Debbie Hancock - VP, IR Brian Goldner - Chairman, President and CEO Deb Thomas - CFO.

Felicia Hendrix - Barclays Drew Crum - Stifel Arpiné Kocharyan - UBS Stephanie Wissink - Piper Jaffray Greg Badishkanian - Citi Taposh Bari - Goldman Sachs Jaime Katz - Morningstar Lee Giardano - Sterne Agee Eric Handler - MKM Partners Jim Chartier - Monness Crespi Gerrick Johnson - BMO Capital Markets.

Good morning. And welcome to the Hasbro First Quarter 2016 Earnings Conference Call. At this time, all participants will be in a listen-only mode. [Operator Instructions] Today’s conference is being recorded. If you have any objections, you may disconnect at this time. 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 this morning are Brian Goldner, Hasbro’s Chairman, President and Chief Executive Officer; and Deb Thomas, Hasbro’s Chief Financial Officer. Today, we will begin with Brian and Deb providing commentary on the Company’s performance and then we will take your questions.

Our first quarter earnings release was issued this morning and is available on our website. Additionally, presentation slides containing information covered in today’s earnings release and call are also available on our site. The press release and presentation include information regarding non-GAAP financial measures.

Please note that whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share.

Before we begin, I would like to remind you 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.

There are many factors that could cause actual results or events 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, our most recent 10-Q, 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. I would now like to introduce Brian Goldner.

Brian?.

Civil War will be in theatres on May 6th. We have a robust line and strong planned retail promotional activity supporting this film. The first quarter was a good start to the year, but we know, there is a lot of the year left to deliver.

For 2016 and beyond, we have an innovative line of both Hasbro brands and partner brands, and we are investing to deliver the best experiences to retailers and consumers globally.

This includes continued strategic investment and further development of our capabilities around the brand blueprint including in storytelling digital gaming and our consumer products licensing efforts. I’ll now turn the call over to Deb.

Deb?.

THE GATHERING and our IT systems to drive efficiencies and enhance innovation and in our talent and capabilities to execute our brand blueprint. In the first quarter, the strength of our business enabled us to deliver operating profit expansion while investing for future growth.

Turning to our results below operating profit for the quarter, other expense was $2.7 million versus income of $4.7 million last year.

Increased profit is associated with our 40% share of the operating income in the Discovery Family channel combined with higher interest income on our investments was more than offset by larger losses from foreign exchange transactions. Underlying tax rate was 26.5%, down from 27% last year and essentially in line with 26.4% for the full year 2015.

Diluted earnings per share was $0.38 compared to $0.21 last year. Our balance sheet remained strong. Cash totaled $1.1 billion at quarter-end. We generated $294 million in operating cash flow during the quarter and $531 million over the past 12 months.

During the first quarter, we returned $93.2 million to shareholders, $57.4 million in dividends and $35.8 million in share repurchases. Our May 16th dividend payment will be the first quarter as a higher dividend rate of $0.51 per share, which the Board increased 11% in February.

Receivables at quarter end were up 19% versus the 16% growth in revenues. And DSOs increased two days to 73 days. Absent the impact of foreign exchange, receivables increased approximately 23% versus 20% revenue growth absent FX. Overall, our accounts receivable are in good condition and collections continue to be strong.

Inventories increased 36% versus last year. Adjusting for a negative foreign exchange impact, inventory increased 41%, reflecting the new businesses we’re supporting, the timing of entertainment, and our outlook for 2016.

Overall, we believe we have the right amount and quality of inventory at retail and at Hasbro to meet our growth expectations for the year. Throughout the first quarter, we maintained and improved upon the higher level of performance we delivered last year.

While we have a great deal of the year left to go, we are well-positioned to capitalize on the innovation and entertainment driving our brands. Brian and I are now happy to take your questions..

Thank you. [Operator Instructions] Our first question is coming from the line of Felicia Hendrix with Barclays. Please go ahead with your questions..

Hey Brian, I just wanted to touch on a comment that you made in your prepared remarks about some retailers being affected from global economic challenges.

I was just wondering, can you elaborate, is that globally, is that U.S., internationally; can you just talk about that comment a little bit more, please?.

