HASBRO INC

Previous wording

Unless otherwise specifically indicated, all dollar or share amounts herein are expressed in millions of dollars or shares, except for per share amounts.

Current wording

The following includes a comparison of our consolidated results of operations for fiscal years 2024 and 2023. For a comparison of our consolidated results of operations for fiscal years 2023 and 2022, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024. Unless otherwise specifically indicated, all dollar or share amounts herein are expressed in millions of dollars or shares, except for per share amounts.

Previous wording

The fiscal year ended December 31, 2023 was a fifty-three week period, December 25, 2022 and December 26, 2021 were each fifty-two week periods.

Current wording

The fiscal year ended December 29, 2024 was a fifty-two week period and fiscal year December 31, 2023 was a fifty-three week period.

Previous wording

Hasbro generates revenue and earns cash by developing, marketing, licensing and selling products, play and entertainment experiences, based on our global brands as well as other IP in a broad variety of categories. This includes: innovative toy and gaming brands and role-playing and fantasy card collecting games, the marketing and sale of toys and games, including our owned and partner brands, through retail stores, ecommerce platforms and Hasbro Direct, our direct-to-consumer platform; the distribution, license and sale of digital games developed both internally and through licensing out our IP to third parties, such as Baldur's Gate 3, Monopoly Go! and Magic: The Gathering Arena and other digital games. Additionally, the Company generates revenue though the development, production and sales of entertainment content and from out-licensing certain non-core brands which are more profitable through a licensing arrangement for products that include various toys and games, consumer products, such as apparel and publishing, as well as for use in theme park attractions and other forms of location-based entertainment and within formats such as film and TV programming.

Current wording

We generate revenue and earn cash by developing, marketing, licensing and selling products, play and entertainment experiences, based on our global brands as well as other IP in a broad variety of categories. This includes: innovative toy and gaming brands and role-playing and fantasy card collecting games; the marketing and sale of toys and games, including our owned and partner brands, through retail stores, ecommerce platforms and Hasbro Direct, our direct-to-consumer platform; the distribution, license and sale of digital games developed both internally and through licensing out our IP to third parties, such as Baldur's Gate 3, Monopoly Go! and Magic: The Gathering Arena and other digital games; and entertainment content. Additionally, the Company generates revenue through licensing our brands to third parties for toys and games, consumer products, such as apparel and publishing, as well as for use in theme park attractions and other forms of location-based entertainment and within formats such as film and TV programming.

Previous wording

A summary of the Company’s results of operations for 2023, 2022 and 2021 is illustrated below.

Current wording

The following table presents the consolidated results of operations for 2024 and 2023:

Previous wording

Wizards of the Coast and Digital Gaming Segment

Current wording

Consolidated net revenues for the year ended December 29, 2024 decreased 17.3% to $4,135.5 million from $5,003.3 million for the year ended December 31, 2023, primarily driven by a $579.0 million, or 88%, decline in the Entertainment segment as a result of the sale of the eOne Film and TV business during the fourth quarter of 2023 and a $342.5 million, or 12%, decline in the Consumer Products segment, partially offset by a $53.7 million, or 4%, increase in the Wizards of the Coast and Digital Gaming segment. See the Segment Results discussion below for further details.

Previous wording

The following table presents net revenues expressed in millions of dollars, by brand portfolio for each year in the three years ended December 31, 2023.

Current wording

The following table presents net revenues expressed in millions of dollars, by brand portfolio for 2024 and 2023:

Previous wording

•During 2023, the Company exited a lease agreement associated with the eOne Film and TV business sold to Lionsgate during the fourth quarter of 2023, resulting in a $2.7 million impairment loss recorded on the right-of-use asset during the second quarter.

Current wording

(1) Net revenues from the Company's Non-Hasbro-branded Film and TV portfolio were associated with the Company's non-core eOne Film and TV business sold to Lionsgate during the fourth quarter of 2023.

Previous wording

Franchise Brands: The Franchise Brands portfolio net revenues decreased 3% in 2023 compared to 2022. The net revenue decrease primarily reflects lower net revenues from NERF products, lower net revenues from Hasbro Gaming products, lower net revenues from PLAY-DOH products compared to 2022, which benefited from the release of Play-doh Squished programming and to a lesser extent, lower net revenues from PEPPA PIG products. These net revenue decreases were partially offset by net revenue increases from DUNGEONS & DRAGONS digital gaming products, most notably Baldur's Gate 3, the DUNGEONS & DRAGONS-based role-playing video game released during the third quarter 2023, as well as the theatrical release of Dungeons & Dragons: Honor Among Thieves released in March 2023 and higher net revenues from D&D Beyond, acquired during the second quarter of 2022. In addition, partially offsetting losses in the category were higher net revenues from TRANSFORMERS products, supported by the June 2023 theatrical release of Transformers: Rise of the Beast, and to a lesser extent, higher net revenues from MAGIC: THE GATHERING products, most notably from sales of the Lord of the Rings: Tales of Middle-earth card set released in June 2023, making 2023 the second consecutive year that MAGIC: THE GATHERING has reached billion-dollar brand acclaim, reflecting ongoing fan enthusiasm for the brand, as well as higher net revenues from MONOPOLY products reflecting the success of the mobile game Monopoly Go!, launched during the second quarter of 2023.

