Hasbro, Inc. (HAS) Q4 2011 Earnings Report, Transcript and Summary

Good morning, and welcome to the Hasbro Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the call over to Ms. Debbie Hancock, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Joining me today are Brian Goldner, President and Chief Executive Officer; David Hargreaves, Chief Operating Officer; and Deb Thomas, Chief Financial Officer. Our fourth quarter and full year 2011 earnings release was issued earlier this morning and is available on our website. The press release includes information regarding non-GAAP financial measures included in today's call. Additionally, whenever we discuss earnings per share, or EPS, we are referring to earnings per diluted share. This morning, Brian will discuss key factors impacting our results, and Deb will review the financials. We will then open the call to your questions. Before we begin, let me note that during this call and the question-and-answer session that follows, members of Hasbro management may make forward-looking statements concerning management's expectations, goals, objectives and similar matters. These forward-looking statements may include comments concerning our product and entertainment plans, anticipated product performance, business opportunities and strategies, costs, financial goals and expectations for our future financial performance and achieving our objective. There are many factors that could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. Some of those factors are set forth in our annual report on Form 10-K, in today's press release and in our other public disclosures. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call. Now I would like to introduce Brian Goldner. Brian?

Thank you, Debbie. Good morning, everyone, and thank you for joining us today. In 2011, we continued to develop and execute our branded play strategy. We invested in growing our capabilities to deliver innovation globally across our brands and our business. We invested in creating new teams to deploy our brands around the world adding new immersive experiences through entertainment, digital media and licensing. While these investments enabled us to deliver very strong growth in our International business during 2011, and overall solid revenue growth for the fourth quarter and full year, we did not meet our expectations for growth in the U.S. and Canada including in the Games & Puzzle business. When we look to our success in both mature and emerging markets internationally, we know and you can see that our innovation, marketing and brands are very successful. It is clear we can do better in the U.S. and Canada. In both this business and in gaming, we have taken steps to deliver more innovation and growth through the direction of new leadership and the implementation of new plans. I will speak to this more in detail shortly, but let's first review a number of successes from 2011. Revenue grew 7%, reaching $4.29 billion for the year, ahead of our 5% compound annual growth rate target for revenue. As a result of our expanded global footprint, marketing and brand innovation, the International segment grew 19% or 16% without the benefit of the foreign exchange impact. Revenue grew in every major territory internationally, in both mature and emerging markets, and we gained share in 9 of the 10 countries for which we have third-party data. As we indicated and planned, we are growing in Latin America, posting 19% growth during 2011 and at Asia Pacific, where we continue to have strong growth, up 24% in 2011 as we establish our presence in emerging markets and grow our business in mature markets. In 2011, Hasbro was the fastest-growing major toy company in Western Europe. We gained 1.4 percentage points in market share, and have achieved market share leadership in 3 European countries. Through the successful implementation of our branded play strategy, which at the core, focuses on the innovation and invention of Hasbro brands worldwide, we are building bigger and more global brands. In 2011, several brands were more than $400 million of annual revenue including Transformers, which posted $483 million in revenue growing more than 85% year-over-year. Beyblade delivered $477 million in revenues on strong growth in the U.S. and international markets. And Nerf, which has grown fourfold over the past 5 years, was $410 million in revenue in 2011, essentially flat with 2010 and driven by strong growth overseas. The Nerf team continues to deliver great innovation for the brand and we have 2 major new initiatives planned for 2012. In addition to innovation within our core brands, we are inventing new global brands. In 2011, we successfully launched key initiatives including KRE-O and Sesame Street. Beginning in July 2011, KRE-O launched in 10 markets globally, generating tens of millions of dollars in revenue and good early market share. In 2012, we will add 15 new markets by year end, as well as expand the line to include Battleship supported by our major motion picture with Universal. 2011 was also our first year with Sesame Street and marked a great first step toward building a year-round global brand. To do this, we are creating play experiences around a number of Sesame Street characters, which engage children and help them to learn. We are very excited about the potential of this brand over the coming years. Hasbro's inventory levels at year end are down 8%. In the U.S., retail inventory was essentially flat and of better overall quality than last year. Given the growth in our business internationally, retail inventories grew in many countries, but we are comfortable with the quality and level of inventory. In 2011, we also funded important investments, which expanded our global capabilities in sales, marketing, licensing, entertainment and infrastructure. And finally, we grew EPS for the 11th consecutive year while returning $577 million to shareholders through our stock buyback and quarterly dividend programs. Last week, the board voted to increase our quarterly dividend 20% to $0.36 per share, marking the third year in a row we have grown our dividend 20% or more. In total, there were a number of things that worked well for Hasbro in 2011. However, despite these significant accomplishments, the year did not meet our performance expectations. Our U.S. and Canada segment declined 2%, weakening most notably post-Thanksgiving when the positive point of sale trends we had seen early in the quarter did not continue. This decline was in line with the industry decline in the U.S., reflecting a challenging economic environment but was not up to our expectations. As a result, we made some strategic moves in the leadership of our business. Wiebe Tinga, who many of you heard from at our Investor Day in November, has taken over as President of the U.S. and Canada business. He is a 24-year veteran of Hasbro, most recently serving as President of Asia-Pacific and Latin America and has been instrumental in the company's expansion in key emerging markets. In this role, Wiebe has built a strong team both in Asia-Pacific and Latin America, and the heads of these regions are now reporting directly to David Hargreaves, Hasbro's COO. Wiebe brings a tremendous track record of strong performance, and I'm delighted to have someone with his experience, passion and financial discipline to step in and lead our U.S. and Canada teams. He and the team are focused on returning the business to historical levels of profitability and rebuilding our share in the region by capitalizing on the strength of Hasbro innovation, marketing and brands as he has done successfully around the world. Additionally, our Games & Puzzle category performance in 2011 was disappointing, contributing to the weakness in U.S. We have already outlined for you a multi-year plan that is designed to drive innovation and excellence in gaming, stabilizing this business in 2012 and delivering growth in 2013 and beyond. We have a new team with a lot of talent from outside the traditional board game arena. We've invested in this team establishing the new Gaming Center of Excellence, and they are innovating, creating new technologies and inventing new brands. We continue to believe that through a combination of face-to-face, off-the-board, and digital gaming, there's