Hasbro Inc

Item 1A. Risk Factors.

In evaluating our business, the material risks described below, as well as other information contained in this Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission should be considered carefully. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business. The occurrence of any of these events or circumstances could individually or in the aggregate have a material adverse effect on our business, financial condition, cash flow or results of operations. This report contains forward-looking statements. Please refer to the cautionary statements made under the heading "Special Note Regarding Forward-Looking Statements" for more information on the qualifications and limitations on forward-looking statements.

Strategic Risks Related to Our Business

Our business will suffer if we are not successful in executing our strategy and transformation initiatives.

Ourbusiness strategy focuses on fewer and bigger brands that we believe have the largest potential, while emphasizing bottom-line growth, operational discipline, enhanced focus on our fans and commitment to shareholder return. In mid-2022, we formed the Hasbro Transformation Office ("HTO"), a team of leaders dedicated to designing and running a simple, efficient and effective business aligned with our strategy. The HTO is supporting.

Our business strategy has evolved to focus on extending the reach of our Operational Excellence Program, an ongoing enterprise-wide cost savings initiative intended to imtoy and game prove our business through specialized organizational programs that include targeted cost-savings, suppducts globally chain transformation and certain other restructuring actions designed to drito improve growth and enhance shareholder value. There are no assurances that we will achieve these cost savingsour position in the amounts we anticipate or within the anticipated timeframes or at all. In addition, any cost savings that we realize may be offsetmarketplace, in whole or in part, by reductions in net sales or through incrcreases in other expenses. Failure to realize the expected cost savings from the revenue and increase cost savings programs could have an adverse effect on our business, financial condition, and results of operations.operating profit.

Failure to execute our strategic plan and transformation initiatives mamay harm our business. Our ability to successfully implement and execute theseour plans and initiatives in a timely basis, if at all, is dependent on many factors, including, among other things: 

our ability to successfully innovate, design, develop, price, commercialize and grow a selectfocused group of brands across our Blueprint to global consumers in a wide array of markets;

our ability to successfully grow our digital gaming , licensing, and direct-to-consumers business;

our ability to optimize our toy business, including through right-sizing our cost structure and creating efficiencies in our operations;

our ability to implement appropriate systems and processes to obtain and analyze data and insights from consumers to enable us to make informed decisions about priorities and consumer preferences;

our ability to successfully develop products that gain masufficient consumer interest;

our ability to gain market share in our focus categories;

our ability to simplify our supply chain logistics;

our ability to successfully manage inventory;

the ability of our workforce to focus and execute on priority transformational projects across the business, and to sustain changes to maximize savings;

the attraction and retention of key personnel with core skills and competencies in the areas of focus; and

our ability to successfully license, divest, sell, or otherwise cease certain parts of the business that are not as profitable as other areas or are not core to the business.

Consumer interests change rapidly and acceptance of products and entertainment offerings are influenced by outside factors, making it difficult to design and develop innovative products, play patterns and entertainment offerings which are and wiOur business will continue to be popular with children, families and audiences.

Central to our mission is to Create Magic Through Play. This means we need to design innovative toys and games that create memorable, social and collectible experiences of play and entertainment. Our ability to successfully create innovative toys and games is affected by the interests of children, families, fans and audiences evolve quickly and can change dramatically from year to year and by geography. To be successful, we must correctly

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suffer if we anticipate the types of products, play patterns and entertainment which will capture consumers interests and imagination, and quickly develop and introduce innovative products and engaging entertainment which can compete successfully for consumers limited time, attention and spending. Although we utilize our brand insights platform to gather data and analytics to help us make informed decisions, it is very difficult to predict consumer acceptance with certainty due to, among other things, the ever-increasing utilization of technology at younger and younger ages, social media and digital media in entertainment offerings, and the increasing breadth of products and entertainment available to consumers. Evolving consumer tastes and shifting interests, coupled with an ever-changing and expanding pipeline of products, technology and entertainment which compete for consumer interest and acceptance, create an environment in which some products, technology and entertainment offerings can fail to achieve consumer acceptance or can be popular during a certain period of time but then be rapidly replaced. As a result, our products and entertainment offerings can have short consumer life cycles with no guarantee of success. Consumer acceptance is even more critical for our toy business due to the recent decline in the overall toy industry.

Consumer acceptance of our or our partners entertainment offerings is also affected by outside factors, such as critical reviews, promotions, the quality and are unable to develop, publish and commercialize digital games.

A key component to the succeptance of films and television programs and content released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and public tastes generally, all of which could change rapidly and most of which are beyond our control. There can be no assurance that television programs and films we or our partners develop, produce or distribute will obtain favorable reviews or ratings, that films we ss of our strategy is to continue to develop, produce or distribute will be popular with consumers and perform well at the box office or in other distribution channels, or that broadcasters will license the rights to broadcast any of our television programs in development or renew licenses to broadcast programs in our library.

If we devote time and resources to developing and marketing products or entertainment that consumers do not accept, do not find interesting enough to buy in sufficient quantities to be profitable to us or do not purchasublish and commercialize due to the pricing of a product, our revenues and profits may decline and our business performance may be harmed. Similarly, if our product offerings and entertainment fail to correctly anticipate consumer interests, our revenues and earnings will be reduced.

Our business will suffer if we are unable to innovate, develop and igital games. We have invest in digital gaming.

A key component to theed success of our strategy is to cobstantinue to innovate, develop and invest in digital gaming, particularly through our Wizards of the Coast and dally in our digital gaming business. We have invested substantially in this business and as a  and as a result it has seen significant growth over the past several years. Continued digital game development is a key growth factor for the future, including AAA games, games as a service and licensed games. If we are unable to continue to grow this business and ensure its integration with our other business segments, our business may be harmed. The digital gaming industry is highly competitive, including for talent, and costs associated with designing, developing and producing digital games and technologically advanced or sophisticated products tend to be higher than for many of our other more traditional products, such as board and trading card games and action figures, with no assurance of success. As a result, we face increased risk of not achieving sales sufficient to recover our costs and we may lose money on the development and sale of these products. Additiona There is no guaranty that a given game will be successful and it is possible we may cease development on a game after significant investment. As a result, we face the risk of significant write-offs in the event a digital games development is discontinued prior to commercialization or is not as commercially, d successful as we planned.

Designing, developing and producing digital gaming and other technologically advanced or innovative products often relies on third parties and requires different competencies and follows different timelines than traditional toys and games. Delays in the design, development or production of our digital gaming products could have a significant impact on our success. In addition, the pace of change in product offerings and consumer tastes in the electronics and digital gaming areas is potentially even greater than for our other products and this pace of change is expected to accelerate as artificial intelligence is further incorporated into the development of games. If a digital game fails to

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gain consumer acceptance early in its life cycle, there are limited opportunities to gain such acceptance through secondary launches or distribution through alternative platforms. This pace of change or lack of consumer acceptance means that the window in which a digital gaming product can achieve and maintain consumer interest may be even shorter than traditional toys and games.

If we fail to respoThird party licensees and to or capitalize on the rapid technologicpartners of our brands or intellectual development inproperty may fail to honor the entertainment industry, including changes in entir obligations to us or their actions may put us at risk.