Sure. We are really referring to a few of our retailers in the emerging markets. Deb noted bad debt provision that we took in the quarter. And so, we are just indicating that we had a couple of retailers in the emerging markets that were challenged and where we felt that there was some revenue that would be uncollectable..

Consumer take away in those markets still continues to be strong. So, as we look at the emerging markets, we still have that outlook of double digit growth absent FX for the year..

Okay. And then in….

Yes, this is -- yes, it’s good point, I mean this isn’t consumer related; we’re not talking about the takeaways, and we talked about double digit growth in POS across all of our regions in the quarter, and we had very strong double digit growth throughout our business.

And so, again, we are just referring to a few retailers where we took a provision..

Okay, that’s very helpful, thank you. And you gave us some nice color on games and puzzles and magic, and it looks like magic with the release in April, versus a first quarter release last year had some tough comp.

Just wondering a couple of things in games and puzzles, first, I just wanted to clarify, did magic see growth in the first quarter? And then, also you had a management change in that division.

So, I was just wondering if you could talk about the drivers behind that change and what you expect for games and puzzles for the rest of the year?.

The Gathering player and role playing gamer overall, but he’s also got some tremendous experience, most recently at Microsoft, so has both the analog and digital capability and will continue to drive us in both directions..

Great, thanks so much. And then just finally on -- your quarter was obviously very strong for a lot of different reasons. Just wondering how much of that was attributable to the Easter shift..

We definitely saw a very strong Easter for us in POS but our Easter was actually up significantly versus prior Easter. But we’ve seen this continued strong POS and even after Easter this year our POS continues to be strong and the double digit POSes across every category and every geography.

And I think it goes back to something we talked about in prepared remarks, and that’s -- I think the thing that you’re seeing in the first quarter that’s obfuscating our otherwise very strong franchise brand results is just the payments that were made a year ago for stream content in a quarter that tends to be a bit lower in overall revenue, so has a bigger impact.

So, if you take that out, our total franchise brands growth for the quarter was 9% and you saw double-digit growth in U.S. and high-single digit growth internationally for franchise brands.

So again, the streaming payments made a year ago just get in the way of seeing that underlying strength and it’s why you’re also seeing our market shares grow all around the world..

Thank you. Our next question comes from the line of Drew Crum with Stifel. Please go ahead with your question..

Okay, thanks, good morning, everyone. So Brian, you provided your updated view on expectations for STAR WARS, which is unchanged for the year.

Can you kind of run us through what the puts and takes are and how you arrived at that number or that view? And then, continuing with Boys, how does Spiderman fit into the Company’s plans for Marvel in 2016? Thanks..

Civil War, which as I said is a full array of characters including some of our favorites like the character you mentioned. And then of course, we get into ‘17 and we do have the Spiderman movie..

Brian, just go back to your last comment, are you suggesting that you were not shipping Captain America products in the first quarter?.

We -- not saying we didn’t ship Captain America products in the first quarter, we’re just saying that the timing shifted. So, it probably didn’t have as big an impact as it did a year ago; so, to frame it out, the partner brand for partner brand, the puts and takes..

Yes, got it, okay. And then just one last question, Deb, on the advertising, can you discuss the year-on-year increase? Typically we don’t see when you have a heavy mix towards entertainment and contribution from partner brands, the increased advertising, just want to understand what’s driving that..

Really just as we look at our full year expectations and look at rolling out our advertising, really just what you’re seeing this year compared to last year is the impact of our expectations and how we’re looking at funding the programs that will be running all year long against the revenue spread out over the quarters..

Our next question comes from the line of Arpiné Kocharyan with UBS. Please go ahead with your question..

Alright, thanks, the name is Arpiné. Could you talk a little bit about U.S. retail takeaway in the quarter and how sort of to think about the Easter shift? And thank you for the Easter and Easter comparison; that was helpful. How do kind of think about what Easter shift was in terms of retail takeaway and your shipment in the U.S.

of up about 28%?.

