Hasbro 2006 Annual Report Download - page 41

certain bank conduits. During the period from the first day of the October fiscal month through the last day of
the following January fiscal month, this limit is increased to $300,000. The program provides the Company
with a cost-effective source of working capital. Based on the amount of eligible accounts receivable as of
December 31, 2006, the Company had $300,000 available to sell under this program of which $250,000 was
utilized.
In June 2006, the Company entered into a five-year revolving credit agreement (the “Agreement”) which
provides the Company with a $300,000 committed borrowing facility that replaced the prior credit facility.
The Company has the ability to request increases in the committed facility in additional increments of at least
$50,000, up to a total of committed facility of $500,000. The Company is not required to maintain
compensating balances under the Agreement. The Agreement contains certain financial covenants setting forth
leverage and coverage requirements, and certain other limitations typical of an investment grade facility,
including with respect to liens, mergers and incurrence of indebtedness. The Company was in compliance with
all covenants as of and for the fiscal year ended December 31, 2006. The Company had no borrowings
outstanding under its committed revolving credit facility at December 31, 2006. The Company also has other
uncommitted lines from various banks, of which approximately $37,755 was utilized at December 31, 2006.
Amounts available and unused under the committed line at December 31, 2006 were approximately $297,131.
Net cash utilized by financing activities was $467,279 in 2006. Of this amount, $456,744, which includes
transaction costs, was used to repurchase shares of the Company’s common stock. In July 2006, the
Company’s Board of Directors authorized the repurchase of an additional $350,000 in common stock
subsequent to the full utilization of the Board of Director’s May 2005 authorization of $350,000. During 2006,
the Company repurchased 22,767 shares at an average price of $20.03. In addition, $32,743 was used to repay
long-term debt. Dividends paid were $75,282 in 2006 reflecting the increase in the Company’s quarterly
dividend rate to $.12 per share in 2006 compared to $.09 per share in 2005. These uses of cash were partially
offset by cash receipts of $86,257 from the exercise of employee stock options.
Net cash utilized by financing activities was $158,641 in 2005. This amount included repayments in
principal amount of long-term debt totaling $93,303. These amounts primarily related to $71,970 of bonds that
matured in November of 2005. The remaining amount related to repayment of long-term debt associated with
the Company’s former manufacturing facility in Spain. Dividends paid increased to $58,901 as a result of the
increase of the quarterly dividend rate to $0.09 in 2005 from $0.06. In 2005, the Company repurchased
2,386 shares at an average price of $20.10 under the Board of Director’s May 2005 authorization. The total
cost of these repurchases, including transaction costs, was $48,030. The Company received $45,278 in 2005 in
proceeds from the exercise of employee stock options.
Net cash utilized by financing activities was $75,824 in 2004. This amount included repurchases in
principal amount of long-term debt totaling $56,697 in connection with the Company’s strategy of reducing its
overall debt and improving its debt-to-capitalization ratio. The Company received $25,836 from the exercise of
stock options during the year. Cash paid for dividends in 2004 was $37,088.
At December 31, 2006, the Company has outstanding $249,996 in principal amount of senior convertible
debentures due 2021. The senior convertible debentures bear interest at 2.75%, which could be subject to an
upward adjustment in the rate, not to exceed 11%, should the price of the Company’s stock trade at or below
$9.72 per share for 20 of the 30 trading days preceding the fifth day prior to an interest payment date. This
contingent interest feature represents a derivative instrument that is recorded on the balance sheet at its fair
value, with changes in fair value recognized in the statement of operations. If the closing price of the
Company’s stock exceeds $23.76 for at least 20 trading days, within the 30 consecutive trading day period
ending on the last trading day of the calendar quarter, or upon other specified events, the debentures will be
convertible at an initial conversion price of $21.60 in the next calendar quarter. At December 31, 2006, this
conversion feature was met and the bonds are convertible through March 31, 2007 at which time the
conversion feature will be reassessed. In addition, if the closing price of the Company’s stock exceeds $27.00
for at least 20 trading days in any 30 day period, the Company has the right to call the debentures by giving
notice to the holders of the debentures. During a prescribed notice period, the holders of the debentures have
the right to convert their debentures in accordance with the conversion terms described above. The holders of
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