Licensing certainment delivery formats, of our brands and intellectual property to third parties is also a significant part of our business could be harmed.

The entertainstrategy. Under these and other partner arrangement industrys, we lose some continues to experience frequent change driven by technological development and audience viewing preferences, including developmenrol over how the brand or intellectual property is used, potentially leading to misuse or misrepresentation. The actions of third-party licensees and partners may put our business and reputation at risk if they do not maintain the quality of our products with respect to the formats through which films, television programming, andor otherwise do not operate in accordance with our standards. These third parties may fail to pay royalties or other episodic content are delivereagreed upon fees, which could lead to consumerfinancial losses. With rapid technological changes and expanded digital content offeringIt is also possible that these third parties could infringe on others intellectual property rights, the scale and scope of which could result in legal issues for us. Furthese changes have accelerated in recent years. Consumers are continuing to increaser, disruptions in the financial markets, economic downturns, poor business decisions, or reputational harm may adversely affect their access to television, film and ose third-party licensees and may impact their ability to honor ther episodic content on streaming and digital content networks. Simir obligations to us or we may cease our arrangements with them. Alternative arrangements may not be availarly, some filmble to us on commercially releases go direct to streaming channels as opposed to theaters or at the same time as theaters or have gone to streaming channels after only a short period of time inasonable terms or we may experience business interruptions upon a transition to an alternative partner.

We may not realize the full benefit of our licenses from third parties if the thelicensed maters.

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Technological has well as other trends in the industry have cauless market appeal than expected, if revenue from the licensed signiproducts is not sufficaient disruption toto earn out the retail distribution minimum guaranteed royalties or if licenses are not renewed.

The success of entertainment offerings and hand other properties for which we have caused, and could in the future cause, a negative ia license, such as licenses we have with The Walt Disney Compact on sales of our ny for the MARVEL and STAR WARS productsperties, and other forms of monetization of content, especialur ability to successfully market and sell related products, can significantly those which are reliant on box office success. Waffect our revenues and profitability. In some cases, we may loonly obtain a license opportunities to capitalize on changing market dynamicfor certain aspects of an intellectual property or for certain territories, technological innovations owhich means that some of our consumer tastes if we do not adapt to such changmpetitors may also use the same intellectual property for other categories or in a timely manner. The overall effect that technological development and new digital distribution platforms have on the revenudifferent territories. If we produce a line of products based on a movie or television series, the success of the movie or series has a critical impact on the level of consumer interest in the anssociated profiducts we derive from our eoffer. In addition, competition in our industry for access to entertainment content, including from merchproperties can lessen our ability to secure, maintain, andise sales derived from such content renew popular licenses to entertainment products on beneficial terms, if at all, and the additional costs associated with changingo attract and retain the talented employees necessary to design, develop and markets, media platforms and technologies, is unpredictable successful products based on these properties. If we failare unable to accurately assessrealize the full benefit of and effectively respond to changes in technology and consumer behavi important license, or if an important license is not renewed or in s othe enrwise tertainment industryminated, our business results may be harmed.

The industries license agreements we enter to obtain which we compete are highly competitive. Ifthese rights usually require us to pay minimum royalty guarantees that may be substantial, and in some cases may be greater than what we are unltimately able to compete effectively with existing or newrecoup from actual sales, which could result in write-offs and competitors, ouuld harm our results of operations. Acquiring or revenues,enewing licenses market share and profitability could decline.

The play industry isy require the payment of minimum guaranteed royalties that we consider to be too highly competitive. We compete in the U.S. and internationally with a wide array of large and small manufacturers, marketers, and sellers of toy to be profitable, which may result in losing licenses that we currently hold when they become available for renewal, or not pursuing certain new licenses. Additionally, as and games, licensee of entertainment-based products which combinperties, we cannot guarantee traditional hat a particular property or brand digital plawill translate into successful toy, digital gaminggame or other family entertainment products, and other consumerunderperformance of any such products, as well as with may result in retailers who offer suchduced revenues and operating products undfit for us.

Consumer their own private labelsinterests change quickly and acceptance often at lower prices. In addition, we compete with companies focused on building their br toys and games and entertainment offerings are influenced by technological and outside factors, making it difficult to design ands across multipl develop innovative product and consumer categories, including through s, play patterns and entertainment offerings. Across our business, we face competitors who are constant which are and will continue to be popular with children, families and audiences.

Our ability to successfully create innovative toys and games is affected by the interests of children, families, fans and audiences which evolve quickly and can change dramatically monitoringfrom year to year and attempting to by geography. To be successful, we must correctly anticipate consumer tastes and trends, seeking ideasthe types of products, play patterns and entertainment which will appeal tocapture consumers interests and imagination, and inquickly develop and introducing new e innovative and value driven products that compete with our productsand engaging entertainment which can compete successfully for consumer acceptance and purchase.

In addis limited time, attention to existand spending competitors, the barriers. It is very difficult to entry for new participants in the play industry are lowpredict consumer acceptance with certainty due to, and mong othe inr things, the increasing importanceutilization of digital mediatechnology at younger and the heightened connection betweenyounger ages, social media and digital media and consumer interest, has furin entertainment offerings, ther increased the ability for new participaning breadth of products toand enter our markettainment available to consumers, and has broadened the array ofoutside factors such as critical reviews and promotions. Evolving companies wensumer tastes and shifting interests, competeupled with. New participants with a popular  an ever-changing and expanding pipeline of product idea can gs, technology and entertain access toment which compete for consumers interest and become a significant source of competition for ouracceptance, create an environment in which some products in a very short period of time. These risks will be heightened if the use of , technology and entertainment offerings can fail to achieve consumer

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artificial intelligencceptance in developing products becomes safer, more accepted anor can be popular during a certain period otherwise more broaf time but then be rapidly adoptreplaced. These existing As a result, our products and new competitors may be able to respond more rapidly than us to changes in centertainment offerings can have short consumer life cycles with no guarantee of success. Consumer prefereacceptances or may design products that are is even more desirable than ours. Ocritical for our competitors products may achieve greater market acceptance than our productstoy business due to the recent decline in the overall toy industry and potentially reduce demand for our producthe impact of declining birthrates globally. Failure to correctly anticipate consumer interests, lowerwill harm our revenues and lower our profitability.

Ourearnings.

Technological as well as other trends in the entertainment business, whiindustry, such followingas the sale of our eOne film and television business is primarily foccontinuing shift to streaming platforms, have caused on Hasbro and family-oriented content, faces global competitisignificant disruption from major film studios and televisto the retail distribution production companieof entertainment offerings as well as other independent distributors and independent content nd have caused, and could in the future cause, a negative impact on sales of our producers. Many of ts and othese compr forms of monetitors release a large numberzation of content offerings annua, especially and command a significthose which are reliant share ofon box office revenues, streaming rsuccess.

Rules governing new technological devenuelopments, and televisiosuch as developments in airtime, as well as other independent filmficial intelligence remain unsettled, and television production or dhese developments may affect aspects of our existribution companies. Some ofing business model, including revenue streams for the use competitors have substantially greater marketingof our intellectual property and financial reshow we create ources than we do and products and games. We may be ablelose opportunities to compete aggressivelyapitalize on pricing in order to increase box office or streaming revenues, obtain distribution rights and obtain televisiochanging market dynamics, technological innovations or consumer tastes if we do not adapt to such changes in air time. The competitionly manner. If we face may cause us to lose market share or achieve lower prices for productions based on ouil to accurately assess and effectively respond to changes in technology and consumer behavior intellectual property,  the markets in which could harmwe operate, our business.

