Hasbro 2014 Annual Report Download - page 60

The Company has a revolving credit agreement (the “Agreement”) which provides the Company with a
$700,000 committed borrowing facility. 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 28, 2014. The Company had no
borrowings outstanding under its committed revolving credit facility at December 28, 2014. However, letters of
credit outstanding under this facility as of December 28, 2014 were approximately $900. Amounts available and
unused under the committed line at December 28, 2014 were approximately $459,100, inclusive of borrowings
under the Company’s commercial paper program. The Company also has other uncommitted lines from various
banks, of which approximately $28,500 was utilized at December 28, 2014. Of the amount utilized under, or
supported by, the uncommitted lines, approximately $12,500 and $19,800 represent outstanding short-term
borrowings and letters of credit, respectively.
Net cash utilized by financing activities was $230,956, $341,009 and $219,379 in 2014, 2013 and 2012,
respectively. The 2014 utilization includes net proceeds from the issuance and repayment of long-term debt
totaling $134,986. In 2014, the Company issued an aggregate $600,000 in long-term notes which were partially
utilized to re-pay the $425,000 in long-term notes due in May 2014. Of the amounts utilized in 2014, 2013 and
2012, $459,564, $103,488 and $98,005 reflects cash paid, including transaction costs, to repurchase the
Company’s common stock, respectively. During 2014, 2013 and 2012, the Company repurchased 8,490, 2,268
and 2,694 shares at an average price of $54.26, $45.17 and $37.11, respectively. At December 28, 2014, $64,151
remained under outstanding Board authorizations. Dividends paid were $216,855 in 2014 compared to $156,129
in 2013 and $225,464 in 2012. Dividends paid in 2012 include an additional dividend payment resulting from a
decision by the Company’s Board to accelerate the payment of the dividend declared in December 2012, which
historically would have been paid in February 2013, to December 2012. This acceleration resulted in one less
quarterly dividend paid in 2013. Further, the Company has increased its quarterly dividend rate from $0.36 in
2012 to $0.40 in 2013 and $0.43 in 2014. Lastly, proceeds from other short-term borrowings of $246,054 and
$43,016 in 2014 and 2012, respectively, compared to repayments of other short-term borrowings of $215,273 in
2013. The Company generated cash from employee stock option transactions of $60,519, $118,122 and $54,963
in 2014, 2013 and 2012, respectively.
For the $350,000 in notes due in 2017 which bear interest at 6.30%, 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 28, 2014, 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.
Including the notes described above, the Company has principal amounts of long-term debt at December 28,
2014 of approximately $1,559,895 due at varying times from 2017 through 2044. The Company also had letters
of credit and other similar instruments of $167,117 and purchase commitments of $295,244 outstanding at
December 28, 2014. Letters of credit and similar instruments include $146,410 of bonds related to tax
assessments for transfer pricing issues in Mexico which were settled during December 2014. These bonds are
expected to be cancelled during the first quarter of 2015. In addition, the Company is committed to guaranteed
royalty and other contractual payments of approximately $107,238 in 2015.
Critical Accounting Policies and Significant Estimates
The Company prepares its consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America. As such, management is required to make certain estimates,
judgments and assumptions that it believes are reasonable based on information available. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial
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