an opportunity to grow our gaming business. We had a good foundation upon which to build as Hasbro has 8 of the top 10 game brands in the U.S. last year. At Toy Fair, we'll unveil a number of new gaming initiatives, which we are excited about and set the stage for the types of innovation we seek to bring to market go forward. Before I move on from gaming, let me speak to the continued success of Magic: The Gathering. The team at Wizards of the Coast has done a tremendous job of taking this brand, which totaled less than $100 million in revenues in 2008, and was on the decline to where it is today, the largest brand in our Games & Puzzle category, the largest game brand in the U.S. and more than double the size it was just 3 years ago. It proves that with new leadership, strong consumer insights, innovative game play and the integration of face-to-face and digital play, gaming brands can thrive. We need to do more of this. In 2012, the team at Wizards of the Coast will unveil a completely new brand initiative, which you will learn more about at Toy Fair. Looking at the rest of our business in 2011, our Boys category had a tremendous year, growing 35% on the strength of Transformers and Beyblade, as well as the launch of KRE-O, significant sales of Nerf and growth in Super Soaker. Transformers revenue grew by more than 85% year-over-year and came in at the low end of our targeted revenue range for the brand. As the fourth highest grossing film of all time, Transformers: Dark of the Moon was extremely successful at the global box office, and we recently began airing Transformers Prime television animation around the world. In 2012, we have the benefit of global television programming, an innovative line with new characters and play patterns and several new digital gaming introductions behind the Transformers brand. Beyblade exceeded our expectations and was an incredible success globally. When we began to work on Beyblade with our partners, Nelvana, d-rights and Takara Tomy, we set out to manage it as a long-term battling brand, with continuous innovation beyond the core tops. We are entering the next phase of that strategy this year. In fall 2012, we are introducing an all-new play pattern supported by Nelvana's television entertainment and digital play called Beywheels [ph]. In addition, we have other new innovation in the line for 2012, which we will unveil at Toy Fair that will help the continued momentum in the brand. In 2012, we believe in our Marvel opportunity with Marvel and Sony's reinvention of The Amazing Spider-Man, as well as Marvel Studios' The Avengers. We're also looking forward to new Ultimate Spider-Man animation and continuing Avengers: Earth's Mightiest Heroes animation. These films and television series help make up a tremendous entertainment slate we are supporting in 2012, which also includes Star Wars: The Phantom Menace in 3-D, which hits theaters this Friday; Battleship with Universal; and G.I. Joe: Retaliation with Paramount; as well as the global television programming behind Transformers; continued television animation and innovation in Beyblade. Now turning to our Girls category. Although overall, the category did not grow in 2011, My Little Pony through a coordinated entertainment, merchandise and retail program, as well as Baby Alive, which is growing in the U.S. and internationally, both posted year-over-year gains. FurReal Friends, after doubling revenues in 2010, remained essentially flat in 2011. This brand is a great success story. Created just 10 years ago, it is now a very significant growth brand for Hasbro. In 2012, FurReal Friends brings new play with the all new Dizzy Dancers line and an exciting new feature pet for the holidays. In fall 2012, Littlest Pet Shop will get a new look at its own Hasbro Studios television series set to air in the U.S. on The Hub. Similar to how we are successfully reigniting My Little Pony, Littlest Pet Shop television will tell stories, which engage the Littlest Pet Shop consumer and carry through our merchandise and retail presence. Finally, our Preschool category grew 4% in 2011 supported by the successful introduction of Sesame Street and innovation in core PLAYSKOOL. As I mentioned earlier, 2011 marked the first year we had product on shelf in our 10-year alliance with the Sesame Workshop. We are delighted to be working together, and last year was the beginning of building a year-round global brand for Sesame Street. We're off to a good start in 2011. Sesame Street was the #1 dollar growth property within the plush category. Within Preschool, we also successfully introduced the all-new Playskool Heroes line based on Transformers, Star Wars and Marvel. In 2012, this line will benefit from theatrical releases for Star Wars and Marvel properties. Additionally, Transformers Rescue Bots television programming will premiere on The Hub on February 18. We're also excited that Marvel Super Hero Squad programming began airing on The Hub on January 30. In conjunction with this, Marvel is expanding its licensing business behind Super Hero Squad, which Hasbro will support with an expanded line of product. Turning to Hasbro television. Our global initiatives are making real progress with Hasbro Studios programming now airing globally in over 140 countries this year. In the U.S., we are one year into the launch of the all-new Hub Television Network, and the ratings trends continue to be positive. The fourth quarter is the first quarter we have year-over-year comparisons for The Hub. And during the quarter, The Hub posted 31% gains in total day against kids 2 to 11. The network posted growth throughout 2011, and Hasbro Studios series accounted for 5 of the top 10 series for the year. In respect to our movie deals, Stretch Armstrong is scheduled for release on April 11, 2014, and we are partnering with Relativity to bring this film to global audiences. I've described to you before the value of reinventing a brand like Stretch Armstrong. Remember, we have not actively marketed Stretch Armstrong for nearly 20 years. While it is a vault brand, the reinvention and reimagination of this brand will deliver incremental revenues and profits as we activate the entire brand blueprint globally in 2014 and beyond. With Candy Land, we're pleased to expand our relationship with Sony. We are also looking forward to be working with Adam Sandler and his production company, Happy Madison, for the first time. The creative talent on board for Candy Land is amazing, and we're excited to see the world of Candy Land come alive for kids and families everywhere. In 2012, we have 2 films based on Hasbro brands. First, in partnership with Universal, Battleship will debut on the big screen in April, internationally and in May, domestically. And together with Paramount, the second G.I. Joe film, G.I. Joe: Retaliation, will hit theaters in June. We are now working with 4 major studio partners: Sony, Relativity, Universal, and Paramount, which provides us access to amazing talent and tremendous resources. As we look ahead to this year, we believe absent the impact of foreign exchange, we can again grow revenues and earnings per share in 2012. Our focus is on the core tenets of our branded play strategy. This is centered on creating the most innovative play experiences in the industry, inventing new brands, keeping momentum in our International businesses while delivering new immersive brand experiences for our consumers. Our plan includes a return to historical profitability levels in the U.S. and Canada business and a drive for growth while creating innovative gaming experiences globally through newly created and reinvented Hasbro brands. I believe we have the right teams in place to make this happen. We have invested in the infrastructure to move from global aspirations to global execution and are positioned to capitalize on the innovation in our line all around the world. Our branded play strategy is working even as there are areas of improvement we need to make in our execution. We look forward to speaking with you later this week at our investor event in Toy Fair in New York, where we'll update you on our business and provide visibility to a number of new and exciting Hasbro brand initiatives. We hope you're able to join us. Now I'd like to turn the call over to Deb. Deb?

