The outlook change reflects Moody's view that management has adopted a more aggressive posture in its financial strategy as reflected by the recent announcement of an acceleration in the share repurchase program through a Modified Dutch Auction Tender Offer.

The repurchase of up to 17.25 million shares at an aggregate price of $260 to $300 million, will be mostly debt-financed, which will weaken the company's debt protection measures in the short run, and limit its financial flexibility. Leverage has risen in recent years due to a number of acquisitions.

Moody's noted Hasbro's solid business fundamentals which include strong earnings and cash flow, and a diversified portfolio of toy, game and lifestyle products with leading global market positions. At the same time, the company faces the challenge of responding to rapidly changing play patterns and a resulting shift away from traditional toys.

Hasbro has made good progress in developing an array of interactive products, including those that leverage off of its leading positions in games. But the evolution of the industry into technology and entertainment-oriented products also changes the scope of competition.

Hasbro's business is seasonal, with the greatest cash collections occurring in the last calendar quarter of each year. Because the company has several very large customers, there is also a high degree of concentration risk, some of it with retailers who have recently faced significant challenges.

Moody's current ratings reflect the expectation that Hasbro will continue to generate good cash flow, and will bring its debt protection measures back in line with historic levels over the next several years. However, the possibility of debt financed acquisitions, or of unexpected charges for restructuring or obsolescence, which have been more frequent in recent years, add a degree of uncertainty as to the timing of such improvements, and could, if material, lead to downward pressure on the ratings.

Hasbro, Inc. headquartered in Pawtucket, Rhode Island, offers children's and family leisure time products and services including the design, manufacture, and marketing of toys, games, interactive software, puzzles and infant care products.

[Updated 3/07/2000]