Hasbro 2007 Annual Report Download - page 65

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A reconciliation of the statutory United States federal income tax rate to Hasbro’s effective income tax
rate is as follows:
2007 2006 2005
Statutory income tax rate . ...................................... 35.0% 35.0% 35.0%
State and local income taxes, net ................................. 1.1 1.2 0.8
One time dividend ............................................ — — 8.3
International earnings not indefinitely reinvested...................... 4.4 — —
Tax on international earnings .................................... (10.9) (9.7) (12.2)
Fair value adjustment of Lucas warrants ............................ 3.4 3.3 (0.2)
Change in valuation allowance ................................... — 0.8 —
Exam settlements and statute expirations ........................... (6.5) 1.5 (1.4)
Other, net .................................................. 1.5 0.5 1.5
28.0% 32.6% 31.8%
During 2007, the Company designated $90,000 of current year international net earnings that will not be
indefinitely reinvested outside of the U.S. The incremental income tax on this amount, representing the
difference between the U.S. federal income tax rate and the income tax rates in the applicable international
jurisdictions, is a component of deferred income tax expense.
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.
The components of earnings before income taxes, determined by tax jurisdiction, are as follows:
2007 2006 2005
United States ........................................ $165,274 113,761 98,180
International ........................................ 297,108 227,713 212,733
$462,382 341,474 310,913
57
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)