Thank you, Brian, and good morning. As Brian spoke to, 2011 was a good year for Hasbro albeit with areas to improve. We grew our business, invested in long-term growth opportunities and returned $577 million in cash to you, our shareholders, through dividends and share repurchases. We grew revenue, operating profit and earnings per share including strong international growth. However, the results of our U.S. and Canada segment did not meet our expectations, and this impacted our performance for the full year. As Brian mentioned, we put new leadership in place to drive growth and improve profitability in this segment go forward. We're also keenly focused on managing our worldwide costs and improving the leverage of our expenses while continuing to unlock the potential of our brands globally. For the full year 2011, net revenues grew 7% to $4.29 billion from $4 billion in 2010. Foreign exchange had a $64.3 million favorable impact on net revenues for the year. Excluding the impact of foreign exchange, net revenues grew 5.5%. While not as high a percentage growth as we had planned for, revenues were a record for our company. Looking at our full year 2011 results by segment, the U.S. and Canada segment net revenues were $2.25 billion, down 2% versus $2.3 billion last year. Growth in the Boys and Preschool categories was offset by declines in the Girls and Games & Puzzles category. The U.S. and Canada segment reported an operating profit of $278.4 million or 12.4% of revenues for the full year 2011. This compares to $349.6 million or 15.2% of revenues in 2010. The decline in operating profit margin is primarily the result of lower revenues in the year, product mix and the impact from the sale of closed out inventory. In the International segment, net revenues for the full year 2011 increased 19% to $1.86 billion versus $1.56 billion in 2010. Absent a positive foreign exchange impact of $59.3 million, net revenues in the International segment grew 16%. The results in this segment reflect growth in all major geographic regions, including mature and emerging markets in Europe, Latin America and Mexico as well as Asia-Pacific. Growth in the Boys category more than offset declines in the Games & Puzzles, Girls and Preschool categories. The Boys category benefited from strong growth in Transformers, Beyblade, Nerf, Super Soaker and the introduction of KRE-O. Games & Puzzles declined but much less than in the U.S. Magic: The Gathering and the GAME OF LIFE were among the games brands which grew in 2011 internationally. In Girls, FurReal Friends and Baby Alive grew in the year, but Littlest Pet Shop declined. And finally, the Preschool category was down slightly. Play-Doh continued to grow, and Sesame Street contributed to year-over-year yield gains but not at the level it did in the U.S. Operating profit in the International segment grew 29% to $270.6 million or 14.5% of revenues compared to $209.7 million or 13.4% of revenues in 2010. While we made higher levels of investment in building our global teams and capabilities during the year, the strong performance of this segment in 2011 more than offset those investments, and we delivered operating profit growth in all major regions. Consistent with our comments during the year, the full year International segment operating profit improved on these higher revenues and increased leverage on our investments. The Entertainment and Licensing segment full year net revenues increased 19% to $162.2 million compared to $136.5 million in 2010. Revenue growth in the Entertainment and Licensing segment reflects the sale of television programming globally as well as movie and licensing revenue from Transformers: Dark of the Moon. For the full year 2011, the Entertainment and Licensing segment reported an operating profit of $42.8 million compared to $43.2 million in 2010. The impact of the higher revenues in 2011 was offset by investments we made in growing our global licensing teams and strengthening the capabilities of the U.S.-based team. Now let's look at earnings. For the full year 2011, we reported net earnings of $385.4 million or $2.82 per diluted share compared to $397.8 million or $2.74 per diluted share 1 year ago. 2011 earnings per diluted share of $2.82 includes the impact of a $20.5 million favorable tax adjustment or $0.15 per diluted share and pretax expense of $14.4 million or $0.07 per diluted share related to cost associated with establishing Hasbro's Gaming Center of Excellence in Rhode Island, both of which were announced in the second quarter 2011. 2010 earnings per diluted share also included a $0.15 favorable tax adjustment. Absent these factors, 2011 earnings per share increased 5.8% or $0.15 to $2.74 versus $2.59 in 2010. For the year, average diluted shares were 136.7 million compared to 145.7 million last year. Cost of sales for the year was $1.84 billion or 42.8% of revenues versus $1.69 billion or 42.2% of revenues in 2010. This resulted in a gross margin of 57.2% of revenues, which is below our stated target of 58%. The difference versus our expectation is attributable to the weakness in the U.S. and Canada during the fourth quarter. However, the year-over-year decline in gross margin is tied to several factors. These include a negative impact from product mix including a decline in the Games & Puzzles category for 2011, sales of closed down inventory and higher manufacturing variances due to slower games production during the year. Partially offsetting these factors were higher revenues for Magic: The Gathering as well as the higher margin Entertainment and Licensing segment. Operating profit for the year was $594 million or 13.9% of revenues versus $587.9 million or 14.7% in 2010. This includes $14.4 million related to costs associated with establishing our Gaming Center of Excellence. Excluding these costs, operating profit was 14.2% of revenue. As we've communicated to you throughout the year, 2011 included important investments in people, offices, and infrastructure to advance Hasbro's global capabilities, much of which is in our SD&A expense. For the full year, SD&A increased $40.9 million to $822.1 million, representing 19.2% of revenues versus $781.2 million or 19.5% of revenues in 2010. This includes $7.6 million of costs related to establishing the Gaming Center of Excellence. Despite the significant investments we made in 2011, our full year SD&A expense did not increase as much as we had originally anticipated. The lower-than-expected SD&A increase is primarily the result of lower stock compensation in bonuses due to the underperformance of the company versus our financial performance targets combined with a proactive effort to reduce planned expenses. As Brian mentioned, our global Hasbro teams are focused on innovation, and our investments in product development fueled these efforts. In 2011, product development expense totaled $197.6 million or 4.6% of revenues and included $6.7 million in costs related to establishing Hasbro's Gaming Center of Excellence. Product development in 2011 was lower than 2010 as we leveraged our spending on bigger, more global brands. Advertising expense for the full year 2011 was 9.7% of revenue compared to 10.5% in 2010. The lower level of spending was primarily due to the higher mix of entertainment back products including Transformers and Beyblade. Additionally, with its revenue growth, we also saw improved leverage on our advertising to sales ratio in international markets. This richer mix of entertainment back revenues drove royalties higher both in dollars and as a percentage of revenue. For the full year 2011, royalties increased $90.6 million to $339.2 million, and represented 7.9% of revenues versus 6.2% in 2010. In 2011, we had a full year of television program production cost amortization versus 2010 when we only had expense in the third and fourth quarters. For the full year 2011, program production cost amortization of $35.8 million was in line with our stated expected range for the year. This compared to $22.1 million in 2010. Moving below operating profit, other expense net for the year totaled $18.6 million compared to other income net of $2 million in 2010. The year-over-year change was primarily the result of foreign currency losses versus gains in 2010, as well as investment losses which were mark-to-market. Also, as we mentioned last quarter, in 2010, we had a gain of $4.9 million recognized from the sale of intellectual property. Our 50% share of The Hub is also included on this line in the P&L. For 2011, our share on the earnings in The Hub was a loss of $7.3 million compared to a loss of $9.3 million in 2010. The Hub was EBITDA positive in 2011. Our underlying tax rate in 2011 was 26.2% compared to an underlying tax rate of 25.4% in 2010. Over the past few years, our profits internationally have grown, lowering our underlying tax rate. In fact, in 2009, our underlying tax rate was 29%. Now, let's turn to the balance sheet. At year end, cash totaled $641.7 million compared to $727.8 million 1 year ago. Operating cash flow for the past 12 months was $396.1 million and includes $81 million in television programming costs over the period. Almost all of our yearend cash balance is held outside of the U.S. During 2011, we repurchased a total of 10.5 million shares of common stock at a total cost of $423 million and at an average price of $40.42 per share. At year end, $227.3 million remained available under our current share repurchase authorization. Last week, our board voted to increase our quarterly dividend 20% to $0.36 per share from the previous quarterly dividend of $0.30 per share. This was our third consecutive year of a 20% or greater dividend increase. And since 2005, our quarterly dividend has increased fourfold. During that timeframe, consistent with our stated objective to return cash to shareholders, we also repurchased 87.1 million shares of common stock at a total cost of $2.6 billion. The quality of our receivables portfolio remains good, and receivables at quarter end were $1 billion compared to $961.3 million last year. This reflects both the growth and timing of revenues in the fourth quarter. DSOs were 70 days, up 2 days versus last year, and inventories at $334 million were down from $364.2 million 1 year ago, in line with our efforts to lower our inventory levels from 2010. Inventory in the U.S. and Canada segment was down year-over-year and despite strong growth internationally, on a year-over-year basis, our International segment inventories were essentially flat. Depreciation in capital expenditures for the year were $113.8 million and $99.4 million, respectively. Our branded play strategy is working and we're still in the early stages of unlocking the full global potential of our brands. As Brian stated, absent the impact of foreign exchange, we believe we will again grow revenues and earnings per share in 2012. This continued execution of our strategy keeps us on track to deliver a compound annual revenue growth rate of 5% or better over time. Additionally, beyond 2012, we expect operating profit to grow faster than revenues. In 2012, we expect only modest operating profit growth as we rebuild our U.S. and gaming businesses. Finally, we continue to target operating cash flow generation in the amount of $500 million on average. Our financial stability and continued strong cash generation has enabled us to execute our strategy including investing in our brands and our people while maintaining our commitment to return cash to you, our shareholders. Now Brian, David and I are happy to take your questions.