Current wording

Franchise Brands: Our Franchise Brands include our flagship owned or controlled brands, which we believe can deliver significant revenues, profits and growth over the long term, such as MAGIC: THE GATHERING, Hasbro Gaming, PLAY-DOH, TRANSFORMERS, DUNGEONS & DRAGONS, PEPPA PIG and NERF. The Franchise Brands portfolio net revenues decreased 4% in 2024 as compared to 2023. The net revenue decrease primarily reflects lower net revenues from NERF, DUNGEONS & DRAGONS, and TRANSFORMERS products. Net revenues in 2023 were supported by DUNGEONS & DRAGONS digital game and products, most notably Baldur's Gate 3, the DUNGEONS & DRAGONS-based role-playing video game released during the third quarter 2023, as well as theatrical release of Dungeon & Dragons: Honor Among Thieves released in March 2023. Additionally, net revenues in 2023 were supported by TRANSFORMERS products from the June 2023 theatrical release of TRANSFORMERS: Rise of the Beasts ascompared to the late September 2024 theatrical release of Transformers One. The lower net revenues in 2024 from NERF and TRANSFORMERS products were partially offset by higher net revenues from MONOPOLY GO!.

Previous wording

2023, and to a lesser extent, lower net revenues from BEYBLADE products. These decreases were partially offset by net revenue contributions from the introduction of the Company's products for INDIANA JONES, supported by the June 2023 theatrical release of Indiana Jones and the Dial of Destiny.

Current wording

Partner Brands: Partner Brands include those brands we license from other parties for which we develop toy and game products. Partner brand revenues fluctuate based primarily on the entertainment releases around these brands in any given year, such as MARVEL, including SPIDER-MAN and THE AVENGERS, LUCASFILMS' STAR WARS, BEYBLADE, GHOSTBUSTERS, and INDIANA JONES. The Partner Brands portfolio net revenues decreased 15% in 2024 as compared to 2023. During 2024, Partner Brands net revenue decreases were driven by lower net revenues from the Company's products for STAR WARS and MARVEL which benefited from a broader slate of entertainment releases in prior years without a more recent release entertainment release to support revenue in 2024. Additionally, revenue in 2023 was higher due to the Company's products for INDIANA JONES supported by the June 2023 theatrical release of Indiana Jones and the Dial of Destiny.

Previous wording

Portfolio Brands: The Hasbro Gaming portfolio net revenues declined 17% in 2023 compared to 2022 driven primarily by lower sales of FURREAL FRIENDS products and to a lesser extent, lower sales of PJ MASKS, MY LITTLE PONY and BABY ALIVE products. These decreases were partially offset by net revenues from FURBY products following the Company's successful reintroduction of the brand and refreshed product line during the second quarter of 2023, as well as higher net revenues from GI JOE products.

Current wording

Portfolio Brands: Portfolio Brands include those brands we own or control which we feel have upside in revenue and profitability that have not yet grown to the significance of a franchise brand. The Portfolio Brands net revenues decreased 17% in 2024 as compared to 2023 primarily driven by lower net revenues from POWER RANGERS, PJ MASKS and BABY ALIVE products which were partially offset by revenue contributions from FURBY products following the Company's reintroduction of the brand and refreshed product line during the second quarter of 2023, the release of the next generation of BEYBLADE in 2024, and licensing revenue for MY LITTLE PONY trading cards.

Previous wording

Program cost amortization totaled$448.9 million, or 9.0% of net revenues in 2023, compared to$555.5 million, or 9.5% of net revenues in 2022 and$628.6 million, or 9.8% of net revenues, in 2021. The majority of the Company's program costs are capitalized as incurred and amortized using the individual-film-forecast method. The Company also utilizes the percentage of completion methodology, primarily related to unscripted content. Program cost amortization reflects both the phasing of revenues associated with films and television programming, as well as the type of content being produced and distributed. The program cost amortization decrease during 2023 reflects the impact of the writers' and actors' strikes during 2023, which disrupted the number and timing of planned productions and led to reduced deliveries during the year, in addition to an overall slowdown in production activity due to the sale of the eOne Film and TV business unit late in the fourth quarter of 2023. This decrease was partially offset by higher program cost amortization due to production asset impairment charges of $38.1 million associated with Dungeons & Dragons: Honor Among Thieves, recorded during the second quarter of 2023 and higher program amortization costs attributable to certain other cancelled projects as a result of the Company's go-forward brand strategy.

