Latest Hasbro Investor confrence call

[Fifth Element]

So basically in three more years it'll be paid off entirely?

No, amortization has nothing to do with "paying it off". Even if they paid 100% cash for WotC at the time of acquisition, they would still capitalize and amortize it. Amortization is a way to apportion the cost of something over a period of time greater than one year. If something will produce benefits for an extended period of time, you have to try to match the expense of the acquisition with the revenues it produces. For something like goodwill, where it's very difficult to measure actual benefits, you typically pick some arbitrary number of years and use that to amortize it.

 

[Fifth Element]

As for the "laddering" comment, I'm really not sure what they mean by it. In my experience laddering means buying a group of investments with different maturity dates in order to limit interest rate risk. Say, buying some bonds maturing in 2009, some maturing in 2010, some in 2011, etc.

I don't see how that definition fits in with the acquisition of a company. I've only ever seen it used in reference to investing.

 

[Fifth Element]

I won't argue with the technical aspects of your analysis, but this is way off base.

Bah! Armchair speculation is so much more fun than facts are.

 

[Scribble]

So basically in three more years it'll be paid off entirely?

That means Hasbro will stop seeing it as a loss-leader and may invest some capital into it!

pshhh I heard the value of your WoTC totally goes down 30% the second you drive it off the lot!

 

[Chainsaw]

pshhh I heard the value of your WoTC totally goes down 30% the second you drive it off the lot!

Yeah, better to buy those used..

 

[Darkwolf71]

/tries to read thread.

/head esplodes

 

[Mokona]

Where this becomes interesting is that WotC effectively costs Hasbro USD29 million per annum before anything happens. That's USD29 million in costs before you start paying salaries, rent or any other overhead.

Actually no. Hasbro already paid for Wizards of the Coast. Hasbro reports profit according to accounting rules that treated Wizards of the Coast as if it cost $29 million each year through 2009. In fact there is no cash that goes out the door in 2009 towards that $29 million. Tax laws are a little different but Hasbro may get a tax writeoff in 2009 from the amortized expense.

I don't mention PHBs as D&D is a joke as a real business (I suspect that D&D would be lucky to make the company USD1-2 million pa and the bulk of that is probably due to the novels).

I seem to recall a press release that Wizards of the Coast reached the 1/2 million mark (500,000) in units sold of the 3rd edition Player's Handbook. That would be ~$7 million for just one book or approximately $1 million per year all by itself before they sold their first copy of the Dungeon Master's Guide; Monster Manuals 1, 2, 3, and 4; Forgotten Realms Campaign Setting; Eberron Campaign Setting; Star Wars Roleplaying Game Core Rulebook, Revised, and Saga Edition; Savage Species; Sword & Fist, Defenders of the Faith, Tome & Blood, Song & Silence, Masters of the Wild, and the Complete Series clones of each splat book; Psionics Handbook and Expanded version; Manual of the Planes; Deities and Demigods; Draconomicon; all the other 3rd edition and v.3.5 roleplaying books.

For a while Wizards of the Coast produced 2-3 roleplaying supplements every single month. Over the coarse of eight years from 2000-2008 that amounts to almost 200 products (including D&D Dice).

Reality check: if 200 products sold only 15,000 units each for $10 (to Wizards) thats $30 million. Most Dungeons & Dragons books cost $30 or even $40 which would fetch $15-$20 for WotC. I also find it laughable that D&D RPG products averaged less than even 30,000 units sold.

 

[Fifth Element]

I seem to recall a press release that Wizards of the Coast reached the 1/2 million mark (500,000) in units sold of the 3rd edition Player's Handbook. That would be ~$7 million for just one book or approximately $1 million per year all by itself before they sold their first copy of the Dungeon Master's Guide

To be fair, Derulbaskul may have been referring to profit rather than sales.

 

[MonkeyKing]

Thanks for all the answers I found something more about what they meant after I went threw the transcript a second time. It makes it much more clearer. I cant believe I missed it DOH!

Question

[Indiscernible] creation. Can you say a little bit more about why the decision to do that now and then why no tax impact, number one. Then second just in thinking about the EPS you guys are looking for growth next year. Is there any benefit just from their reduced amortization or is that really more of a 2010?
David Hargreaves

I will answer the second part and then I will let Deborah answer the first part of that question. She gets the difficult question.
In terms of the amortization, our Wizards of the Coast acquisition happened at the end of the third quarter of 1999 and we get one quarter of that, which is the coast amortization, which falls off in ’09. I said about $29 million between Wizards and Laramie which is a Super Soaker company we acquired. 23 of that is Wizards, so about ¼ of that 23 will impact ’09 and then the other three quarters incrementally impacted in 2010.

Hasbro, Inc. Fall 2008 Analyst Event Transcript - Seeking Alpha