[Operator Instructions] Our first question is coming from the line of Drew Crum with Stifel, Nicolaus. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Just starting with the games business. I think, Brian, your characterization of the business in 2012 would be to stabilize it. Can you just put a little more color around that? And then, as you look back at the fourth quarter, I think in 2010, you suggested that there's too much focus on several SKUs, you relate to market with the Family Game Night promo and you didn't get the retailer support you were expecting. As you look at the fourth quarter of '11, what do you attribute the 11% decline to?

Yes. So first, Drew, if you look across the business, there were a number of games brands that grew based on having kicked off the Center of Excellence and began to build some of the momentum. So whether it's the GAME OF LIFE or Simon, Magic: The Gathering, Duel Masters, Risk, Yahtzee, a number of brands including Monopoly electronic edition, the Electronic Banking. We need to continue to build the momentum in the innovation and reinvention of our games brands. Inventory in the games business was down at the end of the fourth quarter. So retailers were sort of destocking in some of the other SKUs within our brands. We focused in on a number of campaigns around those brands, those bigger, more global brands, our core brands, if you will, within the games business. And that's our strategy go forward. We need to build greater momentum given the size of the games business to reach across more of our games business, and that's our intention over 2012. You'll see a number of new games initiatives that will be launched throughout the year 2012. Therefore, rather than providing some specific guidance, talking about stabilizing the games business in 2012 and growing it in 2013 and beyond. We know we can grow this games business because every time we innovate, and the team's focused around great innovation and off-the-board gaming and face-to-face gaming, we know we can drive that brand and grow that brand. We need to build more mass and we will do that. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Brian, looking at 2012's entertainment slate, pretty strong for a number of properties there. How are retailers approaching entertainment properties? What is their appetite stock product around those initiatives? And specifically on Transformers, what are your expectations in terms of year-on-year declines as you're past the theatrical release?

Well, it was great that last night in the Super Bowl, our partners and our own brands were so heavily featured, and it was really emblematic of the kind of year we have in entertainment. Within that, we had The Avengers, and Star Wars, Battleship and G.I. Joe. And in the pregame, we had the Transformers theme park ride that opens at Universal in May. Retailers are excited about our initiatives. We're very excited about what Sony and Marvel have done to reinvent Spider-Man and you'll see that product shipping in the second quarter as we go on shelves for May. You'll see in Avengers, product shipping late in the first quarter and a lot of excitement around a combination of superheroes there. Battleship, we focus on other categories like KRE-O, and continue to roll out a very successful new product launch in the KRE-O brand. In G.I. Joe, really good support. So again, across the board, if you look at the entertainment initiatives, people are excited about those. Lots of new innovation within those lines. So again, a good start to 2012. Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And just one last housekeeping question for me. Deb, can you give us the free cash flow for 2011?

Sure. The free cash flow for 2011 was $297 million.

And, Drew, the other piece I just remembered. On Transformers, obviously, Transformers Prime, it's a TV series that's now airing at over 140 countries around the world. So as we've seen in prior years, where we have television following a movie year, we would expect to mitigate the decline. So I would look to those years where we've had television following motion pictures as more of a guidepost. Although I can't provide you specific numbers, but I would say that we're very excited about the early rating successes as we're having on Transformers Prime around the world.

Our next question is from the line of Sean McGowan of Needham & Company. Sean P. McGowan - Needham & Company, LLC, Research Division: I wanted to clarify something. Deb, you said right at the very end of your comments regarding expectations for operating income growth in 2011, did you mean the growth will be modest in dollars or the growth would be modest as a percentage of sales?

As a percentage of sales. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. That's a little different. Okay. One other thing. Brian, at the outset, you've, I think, alluded to 4 brands that do over $400 million but I think you only gave us 3. Well, can you tell us what the fourth was? You gave us Transformers, Beyblade and Nerf.

Yes. I think that those were the 3 that I talked about. Those are the 3 that we have. I don't think I said 4. Sean P. McGowan - Needham & Company, LLC, Research Division: Oh, I thought you said there were 4.

No. The 3 that we cited. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. Question in Marvel, the partnership you have with Marvel for the Squad games. I mean, Squad plays on The Hub. I don't know about everybody else, I was a little surprised to see you kind of teaming up with Marvel for programming on The Hub. Do you think this is something we can look forward to seeing more of in the future?