Current wording

Program Cost Amortization: Program cost amortization totaled $49.3 million, or 1.2% of net revenues in 2024, compared to $448.9 million, or 9.0% of net revenues in 2023. The majority of the Company's program costs are capitalized as incurred and amortized using the individual-film-forecast method. The Company also utilizes the percentage of completion methodology, primarily related to unscripted content. Program cost amortization reflects both the phasing of revenues associated with films and television programming, as well as the type of content being produced and distributed. The decrease in dollars and as a percent of net revenues during 2024 was driven by the impact of the sale of the eOne Film and TV business during the fourth quarter of 2023 as prior year Program costs were primarily associated with the eOne Film and TV business.

Previous wording

Royalty expense of $428.3 million, or 8.6% of net revenues, in 2023 compared to $493.0 million, or 8.4% of net revenues, in 2022 and $620.4 million, or 9.7% of net revenues, in 2021. Fluctuations in royalty expense generally relate to the volume of entertainment-driven products sold in a given period, especially if the Company is selling product tied to one or more major motion picture releases in the period. Product lines related to Hasbro-owned or controlled brands supported by entertainment generally do not incur the same level of royalty expense as licensed properties, particularly products for STAR WARS and MARVEL properties and certain other licensed properties which carry higher royalty rates than other licensed properties. In 2023, the decrease in royalty expense was primarily due to lower sales of certain Partner Brands products which carry higher royalty rates, driven in part by the exit of certain license agreements in December 2022, combined with lower royalty expense associated with the eOne Film & TV business as a result of the slowdown in production activity described above. These decreases to royalty expense were partially offset by the impact of royalty rates associated with the 2023 card set releases, Lord of the Rings: Tales of Middle-Earth and Doctor Who.

Current wording

Royalties: Royalty expense totaled $284.2 million, or 6.9% of net revenues, in 2024 compared to $428.3 million, or 8.6% of net revenues, in 2023. Fluctuations in royalty expense generally relate to the volume of entertainment-driven products sold in a given period, especially if the Company is selling product tied to one or more major motion picture releases in the period. The decrease in Royalty expense in dollars and as a percent of net revenues during 2024 directly reflects the impact of the sale of the eOne Film and TV business.

Previous wording

Product development expense in 2023 totaled $306.9 million, or 6.1% of net revenues, compared to $307.9 million, or 5.3% of net revenues, in 2022 and $315.7 million, or 4.9% of net revenues, in 2021. Product development expenditures reflect the Company’s investment in innovation and anticipated growth across our brand portfolio. In 2023 product development expense was consistent in dollars compared to 2022 and higher as a percent of net revenues reflecting the Company's continued investments and costs to support the Wizards of the Coast tabletop and digital gaming initiatives, partially offset by lower personnel costs with the Consumer Products segment.

Current wording

Product Development: Product development expense in 2024 totaled $294.1 million, or 7.1% of net revenues, compared to $306.9 million, or 6.1% of net revenues, in 2023. Product development expenditures reflect the Company’s investment in innovation and anticipated growth across our brand portfolio. The decrease in Product development expense during 2024 was driven by cost savings initiatives, along with phasing of product releases.

Previous wording

Advertising expense in 2023 totaled $358.4 million, or 7.2% of net revenues, compared to $387.3 million or 6.6% of net revenues in 2022 and $506.6 million or 7.9% in 2021. The level of the Company’s advertising expense is generally impacted by revenue mix, the amount and type of theatrical releases and television programming delivered. The advertising expense decrease during 2023 was driven by lower expense within the Consumer Products segment, due to the volume and mix of product sales and timing of advertising expenditures during 2023, partially offset by higher expense within the Entertainment and Wizards of the Coast and Digital Gaming segments, in support of the theatrical release of Dungeons & Dragons: Honor Among Thieves and advertising costs associated with D&D Beyond, acquired during the second quarter of 2022.

Current wording

Advertising: Advertising expense in 2024 totaled $319.5 million, or 7.7% of net revenues, compared to $358.4 million or 7.2% of net revenues in 2023. The level of the Company’s advertising expense is generally impacted by revenue mix, the amount and type of theatrical releases and television programming delivered. The Advertising expense decrease during 2024 was primarily driven by the sale of the eOne Film and TV business, along with declines in the advertising expense in the Consumer Products segment due to lower net revenues.

Previous wording

In 2023, the Loss on disposal of business of $539.0 million, or 10.8% of net revenues represents non-cash impairment charges and foreign currency translation losses reclassified from accumulated other comprehensive losses to current earnings, associated with the sale of the Company's non-core eOne Film and TV business within the Entertainment segment. In 2022, the loss on disposal of business of $22.1 million, or 0.4% of net revenues represents non-cash impairment charges associated with the exit of certain non-core businesses within the Entertainment segment. The Loss on disposal of business of $108.8 million, or 1.7% of net revenues, represents a non-cash impairment charge associated with the disposition of eOne Music during 2021. See note 3 to the consolidated financial statements, included in Part II, Item 8. Financial Statements, of this Form 10-K for additional information on the sale of the eOne Film and TV business.

