Hasbro 2012 Annual Report Download - page 74

HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
(8) Accrued Liabilities
Components of accrued liabilities are as follows:
2012 2011
Royalties ....................................................... $133,009 156,955
Advertising ..................................................... 85,401 83,080
Payroll and management incentives .................................. 70,954 59,070
Non-income based taxes ........................................... 41,360 52,590
Other .......................................................... 265,440 275,355
Total accrued liabilities ............................................ $596,164 627,050
(9) Long-Term Debt
Components of long-term debt are as follows:
2012 2011
Carrying
Cost
Fair
Value
Carrying
Cost
Fair
Value
6.35% Notes Due 2040 ................... $ 500,000 615,650 500,000 540,850
6.125% Notes Due 2014 .................. 436,526 455,175 440,977 462,868
6.30% Notes Due 2017 ................... 350,000 399,700 350,000 400,400
6.60% Debentures Due 2028 ............... 109,895 129,687 109,895 120,148
Total long-term debt ..................... $1,396,421 1,600,212 1,400,872 1,524,266
The carrying cost of the 6.125% Notes Due 2014 include principal amounts of $425,000 as well as fair
value adjustments of $11,526 and $15,977 at December 30, 2012 and December 25, 2011, respectively, related to
interest rate swaps. The interest rate swaps were terminated in November 2012 and the fair value adjustment at
December 30, 2012 represents the unamortized portion of the fair value of the interest rate swaps at the date of
termination. All other carrying costs represent principal amounts. Total principal amounts of long-term debt at
December 30, 2012 and December 25, 2011 were $1,384,895.
The fair values of the Company’s long-term debt are considered Level 3 fair values (see Note 12 for further
discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In
addition to the debt terms, the valuation methodology includes an assumption of a discount rate that
approximates the current yield on a similar debt security. This assumption is considered an unobservable input in
that it reflects the Company’s own assumptions about the inputs that market participants would use in pricing the
asset or liability. The Company believes that this is the best information available for use in the fair value
measurement.
Interest rates for the 6.125% Notes Due 2014 and the 6.30% Notes Due 2017 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 30, 2012, the Company’s
ratings from Moody’s Investor Services, Inc., Standard & Poor’s Rating 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 these notes
at its option at the greater of the principal amount of these 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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