Yes. So, if you look at our POS, it’s very strong across the Board in the U.S., up strong double-digits across all categories. For toys up strong double-digits and boys, similarly girls, preschool, and games were up double-digit, our franchise brands in the U.S. were up double-digits in POS.

And we did see a very strong Easter, but we’ve been seeing strong week-on-week POS, and as I indicated, our strong double-digit POS has continued beyond Easter..

Okay, thank you. And then my second question is, Brian, back in February, you had said that you expected partner revenues to be closer to that 25% range higher than historical around 20. Partner brands came in stronger than franchise, although there is a bit of tough comp in entertainment and licensing but overall royalty rate was also up tiny bit.

Could you share with us whether your guidance for full year of partner brands being, still at the higher end of that 20%, 25% range on royalty rates coming down as a percentage of sales for the full year; has that kind of guidance or expectation changed?.

No, it hasn’t changed. Our guidance is very much the same. In fact, if you look as a percent of revenues, our royalties are only up one-tenth of a percentage point in the quarter versus a year ago; so a very small change.

The other element, as we said, the partner brands even in the first quarter where you have lower absolute revenues and the impact were only up slightly above the 25% number that we’ve given at the high end of the range. So, again, over the four quarters, we still expect it to be at the high-end of the 20% to 25% range..

That’s helpful.

So, absent the licensing -- entertainment and licensing tough comp, that one-off payment, you still expect franchise brands to grow at a higher rate was partner?.

Well, I think it’s very hearting. We’re looking at the numbers and if you take the top 10 brands of our Company at this moment, in the quarter, six of the top 10 brands of our Company are franchise brands. And the top brand in our Company still in the first quarter is NERF.

So, I think the portfolio management the teams are executing is quite strong; it’s certainly a complement of franchise brands and partner brands revenues, so the other four brands within the top 10 are partner brands. But that’s a great combination. And our strongest brand, top brand of the quarter is still NERF.

And that combination allows us to continue to provide that guidance to you about royalties and about partner brands as a percent of revenue for the year..

Our next question is coming from the line of Stephanie Wissink with Piper Jaffray. Please proceed with your question..

Thank you. Good morning and congratulations to everyone there on a fantastic quarter..

Thanks..

My question is just related to the profit growth versus the sales growth, which is a factor of three-fold in this quarter, really outstanding. Curious, Deb, if you can share with us how we should thinking about that over the next couple of quarters and the next couple of years.

I think in Toy Fair you indicated your margin targets for the Q are roughly flattish, but a couple of hundred basis points of expansion in the first quarter.

I’m just curious if that’s changed the way you’re thinking about the forward year and next couple of years?.

We think based on our -- we talked a little bit about the fact that the first quarter is a log of small numbers for us.

But what we’re seeing is the improvement in our margins that we did say at year-end in the Toy Fair that we believe were sustainable and expandable over time, particularly as we ramped some of the new brands and gained more operating profit for us.

So, the one item we did want to point out was the bad debt that was unusual for us, while we won’t exclude it, it was the first one that we encountered as we’ve expanded particularly into emerging markets. And we do have some high risk accounts, but we managed those very closely and do have reserves where we deem them appropriate.

But overall, our margins have grown in all of our segments with the exception of entertainment and licensing. And again that streaming revenue because of the profitability of it has a big impact. But we do continue to believe that based on our current estimates that the guidance that we gave in February still holds..

Thank you. And then just one follow-up, Deb, on the inventory, I think you mentioned excluding currency up 41% year-over-year. I’m wondering if you’d be willing to just eliminate the non-comparable for PRINCESS. I’d imagine there is some ramp inventory there for PRINCESS.

Is it more consistent with sales, if you back that out? I mean just look at it on a comparable basis..

Yes. I think as we look at our inventory overall, you have identified a big piece of it. I mean we’re really ramping up for the business we see in the year ahead..

Thank you. Best of luck everyone..

If you look where inventory is, Steph, it’s really nicely spread and it does follow our sales curves globally, so you get about a better third of the inventory increase in the U.S. and the other two thirds out internationally, as we’re going in region for region..

Our next question comes from the line of Greg Badishkanian with Citi. Please go ahead with your questions..

Hey, good morning. This is actually Fred on for Greg.