We may not realizbe harmed.

Failure the full benefit of o achieve of our anticipated cost-savings may impact our licenses if the licensed material has less market appeal thanability to operate efficiently and profitably.

In mid-2022, we committed to an operational expected, if revenue from the licensed products is not sucellence program focusing on designing and running a simple, efficient to earn out the minimum guaranteand effective business aligned royalties or if licenseswith our strategy. There are not renewed.

The suc assurancess of entertainment properties for which we ha that we will achieve a license, such as licensecost savings in the amounts we have anticipate or with Tin the Walt Disney Company, and the ability of us to successfully market and sellanticipated timeframes or at all. In addition, any cost savings that we related products, can significantly affect our revenues and profitability. In some calize may be offset, in whole or in part, by reductions in net sales or through increases, we may only obtain an in other exclusive license for certain aspenses. Failure to realize the expects of an IP or for certain territories, which means that some ofed cost savings from these cost savings programs could have an adverse effect on our competitors also have tbusiness, financial condition, and results of operations.

The right to use the same IP for other categories or in different territoriesindustries in which we compete are highly competitive. If we produce a line of products based on a movie or television series, the success of the movie or series has a critical impact on the level of consumer interest in the associated productsare unable to compete effectively with existing or new competitors, our revenues, market share and profitability could decline.

The play industry is highly competitive, and if we are offering. In addition,fail to competition in our industry for acce successfully, our business to entertainmentmay be harmed. Our properties can lessen our ability to secure, maintain,imary competition comes from toy and game companies, digital gaming companies and renew popular licenses to entertainmentdigital gaming developers. We compete with several large companies in our products on beneficial term categories, if at all, and to attractas well as with many smaller United States and retain the talented employees necessaryinternational game and toy design, developers, manufacturers and market successful products based on these properties. If we are unable to realize the full benefit of an important licenseers. In certain instances, we also compete with large retailers, who offer such products under their own private labels, or if an important lften at lower pricenses. Competition is not renew based or is otherwise terminated, our business results mprimarily on meeting consumer preferences and on the quality and play be harmed.

The license agreements we enter to obtain these rights usually require us to pay minimum royalty guaranteesvalue of our products and experiences. To a lesser extent, competition is also based on product pricing. We expect that may be substantial, and in sas the use of artificial intelligence become cases may be greater than what we are ultimately able to recoups more prevalent, we will see increased competition from actual

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thosales, whie using such could result in write-offs which, in turn, would harm our results of operations. Acquiring technology to develop games, toys and content.

In addition to existing competitors, the barriers to entry for renewing licenses may require participants in the payment of minimum guaranteed royalties that we consider to be too hlay industry are low, and the increasing importance of digital media and the heigh totened connection be proftween digitable, which may resultl media and consumer interest, has further in losing licensecreased the ability for new participants that we currently hold wheno enter our markets, and has broadened they be array of companies we come available for renewal, or not pursuing certain new licenses. Additionally, aspete with. New participants with a popular product idea can gain access to consumers and become a licensesignificant source of entertainment-based properties, we cannot guarantee that a particular property or brand will translatecompetition for our products in a very short period of time. These existing and new competitors may respond more rapidly than us to changes into suc consumer preferencessful toy, game or other family entertainment or may design products that are more desirable than ours. Our competitors products, and underperforma may achieve greater market acceptance of any suchthan our products maand potentially result in reduce demand for our produced rts, lower our revenues and operatinglower our profit for usability.

We may not realize the anticipated benefits of acquisitions, dispositions or investments in joint ventures, or those benefits may be delayed or reduced in their realization.

We cannot be certain that the products and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity with consumers in the future or that any such acquired companies or investments will allow us to more effectively market our products, develop our competencies or grow our business. In some cases, we expect that the integration of the companies that we may acquire into our operations will create production, marketing and other operating, revenue or cost synergies which will produce greater revenue growth and profitability and, where applicable, cost savings, operating efficiencies and other advantages. However, we cannot be certain that these synergies, efficiencies and cost savings will be realized. Even if achieved, these benefits may be delayed, reduced or short-lived in their realization. In other cases, we may acquire or invest in companies that we believe have strong and creative management, in which case we may plan to operate them more autonomously rather than fully integrating them into our operations. We cannot be certain that the key talented individuals at these companies

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would continue to work for us after the acquisition or that they would develop popular and profitable products, entertainment or services in the future. Acquisitions of businesses and brands could also be adversely affected by changes in our business strategy or external factors. For example, with our Blueprint strategy, we, such as any determinedcision to sell, license or otherwise dispose of certain non-core assets, such as the recour sale our Entertainmently completed sale of  One film and television business ("eOne Film and TV") to Lions Gate Entertainment Corp., Lions Gate Entertainment Inc. and Lions Gate International Motion Pictures S..r.l (collectively "Lionsgate") in December 2023. We cannot guarantee that any acquisition, disposition , license or investment we may make will be successful or beneficial, and acquisitions, dispositions , licenses and investments can consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business.

Operational Risks Related to our Business

If we are not successful in transforming our supply chaOur business may be harmed by the imposition or threat of tariffs, including reciprocal or retaliatory tariffs, in markets in which we operations,e which could increase our product costs and other costs of doing business may be harmed.

As part of, impact consumer spending, or lower our transformation efforts, we are continuing to optimizerevenues and earnings.

The current global tariff environment is uncertain. For products manufactured outside the U.S., tariffs increase the cost of our products. Tariffs may impact our supply chain by ales and reduce our profitability. Tariffs may also improvact consumer spending our systems and sourcing to enable efficient product deploy if products become more expensive or consumers have less discretionary income or consumer spending power. The current tariff environment, enhanceparticularly the imposition or threat of tariffs on product quality and safety, drive efficiency in transports manufactured in China for import into the U.S. as well the potential for retaliatory and reciprocal tariffs in other countries in which we do business, has in the past negation anvely impacted our fulfillment centers,business and strengmay in then our direct-to-consumer operations. This is a long-term projec future negatively impact our business, sales and profitability. The threat and imposition of tariffs have resulted in the past, and may in the future result, with no assurance that we will achievein the elimination of some direct import orders, where customers take ownership of products near the anticipated efficiencisource of supply and import the product themselves and benefits from suinto the U.S., in favor of shifting to domestic orders, which efforts. Ifrequires us to ship the products to the transformation of our supply chain operations is not successful, our busine U.S., and import and warehouse the products prior to delivery to the customer. This shift to domestic orders raises the cost to us, can result in delays in the time of a sale, and may result in the potential loss may be harmed. Furof some orders entirely due to the lack of timely supply or other we may delays. We cannot achieve our anticipated cost savings, and we may face costlyssure you that we will be able to successfully implement actions to lessen the impact of tariffs imposed on our products, inefficiencicluding any changes or otheto our supply chain disruption, logistics capabilities, sales policies or pricing of our products.