Current wording

Loss on Disposal of Business: Loss on disposal of business decreased to $37.4 million, or 0.9% of net revenues, in 2024 compared to $539.0 million, or 10.8% of net revenues, in 2023. The Loss on disposal of business for both periods represents the loss recognized associated with the sale of the Company's eOne Film and TV business within the Entertainment segment during 2023. See Note 3, Sale of Entertainment One Film and TV Business, in our consolidated financial statements for additional information on the sale of the eOne Film and TV business.

Previous wording

Interest income was $23.0 million in 2023 compared to $11.8 million in 2022 and $5.4 million in 2021. Higher interest income in 2023 primarily reflects higher average interest rates and higher interest income on income tax recoveries received in 2023 compared to 2022. Higher interest income in 2022 compared to 2021 is primarily the result of higher average interest rates in 2022 compared to 2021.

Current wording

Interest Income: Interest income was $47.3 million in 2024 compared to $23.0 million in 2023. Higher Interest income in 2024 primarily reflects higher average interest rates in 2024 compared to 2023, along with the Company's investment in short-term treasury bills in connection with the issuance of the 2034 Notes that fully matured in the fourth quarter of 2024 (see Liquidity and Capital Resources discussion below for further information including description of the 2034 Notes).

Previous wording

Income tax benefit totaled 12.9% of pre-tax loss in 2023 compared with income tax expense on pre-tax earnings of 22.4% in 2022 and 25.2% in 2021. Our effective tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. Fiscal year 2023 includes discrete items related to (i) impairment of goodwill in our Family Brands business segment of $960.0 million with no tax benefit and (ii) impairment of goodwill in the Film and TV reporting unit of $231.2 million with no tax benefit. Exclusive of the goodwill impairments, the Company recorded a net discrete tax benefit of $278.7 million. This benefit is primarily related to two items. First, the Company recognized tax benefits of $124.0 million associated with the impairment of trade names in our Film and TV reporting unit, as well as loss on assets held for sale. Second, during 2023, the Company concluded its discussions with the tax authorities in Switzerland as to the application of the grandfathering rules related to 2020 Swiss Tax Reform. This resulted in the recording of a deferred tax asset of $135.6 million related to tax intangibles that will be amortized over time and result in a future cash tax benefit. This treatment applies starting in 2021.

Current wording

Income tax expense totaled $102.6 million on pre-tax income of $497.0 million during 2024 compared to an income tax benefit of $221.3 million on pre-tax loss of $1,709.1 million during 2023. During 2024, the Company incurred a $37.4 million unfavorable adjustment to the 2023 Loss on sale of the Film & TV reporting unit with no corresponding tax benefit. Absent the unfavorable adjustment to the loss on sale with no corresponding tax benefit, the Company recorded a net discrete tax benefit of $13.1 million, primarily associated with a benefit from the release of uncertain tax positions for certain statute of limitation expirations, and favorable return to provision adjustments. Fiscal year 2023 includes discrete items related to an impairment of goodwill in our Family Brands reporting unit of $960.0 million with no tax benefit and an impairment of goodwill in the Film and TV reporting unit of $231.2 million with no tax benefit. Exclusive of the goodwill impairments, the Company recorded a net discrete tax benefit of $278.7 million. This benefit is primarily related to two items: (i) the Company recognized tax benefits of $124.0 million associated with the impairment of trade names in our Film and TV reporting unit, as well as loss on assets held for sale, and (ii) during 2023, the Company concluded its discussions with the tax authorities in Switzerland as to the application of the grandfathering rules related to 2020 Swiss Tax Reform. This resulted in the recording of a deferred tax asset of $135.6 million related to tax intangibles that will be amortized over time and result in a future cash tax benefit. This treatment applies starting in 2021.

Previous wording

Subsequent to the United States passing the Tax Cuts and Jobs Act ("the Tax Act"), the Company has greater flexibility to manage cash globally. The Company intends to repatriate the accumulated foreign earnings as needed from time to time. The Company still has significant cash needs outside the United States and continues to consistently monitor and analyze its global working capital and cash requirements. As of 2023, we have recorded $3.2 million of foreign withholding and U.S. state income tax liability. The Company will continue to record additional tax effects, if any, in the period that the on-going distribution analysis is completed and is able to make reasonable estimates.

Current wording

Subsequent to the United States passing the Tax Cuts and Jobs Act (the "Tax Act"), the Company has greater flexibility to manage cash globally. The Company intends to repatriate the accumulated foreign earnings as needed from time to time. The Company still has significant cash needs outside the United States and continues to consistently monitor and analyze its global working capital and cash requirements. As of 2024, we have recorded $4.6 million of foreign withholding and U.S. state income tax liability. The Company will continue to record additional tax effects, if any, in the period that the on-going distribution analysis is completed and is able to make reasonable estimates.

