Hasbro 2015 Annual Report Download - page 87

HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
(9) Long-Term Debt
Components of long-term debt are as follows:
2015 2014
Carrying
Cost
Fair
Value
Carrying
Cost
Fair
Value
6.35% Notes Due 2040 ................... $ 500,000 556,300 500,000 617,700
6.30% Notes Due 2017 ................... 350,000 374,045 350,000 387,660
5.10% Notes Due 2044 ................... 300,000 286,710 300,000 316,980
3.15% Notes Due 2021 ................... 300,000 300,060 300,000 302,700
6.60% Debentures Due 2028 ............... 109,895 121,269 109,895 128,698
Total long-term debt ..................... 1,559,895 1,638,384 1,559,895 1,753,738
Less: Deferred debt expenses .............. 12,780 — 14,042 —
Long-term debt ......................... $1,547,115 1,638,384 1,545,853 1,753,738
In May 2014, the Company issued $600,000 in long-term debt which consists of $300,000 of 3.15% Notes
Due in 2021 and $300,000 of 5.10% Notes Due in 2044 (collectively, the “Notes”). 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. Prior to the issuance of the Notes, the Company held forward-starting interest rate swap contracts to
hedge the variability in the anticipated underlying U.S. Treasury interest rate associated with the expected
issuance of the Notes. At the date of issuance, these contracts were terminated and the Company paid $33,306,
the fair value of the contracts on that date, to settle. Of this amount, $6,373 related to 3.15% Notes Due 2021 and
$26,933 related to 5.10% Notes Due 2044, which have been deferred in AOCE and are being amortized to
interest expense over the life of the respective Notes using the effective interest rate method. The proceeds from
the Notes have been presented net of the payment for these contracts in the consolidated statements of cash
flows.
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 27, 2015, 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 27, 2015, 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 2020. The aggregate
principal amount of long-term debt maturing in the next five years is $350,000.
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