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Hasbro Profit Rises 11% on Lower Royalty, Ad Costs

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July 19 (Bloomberg) -- Hasbro Inc., the world’s second-largest toymaker, said second-quarter profit increased 11 percent as operating margins widened on lower royalty and advertising costs.

Net income rose to $43.6 million, or 29 cents a share, from $39.3 million, or 26 cents, the Pawtucket, Rhode Island-based company said today in a statement. Total sales in the period ended June 27 fell 7 percent to $737.8 million.

Sales in Hasbro’s boys business tumbled 34 percent from a year earlier when revenue was spurred by the “Transformers” and “G.I. Joe” movies based on its toy brands. Mattel Inc., the world’s largest toymaker, last week reported its second-quarter profit more than doubled, helped by sales tied to the third film in the “Toy Story” franchise.

Analysts predicted 24 cents a share, the average of 13 estimates compiled by Bloomberg. Costs related to Hasbro’s joint venture with Discovery Communications Inc., a children’s television network named The Hub, totaled 5 cents, compared with 6 cents a year earlier.

The network begins airing programming on Oct. 10, Chief Executive Officer Brian Goldner said in a conference call today. The channel will be available in 60 million homes and feature programs based on Hasbro brands such as My Little Pony.

Profit Margin

The operating profit margin widened to 10.8 percent from 9.2 percent. Royalty costs fell 32 percent to $50.1 million, reflecting the drop in sales of movie-related toys, and made up a smaller percentage of revenue. Advertising expenses dropped 12 percent to $72 million.

Hasbro fell 15 cents to $39.35 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have gained 23 percent this year.

The toymaker repurchased 6.7 million of its shares for $271.4 million during the quarter. Since its buyback program began in June 2005, Hasbro has bought 70.3 million shares for $1.9 billion, the company said.

Hasbro, the maker of Nerf toys and Monopoly, last month denied that it was in discussions regarding a possible takeover and said the board spurned an approach from a private-equity firm. Providence Equity Partners Inc. was in talks with Hasbro, a person familiar with the matter said at the time.

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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