Previous wording

Tax laws are regularly being re-examined and evaluated globally. Recently, the Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2). Certain aspects of Pillar 2 are effective January 1, 2024, and other aspects are effective January 1, 2025. Many non-US tax jurisdictions have either (i) enacted legislation to adopt certain components of Pillar 2 beginning in 2024 (including the European Union Member States) with delayed adoption of other components; or (ii) announced their plans to enact legislation in future years. We continue to evaluate the impacts of enacted and pending legislation related to Pillar 2 in our non-US tax jurisdictions.

Current wording

Tax laws are regularly being re-examined and evaluated globally. The Organization for Economic Co-operation and Development ("OECD") has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar 2"). Certain aspects of Pillar 2 were effective in 2024, which were not material to the Company’s financial statements, and other aspects are effective January 1, 2025. Many non-US tax jurisdictions have either (i) enacted legislation to adopt certain components of Pillar 2 beginning in 2024 (including the European Union Member States) with delayed adoption of other components; or (ii) announced their plans to enact legislation in future years. We continue to evaluate the impacts of enacted and pending legislation related to Pillar 2 in our non-US tax jurisdictions.

Previous wording

The summary that follows provides a discussion of the results of operations of our four reportable segments: Consumer Products, Wizards of the Coast & Digital Gaming, Entertainment and Corporate and Other.

Current wording

The summary that follows provides a discussion of the results of operations of our segments: Consumer Products, Wizards of the Coast & Digital Gaming and Entertainment. Corporate and Other, which does not meet the criteria to be an operating segment, provides management and administrative services to the Company's principal reporting segments and consists of unallocated corporate expenses and administrative costs and activities not considered when evaluating segment performance as well as certain assets benefiting more than one segment.

Previous wording

The following table presents the Consumer Products segment net revenues by major geographic region for each fiscal year in the three years ended December 25, 2022.

Current wording

The following table presents the Consumer Products segment net revenues by major geographic region for 2024 and 2023:

Previous wording

Consumer Products segment operating results decreased $282.0 million to an operating loss of $64.7 million in 2023, compared to operating profit of $217.3 million in 2022. Operating profit margin decreased to -2.2% of net revenues in 2023 from 6.1% of net revenues in 2022.

Current wording

Consumer Products segment operating results increased $180.0 million to an operating income of $115.3 million in 2024, compared to an operating loss of $64.7 million in 2023. Operating profit margin increase to 4.5% of net revenues in 2024 from an operating loss margin of 2.2% of net revenues in 2023. The increase in operating profit in 2024 was driven by favorable licensing product mix, supply chain productivity, and cost savings realized from cost savings initiatives, partially offset by the lower sale volumes contributions.

Previous wording

The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category (tabletop gaming and digital and licensed gaming) for each fiscal year in the three years ended December 31, 2023.

Current wording

The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category for 2024 and 2023:

Previous wording

Wizards of the Coast and Digital Gaming segment operating profit decreased $12.6 million to $525.7 million in 2023, compared to $538.3 million in 2022. Operating profit margin decreased to 36.1% in 2023 from 40.6% in 2022.

Current wording

Wizards of the Coast and Digital Gaming segment operating profit increased $106.3 million to $632.0 million in 2024, compared to $525.7 million in 2023. Operating profit margin increased to 41.8% in 2024 from 36.1% in 2023. The increase in operating profit was primarily driven by increased net revenues, contributions from higher digital licensing revenue mix, lower royalty expense, and cost savings initiatives.

Previous wording

The following table presents Entertainment segment net revenues by category for each fiscal year in the three years ended December 31, 2023.

Current wording

The following table presents Entertainment segment net revenues by category for 2024 and 2023:

Previous wording

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. The critical accounting policies which management believes are the most critical to aid in fully understanding and evaluating the Company’s reported financial results include film and television production costs, recoverability of goodwill, intangible assets, income taxes and business combinations. Additionally, the Company identified the valuation of the Company’s equity method investment in Discovery Family Channel as a significant accounting estimate.

Current wording

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. The critical accounting policies which management believes are the most critical to aid in fully understanding and evaluating the Company’s reported financial results include the recoverability of goodwill and intangible assets and income taxes.

Previous wording

The Company tests goodwill for impairment at least annually. If an event occurs or circumstances change that indicate that the carrying value of a reporting unit exceeds its fair value, the Company will perform an interim goodwill impairment test at that time. The Company may perform a qualitative assessment and bypass the quantitative impairment testing process, if it is not more likely than not that the carrying value of a reporting unit exceeds its fair value.

