Hasbro 2006 Annual Report Download - page 65

Download and view the complete annual report

Please find page 65 of the 2006 Hasbro annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

less allowances, approximates fair value. Variations in the credit and discount assumptions would not
significantly impact fair value.
(6) Accrued Liabilities
2006 2005
Liabilities potentially settleable in common stock ...................... $155,630 123,860
Royalties ................................................... 76,695 84,765
Advertising .................................................. 74,781 75,515
Payroll and management incentives ................................ 76,653 64,583
Accrued income taxes .......................................... 121,254 130,007
Other ...................................................... 230,283 232,082
$735,296 710,812
The Company currently has a warrant amendment agreement with Lucas Licensing Ltd. and Lucasfilm
Ltd. that provides the Company with a call option through October 13, 2016 to purchase all of these warrants
from Lucas for a price to be paid at the Company’s election of either $200,000 in cash or the equivalent of
$220,000 in shares of the Company’s common stock, such stock being valued at the time of the exercise of the
option. Also, the warrant amendment agreement provides Lucas with a put option through January 2008 to sell
all of these warrants to the Company for a price to be paid at the Company’s election of either $100,000 in
cash or the equivalent of $110,000 in shares of the Company’s common stock, such stock being valued at the
time of the exercise of the option.
The Company adjusts these warrants to their fair value through earnings at the end of each reporting
period. During 2006, 2005, and 2004, the Company recorded (income) expense of $31,770, $(2,080), and
$(12,710), respectively, to adjust the warrants to their fair value. This (income) expense is included in other
(income) expense, net in the consolidated statement of operations. There is no tax benefit or expense
associated with the fair value adjustments.
Should either the put or call option be required to be settled, the Company believes that it will have
adequate funds available to settle them in cash if necessary. Had this option been exercised at December 31,
2006 and the Company had elected to settle this option in the Company’s stock, the Company would have
been required to issue 4,078 shares. If the share price of the Company’s common stock were higher as of
December 31, 2006 the number of shares issuable would have decreased. If the share price were lower as of
December 31, 2006, the number of shares issuable would have increased.
54
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)