present value of the remaining scheduled payments discounted using the effective interest rate on applicable U.S. Treasury bills at the time of repurchase.

The fair values of the Company's long-term debt are considered Level 3 fair values (see Note 6 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a similar debt security. This assumption is considered an unobservable input in that it reflects the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement.

(5) Income Taxes

The Company and its subsidiaries file income tax returns in the United States and various state and international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal, state and local and international tax authorities in various tax jurisdictions.

The Company is no longer subject to U.S. federal income tax examinations for years before 2013. With few exceptions, the Company is no longer subject to U.S., state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions for years before 2009. The Company is currently under income tax examination in several U.S., state and local and non-U.S. jurisdictions.

(6) Fair Value of Financial Instruments

The Company measures certain financial instruments at fair value. The fair value hierarchy consists of three levels: Level 1 fair values are based on quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access; Level 2 fair values are those based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 fair values are based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Accounting standards permit entities to measure many financial instruments and certain other items at fair value and establish presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar assets and liabilities. The Company has elected the fair value option for certain available-for-sale investments. At September 27, 2015, September 28, 2014 and December 28, 2014, these investments totaled $22,834, $24,292 and $23,560, respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheets. The Company recorded net losses of $176 and $246 on these investments in other (income) expense, net for the quarter and nine-months ended September 27, 2015, respectively, related to the change in fair value of such instruments.  For the quarter and nine-month periods ended September 28, 2014 the Company recorded net gains and interest income of $247 and $2,487, respectively, in other (income) expense, net, related to the change in fair value of such instruments.

At September 27, 2015, September 28, 2014 and December 28, 2014, the Company had the following assets and liabilities measured at fair value in its consolidated balance sheets:

Available-for-sale securities include equity securities of one company quoted on an active public market as well as certain investments valued at net asset values quoted on private markets that are not active. These net asset values are predominantly based on underlying investments which are traded on an active market; investments are redeemable within 45 days.  The Company also holds an available-for-sale investment which invests in hedge funds and contains financial instruments that are valued using certain estimates which are considered unobservable in that they reflect the investment manager's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that these estimates are the best information available for use in the fair value of this investment.

The Company's derivatives consist primarily of foreign currency forward contracts. The Company uses current forward rates of the respective foreign currencies to measure the fair value of these contracts. The option agreement included in other liabilities at September 27, 2015, September 28, 2014 and December 28, 2014, is valued using an option pricing model based on the fair value of the related investment.  Inputs used in the option pricing model include the volatility and fair value of the underlying company which are considered unobservable inputs as they reflect the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. There were no changes in these valuation techniques during the first nine months of 2015.

The following is a reconciliation of the beginning and ending balances of the fair value measurements of the Company's financial instruments which use significant unobservable inputs (Level 3):

 

(7) Pension and Postretirement Benefits

The components of the net periodic cost of the Company's defined benefit pension and other postretirement plans for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014 are as follows:

During the first nine months of fiscal 2015, the Company made cash contributions to its defined benefit pension plans of approximately $10,760 in the aggregate. The Company expects to contribute approximately $3,240 during the remainder of fiscal 2015.

(8) Derivative Financial Instruments

Hasbro uses foreign currency forward contracts to mitigate the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. These over-the-counter contracts, which hedge future currency requirements related to purchases of inventory, product sales and other cross-border transactions not denominated in the functional currency of the business unit, are primarily denominated in United States and Hong Kong dollars, and Euros. All contracts are entered into with a number of counterparties, all of which are major financial institutions. The Company believes that a default by a single counterparty would not have a material adverse effect on the financial condition of the Company. Hasbro does not enter into derivative financial instruments for speculative purposes.

The Company uses foreign currency forward contracts to reduce the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. All of the Company's designated foreign currency forward contracts are considered to be cash flow hedges. These instruments hedge a portion of the Company's currency requirements associated with anticipated inventory purchases, product sales and other cross-border transactions in 2015 through 2020.

At September 27, 2015, September 28, 2014 and December 28, 2014, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:

The Company has a master agreement with each of its counterparties that allows for the netting of outstanding forward contracts. The fair values of the Company's foreign currency forward contracts designated as cash flow hedges are recorded in the consolidated balance sheets at September 27, 2015, September 28, 2014 and December 28, 2014 as follows:

 

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014 as follows:

 

In addition, gains of $275 and $842, respectively, were reclassified to earnings as a result of hedge ineffectiveness for the quarter and nine-month periods ended September 27, 2015, and net gains of $62 were reclassified to earnings as a result of hedge ineffectiveness for the nine-month periods ended September 28, 2014.

