Hasbro 2009 Annual Report Download - page 43

by higher accrued payroll and management incentives at December 27, 2009. Accounts payable and accrued
expenses increased to $792,306 at December 28, 2008 from $742,122 at December 30, 2007. The increase was
primarily the result of increased accrued royalties as a result of the utilization of the remainder of the Lucas
prepaid royalty advance in the third quarter of 2008 as well as increased accrued pension primarily due to
decreases in the Plans’ asset values in 2008. The December 28, 2008 accounts payable and accrued expenses
balance also included a decrease of approximately $64,300 as a result of the currency impact of the stronger
U.S. dollar in 2008 compared to 2007.
Cash flows from investing activities were a net utilization of $497,509, $271,920 and $112,465 in 2009,
2008 and 2007, respectively. The 2009 utilization includes the Company’s $300,000 payment to Discovery for
its 50% interest in the joint venture, a payment of $45,000 to Lucas to extend the term of the license
agreement related to the STAR WARS brand and approximately $26,500 used to acquire certain other
intellectual properties. The 2008 utilization includes the Company’s purchase of the intellectual property rights
related to the TRIVIAL PURSUIT brand for a total cost of $80,800 as well as $65,153 in cash, net of cash
acquired, used to acquire Cranium in January 2008. In 2007 the Company reacquired the remaining digital
gaming rights for its owned or controlled properties held by Infogrames Entertainment SA (Infogrames), with
the exception of rights to DUNGEONS & DRAGONS, for an acquisition price of $19,000 which included
$18,000 in cash and $1,000 of non-cash consideration in the form of the return of preferred stock held by the
Company in a subsidiary of Infogrames. During 2009, the Company expended approximately $104,000 on
additions to its property, plant and equipment compared to $117,000 during 2008 and $92,000 during 2007. Of
these amounts, 58% in 2009, 56% in 2008 and 61% in 2007 were for purchases of tools, dies and molds
related to the Company’s products. In 2010, the Company expects capital expenditures to increase and be in
the range of $120,000 to $140,000. During the three years ended December 27, 2009, depreciation of plant
and equipment was $95,934, $87,873 and $88,804, respectively.
The Company commits to inventory production, advertising and marketing expenditures prior to the peak
third and fourth quarter retail selling season. Accounts receivable increase during the third and fourth quarter
as customers increase their purchases to meet expected consumer demand in the holiday season. Due to the
concentrated timeframe of this selling period, payments for these accounts receivable are generally not due
until the fourth quarter or early in the first quarter of the subsequent year. This timing difference between
expenditures and cash collections on accounts receivable makes it necessary for the Company to borrow higher
amounts during the latter part of the year. During 2009, 2008 and 2007, the Company primarily utilized cash
from operations, borrowings under its available lines of credit and its accounts receivable securitization
program to fund its operations.
The Company is party to an accounts receivable securitization program whereby the Company sells, on
an ongoing basis, substantially all of its U.S. trade accounts receivable to a bankruptcy remote special purpose
entity, Hasbro Receivables Funding, LLC (“HRF”). HRF is consolidated with the Company for financial
reporting purposes. The securitization program then allows HRF to sell, on a revolving basis, an undivided
fractional ownership interest of up to $250,000 in the eligible receivables it holds to certain bank conduits.
During the period from the first day of the October fiscal month through the last day of the following January
fiscal month, this limit previously was increased to $300,000. The program provides the Company with a
source of working capital. Based on the amount of eligible accounts receivable as of December 27, 2009, the
Company had availability under this program to sell $300,000, of which no amounts were utilized. In 2010,
the facility was amended to extend the agreement through January 2011. Pursuant to this amendment, the limit
will be $250,000 for the extension period.
The Company has a revolving credit agreement (the “Agreement”) which provides it with a $300,000
committed borrowing facility. The Company has the ability to request increases in the committed facility in
additional increments of at least $50,000, subject to lender agreement, up to a total committed facility of
$500,000. The Agreement contains certain financial covenants setting forth leverage and coverage require-
ments, and certain other limitations typical of an investment grade facility, including with respect to liens,
mergers and incurrence of indebtedness. The Company was in compliance with all covenants as of and for the
fiscal year ended December 27, 2009. The Company had no borrowings outstanding under its committed
revolving credit facility at December 27, 2009. However, letters of credit outstanding under this facility as of
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