Hasbro 2014 Annual Report Download - page 88

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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
The carrying cost of the 6.125 % Notes Due 2014 included principal amounts of $425,000 as well as a fair
value adjustment of $3,390 at December 29, 2013, related to interest rate swaps. The interest rate swaps were
terminated in November 2012 and the fair value adjustment at December 29, 2013 represents the unamortized
portion of the fair value of the interest rate swaps at the date of termination. At December 29, 2013, the principal
amount and fair value adjustment associated with the 6.125 % Notes Due 2014, totaling $428,390, were included
in the current portion of long-term debt. All other carrying costs represent principal amounts and were included
in long-term debt excluding the current portion at December 29, 2013. Total principal amounts of long-term debt
at December 28, 2014 and December 29, 2013 were $1,559,895 and $1,384,895 respectively.
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 6.30% 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 28, 2014, 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.
At December 28, 2014, as detailed above, the Company’s 6.30% Notes mature in 2017. All of the
Company’s other long-term borrowings have contractual maturities that occur subsequent to 2019. The aggregate
principal amount of long-term debt maturing in the next five years is $350,000.
(10) Income Taxes
Income taxes attributable to earnings before income taxes are:
2014 2013 2012
Current
United States ......................................... $ 70,390 12,760 64,076
State and local ........................................ 3,134 1,677 1,587
International ......................................... 62,909 72,640 67,826
136,433 87,077 133,489
Deferred
United States ......................................... (15,448) (10,751) (8,832)
State and local ........................................ (530) (368) (303)
International ......................................... 6,223 (8,064) (6,951)
(9,755) (19,183) (16,086)
Total income taxes ...................................... $126,678 67,894 117,403
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