Hasbro 2008 Annual Report Download - page 81

(13) Leases
Hasbro occupies certain offices and uses certain equipment under various operating lease arrangements.
The rent expense under such arrangements, net of sublease income which is not material, for 2008, 2007, and
2006 amounted to $43,634, $36,897, and $34,603, respectively.
Minimum rentals, net of minimum sublease income, which is not material, under long-term operating
leases for the five years subsequent to 2008 and in the aggregate thereafter are as follows: 2009: $30,921;
2010: $22,118; 2011: $16,559; 2012: $11,923; 2013: $9,527; and thereafter: $10,522
All leases expire prior to the end of 2018. Real estate taxes, insurance and maintenance expenses are
generally obligations of the Company. It is expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties; thus, it is anticipated that future minimum lease
commitments will not be less than the amounts shown for 2008.
In addition, Hasbro leases certain facilities which, as a result of restructurings, are no longer in use.
Future costs relating to such facilities were accrued as a component of the original charge and are not included
in minimum rental amounts above.
(14) Derivative Financial Instruments
Hasbro uses foreign currency forwards to reduce the impact of currency rate fluctuations on firmly
committed and projected future foreign currency transactions. These instruments hedge a portion of the
Company’s anticipated inventory purchases and other cross-border transactions through 2011. At December 28,
2008, these contracts had net unrealized gains of $72,053, of which $32,203 are recorded in prepaid expenses
and other current assets and $39,850 are recorded in other assets. The Company has a master agreement with
each of its counterparties that allows for the netting of outstanding forward contracts.
During 2008, 2007, and 2006, the Company reclassified net losses, net of tax, from other comprehensive
earnings to net earnings of $1,409, $6,887, and $1,448, respectively, which included gains (losses) of $1,292,
$(37), and $(68), respectively, as the result of hedge ineffectiveness.
The remaining balance in AOCE at December 28, 2008 of $63,513 represents a net unrealized gain on
foreign currency contracts relating to hedges of inventory purchased during the fourth quarter of 2008 or
forecasted to be purchased during 2009 through 2011 and intercompany expenses and royalty payments
expected to be paid or received during 2009 through 2011. These amounts will be reclassified into the
consolidated statement of operations upon the sale of the related inventory or receipt or payment of the related
royalties and expenses. Of the amount included in AOCE at December 28, 2008, the Company expects
approximately $26,100 to be reclassified to the consolidated statement of operations within the next
12 months.
The Company also enters into derivative instruments to offset changes in the fair value of intercompany
loans due to the impact of foreign currency changes. The Company recorded a net loss on these instruments to
other (income) expense, net of $42,382, $2,098, and $5,501 in 2008, 2007, and 2006, respectively, relating to
the change in fair value of such derivatives, substantially offsetting gains from the change in fair value of
intercompany loans to which the contracts relate included in other (income) expense, net.
(15) Commitments and Contingencies
Hasbro had unused open letters of credit and related instruments of approximately $100,700 and $70,000
at December 28, 2008 and December 30, 2007, respectively.
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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)