An inability to develop, introduce and ship planned products, product lines and new brands in a timely and cost-effective manner could result in excess inventory, a shortage of products or otherwise damage our business.

In developing products, product lines and new brands we have anticipated dates for the associated product and brand introductions. When we state that we will introduce, or anticipate introducing, a particular product, product line or brand at a certain time in the future those expectations are based on completing the associated development, implementation, and marketing work in accordance with our currently anticipated development schedule. If we do not have in place, appropriate systems and technology, or do not obtain sufficient data, analytics and insights, we may not be able to adequately predict demand for our products. If we fail to accurately forecast demand, we may experience excess inventory levels or a shortage of product to deliver to our customers. Inventory levels in excess of demand have in the past resulted in, and may in the future result in, inventory write-downs or write-offs, and the sale of excess inventory at discounted prices or through less preferred distribution channels, which could harm our profit margins. If we do not operate our supply chain in an effective manner, we will not be able to manufacture, source and ship new or continuing products in a timely manner and on a cost-effective basis to meet constantly changing consumer demands. This risk is heightened by our customers compressed shipping schedules and the seasonality of our business.

The risk is also exacerbated by the increasing sophistication of many of the brands and products we are designing and developing in terms of combining digital and traditional technologies, and providing greater innovation and product differentiation. Unforeseen delays or difficulties in the development process, significant increases in the planned cost of development, or changes in anticipated consumer demand for our products and new brands may cause the introduction date for products to be later than anticipated, may reduce or eliminate the profitability of such

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products, result in excess inventory, or, in some situations, may cause a product or new brand introduction to be discontinued.

If we are unable to navigate through global supply chain challengnot successful in transforming our supply chain operations, our business may be harmed.

We are continuing to optimize our supply chain by improving our systems and sourcing to enable efficient product deployment, enhance product quality and safety, drive efficiency in transportation and our fulfillment centers, and strengthen our direct-to-consumer operations. This is a long-term project, with no assurance that we will achieve the anticipated efficiencies and benefits from such efforts. If the transformation of our supply chain operations is not

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successsful, our business may be harmed.

In recent years, we Further we may not achieve our anticipated cost savings, and we may face costly inefficiencies or other supply chain disruptions.

If we are unable to navigate through global supply chain challenges, our business may be harmed.

We have periodically faced global supply chain challenges with the production and delivery of some products being delayed due to logistics, including labor, trucking and container shortages, strikes, port congestion and other shipping disruptions. We experienced increases in material costs and shortages for some of our products, due in part to higher wages being paid due to labor shortages in China and Vietnam, as well as periodic and unpredictable manufacturing shut-downs or slow-downs due to COVID-19. While we have t, political instability in certain port regions and tariffs. We attempt to taken actions to lessen the impact of these supply chain challenges, such as through the use of alternative ports and air freight, and acceleradjusting inventory purchases in certain cases to ensure product availability for customers, such though these actions have resulted in higher costs andand may in the future can be no assurance that the actions taken will be effectiveresult in higher costs. We have also increased prices in some cases to help offset increased costs. We can provide no assurance that we will be able to increase prices in the future and we cannot assure that price increases we have already taken, will offset the entirety of additional costs we have incurred, and may incur in the future to mitigate the supply chain disruption. Further, if we are unable to negotiate favorable carrier agreements, deliver products on time or otherwise satisfy demand for our products, our business may be harmed.

If we are unable to adapt our business to the continued shift to direct-to-consumer, our business may be harmed.

Part of our strategy is to build lifelongincrease our relationshipsach with our consumers through direct-to consumer relationships created through ecommerce, social media, digital games and services. If we are unable to effectively connect with consumers through these channels, our business may be harmed. Similarly, if our technology and systems used to support direct-to-consumer order processing are not effective, our ability to deliver products on time on a cost-effective basis may be adversely affected. Failure to continue to adapt our systems and supply chain and successfully fulfill ecommerce sales could harm our business.

The concentration of our customer base means that economic difficulties or changes in the purchasing or promotional policies or patterns of our major customers could have a significant impact on us.

We depend upon a relatively small customer base to sell the majority of our products. For the fiscal year ended December 31, During 20234, Walm-Mart, Inc. and Amazon.com, Inc. each acaccounted for approximately 11% 2% and 11%, respectively, of our consolidated net revenues. Similarly, sales of certain products of our Wizards business depend in part on the success of specialty hobby stores. Due to our customer concentration and customer base, if one or more of our major customers or specialty hobby stores were to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce the amount of their purchases from us, favor competitors or new entrants, increase their direct competition with us by expanding their private-label business, change their purchasing patterns, impose unexpected fees on us, alter the manner in which they promote our products or the resources they devote to promoting and selling our products, or return substantial amounts of our products, our business may be harmed.

Our customers do not make binding long-term commitments to us regarding purchase volumes and make all purchases by delivering purchase orders. Any customer could reduce its overall purchase of our products and reduce the number and variety of our products that it carries and the shelf space allotted for our products. In addition, increased concentration among our customers could negatively impact our ability to negotiate higher sales prices for our products and could result in lower gross margins than would otherwise be obtained if there were less consolidation among our customers. Furthermore, as we experienced with the bankruptcy of certain of our retailers in the past, the failure or lack of success of a significant retail customer could negatively impact our revenues and profitability.

Our substantial business, sales and manufacturing operations outside the U.S. subject us to risks associated with international operations.

We operate facilities and sell products and entertainment offerings in numerous countries outside the U.S. Additionally, we utilize third-party manufacturers primarily located in the Far East, including China, Vietnam and India, to produce most of our products. These international operations, including operations in emerging markets, have unique consumer preferences and business climates, present additional challenges and are subject to risks that may significantly harm our sales, increase our costs or otherwise damage our business, including:

Currency conversiThe imposition riskof tariffs and currency fluctuations;

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Ths described in these imposition of tariffrisk factors, trade sanctions, quotas, border adjustment taxes or other protectionist measures;

Potentilitical instability, civil unrest and economic instability;

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Currency conversion risks alnd currency fluctuations;

Potential challenges to our transfer pricing determinations and other aspects of our cross-border transactions, which can materially increase our taxes and other costs of doing business;

Political instability, civil unrest and economic instability, such as has recently been experienced between Russia and Ukraine, which has resulted in a suspension of our business activities in Russia;

Greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;

Complications in complying with different laws in varying jurisdictions and in dealing with changes in governmental policies and the evolution of laws and regulations and related enforcement, as such laws and policies relate to our products and approval of entertainment;

Difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets which may be different from the U.S.;

Natural disasters and the greater difficulty and cost in recovering therefrom;

Difficulties in moving materials and products from one country to another, including port congestion, strikes, labor shortages and other events causing transportation delays and interruptions;

Increased investment and operational complexity to make our products compatible with systems in various countries and compliant with local laws; and

Changes in international labor costs and other costs of doing business internationally.

Because of the importance of international sales, sourcing and manufacturing to our business, our financial condition and results of operations could be significantly harmed if any of the risks described above were to occur or if we are otherwise unsuccessful in managing our increasing global business and operating in an environment with these risks.

Our reliance on third-party manufacturers to produce our products, particularly in China, the U.S., Vietnam and India, presents risks to our business.

