Hasbro 2010 Annual Report Download - page 68

borrowings outstanding under its committed line of credit at December 26, 2010. During 2010, Hasbro’s
working capital needs were fulfilled by cash generated from operations and borrowings under lines of credit.
The unsecured committed line (the “Agreement”) provides the Company with a $500,000 committed
borrowing facility through December 2014. The Agreement was entered into on December 16, 2010 replacing
the previous Revolving Credit Agreement. The Agreement contains certain financial covenants setting forth
leverage and coverage requirements, 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 year ended December 26, 2010.
The Company pays a commitment fee (0.225% as of December 26, 2010) based on the unused portion of
the facility and interest equal to a Base Rate or Eurocurrency Rate plus a spread on borrowings under the
facility. The Base Rate is determined based on either the Federal Funds Rate plus a spread, Prime Rate or
Eurocurrency Rate plus a spread. The commitment fee and the amount of the spread to the Base Rate or
Eurocurrency rate both vary based on the Company’s long-term debt ratings and the Company’s leverage. At
December 26, 2010, the interest rate under the facility was equal to Eurocurrency Rate plus 1.50%.
In January 2011, the Company entered into an agreement with a group of banks to establish a commercial
paper program (the “Program”). Under the Program, at the Company’s request the banks may either purchase
from the Company, or arrange for the sale by the Company, of unsecured commercial paper notes. Under the
Program, the Company may issue notes from time to time up to an aggregate principal amount outstanding at
any given time of $500,000. The maturities of the notes may vary but may not exceed 397 days. Subject to
market conditions, the notes will be sold under customary terms in the commercial paper market and will be
issued at a discount to par, or alternatively, will be sold at par and will bear varying interest rates based on a
fixed or floating rate basis. The interest rates will vary based on market conditions and the ratings assigned to
the notes by the credit rating agencies at the time of issuance.
Securitization
During the three years ended 2010, the Company was party to an accounts receivable securitization
program whereby the Company sold, on an ongoing basis, substantially all of its U.S. trade accounts receivable
to a bankruptcy-remote, special purpose subsidiary, Hasbro Receivables Funding, LLC (HRF), which is
wholly-owned and consolidated by the Company. HRF, subject to certain conditions, sold, from time to time
on a revolving basis, an undivided fractional ownership interest in up to $250,000 of eligible domestic
receivables to various multi-party commercial paper conduits supported by a committed liquidity facility.
During the period from the first day of the October fiscal month through the last day of the following January
fiscal month, this limit increased to $300,000. Subsequent to December 27, 2009, in January 2010, the
agreement was amended on a prospective basis to eliminate the additional $50,000 available from the first day
of the October fiscal month through the last day of the following January fiscal month. Under the terms of the
agreement, new receivables are added to the pool as collections reduce previously held receivables. The
Company serviced, administered, and collected the receivables on behalf of HRF and the conduits. The net
proceeds of sale were less than the face amount of accounts receivable sold by an amount that approximates a
financing cost. Effective January 28, 2011, this program was terminated.
As of December 26, 2010 and December 27, 2009, there were no amounts utilized under the receivables
facility. The Company did not utilize the facility in 2010. As of December 26, 2010 the Company had
$250,000 available to sell under the facility. During 2009 and 2008, the transactions were accounted for as
sales under then current accounting guidance. During 2009 and 2008, the loss on the sale of receivables totaled
$2,514 and $5,302, respectively, which is recorded in selling, distribution and administration expenses in the
accompanying consolidated statements of operations. The discount on interests sold was approximately equal
to the interest rate paid by the conduits to the holders of the commercial paper plus other fees.
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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)