Current wording

Goodwill and other intangible assets include the cost of the acquired business in excess of the fair value of the tangible net assets recorded in connection with each acquisition. We assess goodwill and other intangible assets with indefinite lives for impairment each year, or more frequently if events or changes in circumstances indicate an asset may be impaired. For goodwill and indefinite-lived intangible assets, our policy is to assess for impairment as of the beginning of each fiscal fourth quarter. The Company may perform a qualitative assessment and bypass the quantitative impairment testing process, if it is not more likely than not that the carrying value of a reporting unit exceeds its fair value. For other intangible assets with definite lives, we assess for impairment only if events occur that indicate that the carrying amount of an asset may not be recoverable.

Previous wording

Intangible assets, other than those with indefinite lives, are reviewed for indications of impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.

Current wording

Intangible assets, other than those with indefinite lives, are reviewed for indications of impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. During 2024, there were no triggering events which would indicate the Company's intangible assets were impaired.

Previous wording

The Company has historically generated a significant amount of cash from operations. In 2023, the Company primarily funded its operations and liquidity needs through cash on hand and from cash flows from operations, commercial paper, and when needed, used borrowings under its available lines of credit. In addition, the Company’s Entertainment operating segment used production financing to fund certain of its television and film productions which are typically arranged on an individual production basis by using either the Company's senior revolving film and television production credit facility or through special purpose production subsidiaries. The senior revolving credit facility dedicated to production financing and individual production loans were assumed by Lionsgate effective upon the closing of the sale of eOne Film and TV in the fourth quarter of 2023. For more information on the Company's production financing facilities, see notes 3, 9 and 11 to the consolidated financial statements included in Part II, Item 8. Financial Statements, of this Form 10-K.

Current wording

The Company has historically generated a significant amount of cash from operations. The Company has primarily funded its operations and liquidity needs through cash on hand and from cash flows from operations, and when needed, used commercial paper and borrowings under its available lines of credit. As of December 29, 2024, the Company had $695.0 million of Cash and cash equivalents and $3,401.8 million of Long-term debt.

Previous wording

During 2024, the Company expects to continue to fund its working capital needs primarily through available cash, cash flows from operations and, if needed, by issuing commercial paper or borrowing under its revolving credit agreement. The Company believes that the funds available to it, including cash expected to be generated from operations, funds available through its commercial paper program or its available lines of credit, are adequate to meet its working capital needs for 2024, including the repayment of the current portion of long-term debt of $500.0 million, as shown on the Consolidated Balance Sheets which represents the Company's 3% fixed-rate notes due in November 2024. The Company may also issue debt or equity securities from time to time, to provide additional sources of liquidity when pursuing opportunities to enhance our long-term competitive position, while maintaining a strong balance sheet. However, unexpected events or circumstances such as material operating losses or increased capital or other expenditures, or the inability to otherwise access the commercial paper market, may reduce or eliminate the availability of external financial resources. In addition, significant disruptions to credit markets may also reduce or eliminate the availability of external financial resources. Although the Company believes the risk of nonperformance by the counterparties to its financial facilities is not significant, in times of severe economic downturn in the credit markets, it is possible that one or more sources of external financing may be unable or unwilling to provide funding to the Company.

Current wording

The Company may issue debt or equity securities from time to time, to provide additional sources of liquidity when pursuing opportunities to enhance its long-term competitive position, while maintaining a strong balance sheet. However, unexpected events or circumstances such as material operating losses or increased capital or other expenditures, or the inability to otherwise access the commercial paper market, may reduce or eliminate the availability of external financial resources. In addition, significant disruptions to credit markets may also reduce or eliminate the availability of external financial resources. Although the Company believes the risk of nonperformance by the counterparties to its financial facilities is not significant, in times of severe economic downturn in the credit markets, it is possible that one or more sources of external financing may be unable or unwilling to provide funding to the Company.

Previous wording

During September 2023, the Company entered into a third amended and restated revolving credit agreement with Bank of America, N.A., as administrative agent, swing line lender and a letter of credit issuer and lender and certain other financial institutions, as lenders thereto (the "Amended Revolving Credit Agreement"), which provides the Company with commitments having a maximum aggregate principal amount of $1.25 billion, effective as of September 5, 2023. The Amended Revolving Credit Agreement also provides for a potential additional incremental commitment increase of up to $500.0 million subject to agreement of the lenders. The Amended Revolving Credit Agreement contains certain financial covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment grade facility, including with respect to liens, mergers and incurrence of indebtedness. The Amended Revolving Credit Agreement extends through September 5, 2028. The Company was in compliance with all covenants as of December 31, 2023. The Company had no borrowings outstanding under its committed revolving credit facility as of December 31, 2023. However, letters of credit outstanding under this facility as of December 31, 2023 were approximately $4.0 million. Amounts available and unused under the committed line, at December 31, 2023 were approximately $1.2 billion, inclusive of borrowings under the Company’s commercial paper program. The Company also has other uncommitted lines from various banks, of which approximately $9.3 million was utilized in the form of letters of credit, at December 31, 2023.

