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Message: <blockquote data-quote="Ellorghast" data-source="post: 9220386" data-attributes="member: 7043938">Hi! I'm a professional securities analyst, meaning it's my job to look at companies and recommend whether people should buy stock in them or not, and I just made an account here to comment on this specific issue, because it seems like a lot of people don't know how to parse what actually seems to be happening here, but would probably like to. The "not knowing how to parse what's happening" part is by design; as a rule, corporate finance is as obtuse as the law allows, because that makes it easier for the CEO to spin things on the quarterly earnings call, which in many ways is actually their main job. (Running a successful company is nice, but less important.) Fortunately (for you; less so for me), I've been I've been doing this for a few years now, and Hasbro has not actually done a particularly thorough job of hiding the bodies in this case.For this, the data we want is all in the company's most recent form 10-Q, which is a quarterly document that any publicly-traded American company has to file with the Securities and Exchange Commission. I'll include screenshots here, but if you want to look at it yourself, you can find a copy <a href="https://investor.hasbro.com/static-files/69afb88f-126e-4604-856e-dae9826abbe6" target="_blank">here</a>.First, let's address the question of whether Hasbro would actually be in any danger of collapsing as a company without these layoffs. To determine that, we'll want to look at the company's balance sheet. This can tell you a lot of things, but for a quick-and-dirty analysis of the company's health, we're only going to look at two: working capital and the debt-to-capital ratio.Working capital is very easy to calculate: we simply subtract the company's current liabilities (i.e. everything it will need to pay in the near future) from its current assets (i.e. cash, plus things that can very quickly become cash). If this number is negative, that is very bad, because it means that the company can't pay its bills. Higher isn't necessarily better, past a certain point—eventually, if a company's sitting on a big mountain of cash, you have to wonder why they aren't doing anything with it—but in general, having a cushion here is a sign of financial health.These are Hasbro's current assets as of October 1st, the most recent data publicly available. All of these numbers are in millions of dollars:[ATTACH=full]339986[/ATTACH]And these are its current liabilities:[ATTACH=full]339987[/ATTACH]A bit of grade school math later and we get a working capital of $1,214.9 million. That's a very solid number for a company of Hasbro's size. No danger there.Next, we'll look at the debt-to-capital ratio. This is Hasbro's total debt, divided by the sum of that debt and the shareholders' equity, which is essentially how much money the shareholders would get if the company were liquidated right now. Lower is better, here, since it means the company isn't overly burdened with debt and there's less risk for investors.[ATTACH=full]339988[/ATTACH]So, total debt is $3,714.6 million, total capital is $5,937.8 million, and the debt-to-capital ratio is about 63%, which isn't great, but also not terrible. I'd give that a solid B, in corporate finance terms.All of which is to say, Hasbro is not in any danger of imminent collapse. The company is fine. If they're firing a ton of people, it's because of profitability issues, and to see what might be behind those, we'll have to look at the next page of the 10-Q: the Statement of Operations. This section will show us quarterly revenues, and will walk us through everything that gets deducted from that to end up with the quarter's earnings.[ATTACH=full]339989[/ATTACH]At first glance, it looks pretty straightforward. Revenues were down for the third quarter of 2023 vs. 2022 ($1,503.4 million vs. $1,675.9 million), and the company posted a net loss of $171.1 million for the quarter, compared to positive earnings of $129.2 million last year. Except, hang on, what is "Loss on assets held for sale," and why is it so much higher this year than last year? To find out, we'll have to go into the accompanying notes, where we find this:[ATTACH=full]339990[/ATTACH]Translation: Hasbro wanted to sell off eOne, but the best deal it could get was for $473 million less than its own books recorded eOne as being worth. To make the books balance with the sale, Hasbro had to record that difference as a charge against their earnings for the quarter in which the sale was made.This is what we in the business call a 'non-recurring item:' a big charge that doesn't really reflect a company's operations, and is often more an accounting artifact than meaningful financial data. Analysts like me often exclude them from consideration when we're trying to figure out how well a company's actually doing. In this case, if we exclude the $473 million loss from Hasbro's third quarter results, the story dramatically changes. Rather than a net loss of $171.1, we see a net profit of $301.9 million: more than double the previous year's profits.Of course, that's just one quarter. Let's look at the full year so far:[ATTACH=full]339991[/ATTACH]Looking at the operations for the first three quarters of 2023, we once again see a massive net loss ($428.2 million) compared to profit ($332.4 million) for the same period last year. However, we can once again exclude the $473 million loss on eOne, as well as the $231.2 million goodwill impairment charge, which is a similar thing. (Goodwill is anything you pay for an asset above its recorded value; goodwill impairment is a charge you record when it becomes indisputably obvious that you overpaid.) If we exclude those two items from the total, you get a net profit for the year so far of $276 million. So, Hasbro did lose money in the first two quarters of the year, but its third quarter was actually good enough to largely make up for it.Of course, we don't know yet what the company's fourth quarter results will look like, and won't until probably mid-February, which is when they reported last year. However, considering that a) whatever was going on with them in the first two quarters seems to be over now (I could probably find out what it was, but I'm lazy and I'm not being paid for this analysis), and b) the fourth quarter includes the holiday season, AKA the best part of the year for toys and games, I'd be pretty shocked if their numbers weren't good.So, looking at the evidence, it definitely seems to me like these firings are meant to look proactive to investors in order to cover up for the rather embarassing loss on eOne/any other nonrecurrings that might crop up in the fourth quarter, and aren't really necessary for the company's financial health or long-term profitability at all.</blockquote>

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