Hasbro 2010 Annual Report Download - page 87

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(17) Commitments and Contingencies
Hasbro had unused open letters of credit and related instruments of approximately $179,592 and
$135,277 at December 26, 2010 and December 27, 2009, respectively. Included in this amount is $114,890 of
bonds related to a tax assessment in Mexico. See note 10 for additional discussion.
The Company enters into license agreements with inventors, designers and others for the use of
intellectual properties in its products. Certain of these agreements contain provisions for the payment of
guaranteed or minimum royalty amounts. Under terms of existing agreements as of December 26, 2010,
Hasbro may, provided the other party meets their contractual commitment, be required to pay amounts as
follows: 2011: $39,513; 2012: $46,353; 2013: $85,675; 2014: $14,775; 2015: $14,375; and thereafter: $86,250.
At December 26, 2010, the Company had $112,922 of prepaid royalties, $17,922 of which are included in
prepaid expenses and other current assets and $95,000 of which are included in other assets.
In addition to the above commitments, certain of the above contracts impose minimum marketing
commitments on the Company. The Company may be subject to additional royalty guarantees totaling
$140,000 that are not included in the amounts above that may be payable during the next five to six years
contingent upon the quantity and types of theatrical movie releases.
In connection with the Company’s agreement to form a joint venture with Discovery, the Company is
obligated to make future payments to Discovery under a tax sharing agreement. The Company estimates these
payments may total approximately $135,600 and may range from approximately $6,000 to $7,500 per year
during the period 2011 to 2015, and approximately $102,000 in aggregate for all years occurring thereafter.
These payments are contingent upon the Company having sufficient taxable income to realize the expected tax
deductions of certain amounts related to the joint venture.
At December 26, 2010, the Company had approximately $340,007 in outstanding purchase commitments.
Hasbro is party to certain legal proceedings, as well as certain asserted and unasserted claims. Amounts
accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually
and in the aggregate, are not deemed to be material to the consolidated financial statements.
(18) Segment Reporting
Segment and Geographic Information
Hasbro is a worldwide leader in children’s and family leisure time products and services, including toys,
games and licensed products ranging from traditional to high-tech and digital. In 2009 the Company changed
the name of the Other segment to Entertainment and Licensing. The Company’s segments now are (i) U.S. and
Canada, (ii) International, (iii) Entertainment and Licensing, and (iv) Global Operations.
The U.S. and Canada segment includes the marketing and selling of boys’ action figures, vehicles and
playsets, girls’ toys, electronic toys and games, plush products, preschool toys and infant products, electronic
interactive products, toy-related specialty products, traditional board games and puzzles, DVD-based games
and trading card and role-playing games within the United States and Canada. Within the International
segment, the Company markets and sells both toy and certain game products in markets outside of the U.S. and
Canada, primarily the European, Asia Pacific, and Latin and South American regions. The Global Operations
segment is responsible for manufacturing and sourcing finished products for the Company’s U.S. and Canada
and International segments. The Company’s Entertainment and Licensing segment includes the Company’s
lifestyle licensing, digital gaming, movie, television and online entertainment operations.
Segment performance is measured at the operating profit level. Included in Corporate and eliminations
are certain corporate expenses, the elimination of intersegment transactions and certain assets benefiting more
77
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)