Hasbro 2008 Annual Report Download - page 60

Accounting for Stock-Based Compensation
The Company has stock-based employee compensation plans and plans for non-employee members of the
Company’s Board of Directors. Under these plans the Company may grant stock options at or above the fair
market value of the Company’s stock, as well as restricted stock, restricted stock units and contingent stock
performance awards. All awards are measured at fair value at the date of the grant and amortized as expense
on a straight-line basis over the requisite service period of the award. For awards contingent upon Company
performance, the measurement of the expense for these awards is based on the Company’s current estimate of
its performance over the performance period. See note 11 for further discussion.
Net Earnings Per Common Share
Basic net earnings per share is computed by dividing net earnings by the weighted average number of
shares outstanding for the year. Diluted net earnings per share is similar except that the weighted average
number of shares outstanding is increased by dilutive securities, and net earnings are adjusted for certain
amounts related to dilutive securities. Dilutive securities include shares issuable under convertible debt, as well
as shares issuable upon exercise of stock options and warrants for which the market price exceeds the exercise
price, less shares which could have been purchased by the Company with the related proceeds. Dilutive
securities may also include shares potentially issuable to settle liabilities. Options and warrants totaling 3,491,
3,250 and 5,148 for 2008, 2007 and 2006, respectively, were excluded from the calculation of diluted earnings
per share because to include them would have been antidilutive.
A reconciliation of net earnings and average number of shares for each of the three fiscal years ended
December 28, 2008 is as follows:
Basic Diluted Basic Diluted Basic Diluted
2008 2007 2006
Net earnings .............. $306,766 306,766 333,003 333,003 230,055 230,055
Interest expense on
contingent convertible
debentures due 2021, net
oftax................ — 4,238 — 4,248 — 4,262
$306,766 311,004 333,003 337,251 230,055 234,317
Average shares outstanding.... 140,877 140,877 156,054 156,054 167,100 167,100
Effect of dilutive securities:
Contingent convertible
debentures due 2021 ..... — 11,566 — 11,568 — 11,574
Options and warrants ...... — 2,787 — 3,583 — 2,369
Equivalent shares ........... 140,877 155,230 156,054 171,205 167,100 181,043
Net earnings per share ....... $ 2.18 2.00 2.13 1.97 1.38 1.29
The net earnings per share calculations for each of the three years ended December 28, 2008 include
adjustments to add back to earnings the interest expense, net of tax, incurred on the Company’s senior
convertible debentures due 2021, as well as to add back to outstanding shares the amount of shares potentially
issuable under the contingent conversion feature of these debentures. See note 7 for further information on the
contingent conversion feature.
Certain warrants containing a put feature that could be settled in cash or common stock were required to
be accounted for as a liability at fair value. These warrants were repurchased by the Company in May of
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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)