Hasbro 2008 Annual Report Download - page 46

An estimated effective income tax rate is applied to the Company’s quarterly operating results. In the
event there is a significant unusual or extraordinary item recognized in the Company’s quarterly operating
results, the tax attributable to that item is separately calculated and recorded at the time. Changes in the
Company’s estimated effective income tax rate during 2008 were primarily due to changes in its estimate of
earnings by tax jurisdiction. In addition, changes in judgment regarding likely outcomes related to tax
positions taken in a prior fiscal year, or tax costs or benefits from a resolution of such positions would be
recorded entirely in the interim period the judgment changes or resolution occurs. During 2008, the Company
recorded a total benefit of approximately $10,200 related to discrete tax events primarily comprised of a
benefit related to the repatriation of certain foreign earnings to the U.S., as well as the settlement of various
tax examinations in multiple jurisdictions.
In certain cases, tax law requires items to be included in the Company’s income tax returns at a different
time than when these items are recognized on the financial statements or at a different amount than that which
is recognized in the financial statements. Some of these differences are permanent, such as expenses that are
not deductible on the Company’s tax returns, while other differences are temporary and will reverse over time,
such as depreciation expense. These differences that will reverse over time are recorded as deferred tax assets
and liabilities on the consolidated balance sheet. Deferred tax assets represent credits or deductions that have
been reflected in the financial statements but have not yet been reflected in the Company’s income tax returns.
Valuation allowances are established against deferred tax assets to the extent that it is determined that the
Company will have insufficient future taxable income, including capital gains, to fully realize the future
credits, deductions or capital losses. Deferred tax liabilities represent expenses recognized in the Company’s
income tax return that have not yet been recognized in the Company’s financial statements or income
recognized in the financial statements that has not yet been recognized in the Company’s income tax return.
During 2007, the Mexican government instituted a tax structure which results in companies paying the higher
of an income-based tax or an alternative flat tax commencing in 2008. Should the Company be subject to the
alternative flat tax, it would be required to review whether its net deferred tax assets would be realized. During
2008 the Company was subject to the income-based tax. As the Company believes that it will continue to be
subject to the income-based tax in 2009, it believes that the net deferred tax assets related to the Mexican tax
jurisdiction will be realizable. Should the facts and circumstances change, the Company may be required to
reevaluate deferred tax assets related to its Mexican operations, which may result in additional tax expense.
Contractual Obligations and Commercial Commitments
In the normal course of its business, the Company enters into contracts related to obtaining rights to
produce product under license, which may require the payment of minimum guarantees, as well as contracts
related to the leasing of facilities and equipment. In addition, the Company has $709,723 in principal amount
of long-term debt outstanding at December 28, 2008. Future payments required under these and other
obligations as of December 28, 2008 are as follows:
Certain Contractual Obligations 2009 2010 2011 2012 2013 Thereafter Total
Payments Due by Fiscal Year
Long-term debt ............ $ — — — — — 709,723 709,723
Interest payments on long-term
debt ................... 36,173 36,173 36,173 36,173 36,173 251,956 432,821
Operating lease commitments . . 30,921 22,118 16,559 11,923 9,527 10,522 101,570
Future minimum guaranteed
contractual payments . ..... 16,041 5,605 36,172 — — — 57,818
Purchase commitments . . ..... 227,673 — — — — — 227,673
$310,808 63,896 88,904 48,096 45,700 972,201 1,529,605
The Company has a liability at December 28, 2008, including potential interest and penalties, of $92,812
for uncertain tax positions that have been taken or are expected to be taken in various income tax returns. The
Company does not know the ultimate resolution of these uncertain tax positions and as such, does not know
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