Hasbro 2008 Annual Report Download - page 47

the ultimate timing of payments related to this liability. Accordingly, these amounts are not included in the
table above.
Included in the Thereafter column above is $249,828 in principal amount of senior convertible debt due
2021. The holders of these debentures may put the notes back to the Company in December 2011 and
December 2016 at the principal amount. At that time, the purchase price may be paid in cash, shares of
common stock or a combination of the two. In addition, at December 28, 2008, these debentures may be
converted to shares at an initial conversion price of $21.60 per share through March 31, 2009, at which time
the requirements of the contingent conversion feature will be reevaluated. If the closing price of the
Company’s common stock exceeds $23.76 for at least 20 trading days within the 30 consecutive trading day
period ending on the last trading day of a calendar quarter, or upon other specified events, the debentures will
be convertible at the initial conversion price of $21.60.
The Company’s agreement with Marvel provides for minimum guaranteed royalty payments and requires
the Company to make minimum expenditures on marketing and promotional activities. The future minimum
contractual payments in the table above include future guaranteed contractual royalty payments of $35,000
payable to Marvel that are contingent upon the theatrical release of SPIDER-MAN 4 which the Company
currently expects to be paid in 2011. Subsequent to December 28, 2008, the Company entered into an
agreement with Marvel that resulted in the extension of the current agreement from the end of 2011 through
the end of 2017. The extended agreement includes an additional $100,000 in minimum guaranteed royalties,
with the potential for up to an additional $140,000 in guaranteed royalties contingent upon the release by
Marvel of certain MARVEL character-based theatrical releases that meet certain defined criteria. Amounts that
are or may be payable to Marvel under this extended agreement are not reflected in the table above.
In addition to the amounts included in the table above, the Company expects to make contributions
totaling approximately $17,100 related to its unfunded U.S. and other International pension plans in 2009. The
Company also has letters of credit and related instruments of approximately $100,700 at December 28, 2008.
Financial Risk Management
The Company is exposed to market risks attributable to fluctuations in foreign currency exchange rates
primarily as the result of sourcing products priced in U.S. dollars, Hong Kong dollars and Euros while
marketing those products in more than twenty currencies. Results of operations may be affected primarily by
changes in the value of the U.S. dollar, Hong Kong dollar, Euro, British pound, Canadian dollar and Mexican
peso and, to a lesser extent, currencies in Latin American and Asia Pacific countries.
To manage this exposure, the Company has hedged a portion of its forecasted foreign currency
transactions using foreign exchange forward contracts. The Company estimates that a hypothetical immediate
10% depreciation of the U.S. dollar against foreign currencies could result in an approximate $64,500 decrease
in the fair value of these instruments. A decrease in the fair value of these instruments would be substantially
offset by decreases in the related forecasted foreign currency transactions.
The Company is also exposed to foreign currency risk with respect to its net cash and cash equivalents or
short-term borrowing positions in currencies other than the U.S. dollar. The Company believes, however, that
the on-going risk on the net exposure should not be material to its financial condition. In addition, the
Company’s revenues and costs have been and will likely continue to be affected by changes in foreign
currency rates. A significant change in foreign exchange rates can materially impact the Company’s revenues
and earnings due to translation of foreign revenues and costs. The Company does not hedge against translation
impacts of foreign exchange. From time to time, affiliates of the Company may make or receive intercompany
loans in currencies other than their functional currency. The Company manages this exposure at the time the
loan is made by using foreign exchange contracts.
The Company reflects all derivatives at their fair value as an asset or liability on the balance sheet. The
Company does not speculate in foreign currency exchange contracts. At December 28, 2008, these contracts
had unrealized gains of $72,053, of which $32,203 are recorded in prepaid expenses and other current assets
and $39,850 are recorded in other assets. Included in accumulated other comprehensive income at Decem-
ber 28, 2008 are deferred gains of $63,513, net of tax.
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