Hasbro 2006 Annual Report Download - page 67

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day period ending on the last trading day of the calendar quarter, the holders have the right to convert the
notes to shares of the Company’s common stock at the initial conversion price of $21.60 in the next calendar
quarter. At December 31, 2006, this contingent conversion feature was met and the debentures are convertible
through March 31, 2007, at which time the contingent 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 these debentures may also put the notes back to
Hasbro in December 2011 and December 2016. At these times, the purchase price may be paid in cash, shares
of common stock or a combination of the two, at the discretion of the Company.
(8) Income Taxes
Income taxes attributable to earnings before income taxes are:
2006 2005 2004
Current
United States ....................................... $ 34,049 76,642 3,786
State and local ...................................... 3,203 7,147 (497)
International ....................................... 49,200 39,081 26,198
86,452 122,870 29,487
Deferred
United States ....................................... 24,912 (20,611) 28,019
State and local ...................................... 2,135 (1,767) 2,402
International ....................................... (2,080) (1,654) 4,203
24,967 (24,032) 34,624
$111,419 98,838 64,111
On October 22, 2004, the American Jobs Creation Act of 2004 (the “Act”) was signed into law. The Act
created a one-time incentive for U.S. corporations to repatriate undistributed earnings from their international
subsidiaries by providing an 85% dividends-received deduction for certain international earnings. The
deduction was available to corporations during the tax year that includes October 22, 2004 or in the
immediately subsequent tax year. In the fourth quarter of 2005, the Company’s Board of Directors approved a
plan to repatriate approximately $547,000 in foreign earnings, which was completed in December 2005. The
tax expense related to this repatriation was $25,844.
Certain tax benefits (expenses) are not reflected in income taxes in the statements of operations. Such
benefits of $27,876 in 2006, $8,426 in 2005, and $6,675 in 2004, relate primarily to stock options. In 2006,
2005 and 2004, the deferred tax portion of the total benefit (expense) was $12,917, $4,563, and $(283),
respectively.
56
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)