The Company also enters into foreign currency forward contracts to minimize the impact of changes in the fair value of intercompany loans due to foreign currency fluctuations. Due to the nature of the derivative contracts involved, the Company does not use hedge accounting for these contracts.  At September 27, 2015, September 28, 2014 and December 28, 2014 the total notional amounts of the Company's undesignated derivative instruments were $263,247, $413,065 and $294,571, respectively.

At September 27, 2015, September 28, 2014 and December 28, 2014, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:

The Company recorded net gains of $21,070 and $40,024 on these instruments to other (income) expense, net for the quarter and nine-month periods ended September 27, 2015, respectively, and net losses of $20,050 and $19,988 on these instruments to other (income) expense, net for the quarter and nine-month periods ended September 28, 2014, respectively, relating to the change in fair value of such derivatives, substantially offsetting gains and losses from the change in fair value of intercompany loans to which the contracts relate.

For additional information related to the Company's derivative financial instruments see Notes 4 and 6.

 

(9) Sale of Manufacturing Operations

 

On August 30, 2015, the Company completed the sale of its manufacturing operations to Cartamundi Group ("Cartamundi") for approximately $54,400, approximately $18,600 of which was received on the date of sale with the remainder to be paid in 5 annual installments. Under the terms of the purchase and sale agreement, Cartamundi acquired the inventory and property, plant and equipment related to manufacturing operations in East Longmeadow, MA and the common stock of the Company's manufacturing subsidiary in Waterford, Ireland.  Inclusive of this transaction and other related costs, the Company recognized a gain of $6,832 on the sale recorded in other (income) expense, net in the consolidated statements of operations. These operations were a component of the Company's Global Operations segment.

In connection with this transaction, the Company also entered into a manufacturing services agreement under which Cartamundi will provide manufacturing services over a 5-year term.  In connection with this agreement, the Company has agreed to minimum purchase commitments from Cartamundi over the term of the agreement. The Company and Cartamundi are also party to a warehousing agreement under which the Company leases designated warehouse space at the East Longmeadow, MA location, as well as a transition services agreement related to certain administrative functions each party is providing each other during a defined transition period.  In connection with this transaction, the Company froze the benefits of one of its funded defined benefit pension plans covering union employees.  In connection with these actions, the Company recognized a net curtailment benefit of $3,061 related to net prior service credits in the related defined benefit pension and post-retirement plans. This benefit is recorded in selling, distribution and administration expenses in the consolidated statements of operations. The Company has retained the frozen defined benefit pension plans related to its' former employees of its East Longmeadow, MA and Waterford, Ireland businesses.

 

(10) Segment Reporting

Hasbro is a worldwide leader in children's and family leisure time products and services with a broad portfolio of brands and entertainment properties spanning toys, games, licensed products ranging from traditional to high-tech and digital, and film and television entertainment. The Company's segments are (i) U.S. and Canada, (ii) International, (iii) Entertainment and Licensing, and (iv) Global Operations.

The U.S. and Canada segment includes the marketing and selling of action figures, arts and crafts and creative play products, electronic toys and related electronic interactive products, fashion and other dolls, infant products, play sets, preschool toys, plush products, sports action blasters and accessories, vehicles and toy-related specialty products, as well as traditional board games and puzzles, and trading card and role-playing games primarily within the United States and Canada. Within the International segment, the Company markets and sells both toy and game products in markets outside of the U.S. and Canada, primarily in the European, Asia Pacific, and Latin and South American regions. The Company's Entertainment and Licensing segment includes the Company's lifestyle licensing, digital gaming, movie and television entertainment operations. The Global Operations segment is responsible for manufacturing and sourcing finished products for the Company's U.S. and Canada and International segments. In fiscal September 2015, the company sold its remaining manufacturing operations and henceforth the Global Operations segment will only be responsible for sourcing product from third parties.

Segment performance is measured at the operating profit level. Included in Corporate and Eliminations are certain corporate expenses, including the elimination of intersegment transactions and certain assets benefiting more than one segment. Intersegment sales and transfers are reflected in management reports at amounts approximating cost. Certain shared costs, including global development and marketing expenses and corporate administration, are allocated to segments based upon expenses and foreign exchange rates fixed at the beginning of the year, with adjustments to actual expenses and foreign exchange rates included in Corporate and Eliminations. The accounting policies of the segments are the same as those referenced in note 1.

