Hasbro 2011 Annual Report Download - page 46

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 request of the Company and subject to market
conditions, the banks may either purchase from the Company, or arrange for the sale by the Company, of
unsecured commercial paper notes. 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. The notes are sold under customary terms in the commercial paper market and are issued at a discount to
par, or alternatively, sold at par and bear varying interest rates based on a fixed or floating rate basis. The interest
rates vary based on market conditions and the ratings assigned to the notes by the credit rating agencies at the
time of issuance. Borrowings under the Program are supported by the Company’s $500,000 revolving credit
agreement. At December 25, 2011, the Company had notes outstanding with par value of approximately
$166,500 related to the Program.
The Company has a revolving credit agreement (the “Agreement”) which provides it with a $500,000
committed borrowing facility through December of 2014. 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 in the Agreement as of and for the fiscal year ended December 25, 2011. The
Company had no borrowings outstanding under its committed revolving credit facility at December 25, 2011.
However, letters of credit outstanding under this facility as of December 25, 2011 were approximately $1,200
and borrowings under the Company’s commercial paper program were approximately $166,500. Amounts
available and unused under the committed line at December 25, 2011 were approximately $332,300. The
Company also has other uncommitted lines from various banks, of which approximately $36,000 was utilized at
December 25, 2011. Of the amount utilized under, or supported by, the uncommitted lines, approximately
$14,000 and $22,100 represent outstanding short-term borrowings and letters of credit, respectively.
Net cash utilized by financing activities was $375,685 in 2011. Of this amount, $423,008 reflects cash paid,
including transaction costs, to repurchase the Company’s common stock. During 2011, the Company repurchased
10,461 shares at an average price of $40.42. At December 25, 2011, $227,269 remained under the May 2011
Board authorization. Dividends paid were $154,028 in 2011 compared to $133,048 in 2010 reflecting the
increase in the Company’s dividend rate in 2011 to $0.30 per quarter from $0.25 per quarter. These utilizations
were partially offset by proceeds of $167,339 from short-term borrowings in 2011. In addition, cash received
from the exercise of employee stock options in 2011 was $29,798.
Net cash utilized by financing activities was $170,595 in 2010. Of this amount, $639,563 reflects cash paid,
including transaction costs, to repurchase the Company’s common stock. During 2010, the Company repurchased
15,763 shares at an average price of $40.37. Dividends paid were $133,048 in 2010 compared to $111,458 in
2009 reflecting the increase in the Company’s dividend rate in 2010 to $0.25 per quarter from $0.20 per quarter.
These utilizations were partially offset by proceeds of $492,528 from the issuance of long-term notes in March
2010. In addition, cash received from the exercise of employee stock options in 2010 was $93,522.
Net cash provided by financing activities was $236,779 in 2009. Of this amount, $421,309 reflected net
proceeds from the issuance of long-term notes in May 2009. Cash received from the exercise of employee stock
options in 2009 was $9,193. These sources of cash were partially offset by $88,112, which included transaction
costs, used to repurchase shares of the Company’s common stock. During 2009, the Company repurchased 3,172
shares at an average price per share of $28.67. Dividends paid were $111,458 in 2009.
For the $425,000 in notes due in 2014 and the $350,000 in notes due in 2017 which bear interest at 6.125%
and 6.30%, respectively, interest rates may be adjusted upward in the event that the Company’s credit rating from
Moody’s Investor Services, Inc., Standard & Poor’s Ratings Services or Fitch Ratings is reduced to Ba1, BB+, or
BB+, respectively, or below. At December 25, 2011, the Company’s ratings from Moody’s Investor Services,
Inc., Standard & Poor’s Ratings Services and Fitch Ratings were Baa2, BBB+ and BBB+, respectively. The
interest rate adjustment is dependent on the degree of decrease of the Company’s ratings and could range from
0.25% to a maximum of 2.00%. The Company may redeem the notes at its option at the greater of the principal
amount of the notes or the present value of the remaining scheduled payments discounted using the effective
interest rate on applicable U.S. Treasury bills at the time of repurchase.
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