AllMost of our toy and game products are manufactured by third-party manufacturers, the majority of which are in China, with a significant amount of our product sourcing also coming from manufacturers in the U.S., Vietnam and a lesser amount from India, India and Japan. Should changes be necessary, our external sources of manufacturing can be shifted, over a significant period of time, to alternative sources of supply. Working with vendors who have not historically manufactured products for us means these new vendors must successfully develop the capability to manufacture our products to the quality and safety standards we require and within the tight timeframe required by our customers. Newer and less experienced vendors are more susceptible to product quality, logistics and other issues, due in part to their less mature infrastructure or unfamiliarity with our product standards.

If we were prevented or delayed in obtaining products or components for a material portion of our product lines due to economic, political, civil, labor or other factors beyond our control, including work stoppages, slowdowns or strikes, natural disasters, adverse health conditions or pandemics, our ability to manufacture would be adversely affected and our operations may be substantially disrupted, potentially for a significant period of time. This delay could significantly reduce our revenues and profitability and harm our business while alternative sources of supply are secured.

Given that our toy and game manufacturing is conducted by third-party manufacturers, health conditions, such as COVID-19, a and other factors affecting social and economic activity where our manufacturers are located may affect the movement of people and products into and from those locations to our major markets, including North America and Europe. Further, increases in the costs of labor and other costs of doing business in markets where we manufacture, could also have a significant negative impact on our operations, revenues and earnings. Prolonged disputes or slowdowns at west coast or other ports can negatively impact both the time and cost of transporting goods into the U.S. Natural disasters or health pandemics impacting our manufacturers had and can have a significant negative impact on our business.

Further,  as described elsewhere, the imposition or threat of tariffs, border adjustment taxes, trade sanctions or other regulations or economic penalties by the U.S. or the European Union against products imported by us from China or other foreign countries, or the loss of normal trade relations status with China or other foreign countries in which we operate, could significantly

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increase our cost of products imported into the U.S. or Europe, shift more orders from direct import to domestic sales, put additional shipping and warehousing burdens on us, delay the time of our sales to retailers, result in lost sales, and otherwise harm our business. Additionally, the suspension of the operations of a third-party manufacturer by government inspectors in China or another market in which we source products could result in delays to us in obtaining product and may harm sales.

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We require our third-party manufacturers to comply with our Global Business Ethics Principles, which are designed to prevent products manufactured for us from being produced under inhumane or exploitive conditions. Notwithstanding these requirements and our monitoring and testing of compliance with them, there is always a risk that one or more of our third-party manufacturers will not comply with our requirements and that we will not immediately discover such non-compliance. Any failure of our third-party manufacturers to comply with labor, consumer, product safety or other applicable requirements in manufacturing products for us could result in damage to our reputation, harm sales of our products and potentially create liability for us.

Our dependence on third-party relationships with studios, content producers and distribution channels to develop and distribute digital games and entertainment content is critical to our business.

We rely on third party relationships with studios, content producers and distribution channels to develop and distribute certain digital games and entertainment content. Our financial performance may be adversely affected by our relationships with these studios, content producers and distribution channels. Some of our digital gaming developers and content producers are affiliates of major studios that develop their own games or content. Some have their own distribution capability in the markets in which we operate, and some may decide, or be required by their respective parent companies, to use their intracompany distribution or content production capabilities rather than contracting with us. Our business may be harmed if the studios, content producers and distribution channels with which we work stop or reduce the amount of work they do with us or otherwise demand less favorable terms to us.

If our vendors or third-party outsourcing partners fail to perform, our business may be harmed.

As a part of our transformation efforts to reduce costs, achieve operational efficiencies, and increase productivity and service quality, we have relied and expect to further rely on third- party vendor and outsourcing relationships for certain areas of the business. Working with third-parties for these critical areas subjects us to risk, including the reduction in full control over certain activities. Any failure to perform timely or accurately or other shortcoming of one of these vendors or outsourcers, could harm our business or could damage our reputation. Transitioning some of these services to a third-party outsourcing vendor is challenging and time-consuming. Problems with transitioning these services and systems to, or operating failures with, these vendors and outsourcers may cause delays to product sales and reduce the efficiency of our operations. We may not achieve the cost-savings we expect, and we may suffer knowledge loss and require significant capital investments to remediate the problem. We cannot guarantee that our outsourcing efforts will be successful.

Our success is dependent on the efforts and dedication of our officers and other employees.

Our officers and employees are at the heart of all our efforts. It is their skill, innovation and hard work that drive our success. We compete with many other potential employers in recruiting, hiring and retaining our management team and our many other skilled officers and employees around the world. In the digital gaming and entertainment industries, eExperienced personnel and top creative talent arein the markets in which we operate are in high demand and competition for their talent is intense. The contpossibility of moving our corporate headquarters may impact our ability to retain and attract key employees. Further, the continuing prevalencdebate and practice of remote and hybrid work creates further challenges in retaining employees as some employees desire more flexibility in their employment and the ability to work remotely or hybrid opens up more employment opportunities. Additionally, a

As we continue to transform our business to execute on our strategic plan, we have reduced our headcount and may otherwise lose employees due to our decision to eliminate or reduce the amount of work performed relative to non-core aspects of our business and the optimization of our business. The impact of reductions in workforce or failing to retain key employees can be high due to increased risk of loss of important information, key knowledge and relationships, loss of creative talent, lost productivity, hiring and training costs, all of which could result in lower efficiency, profitability or otherwise harm the business. We cannot guarantee that we will recruit, hire or retain the key personnel we need to succeed.

We have also experienced significant changes in our leadership in a relatively short period of time, with most key members of executive leadership having been appointed within the past couple of few years. Our future success will depend on the leadership of our key executives and their ability to navigate the organization through our transformation efforts and renewed strategy. Our loss of key management or other key employees, inability to drive success through our new leaders, or our inability to retain or hire talented people with the skill sets we need for our diverse and changing business, could significantly harm our business.

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If we fail to develop diverse top talent, we may be unable to compete and our business may be harmed.

We promote a diverse and inclusive work environment. To compete successfully, we must continuously develop a diverse group of talented people representative of our fans and customers which we believe will foster new ideas and perspectives that will benefit our business, including through enhanced product innovation. Competition for diverse talent is intense. The recent restructuring changes in our business may make it more difficult to attract and retain diverse talent. We cannot guarantee we will achieve our goals or that our actions will result in expected benefits to our business.

Our business may be harmed if we are unable to protect our critical intellectual property rights.

Our intellectual property, including our trademarks and tradenames, copyrights, patents, and rights under our license agreements and other agreements that establish our intellectual property rights and maintain the

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confidentiality of our intellectual property, is of critical value. We rely on a combination of trade secret, copyright, trademark, patent and other proprietary rights laws to protect our rights to valuable intellectual property in the U.S. and around the world. From time to time, third parties have challenged, and may in the future try to challenge, our ownership of our intellectual property in the U.S. and around the world. In addition, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights, as well as the risk of unauthorized third partiepersons copying and distributing our digital or entertainment content or leaking portions of planned digital or entertainment content. We may need to resort to litigation to protect our intellectual property rights, which could result in substantial costs and diversion of resources. Similarly, third parties may claim ownership over certain aspects of our products, productions or other intellectual property. Our failure to successfully protect our intellectual property rights could significantly harm our business and competitive position.

