Hasbro, Inc.
HASBRO INC (Form: 10-Q, Received: 05/04/2011 16:01:25)


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.   20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March 27, 2011

Commission file number 1-6682



HASBRO, INC.

(Exact Name of Registrant, As Specified in its Charter)


 

      Rhode Island     

               05-0155090            

(State of Incorporation)

(I.R.S. Employer Identification No.)



1027 Newport Avenue, Pawtucket, Rhode Island  02862

(Address of Principal Executive Offices, Including Zip Code)

 

               (401) 431-8697               

(Registrant's Telephone Number, Including Area Code)



    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by

Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months

(or for such shorter period that the registrant was required to file such reports), and

(2) has been subject to such filing requirements for the past 90 days.  Yes  X  or No     

 

    Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X or No     

 

  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer    X                                                          Accelerated filer           

Non-accelerated filer            (Do not check if a smaller reporting company)   Smaller reporting company            

 

  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                       Yes      or No  X 

 

The number of shares of Common Stock, par value $.50 per share, outstanding as of April 15, 2011 was 136,238,227.






PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.


HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Thousands of Dollars Except Share Data)

(Unaudited)


         

 

 

March 27,

 

March 28,

 

Dec. 26,

Assets

 

2011

 

2010

 

2010

 

 

---------

 

---------

 

---------

Current assets

           

  Cash and cash equivalents

$

927,422

 

1,259,799

 

727,796

  Accounts receivable, less allowance

           

    for doubtful accounts of $33,300, $32,500,

           

   and $31,200

 

558,980

 

526,031

 

961,252

  Inventories

 

401,309

 

226,784

 

364,194

  Prepaid expenses and other current assets

 

173,070

 

200,226

 

167,807

   

--------------

 

--------------

 

--------------

       Total current assets

 

2,060,781

 

2,212,840

 

2,221,049

             

Property, plant and equipment, less accumulated

           

  depreciation of $437,900, $432,400, and

           

  $430,200

 

238,403

 

220,522

 

233,580

   

--------------

 

--------------

 

--------------

             

Other assets

           

  Goodwill

 

475,343

 

474,401

 

474,813

  Other intangibles, less accumulated amortization

           

    of $586,700, $570,400 and $586,900

 

489,910

 

542,942

 

500,597

  Other

 

675,904

 

627,318

 

663,187

   

--------------

 

--------------

 

--------------

       Total other assets

 

1,641,157

 

1,644,661

 

1,638,597

 

 

--------------

 

--------------

 

--------------

             

       Total assets

$

3,940,341

 

4,078,023

 

4,093,226

 

 

========

 

========

 

========




HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

(Thousands of Dollars Except Share Data)

(Unaudited)


           

                                           

 

March 27,

 

March 28,

 

Dec. 26,

 

Liabilities and Shareholders' Equity

 

2011

 

2010

 

2010

 
   

---------

 

---------

 

---------

 

Current liabilities

             

  Short-term borrowings

$

37,923

 

11,438

 

14,568

 

  Current portion of long-term debt

 

-

 

138,651

 

-

 

  Accounts payable

 

142,876

 

128,780

 

132,517

 

  Accrued liabilities

 

445,733

 

412,974

 

571,716

 

 

 

--------------

 

--------------

 

--------------

 

     Total current liabilities

 

626,532

 

691,843

 

718,801

 
               

Long-term debt, excluding current portion

 

1,396,695

 

1,390,484

 

1,397,681

 

Other liabilities

 

386,126

 

325,842

 

361,324

 

 

 

--------------

 

--------------

 

--------------

 

     Total liabilities

 

2,409,353

 

2,408,169

 

2,477,806

 

 

 

--------------

 

--------------

 

--------------

 

Shareholders' equity

             

  Preference stock of $2.50 par

             

    value. Authorized 5,000,000

             

    shares; none issued

 

-

 

-

 

-

 

  Common stock of $.50 par value.