Well, actually, this trend began earlier on if you look at the lineup on The Hub, you see Batman animation on the air. So certainly, that supporting product line from other companies, a number of toy companies are advertising on the air on The Hub. The Super Hero Squad is something we're very excited about. It really fits our programming lineup. It allows Marvel to go out and enhance its licensing efforts and our team is also working on enhanced line of products. So again, it's sort of emblematic of the trend that we're creating in The Hub as the ratings continue to increase year-on-year as we've seen through the fourth quarter and again in January. So again, we talked a long-term plan to make The Hub successful and then to distribute our programming around the world. So this is just another one of those building blocks in that progress. Sean P. McGowan - Needham & Company, LLC, Research Division: Okay. And then final question, whoever wants to take it, regarding retail inventories, you commented that in the U.S., they're flat versus one year ago but the quality's higher. Now one year ago, you weren't the only ones in that position, higher than desired, higher than expected going into beginning of 2011 caused a benefit of a clog in terms of shippability in the early part of 2011. What are your expectations for what impact that inventory position might have on shippability in the early part of '12?

Firstly, Sean, this is David, and as we said, in the U.S., we're essentially flat. When we said sort of a better quantity, last year, we had too many games but our games are down almost 20% at retail inventory as we come into the end of the year. Where we're up is things like Beyblade. We were in very short supply on Beyblade last year. So logically, that's not a bad thing. We're up on Star Wars, which is another good thing because their movie in 3-D is launching this Friday. And we're up on KRE-O because that's a new brand for us. We didn't have any KRE-O last year, and we're up a bit on Transformers but the DVD on Transformers already hit in the fourth quarter of last year. So you've got kids down to watch right now and still good demand for that as well as television. So where we're up, we're sort of good place to be up and where we are down, in places like games. And actually, we're down a little bit in Nerf. I think we said that Nerf was flat for the year. As a line, it grown internationally but was down a bit in the U.S. and our inventory is down reflecting that. In terms of the first quarter, yes, I think whenever -- obviously, the new brands people were taking that to the extent that you got pockets of brands that you're bit long on, that is going to sort of have some kind of impact during the first quarter. I want to say that remember, half of our business nowadays is in international markets and in international markets, which have clearly grown nearly 19% this year. Last year, we're very happy with the level of inventory we're having in the retail trade.

Our next question is from the line of Michael Kelter of Goldman Sachs.

Just from a big picture perspective, you guys said in the prepared remarks a couple of times that the branded play strategy is working, but this is now the second disappointing Christmas in a row. And so I guess I'm curious if there are at least any parts of the strategy that you need to tweak at this point or if perhaps one direction this may go is whether or not there's going to be a little too much organizational tension on entertainment and not enough on the core. And I wanted to hear what you guys think about that at this point.

Yes. Michael, if you look at the strategy in 2012 as we executed, we are focused on that core tenets of our strategy and 2012 is about executing our strategy. Over the last couple years, we've been putting in place the building blocks, that blueprint that enables us to get there. So we have great brand innovation, and we're focusing on new brands as well as reinvented brands. Our international growth again speaks to the kinds of innovation we've had and the growth that we have in our lines. We're going to return the U.S. to historical levels of profitability and momentum, and we're creating immersive experiences, whether it's in motion picture television. So again, focused on the core reinvention of toys and games primarily and then building the capabilities around that blueprint in order to create that immersive experience for consumers. We did have a setback in the U.S. in 2011. We've already taken steps to change that momentum to return the business to operating profit in the immediate present, and then to continue to drive for growth. So in any transformation, there are steps forward, and then there are areas where we need to improve our execution. But overall, if you look at the growth in Europe at 19%; Latin America, 19%; Asia Pacific at 24%, our growth in Entertainment and Licensing in revenues and soon, in operating profit as we digest the investments we made in personnel there. Again, we're going to grow our operating profit in the long term, in the absolute, faster than revenues over time. And in 2012, as Deb mentioned, we'll have modest improvements in operating profit margin back to more historical levels, particularly focused on the U.S. business. So we're focused on execution, putting the right teams into place.

And in the U.S., where you made the change to management. I mean, obviously, results weren't what you were expecting from a numbers perspective but could you be maybe somewhat specific as to in retrospect, what the team should have done that they didn't do and what you're looking for from the new team in the U.S.?

Well, I think one of the things that we've done a lot of is investing in innovation, and I think around the world, we've gotten paid for that innovation and we've gone after marketing campaigns that have really worked for us around those brands, global marketing initiatives. The U.S. is a more sophisticated market, more technologically savvy, it's where we need to focus on that off-the-board gaming, face-to-face gaming and the marriage of digital gaming along with analog gaming as we've done with the Wizards of the Coast business, where we've seen that kind of growth in Magic: The Gathering. We've seen that kind of growth from Simon or Risk or Yahtzee and MONOPOLY Electronic Banking where we add those elements. Those are the kinds of things we need to go after so you'll see a combination of product development that's focused on a more technological savvy consumer, marketing campaigns that focus on a consumer that's consuming media in any number of platforms which is very true for the U.S., the ability to provide those -- the connection to consumers and that immersive experience across any number of platforms. So it's all about recognizing the difference in a mature market like in the U.S. and growth in growing market share there as we have done internationally.

And on these games, I mean, minus 11 on top of last year's minus 22. It's hard to imagine there's not some sort of secular element and, I guess, as you've continued to see the evolution there, iPhones, iPad, aren't the first technological threat over the years, but is it different this time and is the analog board game business going to, in your opinion, slowly go down and at best, you can try to keep up with technological advances of your own? Or is that overstating the issue?

Well, I look at the -- where were the teams have been able to get to new innovations and recognize they've started to take on this just over the summer, spring and summer of 2011. Everywhere we've put new innovations and new marketing campaigns in place, those brands are growing. Although recognize the size of the games business and the number of brands that we currently market. We need to create some focus and create some impact around that. So as I said, whether it's Magic: The Gathering that's grown, Duel Masters, the GAME OF LIFE, Simon, Risk, Yahtzee, MONOPOLY Electronic Banking. In fact, one of the areas that has been the fastest percentage decline is our puzzle business and we're addressing that business. So that's not where we can apply our best innovation. So again, I don't believe that overall, we're just talking about some secular change. I think what we're talking about is a recognition that we can create all kinds of gaming experiences off the board, the marriage of digital and analog, and on the board with digital and analog connections and you will see a lot of that as you come to Toy Fair on our analyst presentation on Friday and we're quickening the pace and impact of our innovation through the creation of the Gaming Center of Excellence, and we're very committed to and believe in the ability to grow our games business overtime.

And then lastly, I wanted to hear what your expectations were in '12. First of all, for Beyblade, just kind of what your feel for the direction of things will be in '12. And then also, should we assume since you didn't update your prior guidance of Boys being flattish and in games, Girls and Preschool all being up, I think, you guys have said in your analyst day. Is that still good as ongoing guidance or any tweaks to that?