Failure to successfully operate our information systems and implement new technology effectively could disrupt our business or reduce our sales or profitability.

We rely extensively on various information technology systems and software applications to manage many aspects of our business, including product development, management of our supply chain, sale and delivery of our products, analytics, royalty and financial reporting and various other processes and transactions. As part of our transformation efforts, we are also upgrading some of our technology and systems, and, as described elsewhere, we  we are relying on the systems of third-party outsourcers for certain critical functions. We are critically dependent on the integrity, security and consistent operations of these systems and related back-up systems. These systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, malware and other cybersecurity attacks and breaches, catastrophic events such as hurricanes, fires, floods, earthquakes, tornadoes, acts of war or terrorism and usage errors by our employees or partners. The efficient operation and successful growth of our business depends on these information systems, including our ability and the ability of our third-party outsourcers to operate them effectively and to select and implement appropriate upgrades or new technologies and systems and adequate disaster recovery systems successfully. The failure of our information systems or third-party hosted technology to perform as designed or our failure to implement and operate them effectively could disrupt our business, require significant capital investments to remediate a problem or subject us to liability.

If our electronic data is compromised our business could be significantly harmed.

We and our third-party outsourcers and other business partners maintain significant amounts of data electronically in locations around the world and in the cloud. This data relates to all aspects of our business, including current and future products and entertainment under development, and also contains certain customer, consumer, supplier, partner and employee data. We and our partners maintain systems and processes designed to protect this data, but notwithstanding such protective measures, there is a risk of intrusion, cyber-attacks or tampering that could compromise the integrity and privacy of this data. Cyber-attacks continue to increase in their frequency, sophistication and intensity, and are becoming increasingly difficult to detect. They are often carried out by motivated, well-resourced, skilled and persistent actors, including nation states, organized crime groups, hacktivists and employees or contractors acting with malicious intent. Cyber-attacks could include the deployment of harmful malware and key loggers, ransomware, a denial-of-service attack, a malicious website, artificial intelligence, the use of social engineering and other means to affect the confidentiality, integrity and availability of our or third-party technology systems and data. Cyber-attacks could also include supply chain attacks, which could cause a delay in the manufacturing of our products. In addition, we provide confidential and proprietary information to our third-party outsourcers and business partners in certain cases where doing so is necessary to conduct our business. While we obtain assurances from those parties that they have systems and processes in place to protect such data, and where applicable, that they will take steps to assure the protections of such data by third parties, those outsourcers and partners may also be subject to data intrusion or otherwise compromise the protection of

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such data. The risk of data loss or breaches is heightened during uncertain economic times, changes in business strategy and reductions in workforce. Any compromise of the confidential data of our customers, consumers, suppliers, partners, employees or ourselves, or failure to prevent or mitigate the loss of or damage to this data through breach of our third party outsourcers and other business partners information technology systems could substantially disrupt our operations, harm our customers, consumers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and result in a loss of business that could be material.

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Global and Economic Risks Relating to our Business

Outbreaks of communicable infections, diseases, or public health pandemics in the markets in which we and our employees,Changes in U.S., global or regional economic conditions could impact discretionary consumers, customers, partners, licensees, suppliers spending and manufacturers operate, could substantharm our business and financially harm our business performance.

Outbreaks of communicable infections, diseases or or financial performance is impacted by ther adverse public health condi level of discretions, such as COVID-19,ary consumer spending in the markets in which we, our employees, consumers, customers, partners, licensees, licensors, suppliers and manufacturers operate, has had and could in the future have a significant neg operate. Recessions or even fear or anticipation of recessions, inflative impact on our buon, risiness, revenues and profitability. The occurrence of these types of events can result, andg costs due to tariffs or potential tariffs, rising or fluctuating in the case of COVID-19 has teresulted in, disruptiont rates and dammortgage to our businesrates, due to, amongcredit crises and other things:

difficulties in shipping andeconomic downturns, or distributing products due to ongoing port capacity,ruptions in credit markets, in the U.S. and labor, shipping containin other and truck transportation shortages,markets in which we operate can resulting in highlower costs for both ocean and air freight and delays in the availability of productlevels of economic activity, lower employment levels, which can result in delayed sales and in sless consumer disposable income cases result in, and lost sales;

disruptiwer cons in supply of products, due to closures orumer confidence. Similarly, reductions in operations at third-party manufacturing facilities across several geographithe value of key assets held by consumers, such as their homes including, but not limited to, China, Vietnam, India, the United States and Ireland;

adverse sales impact due to changes inor stock market investments, can lower consumer confidence and consumer purchasspending behavior and availabilitpower. Any of products to consumers;

uncertain inventory availability or difficulty in anticipating demand, these factors can reduce the amount which can result in too little or too much supply at a given time;

interruptions, delays oonsumers spend on the purchase of our postponements ofroducts and entertainment productions and. This in turn can reduce our releases;venues and

challenges of working remotelharm our financial performance and profitability.

Inflation and other adverse economic conditions in the markets in which we and our employees, consumers, customers, semployees, suppliers and manufacturers operate could negatively impact our ability to produce and ship our products, and lower our revenues, margins and profitability.

Various economic conditions in the markets in which we, our employees, consumers, customers, semployees, suppliers and manufacturers operate, could have a significant negative impact on our revenues, profitability and business. The occurrence of adverse economic conditions can result in manufacturing and other work stoppages, slowdowns and delays; shortages or delays in production or shipment of products or raw materials; delayed or reduced purchases from customers and consumers; and other factors that cause increases in costs or delay in revenues.

Inflation, such as what consumers in the U.S. and other economies have recently experienced, can ca can cause significant increases in the costs of other products which are required by consumers, such as gasoline, home heating fuels, or groceries, may reduce household spending on the discretionary products and entertainment we offer. Weakened economic conditions, lowered employment levels or recessions in any of our major markets may also significantly reduce consumer purchases of our products and spending on entertainment. Economic conditions may also be negatively impacted by terrorist attacks, wars and other conflicts, natural disasters, increases in critical commodity prices or labor costs, tariffs, or the prospect of such events. Such a weakened economic and business climate, as well as consumer uncertainty created by such a climate, could harm our revenues and profitability.

Our success and profitability not only depend on consumer demand for our products, but also on our ability to produce and sell those products at costs which allow for us to make a profit. Rising fuel and raw material prices, due to inflation or otherwise, for paperboard and other components such as resin used in plastics or electronic components, increased transportation and shipping costs, and increased labor costs in the markets in which our products are manufactured all may increase the costs we incur to produce and transport our products, which in turn may reduce our margins, reduce our profitability and harm our business.

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ChOutbreanges in U.S., global or regional economic conditions could impact discretionaryks of communicable infections, diseases, or public health pandemics in the markets in which we and our employees, consumer spending s, customers, partners, licensees, suppliers and harm our business and financial performancemanufacturers operate, could substantially harm our business.