Results shown for the quarter and nine months are not necessarily representative of those which may be expected for the full year 2015, nor were those of the comparable 2014 period representative of those actually experienced for the full year 2014. Similarly, such results are not necessarily those which would be achieved were each segment an unaffiliated business enterprise.

Information by segment and a reconciliation to reported amounts for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014 are as follows.

(a) The Global Operations segment derives substantially all of its revenues, and thus its operating results, from intersegment activities.

(b) Certain long-term assets, including property, plant and equipment, goodwill and other intangibles, which benefit multiple operating segments, are included in Corporate and Eliminations. Allocations of certain expenses related to these assets to the individual operating segments are done at the beginning of the year based on budgeted amounts. Any differences between actual and budgeted amounts are reflected in Corporate and Eliminations because allocations are translated from the US Dollar to local currency at budget rates when recorded, and Corporate and Eliminations also includes the elimination of inter-company balance sheet amounts.

The following table represents consolidated International segment net revenues by major geographic region for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014.

The following table presents consolidated net revenues by class of principal products for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q, including the following section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements expressing management's current expectations, goals, objectives and similar matters. These forward-looking statements may include statements concerning the Company's product and entertainment plans, anticipated product and entertainment performance, business opportunities, plans and strategies, financial goals, cost savings and efficiency enhancing initiatives and expectations for achieving the Company's financial goals and other objectives. See Item 1A, in Part II of this report and Item 1A, in Part I of the Annual Report on Form 10-K for the year ended December 28, 2014, for a discussion of factors which may cause the Company's actual results or experience to differ materially from that anticipated in these forward-looking statements. The Company undertakes no obligation to revise the forward-looking statements in this report after the date of the filing. Unless otherwise specifically indicated, all dollar or share amounts herein are expressed in thousands of dollars or shares, except for per share amounts.

 

Hasbro, Inc. ("Hasbro" or the "Company") is a global company dedicated to Creating the World's Best Play Experiences. The Company strives to do this through deep consumer engagement and the application of consumer insights, the use of immersive storytelling to build brands, product innovation and development of global business reach. Hasbro applies these principles to leverage its beloved owned and controlled brands, including LITTLEST PET SHOP, MAGIC: THE GATHERING, MONOPOLY, MY LITTLE PONY, NERF, PLAY-DOH and TRANSFORMERS, as well as Partner Brands. From toys and games, to television programming, motion pictures, digital gaming and a comprehensive licensing program, Hasbro fulfills the fundamental need for play and connection for children and families around the world. The Company's wholly-owned Hasbro Studios creates entertainment brand-driven storytelling across mediums, including television, film and more.

Each of these elements is executed globally in alignment with Hasbro's strategic game plan, its brand blueprint.  At the center of this blueprint, Hasbro re-imagines, re-invents and re-ignites its owned and controlled brands and imagines, invents and ignites new brands, through toy and game innovation, immersive entertainment offerings, including television programming and motion pictures, and a broad range of licensed products. Utilizing consumer engagement and insights coupled with immersive storytelling and product innovation, Hasbro generates revenue and earns cash by developing, marketing and selling global brands in a broad variety of consumer goods categories including toy and game products and distribution of television programming based on the Company's properties, as well as through the out-licensing of rights for third parties to use its properties in connection with products, including digital media and games and lifestyle products. Hasbro also leverages its competencies to develop and market products based on well-known licensed brands, including, but not limited to, DISNEY'S DESCENDANTS, JURASSIC WORLD, MARVEL, SESAME STREET and STAR WARS. DISNEY'S DESCENDANTS MARVEL and STAR WARS are owned by The Walt Disney Company.

The Company's business is separated into three principal business segments: U.S. and Canada, International and Entertainment and Licensing. The U.S. and Canada segment markets and sells both toy and game products primarily in the United States and Canada. The International segment consists of the Company's European, Asia Pacific and Latin and South American toy and game marketing and sales operations. The Company's Entertainment and Licensing segment includes the Company's lifestyle licensing, digital licensing and gaming, and movie and television entertainment operations. In addition to these three primary segments, the Company's global development, marketing, and product sourcing operations are managed through its Global Operations segment. 

Third quarter 2015 highlights:

·	Third quarter 2015 net revenues of $1,470,997 were consistent with third quarter 2014 net revenues of $1,469,899. Absent unfavorable foreign currency translation of approximately $132,400, net revenues in the third quarter of 2015 grew 9% compared to the third quarter of 2014.