Just wondering if you guys could give a little bit more color on the DISNEY PRINCESS launch, how it’s gone versus your expectation and where we think we’re at this position?.

Clearly, I think you said one of the keywords, which is it is clearly first quarter is a transitional quarter; we said that all long. Having said that, the teams have done -- our teams at Hasbro have done a fantastic job of launching the brand of beautiful products and it’s been well-received by consumers and the early take away is quite good.

We’re ramping this business and we continue to believe that as we move forward, as we expand in revenues, we’ll continue to improve our operating margin over time there. So, I would say that our guidance for what we want to achieve is being achieved and run on track for our expectations for PRINCESS..

Great.

If we just looked at STAR WARS, is there anything that you guys learned from last year’s movie that you are planning to implement for this coming year’s release?.

Clearly it was great for us to be able to have a major entertainment initiative in the fourth quarter; it’s great to build the spread out, the entertainment initiatives across our portfolio, now almost 12 months a year; and that will continue to be the case, as we have more and more partners and our own brands, launching new story led initiatives throughout each year.

The consumer certainly responded in kind and it gives us great courage to look at new windows for new launches, and will track similar to last year, kind of a similar tempo and template this year, as we have a fall set date for Rogue One product and that will roll into a holiday oriented movie.

But, again, the teams are constantly picking up on new insights, and we’re using those to the advantage of customers and consumers..

Our next question comes from the line of Taposh Bari of Goldman Sachs. Please proceed with your questions..

Hey, good morning everyone and congrats on another great quarter. Brian, on Girls, can you help us better understand how the segment performed excluding the DISNEY PRINCESS piece.

And then, the follow up for that, how do we think about the transition of that property into your business? Should we think of 1Q as a kind of disproportion of beneficiary -- given the fact that it represents the initial shipment window for that property?.

Well, if you look at it, clearly in a quarter where typically lower revenues it does have a disproportional impact; as you grow throughout the year, your revenues grow across the board. We had a number of our girls brands that performed well and grew in the quarter.

So, we saw some great growth from some of what we would call our challenger brands including FurReal Friends Baby Alive and EASY-BAKE and then MY LITTLE PONY, as I said, the brand overall was up.

The only place that had an impact where it flattens the result is because of the streaming revenues are assigned to the purchase of MY LITTLE PONY programming and LITTLEST PET SHOP programming a year ago.

So, we had one brand in there that we’re restaging for the fall which is Nerf Rebelle and clearly the brand is down at this movement, as we restage and get reoriented around that brand for the second half of the year. And again, PET SHOPT had very strong results in several territories including the U.S. and Canada.

And we’re beginning to make the shift, the change in evolution of that brand out internationally and over time, we would expect that brand to see more positive momentum overall..

On games, I just want to make sure, I understand the comment that you made.

So, shipments were flat in constant currency but POS up double digits, did I hear that correctly?.

It is, a strong double digit, yes..

Okay.

So, is that entirely attributable to the magic shift in to take you there?.

No, I don’t -- we had lots of puts and takes, so we have lots of interesting and different brands that were up in the quarter. Our segment -- a lot of the brands within our family oriented segment were up including life and Life and YAHTZEE and several other brands.

Obviously PIE FACE continues to be a strong contributor; DUEL MASTERS within the Yahtzee [ph] business was up. As I said, overall, face-to-face gaming was up a bit in the quarter. And I do think you have our coming off of a very strong fourth quarter, you still have product in the market and very strong POS, both in the U.S.

and internationally for games..

Understood, and one last one for you, Brian, if you can comment on the health of the toy category, as we enter 2016. Again, category’s been relatively flat for a while and it seems to be going through this revival.

What are you hearing from your retailers, both brick and mortar and online; are they believers in the sustainability; are they dedicating more resources to the category? Thanks..

Well, I would say yes to really everything you’ve said. Well, remember that last year we had a very had a very robust growth in U.S. and globally developed economies as well as emerging markets in the toy industry.

So, I would say this is the second year of strong growth year-to-date; we are seeing high single digit growth rates, both in developed economies like U.S. and also throughout Europe. Retailers are very excited about the category, as we continue to have more story driven brands, more integrated play brands and more innovation in the category.