Our financial performanctbreaks of communicable is impacted by nfections, diseases or othe level of discrer adverse public health conditionary consumer spending s, such as COVID-19, in the markets in which we operate. Recessions or even fear or anticipation of recessions, infl, our employees, consumers, customers, partners, licensees, licensors, suppliers and manufacturers operate, has had and could in the future have a significant negation, rising or fluctuating interest rateve impact on our business, revenues and mortgage rates, credit crisesprofitability. The occurrence of these types of events can result, and o in ther economic downturns, or case of COVID-19 resulted in, disruptions in credit markets, in the U.S. and in and damage to our business, due to, among other marketthings:

difficulties in which we operate can result in lower levels of economic activshipping and distributing products due to ongoing port capacity, lower employment levels, less and labor, shipping consumtainer diand truck transposable income, and lowrtation shortages, resulting in higher consumer confidence. Simsts for both ocean and air freight and delays in the availarly, rebility of productionss, which can result in the value of key assets held by consumers, such as their homes or stock marketdelayed sales and in some cases result in lost sales;

disruptions in supply of products, due to closures or reductions investments, can lower consumer confidence and operations at third-party manufacturing facilities across several geographies;

adverse sales impact due to changes in consumer spendpurchasing power. Anbehavior and availability of these factors can reduce the amount products to consumers;

uncertain inventory availability or difficulty in anticipating demand, which consumers spend on the purchase of our products and ean result in too little or too much supply at a given time;

intertainrruptions, delays or postponement. This in turn can res of entertainment produce ourtions and revenuesleases; and harm our financial performance and profitabilit

challenges of working remotely.

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Financial Risks Relating to our Business

Our quarterly and annual operating results may fluctuate due to seasonality in our business.

Sales of our products are extremely seasonal, with a majority of retail sales occf consumers occurring during the period from September through December in anticipation of the holiday season. This seasonality for our consumer products business has increased over time, as retailers become more and more efficient in their control of inventory levels through quick response or just in time inventory management technique, and sales of our card sets, including the use of automated inventory replenishment programs. Similarly, ecommerce retailers tegames and to hold less inventory and take inventory closer to the time of sale to consumers than traditional retailers. As a result, customers are timing their orders so that they are becontent releases varying filled by suppliers, such as us, closer to based on the timeing of purchase by consumers. While these techniques reduce a retailers investment irelease. Seasonality can inventory, they increase pressure on suppliers like us to fill orders promptly and thereby shift a significant portion of inventory risk and carrying costs to the supplier. This can also result in our losing significant revenues and earnings if our supply chain is unable to supply product to our customers when they want it. Tariffs can exacerbate this negative impact by causing retailers to shift from direct import to domestic orders, further pressuring our supply chain.

The level of inventory carried by retailers may also reduce or delay retail sales resulting in lower revenues for us. If we or our customers determine that one of our products is more popular at retail than was originally anticipated, we may not have sufficient time to produce and ship enough additional products to fully meet consumer demand. Additionally, the logistics of supplying more product within shorter time periods increases the risk that we will fail to achieve tight and compressed shipping schedules, which also may reduce our sales and harm our financial performance. The ability to accurately predict levels of inventory remains challenging in the current economic environment, and, in 2023, resulted in write-offs of excess inventory.

Our entertainment business is also subject to variations based on the timing of television, film, streaming and digital content releases or other factors, such as labor or union strikes. Release dates are determined by several factors, including the timing of holiday periods, geographical release dates and competition in the market. In 2023, the development, production and delivery of content was adversely affected by the actors and writers strikes that occurred during the year, which caused contrecent years, resulted in write-offs of excess invent to be reduced, delayed or, in some case, not completedory.

This seasonal patterns of our business requires significant use of working capital, mainly to manufacture or acquire inventory during the portion of the year prior to the holiday season, and requires accurate forecasting of demand for products during the holiday season in order to avoid losing potential sales of popular products or producing excess inventory of products that are less popular with consumers. Our failure to accurately predict and respond to consumer demand, resulting in under -producing popular items and/or overproducing less popular items, would reduce our total sales and harm our results of operations.

As a result of the seasonal nature of our business, we would be significantly and adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events such as a natural disaster, a terrorist attack, economic shock or pandemic that harms the retail environment or consumer buying patterns during our key selling season, or by events such as labor or union strikes, or delays or other issues in the supply chain, particularly from the Far East, during the critical months leading up to the holiday shopping season.

We have had and may in the future have significant impairment charges that adversely affect our net earnings.

Changes in strategy, shifting focus to certain lines of business, lower projections in an area of the business, declines in the profitability of acquired brands or businesses or our decision to reduce our focus or exit these brands or

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businesses, such as certain non-core entertainment assets of the business, has in the past impacted and may in the future impact our ability to recover the carrying value of the related assets and could result in an impairment charge. Similarly, declines in our profitability may impact the fair value of our reporting units, which could result in a write-down of our goodwill and consequently harm our net earnings. In 2023, we recorded non-cash goodwill and asset impairWe have incurred, and may in the future incur, significant costs in connection with the development charges of $1,307.2 million forof video games. If we determine that capitalized costs of the year ended December 31, 2023. See note 6 to our Consolidated Financial Stategame are unlikely to be recovered by product sales due to the termination of development, lack of success of the game or otherwise, we will incur an impairments, included in Part II, Item 8. Financial Statements, of th, which will be charged to costs of sales in the period in which such determination is Form 10-Kmade.

Changes in foreign currency exchange rates can significantly impact our reported financial performance.

Our global operations mean we transact business in many different jurisdictions with many different currencies. As a result, if the exchange rate between the U.S. dollar and a local currency for an international market in which we have significant sales or operations changes, our financial results as reported in U.S. dollars, may be meaningfully impacted even if our business in the local currency is not significantly affected. In recent years, our sales were adversely impacted due to the strength of the U.S. dollar compared to certain foreign currencies in territories in which we operate. Similarly, our expenses can be significantly impacted, in U.S. dollar terms, by exchange rates, meaning the profitability of our business in U.S. dollar terms can be negatively impacted by exchange rate movements which we do not control. Depreciation in key currencies may have a significant negative impact on our revenues and earnings as they are reported in U.S. dollars.

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Our indebtedness may limit our availability of cash, cause us to divert cash to fund debt service payments or make it more difficult to take certain other actions.

We incurred significant indebtedness to finance our acquisition of eOne in 2019. While we continue to pay down this indebtedness, including through the use of proceeds from the sale of certain parts of eOne, the increase in our debt service obligations resulting from additional inhave approximately $3,401.8 million in long-term indebtedness could hav. The a material adverse effect on our resultsmount of operations and financial condition. In particular, ourur long-term increased inddebtedness could:

make it more difficult and/or costly for us to pay or refinance our debts as they become due, particularly during adverse economic and industry conditions, because a decrease in revenues or increase in costs could cause cash flow from operations to be insufficient to make scheduled debt service payments;

require a substantial portion of our available cash to be used for debt service payments, thereby reducing the availability of our cash to fund working capital, capital expenditures, development projects, acquisitions or other strategic opportunities, dividend payments, share repurchases and other general corporate purposes;

result in downgrades in the credit ratings on our indebtedness, which could limit our ability to borrow additional funds on favorable terms or at all (including in order to refinance our other debt), increase the interest rates under our credit facilities and under any new indebtedness we may incur;

make it more difficult for us to raise capital to fund working capital, make capital expenditures, pay dividends, pursue strategic initiatives or for other purposes;

result in higher interest expense, which could be further increased in case of current or future borrowings subject to variable rates of interest;

require that materially adverse terms, conditions or covenants be placed on us under our debt instruments, which could include, for example, limitations on additional borrowings, pay dividends, repurchase our common stock or make investments, any of which could hinder our access to capital markets or our flexibility in the conduct of our business and make us more vulnerable to economic downturns and adverse competitive industry conditions; and

jeopardize our ability to pay our indebtedness if our business experienced a severe downturn.

