Tuesday February 8 1:58 PM ET

## Hasbro Q4 Profits Hit Record

By Christopher Noble

BOSTON, (Reuters) - Hasbro Inc. (NYSE:HAS - news), maker of Tonka trucks, Furby, G.I. Joe action figures and classic board games like Monopoly, said on Tuesday fourth-quarter earnings before charges hit a record, beating Wall Street expectations. It forecast rising revenues and earnings this year.

The No. 2 U.S. toymaker, whose brands include Pokemon trading cards and ``Star War'' toys, earned net income of $155.4 million or 79 cents per diluted share. That exceeded analysts' expectations for 74 cents a share, according to First Call/Thomson Financial. The 1999 fourth-quarter results excluded an after-tax charge of $97.7 million for a consolidation program. In the 1998 fourth quarter, Hasbro, of Pawtucket, R.I., reported net income of $131.8 million or 65 cents per share.

Hasbro's results stand out from those of its largest competitor, Mattel, Inc. (NYSE:MAT - news), which reported a worse-than-expected loss for its fourth quarter last week, followed by resignation of its Chairman and Chief Executive Jill Barad.

Despite the record earnings, the price of Hasbro's stock slipped 1/8 to 15-15/16 a share in early afternoon trading on the New York Stock Exchange, reflecting analysts' concerns about the company's ability to keep that momentum this year.

Including the consolidation charge and other expenses, Hasbro's fourth-quarter earnings fell to $57.7 million, or 29 cents per diluted share. That's less than half its year-ago quarterly earnings. For all of 1999, net income, including the consolidation charge, was $188.95 million, or 93 cents per diluted share, down from $206.37 million or $1.00 per diluted share.

Fourth-quarter revenues rose to a record $1.59 billion from $1.30 billion in the 1998 quarter. Hasbro said revenues and operating earnings from each of its three major business segments rose.

For all of 1999, revenues increased to $4.23 billion, also a record, from $3.30 billion in 1998. Hasbro linked the surge in 1999 revenues to higher shipments of ``Star Wars'' and Furby toys, as well as its Pokemon toys and games. Hasbro picked up the Pokemon line with its acquisition of privately held Wizards of the Coast in September 1999.

Despite optimistic comments from Hasbro officials, some analysts were guarded, warning that Hasbro's big money makers in 1999 -- ``Star Wars'' toys and the wildly popular Pokemon line -- might not be able to keep up the momentum this year.

``While they beat the number, and we're not changing our number (for this year) yet, it was a back-end weighted year and we could have some difficult comparisons in the first half,'' said analyst Margaret Whitfield at Tucker Anthony Cleary Gull.

``It could be a break-even first quarter,'' she said.

She said sales of ``Star Wars'' toys, based on characters from the ``Star Wars Episode 1'' movie, were likely to fall in the coming quarters. Hasbro's reliance on growth in sales of Pokemon toys carried risks, she added.

And she noted that a new product, Digimon, made by Bandai Co Ltd. (7967.T), could pose a threat to Pokemon's dominance. In a conference call with analysts and reporters, Alan Hassenfeld, Hasbro's chairman and chief executive officer, expressed frustration with the share price, which has languished recently. At Tuesday's level, the stock was more than 50 percent off its year high of 37.

``We are all disappointed that our efforts have not been reflected in our share price,'' Hassenfeld said.

He expressed confidence about the year ahead, saying product tie-ins related to an upcoming ``Jurassic Park'' movie and a sequel to the hit film ``Stuart Little'' would help boost Hasbro's results in the year ahead.

``We feel good about our business in 2000,'' he said in a statement. ``Coming off an exceptionally strong 1999, with 28 percent revenue growth and 33 percent earnings per share growth, ... we forecast revenues to increase approximately 5 percent this year,' he said.

``Earnings-per-share growth could approach 10 percent, excluding the impact of Games.com in 2000 and the consolidation program charges in 1999,'' he added, referring to its games Internet portal set for launch this summer.

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