Hasbro 2009 Annual Report Download - page 71

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(8) Long-Term Debt
Components of long-term debt are as follows:
2009 2008
6.125% Notes Due 2014 ....................................... $ 425,000 —
6.30% Notes Due 2017........................................ 350,000 350,000
2.75% Convertible Debentures Due 2021 .......................... 249,828 249,828
6.60% Debentures Due 2028.................................... 109,895 109,895
Total principal amount of long-term debt .......................... 1,134,723 709,723
Fair value adjustment related to interest rate swaps ................... (2,725) —
Total long-term debt .......................................... $1,131,998 709,723
In May 2009 the Company issued $425,000 of Notes that are due in 2014 (the “Notes”). The Notes bear
interest at a rate of 6.125%, which 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. On the date the Notes were issued, the Company’s ratings from Moody’s
Investor Services, Inc., Standard & Poor’s Ratings 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 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.
In the fourth quarter of 2009, the Company entered into a series of interest rate swap agreements to adjust
the amount of debt that is subject to fixed interest rates. The interest rate swaps are matched with the
6.125% Notes Due 2014 and accounted for as fair value hedges of those notes. The interest rate swaps have a
total notional amount of $400,000 with maturities in 2014. In each of the contracts, the Company receives
payments based upon a fixed interest rate of 6.125%, which matches the interest rate of the notes being
hedged, and makes payments based upon a floating rate based on Libor. These contracts are designated and
effective as hedges of the change in the fair value of the associated debt. At December 27, 2009, the fair value
of these contracts was a liability of $2,725 which is recorded in other liabilities with a corresponding fair
value adjustment to decrease long-term debt. The Company recorded a loss of $2,725 on these instruments in
other (income) expense, net for the year ended December 27, 2009, relating to the change in fair value of such
derivatives, wholly offsetting gains from the change in fair value of the associated long-term debt.
In 2008 the Company repaid $135,092 of 6.15% notes due in July 2008.
The Company currently has $249,828 outstanding in principal amount of contingent convertible
debentures due 2021. These debentures bear interest at 2.75%, which could be subject to an upward
adjustment depending on the price of the Company’s common stock. 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 the calendar quarter, the holders have the right to convert the notes to shares
of the Company’s common stock at the initial conversion price of $21.60 in the next calendar quarter. At
December 31, 2009, this contingent conversion feature was met and the debentures are convertible through
March 31, 2010, at which time the requirements of the contingent conversion feature will be reevaluated. In
addition, if the closing price of the Company’s common stock exceeds $27.00 for at least 20 trading days in
any thirty day period, the Company has the right to call the debentures by giving notice to the holders of the
debentures. During a prescribed notice period, the holders of the debentures have the right to convert their
debentures in accordance with the conversion terms described above. At certain times during the year, based
61
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)