·	2015 third quarter net revenues from Franchise Brands decreased 4%; growth from MONOPOLY, NERF and PLAY-DOH was more than offset by declines from MAGIC: THE GATHERING, MY LITTLE PONY and TRANSFORMERS. Excluding unfavorable foreign currency translation, Franchise Brands grew 4% for the quarter.

·

Growth from the Boys and Preschool categories in the third quarter of 2015 was wholly offset by declines in the Games and Girls categories.  Absent unfavorable foreign currency translation, growth in Boys and Preschool was only partially offset by declines in the Girls category while the Games category was flat in 2015 compared to 2014.

·

Third quarter 2015 net revenues from the U.S. and Canada segment were up 5% compared to the third quarter of 2014 while net revenues from the International and Entertainment and Licensing segments  declined approximately 6% and 2%, respectively.  Absent unfavorable foreign currency translation of approximately $126,200, 2015 International segment net revenues increased 14%.

·	Operating profit improved 6% in the third quarter of 2015 compared to the third quarter of 2014 and was up 18% absent unfavorable foreign currency translation of approximately $33,200.

·	The Company finalized the sale of its manufacturing operations to Cartamundi Group which resulted in a total pre-tax benefit of $9,893.

First nine months 2015 highlights:

·

Net revenues for the first nine months of 2015 of $2,982,155 were consistent with net revenues of $2,978,614 in the first nine months of 2014.  Absent unfavorable foreign currency translation of approximately $266,400, net revenues in the first nine months of 2015 grew 9% compared to the first nine months of 2014.

·

First nine months 2015 net revenues from Franchise Brands decreased slightly compared to 2014; growth from MONOPOLY, NERF and PLAY-DOH was more than offset by expected declines from TRANSFORMERS following last year's motion picture release and MY LITTLE PONY. Excluding unfavorable foreign currency translation, Franchise Brands increased 8% during the first nine months of 2015.

·	Growth in the Boys and Preschool categories was offset by declines in the Girls and Games categories. Absent unfavorable foreign currency translation, growth in the Boys, Games and Preschool categories was only partially offset by declines in the girls category.

·

Year-to-date 2015 net revenues from the U.S. and Canada and Entertainment and Licensing segments were up 3% and 18%, respectively whereas net revenues from the International segment were down 5%, compared to the first nine months of 2014. Absent unfavorable foreign currency translation of approximately $257,300, year-to-date 2015 International segment net revenues grew 14%.

·	Operating profit grew 5% in the first nine months of 2015 compared to the first nine months of 2014 and was up 20% absent unfavorable foreign currency translation of approximately $62,100.

In line with our commitment to return excess cash to shareholders, Hasbro increased the quarterly dividend rate from $0.43 per share to $0.46 per share which was effective for the dividend paid in May 2015. During the first nine months of 2015, Hasbro repurchased approximately 1,085 shares at a total cost of $72,823 and an average price of $67.07 per share, respectively.

The components of the results of operations, stated as a percent of net revenues, are illustrated below for the quarter and nine-month periods ended September 27, 2015 and September 28, 2014.

Third Quarter of 2015

The quarters ended September 27, 2015 and September 28, 2014 were each 13-week periods. Net earnings and net earnings attributable to Hasbro, Inc. increased to $206,375 and $207,599, respectively, for the quarter ended September 27, 2015, from $180,155 and $180,457, respectively, for the comparable period of 2014.  Diluted earnings per share attributable to Hasbro, Inc. increased to $1.64 in the third quarter of 2015 from $1.40 in the third quarter of 2014.  Third quarter 2015 net earnings included a favorable adjustment, net of tax, of $7,050, or $0.06 per diluted share, related to the sale of the Company's manufacturing operations whereas third quarter 2014 net earnings included unfavorable adjustments, net of tax, of $7,379, or $0.06 per diluted share, related to the restructuring of the Company's equity interest in Discovery Family Channel.

