Hasbro 2007 Annual Report Download - page 64

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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.
In 2006, the Company repaid in principal amount $32,743 of 8.50% notes due in March 2006.
The Company is a party to interest rate swap agreements in order to adjust the amount of total debt that
is subject to fixed interest rates. The interest rate swaps are matched with specific long-term debt obligations
and accounted for as fair value hedges of those debt obligations. At December 30, 2007, these interest rate
swaps had a total notional amount of $75,000 with maturities in 2008. In each of the contracts, the Company
receives payments based upon a fixed interest rate that matches the interest rate of the debt being hedged and
makes payments based upon a floating rate based on LIBOR. These contracts are designated and effective as
hedges of the change in the fair value of the associated debt. At December 30, 2007, these contracts had
unrealized gains of $256, which were included in other current assets, with a corresponding fair value
adjustment to increase the current portion of long-term debt.
(8) Income Taxes
Income taxes attributable to earnings before income taxes are:
2007 2006 2005
Current
United States ...................................... $ 34,443 34,049 76,642
State and local ..................................... 5,497 3,203 7,147
International....................................... 51,861 49,200 39,081
91,801 86,452 122,870
Deferred
United States ...................................... 33,707 24,912 (20,611)
State and local ..................................... 2,889 2,135 (1,767)
International....................................... 982 (2,080) (1,654)
37,578 24,967 (24,032)
$129,379 111,419 98,838
Certain income tax benefits (expenses), not reflected in income taxes in the statements of operations
totaled ($2,542) in 2007, $27,876 in 2006, and $8,426 in 2005. These income tax benefits (expenses) relate
primarily to pension amounts recorded in AOCE and stock options. In 2007, 2006, and 2005, the deferred tax
portion of the total benefit (expense) was ($20,163), $12,917, and $4,563, respectively.
56
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)