Overall, POS was very strong, as I said, but as we’ve noted before, online POS was even stronger, and many additional retailers that have been historically brick retailers are doing a very good job in omni-channel. And so, we saw great growth for several online retailers, both pure play as well as omni-channel retailers.

So, I would say overall, the state of the industry is quite strong. And our indications are from projections that it will remain strong for the next several years..

Our next question is from the line of Jaime Katz with Morningstar. Please go ahead with your question..

Can you guys discuss if there were any pockets of excess inventory outside EQUESTRIA GIRLS? I know you were selling the channel for a lot of products but that seems to be the only product that was called out, as may be not performing exactly how you had expected?.

Yes, as I mentioned, Nerf Rebelle, clearly, we are restaging that part of the NERF brand, had some inventory carried over, and we are restaging it for the second half. We had a great response from the global retailers to the new lineup of Nerf Rebelle products for the second half of the year.

And our expectation is the brand should sell through some remaining inventory in the first half. But I would say those are really the two brands. The only other one, and I almost -- we’ve talked about this over a number of calls is FURBY. We do have some remaining FURBY last hopefully quarter of FURBY headwinds, if we will.

We are selling out some remaining FURBY up against a year ago..

Okay, and then I know you guys talked a little bit about bad debt, but I am curious on a more regional level.

What you guys are seeing out of Brazil, which had historically been descent growth business and then whether or not Mexico is helping to offset that at all?.

Brazil continues to be strong growth, just obviously you are having a currency impact. So absent, absent FX, the underlying growth in Brazil, our brands in Brazil are performing quite strongly.

Clearly we are seeing growth in regions like Mexico, but Deb, do you want to comment on the environment?.

No. Our business continues to be good. As of late, the real has done a bit better as all currencies have.

And we did say in our prepared remarks, particularly if the euro holds up the way its trading right now that will have a positive impact on our expectations for foreign exchange, impact us for the full year, but we continue to see the market in Brazil being good and consumer takeaway being good as well..

Our next question is from the line of Tim Conder from Wells Fargo. Please go with your questions..

Thank you. Congratulations also again on the ongoing great execution everyone. Just a couple of items; my apologies there. Staying on the currency, Deb, and just following on a few of those related questions, a little more color you said, if rates stay where they are, you talked about the 100 million reference stat that will be substantially better.

Anymore color on the revenue, operating profits, again assuming rates stay where they are today? And did you guys put in on any additional hedging in Q1 that may be benefiting that now that rates have moved?.

We hedge throughout the year, so we probably did put some hedges on in the first quarter. Overall, from a hedging standpoint, we hedged about 75% our product cost last year, and we are about hedged the same amount this year. So, we always try to make sure we say in a similar level. So, it’s hard to tell where the rates are going to go.

I think if you look at what all the experts are saying, they expect the dollar is strengthened. However, we are not seeing that particularly against the euro right now. So, if rates stay the way they are, we did put a chart in our earnings presentation, so you could see the make-up of our revenues by currency in the first quarter.

And depending on what your expectations are for FX rates, you can just look it at that way. But are kind of hitting the point where we are getting comparable FX rates to last year in certain regions..

Okay, I guess from a color standpoint, are you talking, $10million, $20 million difference versus that $100 million that you talked about in February?.

Well, we’ve got $30 million almost already in. So, as you look at the rest of the year, I mean if the euro continues to stay strong, it’s actually trading above levels it was trading at last year. So, that could significantly change our expectations for the year, but again, it’s too early to tell..

Okay. And then any color, Brian, Deb, that you feel comfortable giving? I know part of it’s sensitive with a specific streaming contract.

But as far as the swing factor, the streaming contract and TRANSFORMERS together, how it impacted entertainment and licensing, was that the majority of the swing there, I mean can we just take it as all of it or any additional color you could just breakdown?.

Yes, it was I think between the two -- between the fact that we’re coming off. Remember, we’ve said before that when we do licenses, we get paid the following quarter.