Great. Well, if you look at the Boys business, clearly had a very successful year last year having grown 35%. And so one might be hard pressed to say you expect additional growth. Having said that, we have so many great new initiatives and so many partnered brands that are really being reinvented in such a spectacular way. We could see growth in the Boys business. I think we certainly have put plans in place to continue to reinvent the Beyblade brand and work with Nelvana to put that new innovation into the animation. And you'll see a whole new segment called Beywheels [ph] as well as other new innovations in Beyblade. In Transformers, with the television, we would expect that to mitigate a decline we'd normal see in a movie year. Spider-Man looks fantastic. Avengers looks great. Star Wars launches this Friday in 3D. So whether it's in motion-picture supported brands or television-supported brands, we feel very good about our Boys business. I won't provide specific guidance but suffice it to say, we could see the continued success in our Boys business over and above last year. In games, we've talked about the idea of stabilizing the games business, which we believe we can do and we are seeing momentum in certain brands that we need to expand across a broader array of volume, of revenues and volume to create that critical mass in our games business. We do expect that our Girls business can grow this year and we would expect continued momentum in our Preschool business as we've already created, and you can see the results in our fourth quarter. Sesame Street is just really begun to roll out. It hadn't had as much impact in the international markets as it did domestically and that's just about getting out to more markets beyond English-speaking, as well as new innovations in the Preschool business.

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

While we're on the topic of your 2012 outlook, I just had some follow-up questions there. You had mentioned in the release that earnings would grow in '12 depending on FX. I was just wondering what you were thinking the impact to earnings would be based on current exchange rate?

I think it's difficult in today's market, Felicia, looking at foreign exchange in what we really wanted to indicate that absent the impact of FX, which if you just look at the euro alone, it's been having a $0.10 range in the past month of trading against the dollar. Absent that, we expect to grow underlying revenues and earnings per share.

Okay. So your message is just that let's think about this excluding all the kind of exogenous factors, you're still going to grow?

That's right.

Yes.

Okay. And then gross margins, are you still, based on kind of where you ended up this year, you're still looking for that to be in that 58% range?

Yes, we are.

Okay, great. And then on Sesame Street, Mattel in their earnings call gave enough color to imply that for them, it was roughly $75 million in revenues. Still a new brand for you, you just mentioned that internationally. You're still trying to get traction there but I was wondering if you were able to kind of achieve something near that this year and do you see yourselves being able to generate growth higher than that?

Well, we're focused on the business in a number of ways. First, creating a 12-month business through constant invention of new segments beyond just the plush business has to been historically more back end loaded; focusing on a number of new characters, which you'll see; focusing on learning, which also will be ever present throughout the Sesame line as one might expect. So we have seen great success in Sesame Street, thus far, albeit early days. And we do need to get the brand out to more markets. Sesame Street is one of the most widely distributed TV programs around the world. We need to take advantage of the fact that so many consumers love and admire and watch Sesame Street programming. So we're in the early days but with really positive indications.

Okay, great. And then just moving to entertainment side. Given your experience with Universal and now you're kind of spread out through a number of different studios. I'm just wondering if you could give us any thoughts on perhaps self financing production of a movie or at least taking on some of the expenses at yourself?

The Universal relationship kicked off in 2008. As we all know, the motion picture business has really evolved dramatically since then. Our goal in moving some of those movies to some great new partnerships has everything to do with our ability to create visibility to new initiatives, to work with our global retailers and potential license partners as well as in digital gaming and to be able to plant the flag around timing in the near future, whether it's 2014 or beyond. So it's really mostly about that and signing with Relativity who's a great studio, very innovative studio on Stretch Armstrong and it's currently slated for April. In Candy Land, it was a lot of excitement around working with Adam Sandler and expanding our relationship with Sony, where we already have Risk in development. And so that's really been the plan. If you think about it and the motion picture business for us, while our 3 movies have certainly generated $3 billion at the box office, more importantly for us, those 4 movies have generated over $1.6 billion in merchandise sales for Hasbro across a number of different categories and in license products. So we continue to focus on that. We don't have any plans currently to finance our own motion pictures. We're always out looking at weighing our strategic options and running the math of every number of scenarios in every one of our business initiatives. 2012 is really about executing the core tenants of our strategy. It's about making that pivot and albeit there'll be some investments and continuing to build our emerging market business, it's really about executing our strategy, and you know our brand blueprint as by now. And that's what we're focused on, is executing that strategy.

And then just finally, on The Hub. I'm just wondering if there were any changes to your anticipated marketing spend and any further initiatives that could continue to drive ratings in '12?

As we mentioned, we're EBITDA positive in 2011. We do have marketing budgets considered within our operating plans each year. The Hub has made great progress. We've seen a number of different platforms really work for us, 5 of the top 10 rated shows are Hasbro shows. But we also have some great spooky stuff that's really performing from R.L. Stine, the Haunting Hour and Goosebumps that the team put together a great on-air promotional approach that was kind of an immersive experience onto itself in January called Janu-Scary, which was very effective and drove ratings growth. A combination of our Hasbro Studios programs as well as some of these spooky shows. Though the approach continues to build progress over time and we have marketing support contemplated, and the network is now in 62 million homes.

Our next question is from the line of Rob Carroll of UBS.

Housekeeping on guidance and then something on free cash flow for '12. Around guidance, so, I mean, on a constant-currency basis, has the rate of growth that you guys envision changed at all from what it was back in mid-November?

Rob, I think we're not going to try to forecast growth, as we mentioned, the 7% growth last year was above our 5% guidance on average revenue growth over time. We continue to maintain the 5% CAGR expectation on revenue growth over time. But I'm not going to guide specifically on '12 versus '11. Suffice it to say, we're trying to be clear on the fact that '12, we believe, will grow both revenues and EPS, returning the U.S. business to more normalized levels of profitability and getting operating profit percentage up modestly in 2012.

Got you. And then as we look towards '12, should the rate of share repurchase slow down somewhat? Just given the investment year and as kind of the capital commitments for '12 in terms of the increased dividend and spending on Hub production or Hasbro Studios production. I mean, should the availability of cash share repurchase flow down somewhat versus the, call it, $400 million run rate we've seen over the past few years?

Well, I think as we look at share repurchase, we had done quite a bit in the third quarter and we had mentioned that. And in the past year, we had also called our convertible debt and repurchased an equivalent amount of shares that went into the market with that. So in 2010, you saw a pretty high amount. We've done quite a bit in 2011. And at the end of 2011, we had $227 million remaining under our current board authorization. And my expectation and our expectation would be that we would continue to use that authorization as appropriate in the open market.

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

First one is just with respect to markdown money in the first half of '12 year-over-year just given that you have flat inventories in the U.S. How would -- is that going to be a lot less or is that going to be about the same as last year?

Well, I think that if you look at the fourth quarter, clearly the U.S. operating profit was impacted by our taking more significant steps in markdowns and price variance. So as to ensure we could clean inventories and sell through our inventories at retail. So taking those steps earlier once we saw the decline in rates of sale post Thanksgiving. So I think we've taken into account what we know to be the need -- the necessary markdowns within the fourth quarter. I don't know, David, you want to comment on first?

