Hasbro 2012 Annual Report Download - page 31

As a large, multinational corporation, we are subject to a host of governmental regulations throughout the
world, including antitrust, customs and tax requirements, anti-boycott regulations, environmental regulations and
the Foreign Corrupt Practices Act. Complying with these regulations imposes costs on us which can reduce our
profitability and our failure to successfully comply with any such legal requirements could subject us to
monetary liabilities and other sanctions that could further harm our business and financial condition.
Our business is dependent on intellectual property rights and we may not be able to protect such rights
successfully. In addition, we have a material amount of acquired product rights which, if impaired, would
result in a reduction of our net earnings.
Our intellectual property, including our license agreements and other agreements that establish our
ownership rights and maintain the confidentiality of our intellectual property, is of great value. We rely on a
combination of trade secret, copyright, trademark, patent and other proprietary rights laws to protect our rights to
valuable intellectual property related to our brands in the United States and around the world. From time to time,
third parties have challenged, and may in the future try to challenge, our ownership of our intellectual property in
the United States and around the world. In addition, our business is subject to the risk of third parties
counterfeiting our products or infringing on our intellectual property rights. We may need to resort to litigation to
protect our intellectual property rights, which could result in substantial costs and diversion of resources. Our
failure to protect our intellectual property rights could harm our business and competitive position. Much of our
intellectual property has been internally developed and has no carrying value on our balance sheet. However, as
of December 30, 2012, we had $416,659 of acquired product and licensing rights included in other assets on our
balance sheet. Declines in the profitability of the acquired brands or licensed products may impact our ability to
recover the carrying value of the related assets and could result in an impairment charge. Reduction in our net
earnings caused by impairment charges could harm our financial results.
We may not realize the anticipated benefits of acquisitions or investments in joint ventures, or those benefits
may be delayed or reduced in their realization.
Acquisitions have been a component of our historical growth and have enabled us to further broaden and
diversify our product offerings. In making acquisitions, we target companies that we believe offer attractive
family entertainment products or the ability for us to leverage our entertainment offerings. In the case of our joint
venture with Discovery, we looked to partner with a company that has shown the ability to establish and operate
compelling entertainment channels. However, we cannot be certain that the products of companies we may
acquire, or acquire an interest in, will achieve or maintain popularity with consumers in the future or that any
such acquired companies or investments will allow us to more effectively market our products. In some cases, we
expect that the integration of the companies that we may acquire into our operations will create production,
marketing and other operating synergies which will produce greater revenue growth and profitability and, where
applicable, cost savings, operating efficiencies and other advantages. However, we cannot be certain that these
synergies, efficiencies and cost savings will be realized. Even if achieved, these benefits may be delayed or
reduced in their realization. In other cases, we may acquire companies that we believe have strong and creative
management, in which case we may plan to operate them more autonomously rather than fully integrating them
into our operations. We cannot be certain that the key talented individuals at these companies would continue to
work for us after the acquisition or that they would develop popular and profitable products or services in the
future.
Failure to operate our information systems and implement new technology effectively could disrupt our
business or reduce our sales or profitability.
We rely extensively on various information technology systems and software applications to manage many
aspects of our business, including management of our supply chain, sale and delivery of our products and various
other process transactions. We are dependent on the integrity, security and consistent operations of these systems
and related back-up systems. These systems are subject to damage or interruption from power outages, computer
and telecommunications failures, computer viruses, security breaches, catastrophic events such as hurricanes,
fires, floods, earthquakes, tornadoes, acts of war or terrorism and usage errors by our employees. The efficient
21