So, obviously in first quarter of ‘15, we were collecting royalties for fourth quarter ‘14 in TRANSFORMERS and then of course we had the streaming deal, and I think both are exacerbated by the fact that you’re dealing in a typically lower revenue’s quarter, so more of an impact in percentage terms.

And you’re right, I think that’s the bulk of the change..

Okay. And then, any -- back to the bad debt and again, you said your POS was good in several areas.

What -- can you give us any color as to where the majority of a retailer is concentrated where that bad debt was or where you’re seeing maybe some of retailers, not the consumer have some issues?.

Particularly, we were seeing some impact to certain retailers in our emerging markets. I did already comment that Brazil continues to be a strong market for us right now and do well; so other markets, not Brazil..

The other thing I wanted -- I’d like to just note because we do have some big retailers, we’re not talking about the big retailers that have represented the significant partners for us and growth engines for us in those areas, so Detsky Mir in Russia, PBKIDS Ri Happy and Brazil both are very strong, continue to be strong retailers, really talking about some retailers that were not among our top retailers but clearly retailers we’ve been selling to..

Very helpful. And lastly Brian, China, it would appear that that’s been a -- continues to be a pretty good growth driver for you. Correct me if I’m wrong there.

And then just especially your e-commerce outlook in China and how that is trending over the last 12 months, 18 months whatever period here and then how you see that growth curve here over the balance of ‘16?.

Well clearly, e-com in China is one of the key themes for future growth, even though we’re getting growth today.

I think future growth is even stronger, as we orient our Company and our business to e-com globally but also particularly in China it is a great disintermediary for that market, allows us to get to the vast majority of consumers, and it’s an area of focus for us.

China has shown some good growth but remember, our Asia Pacific business overall showed good growth, so beyond China, which is quite heartening to see, country for country, and Korea some great growth and Southeast Asia as well as our Australia and New Zealand business. So, China continues to be both the short and long term opportunity for us.

We do have a great array of brands that are beloved in China, particularly brands like TRANSFORMERS and we’ll continue to build the business. But I think e-com is one of the focuses for our company globally and also specific e-com focus in China..

The next question comes from the line of Lee Giardano with Sterne Agee. Please go ahead with your question..

Thanks, good morning everybody. Deb, just to clarify on the tax rate, it looks like it came in around 21%.

Should we still continue to look for 26.5% or 27% for the remainder of the year?.

Yes, the adjustments that got us down to that 21% were discrete items. And our underlying tax rate is in the range of 26.5% to 27% that we talked about at year end..

Great, thanks.

And just secondly following up on MY LITTLE PONY, what does the entertainment schedule look like this year and next and how do you view that brand going forward?.

MY LITTLE PONY ‘s next season is just launching now and rolling out around the world, it’s the sixth season for the brand. And the theme this year is all about exploring EQUESTRIA and it ties together with lots of the initiatives that we have across the Company.

We have very robust plans in multi categories for MY LITTLE PONY throughout this year, brand new toys and games products but also I’ve seen some really wonderful product in our consumer products licensing business and apparel that’s out internationally in the UK, very strong results in several categories of products setting all around the world in tune with that theme and that will roll into 2017.

And then as you know for fall of 2017 November, we have our first animated feature film that will be distributed by Lionsgate in the MY LITTLE PONY movie. So, we’ll have television entertainment, streaming entertainment across a number of different over the top providers. Kids can find entertainment, both short form and long form.

And then they can also find entertainment on digital games with some new digital games that we’ll launch including one new MY LITTLE PONY digital game launching from BlackFoot studios; we continue to have a game from Gameloft throughout the year so story telling across a number of different dimensions and continue to feel very good about the brand.

And as I’ve mentioned, the new EQUESTRIA GIRLS line and launch is and going off quite well with the new Mini Dolls! segment..

Our next question comes from the line of Eric Handler with MKM Partners. Please proceed with your questions..

Yes. Thanks for taking my question. Forgive me, if you’ve already gone through this. But, your U.S. and Canada business yet great revenue growth 28%, the margin increased but not as much as revenue growth.

And I’m just curious, what expense items particularly of note where there that sort of drove the margin below your revenue growth? And then secondly, looking at STAR WARS, was POS consistent through the quarter or was there a big shipment that occurred just prior to the Home Entertainment release?.

