Hasbro 2014 Annual Report Download - page 59

Other liabilities increased to $388,919 at December 28, 2014 from $351,304 at December 29, 2013. The
balance at December 28, 2014 includes a decrease of approximately $13,700 resulting from the translation of
foreign currency. The increase in 2014 compared to 2013 reflects higher pension liabilities primarily due to
changes in actuarial assumptions, including a lower discount rate and updated mortality tables. In addition, the
amended relationship between the Company and Discovery resulted in a net increase to other liabilities of
approximately $10,700 reflecting the fair value of an option agreement related to the Company’s equity interest
in the Network, partially offset by a reduction in the amounts due to Discovery related to a tax sharing
agreement. These increases were partially offset by lower liabilities related to uncertain tax positions reflecting
the settlement of tax examinations in 2014 primarily related to the United States and Mexico. In connection with
the settlement of tax assessments and years subject to audit from 2000 through 2013 in Mexico, the Company
paid approximately $65,000 during the fourth quarter of 2014. Other liabilities of $352,304 at December 29,
2013 decreased from $461,152 at December 30, 2012. The decrease in 2013 compared to 2012 is primarily due
to lower liabilities related to pension and uncertain tax positions. The decline in liabilities related to uncertain tax
positions is primarily due to the settlement of tax examinations during 2013, partially offset by additions for
current year activity. The decline in pension liabilities is primarily due to increased discount rates, and, to a lesser
extent, increased benefit payments due to a higher level of retirements during 2013 resulting from an early
retirement program in the United States relating to the cost savings initiative.
Cash flows utilized by investing activities were $485, $217,743 and $106,172 in 2014, 2013 and 2012,
respectively. Additions to property, plant and equipment were relatively consistent at $113,388, $112,031 and
$112,091 in 2014, 2013 and 2012, respectively. Of these additions, 60% in 2014, 51% in 2013 and 45% in 2012
were for purchases of tools, dies and molds related to the Company’s products. In 2015, the Company expects
capital expenditures to be in the range of $120,000 to $140,000. During the three years ended December 28,
2014, the depreciation of plant and equipment was $105,258, $102,799 and $99,718, respectively. Fluctuations in
depreciation of plant and equipment correlate with the percentage of additions to property, plant and equipment
relating to tools, dies and molds which have shorter useful lives and accelerated depreciation. The 2014
utilization is almost wholly offset by $64,400 of cash received from Discovery from the partial sale of the
Company’s equity interest in the Network and $36,000 of cash received from the sale of certain intellectual
property licensing rights which was included in other investing activities in the consolidated statements of cash
flows. The higher utilization in 2013 reflects the Company’s acquisition of a majority stake in Backflip for
$109,955, net of cash acquired, as well as a payment related to an existing intellectual property. No investments
or acquisitions were made in 2012.
The Company commits to inventory production, advertising and marketing expenditures prior to the peak
fourth quarter retail selling season. Accounts receivable increase during the third and fourth quarter as customers
increase their purchases to meet expected consumer demand in their holiday selling season. Due to the
concentrated timeframe of this selling period, payments for these accounts receivable are generally not due until
the fourth quarter or early in the first quarter of the subsequent year. This timing difference between expenditures
and cash collections on accounts receivable makes it necessary for the Company to borrow higher amounts
during the latter part of the year. During 2014, 2013 and 2012, the Company primarily used cash from operations
and borrowings under its commercial paper program and available lines of credit.
The Company has an agreement with a group of banks which provides for 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 $700,000. 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 $700,000 revolving credit agreement. At
December 28, 2014, the Company had approximately $240,000 in borrowings outstanding related to the
Program.
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