If we were unable to obtain or service our other external financings, or if the restrictions imposed by such financing were too burdensome, our business would be harmed.

Due to the seasonal nature of our business, in order to meet our working capital needs, particularly those in the third and fourth quarters, we may rely on our commercial paper program, revolving credit facility and our other credit facilities for working capital. We currently have a commercial paper program which, subject to market conditions, and availability under our committed revolving credit facility, allows us to issue up to $1,000.0 million in aggregate amount of commercial paper outstanding from time to time as a source of working capital funding and liquidity. We

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cannot guarantee that we will be able to issue commercial paper on favorable terms, or at all, at any given point in time.

We also have a revolving credit agreement which provides for a $1,250.0 million committed revolving credit facility. The credit agreement contains certain restrictive covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment grade facility. These restrictive covenants may limit our future actions as well as our financial, operating and strategic flexibility. Non-compliance with our debt covenants could result in us being unable to utilize borrowings under our revolving credit facility and other bank lines, a circumstance which potentially could occur when operating shortfalls would require supplementary borrowings to enable us to continue to fund our operations.

Not only may our individual financial performance impact our ability to access sources of external financing, but significant disruptions to credit markets in general may also harm our ability to obtain financing. In times of severe economic downturn and/or distress in the credit markets, it is possible that one or more sources of external financing may be unable or unwilling to provide funding to us. In such a situation, it may be that we would be unable to access funding under our existing credit facilities, and it might not be possible to find alternative sources of funding.

We also may choose to finance our capital needs, from time to time, through the issuance of debt securities. Our ability to issue such securities on satisfactory terms, if at all, will depend on the state of our business and financial condition, any ratings issued by major credit rating agencies, market interest rates, and the overall condition of the financial and credit markets at the time of the offering. The condition of the credit markets and prevailing interest rates have fluctuated significantly in the past and are likely to fluctuate in the future. Variations in these factors could make it difficult for us to sell debt securities or require us to offer higher interest rates in order to sell new debt

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securities. The failure to receive financing on desirable terms, or at all, could damage our ability to support our future operations or capital needs or engage in other business activities.

If we are unable to generate sufficient available cash flow to service our outstanding debt we would need to refinance our outstanding debt or face default. We cannot guarantee that we would be able to refinance debt on favorable terms, or at all.

Changes in, or differing interpretations of, income tax laws and rules, and changes in our geographic operating results, may impact our effective tax rate.

We are subject to income taxes in the U.S. and in various international tax jurisdictions. We also conduct business activities between our operating units in various jurisdictions and we are subject to transfer pricing rules in the countries in which we operate. There is some degree of uncertainty and subjectivity in complying with transfer pricing rules. Our effective tax rate could be impacted by changes in, or the interpretation of, tax laws, such as those imposed by the current U.S. administration and other jurisdictions in which we do business, or by changes in the amount of revenue and earnings we derive, or are determined to derive by tax authorities, from jurisdictions with differing tax rates.

In addition, we may be subject to tax examinations by federal, state, and international jurisdictions, and these examinations can result in significant tax findings if the tax authorities interpret the application of laws and rules differently than we do or disagree with the intercompany rates we are applying. We assess the likelihood of outcomes resulting from tax uncertainties. While we believe our estimates are reasonable, the ultimate outcome of these uncertain tax benefits, or results of possible current or future tax examinations, may differ from our estimates and may have a significant adverse impact on our business and operating results.

Governmental and Legal Risks Relating to our Business

We are subject to various government regulations, violation of which could subject us to sanctions or otherwise harm our business. In addition, we could be the subject of future product liability suits or product recalls, which could harm our business.

We are subject to significant government regulations, including, in the U.S., under The Consumer Products Safety Act, The Federal Hazardous Substances Act, and The Flammable Fabrics Act, as well as under product safety and consumer protection statutes in our international markets. In addition, certain of our products are subject to regulation by the Food and Drug Administration or similar international authorities. Advertising to children is subject to regulation by the Federal Trade Commission, the Federal Communications Commission and a host of other agencies globally, and the collection of information from children under the age of 13  is subject to the provisions of the Childrens Online Privacy Protection Act and other privacy laws around the world. The collection of personally identifiable information from anyone, including adults, is under increasing regulation in many markets, such as the General Data Protection Regulation adopted by the European Union, and data protection laws in the United States

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and in a number of other counties. While we take all the steps we believe are necessary to comply with these acts and regulations, we cannot assure you that we will be in compliance and, if we fail to comply with these requirements or other regulations enacted in the future, we could be subject to fines, liabilities or sanctions which could have a significant negative impact on our business, financial condition and results of operations. We may also be subject to involuntary product recalls or may voluntarily conduct a product recall. While costs associated with product recalls have generally not been material to our business, the costs associated with future product recalls individually or in the aggregate in any given fiscal year could be significant. In addition, any product recall, regardless of direct costs of the recall, may harm the reputation of our products and have a negative impact on our future revenues and results of operations.

As a large multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust, employment, cpay transparency, customs and tax requirements, anti-boycott regulations, environmental regulations and the Foreign Corrupt Practices Act.  There are also many new laws and proposed laws, rules and regulations governing the use of artificial intelligence that may become applicable to our business. Complying with these regulations imposes costs on us which can reduce our profitability and our failure to successfully comply with any such legal requirements could subject us to monetary liabilities and other sanctions that could further harm our business and financial condition.

Failure to achieve our sustainability goals could result in reputational damage. 

We view sustainability challenges as opportunities to innovate and continuously improve our product design and operational efficiencies. We have set key goals and objectives in this area as described in our business section of this Form 10-K. Our reputation could be damaged if we fail to achieve our sustainability goals, or if we or others in our industry do not act, or are perceived not to act, responsibly with respect to the production and packaging of our products.

We are involved in litigation, arbitration or rare involved in litigation, arbitration or regulatory matters where the outcome is uncertain and which could entail significant expense.

As a large multinational corporation, we are subject to regulatory investigations, litigation and arbitration disputes, including potential liability from personal injury or property damage claims by the users of products that have been or may be developed by us, claims by third parties that our products infringe upon or misuse such third parties

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property or rights, csecurities claims , royalties claims, claims by former employees for employment related matters orand claims relating to media content. Because the outcome of litigation, arbitration and regulatory investigations is inherently difficult to predict, it is possible that the outcome of any of these matters could entail significant cost for us and harm our business. The fact that we operate in a significant number of international markets also increases the risk that we may face legal and regulatory exposures as we attempt to comply with a large number of varying legal and regulatory requirements. Any successful claim against us could significantly harm our business, financial condition and results of operations.