So first of all, the operating profit in the U.S. business increased 89%. So, revenues were up 28%, operating profit was up 89%, and I’m not sure….

Okay. Sorry. Yes..

The operating profit margin in the quarter was 17.7%, up against 12% a year ago. So, I just want to make sure, we’re….

Right. Yes, sorry. I misspoke.

So, what was it that actually allowed you to get that margin up 570 basis points?.

Well, it’s obviously the revenue increases and a great portfolio of franchise growth as well as partner growth. So, again, I mentioned that in the top 10 brands of our Company, we have six of our seven franchise brands, and then some partner brands.

It’s that blend should allow you to understand how we intend to improve operating margins over time, how our partner brands will remain at the top end of the 20% to 25% of revenues and why royalty should be roughly in line with our guidance for the year..

Okay.

And then STAR WARS?.

STAR WARS, no, we’ve been shipping STAR WARS throughout, we came off of a very strong movie, remember the movie has continued to play in theaters, so we continue to ships product as more and more people saw the movie. And then of course, there are all kinds of initiatives around the Home Entertainment windows, but those will continue.

So, I wouldn’t say that there was any one pulse of inventory into the market, but rather very strong sell-through throughout..

Our next question is from the line of Jim Chartier with Monness Crespi. Please proceed with your questions..

Thanks for taking my questions. First question on YOKAI WATCH, now that you’ve had a couple of months with the product in the market, just want to get your update, your thoughts there on both kind of the U.S. and other markets, how it’s been received. And the secondly on STAR WARS, Rogue One looks like has another female lead.

So, just curious how the female business for STAR WARS is doing versus prior years and if you think that’s an opportunity going forward? Thank you..

So, YOKAI is only in its first couple of months, as you correctly indicate and really rolling out around the world of entertainment. So, we’ve really only seen entertainment in the U.S. and it will be going into international markets throughout the year. And early indications are quite good, but it’s still very early days.

Rogue One is exciting for everyone. And I think we continue to offer an array of products for all STAR WARS fans of all ages and genders and affiliations. And you’ll see us continue to focus on product for everyone and product has been well received by everyone.

And again, I think what you’re seeing overall is a blending of such more historical delineation that we’re really not focusing on our fostering, we’re just making great products, we love the lead characters of these movies, and we’re very excited about where STAR WARS is going.

We also saw in the first quarter great sales of Lightsabers and I think Lightsabers are going to everyone, because everybody can be a Jedi..

Thank you. Our next question is from the line of Gerrick Johnson with BMO Capital Markets. Please go ahead with your questions..

Hey, good morning.

Do you guys have a street date for Rogue One; will there be a Rogue Friday?.

I can only say at this point, fall; I don’t think they’ve announced the street date..

Okay.

And do you have the actual number for the bad debt expense?.

We talked about the one particular charge we took; it was $13.8 million..

Okay, and also your franchise brands up 1% in the quarter but I thought I heard on the call you say 9%, what was the 9% number relation to?.

So, I was trying to get across the fact that if you look at actual sales of our toys and games around the world, our franchise brands were up 9% and a brand like MY LITTLE PONLY was up 12%.

So, I just -- again, given the typically smaller revenue quarter and then impact of the streaming deal, if you really look at the underlying consumer orientation of the brands and how it’s performing, they are performing quite strongly..

Okay, I get it, ex the streaming deal.

Lastly, in the past couple of quarters, you’ve talked about MY LITTLE PONY performance in terms of core, I didn’t hear this world this time core, you said it did grow in U.S.; was that core or was that in totality?.

Well, it’s a combination, because we have also EQUESTRIA GIRLS; so, it’s the combination of all the elements..

Thank you. At this time, I’ll turn the floor back to Debbie Hancock for closing remarks. .

Thank you, Rob, and thank you everyone for joining our call today. The replay will be available on our website in approximately two hours. Additionally, management’s prepared remarks will be posted on our website following this call. Our second quarter 2016 earnings release has tentatively scheduled for Monday July, 18th. Thank you..

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