Hasbro 2009 Annual Report Download - page 50

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In connection with the Company’s agreement to form a joint venture with Discovery, the Company is
obligated to make future payments to Discovery under a tax sharing agreement. These payments are contingent
upon the Company having sufficient taxable income to realize the expected tax deductions of certain amounts
related to the joint venture. Accordingly, estimates of these amounts are included in the table above.
Included in the Thereafter column above is $249,828 in principal amount of senior convertible debt due
2021. The holders of these debentures may put the notes back to the Company in December 2011 and
December 2016 at the principal amount. At that time, the purchase price may be paid in cash, shares of
common stock or a combination of the two. In addition, at December 27, 2009, these debentures may be
converted to shares at an initial conversion price of $21.60 per share through March 31, 2010, at which time
the requirements of the contingent conversion feature will be reevaluated. If the closing price of the
Company’s common stock exceeds $23.76 for at least 20 trading days within the 30 consecutive trading day
period ending on the last trading day of a calendar quarter, or upon other specified events, the debentures will
be convertible at the initial conversion price of $21.60.
The Company’s agreement with Marvel provides for minimum guaranteed royalty payments and requires
the Company to make minimum expenditures on marketing and promotional activities. The future minimum
contractual payments in the table above include future guaranteed contractual royalty payments of $35,000
payable to Marvel that are contingent upon the theatrical release of SPIDER-MAN 4 which the Company
currently expects to be paid in 2012. In addition, in connection with the extension of the Marvel license in
2009, the Company may be subject to additional royalty guarantees totaling $140,000 that are not included in
the table above and that may be payable during the next five to six years contingent upon the quantity and
types of theatrical movie releases.
In addition to the amounts included in the table above, the Company expects to make contributions
totaling approximately $5,100 related to its unfunded U.S. and other International pension plans in 2010. The
Company also has letters of credit and related instruments of approximately $135,277 at December 27, 2009.
The Company believes that cash from operations and funds available through its lines of credit and
accounts receivable securitization program will allow the Company to meet these and other obligations
described above.
Financial Risk Management
The Company is exposed to market risks attributable to fluctuations in foreign currency exchange rates
primarily as the result of sourcing products priced in U.S. dollars, Hong Kong dollars and Euros while
marketing those products in more than twenty currencies. Results of operations may be affected primarily by
changes in the value of the U.S. dollar, Hong Kong dollar, Euro, British pound, Canadian dollar and Mexican
peso and, to a lesser extent, currencies in Latin American and Asia Pacific countries.
To manage this exposure, the Company has hedged a portion of its forecasted foreign currency
transactions using foreign exchange forward contracts. The Company estimates that a hypothetical immediate
10% depreciation of the U.S. dollar against foreign currencies could result in an approximate $44,200 decrease
in the fair value of these instruments. A decrease in the fair value of these instruments would be substantially
offset by decreases in the related forecasted foreign currency transactions.
The Company is also exposed to foreign currency risk with respect to its net cash and cash equivalents or
short-term borrowing positions in currencies other than the U.S. dollar. The Company believes, however, that
the on-going risk on the net exposure should not be material to its financial condition. In addition, the
Company’s revenues and costs have been and will likely continue to be affected by changes in foreign
currency rates. A significant change in foreign exchange rates can materially impact the Company’s revenues
and earnings due to translation of foreign-denominated revenues and expenses. The Company does not hedge
against translation impacts of foreign exchange. From time to time, affiliates of the Company may make or
receive intercompany loans in currencies other than their functional currency. The Company manages this
exposure at the time the loan is made by using foreign exchange contracts.
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