Hasbro 2015 Annual Report Download - page 33

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. Similarly, third parties may
claim ownership over certain aspects of our products or other intellectual property. Our failure to successfully
protect our intellectual property rights could significantly harm our business and competitive position.
We have a material amount of acquired product rights which, if impaired, would result in a reduction of
our net earnings.
Much of our intellectual property has been internally developed and has no carrying value on our
consolidated balance sheets. However, as of December 27, 2015, we had $280.8 million of acquired product and
licensing rights included in other assets on our consolidated balance sheets. Declines in the profitability of the
acquired brands or licensed products or our decision to reduce our focus or exit these brands 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 rely on external financing, including our credit facility, to help fund our operations. If we were unable
to obtain or service such financing, or if the restrictions imposed by such financing were too burdensome,
our business would be harmed.
Due to the seasonal nature of our business, in order to meet our working capital needs, particularly those in
the third and fourth quarters, we rely on our commercial paper program, revolving credit facility and our other
credit facilities for working capital. We currently have a commercial paper program which, subject to market
conditions, and availability under our committed revolving credit facility, allows us to issue up to $700.0 million
in aggregate amount of commercial paper outstanding from time to time as a source of working capital funding
and liquidity. There is no guarantee that we will be able to issue commercial paper on favorable terms, or at all,
at any given point in time.
We also have a revolving credit agreement that expires in 2020, which provides for a $700.0 million
committed revolving credit facility and a further source of working capital funding and liquidity. This facility
also supports borrowings under our commercial paper program. The credit agreement contains certain restrictive
covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment
grade facility. These restrictive covenants may limit our future actions as well as our financial, operating and
strategic flexibility. In addition, our financial covenants were set at the time we entered into our credit facility.
Our performance and financial condition may not meet our original expectations, causing us to fail to meet such
financial covenants. Non-compliance with our debt covenants could result in us being unable to utilize
borrowings under our revolving credit facility and other bank lines, a circumstance which potentially could occur
when operating shortfalls would most require supplementary borrowings to enable us to continue to fund our
operations.
Not only may our individual financial performance impact our ability to access sources of external
financing, but significant disruptions to credit markets in general may also harm our ability to obtain financing.
In times of severe economic downturn and/or distress in the credit markets, it is possible that one or more sources
of external financing may be unable or unwilling to provide funding to us. In such a situation, it may be that we
would be unable to access funding under our existing credit facilities, and it might not be possible to find
alternative sources of funding.
We also may choose to finance our capital needs, from time to time, through the issuance of debt securities.
Our ability to issue such securities on satisfactory terms, if at all, will depend on the state of our business and
financial condition, any ratings issued by major credit rating agencies, market interest rates, and the overall
condition of the financial and credit markets at the time of the offering. The condition of the credit markets and
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