Consolidated net revenues for the quarter ended September 27, 2015 were consistent with the quarter ended September 28, 2014 at $1,470,997 compared to $1,469,899 and were negatively impacted by foreign currency translation of approximately $132,400 as a result of the stronger U.S. dollar in 2015 compared to 2014.  Absent the impact of foreign currency, consolidated net revenues increased 9% in the third quarter of 2015 compared to 2014.  Higher net revenues from MONOPOLY, NERF and PLAY-DOH were more than offset by lower net revenues from TRANSFORMERS, which faced challenging comparisons to the third quarter of 2014 due to the June 2014 theatrical release of TRANSFORMERS: AGE OF EXTINCTION, and, to a lesser extent, lower net revenues from LITTLEST PET SHOP, MAGIC: THE GATHERING and MY LITTLE PONY. As a result, Franchise Brands decreased 4% during the third quarter of 2015 compared to 2014. Partner Brands increased in the third quarter of 2015 compared to 2014 primarily related to STAR WARS, as well as DISNEY'S DESCENDANTS, JURASSIC WORLD and MARVEL.

The follow table presents net revenues by product category for the quarters ended September 27, 2015 and September 28, 2014.

BOYS: Net revenues in the boys' category increased 24% in 2015 compared to 2014 and benefited from a strong entertainment line-up.  Higher net revenues from Partner Brands, specifically JURASSIC WORLD and STAR WARS, more than offset lower net revenues from the TRANSFORMERS brand, which benefited from the June 2014 theatrical release.  Franchise Brand NERF also contributed to quarter-over-quarter category growth.

GAMES: Net revenues from the games category decreased 8% in the third quarter of 2015 compared to the third quarter of 2014.  During the third quarter of 2015, the Company began shipping PLAYMATION MARVEL'S AVENGERS product line.  Higher net revenues from Partner Brand MARVEL, specifically PLAYMATION, and Franchise Brand MONOPOLY were more than offset by lower net revenues from Franchise Brand MAGIC: THE GATHERING and other game brands. 

GIRLS: Net revenues in the girls' category decreased 28% in 2015 compared to 2014 primarily due to expected declines from FURBY products. Lower net revenues from FURREAL FRIENDS, LITTLEST PET SHOP, MY LITTLE PONY and NERF brands also contributed to the decline. These lower net revenues were partially offset by increases from PLAY-DOH DOHVINCI products and the 2015 launch of the DISNEY'S DESCENDANTS product line.

PRESCHOOL: Net revenues in the preschool category increased 17% in 2015 compared to 2014. Higher net revenues from PLAY-DOH products as well as higher sales of entertainment-backed product lines, primarily PLAYSKOOL HEROES STAR WARS GALACTIC HEROES and JURASSIC WORLD, as well as the introduction of PLAYSKOOL FRIENDS MY LITTLE PONY were slightly offset by lower net revenues from core PLAYSKOOL products.

Operating profit for the quarter ended September 27, 2015 increased 6% to $303,527, or 20.6% of net revenues, from $285,814, or 19.4% of net revenues, for the quarter ended September 28, 2014.  Third quarter 2015 operating profit includes unfavorable foreign currency translation of approximately $33,200. Furthermore, 2015 operating profit includes a benefit of approximately $3,100 related to the sale of the Company's manufacturing operations whereas 2014 operating profit includes a benefit of approximately $1,300 related to the restructuring of the Company's joint venture television network. Improved operating profit reflects higher net revenues as well as lower amortization of both intangibles and television programming, partially offset by higher selling, distribution and administration and product development expenses. Improved operating profit margin reflects better leverage of expenses on higher net revenues.

First Nine Months of 2015

The nine-month periods ended September 27, 2015 and September 28, 2014 were each 39-week periods. Net earnings and net earnings attributable to Hasbro, Inc. for the first nine months of 2015 were $272,478 and $276,075, respectively, compared to $244,489 and $246,019, respectively, for the first nine months of 2014. Diluted earnings per share attributable to Hasbro, Inc. increased to $2.18 in 2015 from $1.88 in 2014. Net revenues in the first nine months of 2015 included a favorable adjustment, net of tax, of $7,050, or $0.06 per diluted share, related to the sale of the Company's manufacturing operations whereas net earnings in the first nine months of 2014 included unfavorable adjustments, net of tax, of $7,379, or $0.06 per diluted share, related to the restructuring of the Company's equity interest in Discovery Family Channel.

For the nine months ended September 27, 2015, consolidated net revenues were  $2,982,155 compared to $2,978,614 for the nine months ended September 28, 2014. Absent negative foreign currency translation of approximately $266,400 as a result of the stronger U.S. dollar in 2015 compared to 2014, net revenues in the first nine months increased 9% compared to 2014. During the first nine months of 2015, Franchise Brand revenues decreased slightly compared to 2014.

The following table presents net revenues by product category for the first nine months of 2015 and 2014.