Current wording

The Company's third amended and restated revolving credit agreement with Bank of America, N.A. maturing September 5, 2028 (the "Amended Revolving Credit Agreement"), provides the Company with a maximum aggregate principal amount of $1.25 billion and also provides for a potential additional incremental commitment increase of up to $500.0 million subject to agreement of the lenders. The Amended Revolving Credit Agreement contains certain financial covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment grade facility, including with respect to liens, mergers and incurrence of indebtedness. The Company was in compliance with all covenants as of December 29, 2024. The Company had no borrowings outstanding under its committed revolving credit facility as of December 29, 2024. However, letters of credit outstanding under this facility were approximately $3.7 million. Amounts available and unused under the committed line, as of December 29, 2024 were approximately $1.25 billion, inclusive of borrowings under the Company’s commercial paper program. The Company also has other uncommitted lines from various banks, of which approximately $7.6 million was utilized in the form of letters of credit, on December 29, 2024.

Previous wording

The Company has a supplier finance program which provides participating suppliers the option of receiving payment in advance of an invoice due date, to be paid by certain administering banks, on the basis of invoices that the Company has confirmed as valid and approved. The Company’s obligation is to make payment in the invoice amount negotiated with participating suppliers, to the administering banks on the invoice due date. The Company’s suppliers are not required to participate in the supplier finance program. The early payment transactions between the Company’s supplier and the administering bank are subject to an agreement between those parties, and the Company does not participate in any financial aspect of the agreements between the Company’s suppliers and the administering banks. The Company has not pledged any assets to the administering bank under the supplier financing program. The Company or the administering bank may terminate the agreement upon at least 30 days’ written notice.

Current wording

The Company has a supplier finance program which provides participating suppliers the option of receiving payment in advance of an invoice due date, to be paid by certain administering banks, on the basis of invoices that the Company has confirmed as valid and approved. The Company’s obligation is to make payment in the invoice amount negotiated with participating suppliers, to the administering banks on the invoice due date. The Company’s suppliers are not required to participate in the supplier finance program. The early payment transactions between the Company’s supplier and the administering bank are subject to an agreement between those parties, and the Company does not participate in any financial aspect of the agreements between the Company’s suppliers and the administering banks. The Company has not pledged any assets to the administering bank under the supplier financing program. The Company or the administering bank may terminate the agreement upon at least 30 days’ written notice. The amount of obligations confirmed under the supplier finance program that remain unpaid were $66.2 million, and $43.3 million as of December 29, 2024 and December 31, 2023, respectively. These obligations are presented within Accounts payable in the Company's Consolidated Balance Sheets. The activity related to this program is reflected within the operating activities section of the Consolidated Statements of Cash Flows

Previous wording

•Included in other liabilities in the Consolidated Balance Sheets at December 31, 2023, the Company has a liability of $47.4 million of potential tax, interest and penalties for uncertain tax positions that have been taken or are expected to be taken in various income tax returns. The Company does not know the ultimate resolution of these uncertain tax positions and as such, does not know the ultimate amount or timing of payments related to this liability.

Current wording

•Uncertain Tax Positions – As of December 29, 2024, the Company has a liability of $45.6 million of potential tax, interest and penalties for uncertain tax positions that have been taken or are expected to be taken in various income tax returns. The Company does not know the ultimate resolution of these uncertain tax positions and as such, does not know the ultimate amount or timing of payments related to this liability.

Previous wording

To manage this exposure, the Company has hedged a portion of its forecasted foreign currency transactions using foreign exchange forward contracts and foreign exchange option contracts. At December 31, 2023, the Company estimates that a hypothetical immediate 10% depreciation of the U.S. dollar against all foreign currencies included in these foreign exchange forward contracts could result in an approximate $16.6 million decrease in the fair value of these instruments. A decrease in the fair value of these instruments would be offset by increases in the value of the forecasted foreign currency transactions.

Current wording

To manage this exposure, the Company has hedged a portion of its forecasted foreign currency transactions using foreign exchange forward contracts and foreign exchange option contracts. At December 29, 2024, the Company estimates that a hypothetical immediate 10% depreciation of the U.S. dollar against all foreign currencies included in these foreign exchange forward contracts could result in an approximate $15.1 million decrease in the fair value of these instruments. A decrease in the fair value of these instruments would be offset by increases in the value of the forecasted foreign currency transactions.

Previous wording

The Company reflects all derivatives at their fair value as an asset or liability on the Consolidated Balance Sheets. The Company does not speculate in foreign currency exchange contracts. At December 31, 2023, these contracts had net unrealized losses of $3.2 million, of which $0.7 million are recorded in Prepaid expenses and other current assets, $3.9 million are recorded in Accrued liabilities. Included in Accumulated other comprehensive loss at December 31, 2023 are deferred losses of $2.5 million, net of tax, related to these derivatives.