Yes. I think when we think about the first quarter and you look at the calendarization of our sales, clearly, as our International business grows, our international sales tend to come later in the year and less in the first quarter. So I think you're going to see a reduction in the overall percentage of sales in the first quarter and maybe the first half. I think another factor is in the U.S., I think we're going to work with our retailers to try and sort of deliver product to them more in line with consumer demand much more like we do in international markets. So I think in the first quarter of this year and indeed, the first half, you're going to see a lower percentage of our full year sales than you would have done historically for those 2 reasons, not because of our sort of a retail carryover inventory so much.

Right. With movies in entertainment lineup, would that help though the first half a little bit more than last year?

Yes, it would. I mean, it mitigates it a bit in that we have initiatives that are earlier in the year, but I think what David said is particularly important. If you look last year, international sales over the last 10 years in the fourth quarter and then over the last couple of years has actually been more than 50% of our revenues. And so it's a significant difference in first quarter revenues in international versus fourth quarter revenues. So that does tend to -- that will tend to skew as international is growing at the rate that it is and as we play catch up in several markets around the world as we put teams in place and move from distributor businesses into our owned and operated subsidiaries. So that's going to have probably the biggest impact on quarterly sales as growth of the International business relative to the U.S. Equally, if you look at Entertainment and Licensing, a lot of our license fees are paid to us in arrears. In other words, quarters after the activity. And so again, that tends to have an impact of more third and fourth quarter oriented. That, combined with focusing on consumer insights and partnering with our retailers in a very significant way, the team has already been out to see our retailers, and is working with our retailers on great partnerships in the U.S. and promotional partnerships to ensure that we really understand the consumer and shopper insights better than we ever have, and to return to an era of strategic thought leadership around retailing with them.

Right. Okay. And then just on POS internationally, in the U.S., is there anything that was particularly strong in a regional world or any region that was particularly weak?

If you look overall in the POS around the world was particularly strong. And where we get absolute POS data was particularly strong. If look at the international markets, in several markets around the world, there were double-digit gains, significant double-digit gains. So we get POS data in a number of markets. In the U.S., overall, POS was down a bit, it was really led -- that decline was led by games. If you look at toy, it was up a bit. But again, as we look at our markets, international markets are very healthy. We talked about retail inventory levels and the momentum in those markets as we put teams in place, we would expect some of that to continue.

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

Last year, at Toy Fair, you sounded very excited about the opportunity with Nerf growing internationally and Vortex, and now we see a year where Nerf was flat year-over-year. I wondered if you could sort of talk around those points. And then secondly, with regard to the film business, will there be another $5 million cancellation payment for Universal in the first quarter for Stretch Armstrong?

So the second question first, no, there won't be. It was our prerogative to move and to take the opportunity with very excited studio partners in Relativity and Sony to move those films and to plant the flag around dates and years so that we can provide visibility to those initiatives out in the marketplace with retail partnerships and promotional partnerships and the like. So, no, there won't be a charge or a payment. And what was the other one? Oh, sorry, Nerf. So there are actually 3 major initiatives in Nerf coming this year, you'll hear more about those at the end of the week but suffice it to say, there's some underlying initiatives as well as some new brands and new initiatives within that. I think that in the international markets, Vortex work well, but recognize that our business is still primarily a dart business. International growth certainly offset the U.S. challenges. But for the fourth quarter, we recognize that the dart business is still the significant part of our business. You're going to see some major innovations within the lineup of darts and I'll talk more about that at the end of the week, as well as innovations within our sports business, as well as a Volt [ph] brand that we're taking out in the sports action category that we're very excited about and will be new business for us go forward.

Our next question is from the line of Margaret Whitfield with Sterne Agee. Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division: I wondered if you could discuss input cost pressures and any plans to take prices up. And, Brian, after this year's strong entertainment lineup, I think, I'm aware of 2 Marvel movies for '13. Anything else you can share on the entertainment outlook for that year?

Margaret, this is David. In terms of commodity cuts, we do see them going up again in 2012. I think what happened in '11 is in the first part of the year, they went up faster than we expected and then they stabilized a bit more towards the back half of the year and in the fourth quarter. However, overall, they were significantly up. And I think we're going to see them going up again in 2012 over the course of the entire year. I think labor costs, we've already seen that in various provinces in China that had increases ranging from like 15% to 20% that was sort of predetermined, I guess, multi-year increase in place. So labor costs will continue go up. And the second part of the question is given that your costs are going up, are you going take to pricing to cover that? And the answer is, yes, we are. We took a 5.5% price increase on carry-over items in the U.S. on February 1. And in markets around the globe, exchange rates come into impact as well but generally, we're taking sort of similar increases around the globe to offset the cost escalation.

And on the entertainment front. While there have been a couple of announced movies that are certainly supporting some of our brand initiatives, we have a couple of others, one in particular that we'll talk about on Friday for our brand in KRE-O, but I'll let John walk you through that on Friday. And then some other potential news for 2013 from some of our partners. But again, I'll let them share that news with you.

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

A couple of clarifications off the bat here. Regarding Transformers, Brian, the figure that you gave in your preamble, did that include or exclude KRE-O?

It included.

Okay. Okay, any color on the size of KRE-O?

KRE-O was, I think I mentioned tens of millions of dollars. So we only launched in 10 markets this past year, already off to a very good start. We look at the initial market share data in those markets where we have data and very promising early market shares albeit only in a few months. And again, we'll roll out KRE-O now to 15 additional countries in 2012. We also add 1 brand that I will tell you about, which is Battleship. I think we mentioned that before but significant product offering within Battleship. That will go into our first 10 countries that we started KRE-O in, and then, that will roll out over time. And so that's sort of the strategy that we've employed as we look to create the innovations but also to have the capacity to make really high-quality innovative product and to market it in territories.

Okay. And then a few more clarifications. If I -- maybe I misunderstood but are you saying that you anticipate by the end of '12, U.S., Canada being back to those historical profit levels that you have seen in the past or will that be more into '13?

I think that you'll see the profitability return to the U.S. business, and we're focused on the return to profitability and then the drive for growth beyond that. But there are some specific things that had an impact on U.S. profitability in the fourth quarter, had to do with cleaning up the market. It had to do with material price variants in markdowns and partnering with our retailers given that we had higher expectations for sales in the U.S. that didn't materialize, and we had inventories. So I think you've seen we've worked our inventories down. We've gotten retail inventories in pretty good shape in the U.S. recognizing that it's mostly now focused on new initiatives and good performers in the marketplace versus year ago where we had certainly too much carryover inventory in games.

Okay. So you're saying returning to profitability or you're saying returning to the historical levels [indiscernible]?

Sorry, returning to historical -- sorry, I thought I've said that. Returning to historical levels of profitability.

By the end of '12. Okay, okay, okay. And then one piece that I think was missed regarding your commentary from the November analyst meeting. The Entertainment and Licensing, I think you said at that point in time given the heavy Transformers year that you kind of expected that category to be flattish, just an update there. And back to the Beyblade question, also at the analyst meeting, you said given the strong performance of Beyblade that you alluded to and now you've given us the exact numbers. And Transformers that you expected the Boys business to be flattish, now you're saying maybe up a little bit. Beyblade still probably could have a pretty decent follow-off. Are you saying these initiatives should typically see Beyblade sort of hold its own year-over-year?

So go to Beyblade. I mean, clearly, what we've contemplated recognizing we've had experience with Beyblade before in working with partnership with some great partners in Takara Tomy and Nelvana and d-rights, we anticipated that Beyblade could perform very well in 2011. So we took some steps to create some new innovations that we hadn't done the last time around in Beyblade when the brand was out in 2003 and 2004. So you're going to see a major new innovative line within Beyblade called Beywheels [ph], you're going to see that incorporated in the animation. So to your point, we would expect some mitigation in the decline, but we also can expect that Beyblade may decline off a very strong year in 2011. Offsetting that is the fact that there's a number of new entertainment initiatives we're very excited about. So what I'm trying to give you is a sense that given all the new entertainment initiatives to Marvel and Sony, movies and Avengers now for Marvel Studios and the Walt Disney Company backing that globally. We have a lot of excitement around our Boys business, which could lead to increases in revenue year-on-year.

Okay, okay, okay. And then the licensing, still flattish you're thinking about?

You see licensing revenues grew but we put some people into place around the world to take advantage of our brands as we continue to grow them and put immersive experiences around them. So we made investments in licensing which is why you see the operating profit did not grow, is that this has to do with the investments we made. We would expect in out years, in future years, that you'd start to get more profitability out of those investments as you grow revenues over time.

Okay, okay. And the only other thing, just more of a suggestion than anything else, I think, as alluded to a little bit earlier, is it would be helpful in your press releases if you could show the growth to net adjustment, especially, I guess, challenging years. And then, on a go forward basis, as those types of things improve but done by some competitors. So it would be helpful if you guys could also.

I think that, Tim, as we've discussed before, we look at our net revenues as actual net revenues. So we don't split out the growth to net. It's all part of gaining those revenues for us.

Okay. But, I mean, just give some color, I think, when there are some significant adjustments and then down the road when, hopefully, there won't be some significant adjustments as you have opportunities to reinvigorate growth.

Okay. Well, I don't see us doing that, Tim, to be honest with you. Net revenues in net revenues. However, we will talk about different things as necessary. So thanks for the feedback.

Our next question is from the line of Gerrick Thompson with BMO Capital Markets.

I was hoping you could talk about revenue from Hasbro Studios in the quarter and the year, and then also perhaps guidance for production amortization in 2012?

Revenue from the studios has grown in the year, Gerrick, just because we're starting to sell the program internationally. But again, it's not significant at this point from selling the programming. Most of the programming revenue comes from The Hub, and that's just within our numbers and eliminated as necessary. And from an amortization standpoint for 2012, I know we've talked about that, but the number is -- Debbie, do you have that off the top of your head?

I believe we said $60 million to $70 million.

Yes. $60 million to $70 million. And I apologize, I just didn't have it on the top of my head.

Okay. And on The Hub network, you said it was EBITDA positive for the year but negative contributed to earnings by $7.3 million. So I guess that will be $14 million -- $14.6 million overall. So what's that difference, what's the depreciation and the amortization difference between EBITDA and the net contribution?

Well, it's because The Hub has goodwill on its books and as it amortizes that goodwill, that's what's creating essentially the loss. So the Hub is EBITDA positive, from an operational standpoint, it's positive. It's really that amortization that's driving it into a category at this point.

Our final question this morning is from the line of James Hardiman of Longbow Research.

I was just hoping we could drill down a little bit on the profit contribution from the games business. You pointed to the underperformance of the games business as one of the primarily reasons for the gross margin on your performance for the quarter and for the year. I was hoping you could talk a little bit about how much of that is a function of games gross margins coming down and how much of it is merely a function of a mix shift away from games given the historical superiority of games margins? And I guess along those same lines, you've talked about in the past, how the margins from other segments have actually improved and margins from games may have come down a little bit. So as we close out 2011 and look towards 2012, is there still a material gap between games margins and the rest of your business margins such that if games continue to underperform, there's again going to be a gross margin drag.

Yes. I think it's really a couple things. I think first, what you saw was a growth in revenues in the fourth quarter related to entertainment properties. Therefore, royalty-bearing properties. And so as those move ahead, obviously the operating profit changes in order to pay the royalties, and you try to mitigate that a bit by pairing back a bit on your own advertising in order to allow for the properties themselves, the television or motion pictures to market those brands to a bit of an extent. Actually, if you look at a lot of our core brands that we are focused on and the core innovations we're focused on within those brands, many of those brands rival the kinds of operating profit percentage we see in our games business and we're not seeing some kind of a wholesale falloff in our games operating profit and yet, some of our toy brands are equally profitable. What we're just talking about is the mix in the quarter, in the growth in entertainment-based or royalty-bearing brands, particularly in the fourth quarter as you saw a number of those brands move ahead between Sesame Street, Beyblade, Transformers and others offset by some of the games volume. So long-term, again, we see games as a profitable category. Many of our core brands are very profitable categories. But in a year where you have more entertainment, certainly, your royalties increase, and it does have an impact on the mix in operating profit.

That's very helpful. I guess, just along those same lines, we've seen about a 10% decline in games for 2011. I think it was down 4% in 2010. If I were to think about that, how everyone will look at it, whether it would be gross profits or operating profit, is the decline dramatically worse than that, a little worse than that, essentially in line with the -- I'm sure you're not going to give me an actual number, but how should I think about that?

I think that -- you're right, I'm not going to give an actual number. What would say is that our games business and even when we are putting innovation in our games business, whether it's an off-the-board game like Bop It! or Simon Flash, we can still enjoy strong operating profit percentages. So it's not just about making board games and selling those at a good operating profit percentage. We've also been able to, over time, create similar operating profit percentages in our brands by amortizing the R&D and marketing across more of the world by just expanding geographies. So whether it's a brand like My Little Pony that has some royalties related to television or a brand like Nerf or a brand like Play-Doh or PLAYSKOOL, you can grow brands with stronger operating profit percentages over time.

There are no further questions at this time. I would like to turn the floor back over to Ms. Hancock for closing comments.

Thank you. We'd like to thank everyone for joining the call today. The replay will be available on our website at approximately 2 hours. Additionally, management's prepared remarks will be posted on our website following this call. We look forward to seeing you on Friday at Toy Fair. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.