Current wording

The Company reflects all derivatives at their fair value as an asset or liability on the Consolidated Balance Sheets. The Company does not speculate in foreign currency exchange contracts. At December 29, 2024, these contracts had net unrealized gains of $0.5 million, of which $1.7 million are recorded in Prepaid expenses and other current assets, $1.2 million are recorded in Accrued liabilities. Included in Accumulated other comprehensive loss at December 29, 2024 are deferred losses of $4.4 million, net of tax, related to these derivatives.

Previous wording

The principal market for the Company’s toys and games and licensed consumer products, is the retail sector. Revenues from the Company’s top five retail customers, accounted for approximately 34% of its consolidated net revenues in 2023, 35% in 2022 and 36% of its consolidated net revenues in 2021. The Company monitors the creditworthiness of its customers and adjusts credit policies and limits as it deems appropriate.

Current wording

The principal market for the Company’s toys and games and licensed consumer products is the retail sector. Revenues from the Company’s top five retail customers, accounted for approximately 36% of its consolidated net revenues in 2024. The Company monitors the creditworthiness of its customers and adjusts credit policies and limits as it deems appropriate.

Previous wording

The Company’s revenue pattern continues to show the second half of the year to be more significant to its overall business for the full year. In 2023, approximately 56% of the Company’s full year net revenues were recognized in the second half of the year. The Company expects that this concentration will continue. The concentration of sales in the second half of the year increases the risk of (a) underproduction of popular items, (b) overproduction of less popular items, and (c) failure to achieve tight and compressed shipping schedules. The business of the Company is characterized by customer order patterns which vary from year to year largely because of differences in the degree of consumer acceptance of a product line, product availability, marketing strategies, inventory levels, policies of retailers and differences in overall economic conditions. Larger retailers generally maintain lower inventories throughout the year and purchase a greater percentage of product within or close to the fourth quarter holiday consumer buying season, which includes Christmas.

Current wording

The Company’s revenue pattern continues to show the second half of the year to be more significant to its overall business for the full year. In 2024 approximately 58% of the Company’s full year net revenues were recognized in the second half of the year. The Company expects that this concentration will continue. The concentration of sales in the second half of the year increases the risk of (a) underproduction of popular items, (b) overproduction of less popular items, and (c) failure to achieve tight and compressed shipping schedules. The business of the Company is characterized by customer order patterns which vary from year to year largely because of differences in the degree of consumer acceptance of a product line, product availability, marketing strategies, inventory levels, policies of retailers and differences in overall economic conditions. Larger retailers generally maintain lower inventories throughout the year and purchase a greater percentage of product within or close to the fourth quarter holiday consumer buying season, which includes Christmas. Quick response inventory management practices being used by retailers as well as growth in ecommerce result in orders increasingly placed for immediate delivery and fewer orders placed well in advance of shipment. Retailers are timing their orders so that they are filled by suppliers closer to the time of purchase by consumers. To the extent that retailers do not sell as much of their year-end inventory purchases during this holiday selling season as they had anticipated, their demand for additional product earlier in the following fiscal year may be curtailed, thus negatively impacting the Company’s future revenues. The Company is continuing to manage inventory levels and by monitoring consumer purchase patterns to ensure adequate supply of new product while clearing excess supply to mitigate the risk of inventory obsolescence.

Previous wording

Unlike the Company's retail sales patterns, revenue patterns from the Company's entertainment businesses fluctuate based on the timing and popularity of content releases. Release dates are determined by factors including the timing of holiday periods, geographical release dates and competition in the market. In addition, entertainment business operating results fluctuate due to expenses recorded in relation to productions and content such as program amortization costs and advertising expenses, which are incurred and recognized, beginning prior to initial releases and then continue throughout the related distribution windows.

Current wording

Unlike the Company's retail sales patterns, revenue patterns from the Company's entertainment businesses fluctuate based on the timing and popularity of content releases. In addition, entertainment business operating results fluctuate due to expenses recorded in relation to productions and content such as program amortization costs and advertising expenses, which are incurred and recognized, beginning prior to initial releases and then continue throughout the related distribution windows.

Previous wording

The impact of inflation on the Company's business operations was significant during 2022 and 2023. The Company monitors the impact of inflation to its business operations on an ongoing basis and may need to implement actions such as price adjustments to mitigate the impact of changes to the rate of inflation in future periods. However, future volatility of general price inflation could affect consumer purchases of our products and spending on entertainment. Additionally, the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead, could adversely affect the Company's financial results.

Current wording

The impact of inflation on the Company's business operations was significant during 2024. The Company monitors the impact of inflation to its business operations on an ongoing basis and may need to implement actions such as price adjustments to mitigate the impact of changes to the rate of inflation in future periods. However, future volatility of general price inflation could affect consumer spending. Additionally, the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead, could adversely affect the Company's financial results.