             

    Authorized 600,000,000 shares;

             

    issued 209,694,630

 

104,847

 

104,847

 

104,847

 

  Additional paid-in capital

 

624,666

 

516,488

 

625,961

 

  Retained earnings

 

2,954,517

 

2,744,517

 

2,978,317

 

  Accumulated other comprehensive (loss) earnings

 

(1,763

)

56,043

 

8,149

 

  Treasury stock, at cost; 72,890,160 shares at

             

    March 27, 2011; 69,288,243 shares at

             

    March 28, 2010 and 72,278,515 at

             

    December 26, 2010

 

(2,151,279

)

(1,752,041

)

(2,101,854

)

 

 

--------------

 

--------------

 

--------------

 
 

Total shareholders' equity

 

1,530,988

 

1,669,854

 

1,615,420

 

 

 

--------------

 

--------------

 

--------------

 
               

 

Total liabilities and shareholders' equity

$

3,940,341

 

4,078,023

 

4,093,226

 

 

 

========

 

========

 

========

 


See accompanying condensed notes to consolidated financial statements.




HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Thousands of Dollars Except Per Share Data)

(Unaudited)

 

Quarter Ended

 

-------------------------------------------

 

March 27, 2011

March 28, 2010

 

----------------

----------------

Net revenues

$ 671,986 

672,371 

Costs and expenses

   

    Cost of sales

267,246 

262,679 

    Royalties

43,226 

43,782 

    Product development

45,818 

40,324 

    Advertising

66,537 

71,174 

    Amortization of intangibles

10,696 

11,384 

    Program production cost amortization

3,117 

-

    Selling, distribution and administration

186,423 

173,701 

 

------------ 

------------ 

 

  Total costs and expenses

623,063 

603,044 

   

------------ 

------------ 

Operating profit

48,923 

69,327 

   

------------ 

------------ 

Nonoperating (income) expense

   

    Interest expense

21,375 

16,792 

    Interest income

(1,412)

(830)

    Other (income) expense, net

6,122 

(865)

   

------------ 

------------ 

 

  Total nonoperating expense, net

26,085 

15,097 

 

------------ 

------------ 

Earnings before income taxes

22,838 

54,230 

     

Income tax expense (benefit)

5,642 

(4,713)

 

------------ 

------------ 

Net earnings

$  17,196 

58,943 

 

 ======= 

======= 

     

Net earnings per common share

   
 

 Basic

$      0.12 

0.43 

   

======= 

======= 

 

 Diluted

$      0.12 

0.40 

   

======= 

======= 

Cash dividends declared per common share

$      0.30 

0.25 

 

======= 

======= 

 

See accompanying condensed notes to consolidated financial statements.




HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Thousands of Dollars)

(Unaudited)

 

Quarter Ended

 

--------------------------------------

 

March 27, 2011

March 28, 2010

 

-------------------

------------------

Cash flows from operating activities

         
 

Net earnings

$

17,196

 

58,943

 
 

Adjustments to reconcile net earnings to net cash

         
 

provided by operating activities:

         

 

  Depreciation of plant and equipment

 

20,322

 

17,916

 

 

  Amortization of intangibles

 

10,696

 

11,384

 
 

  Program production cost amortization

 

3,117

 

-

 

 

  Deferred income taxes

 

(584

)

15,096

 
 

  Stock-based compensation

 

7,384

 

7,182

 
 

 Change in operating assets and liabilities:

         
 

  Decrease in accounts receivable

 

419,622

 

502,295

 
 

  Increase in inventories

 

(28,022

)

(22,045

)

 

  Increase in prepaid expenses and other current assets

 

(11,024

)

(13,889

)

 

  Program production costs

 

(16,613

)

(4,273

)

 

  Decrease in accounts payable and accrued liabilities

 

(152,626

)

(283,925

)

 

  Other, including long-term portion of royalty advances

 

7,026

 

(23,567

)

 

 

------------

 

--------------

 
 

         Net cash provided by operating activities

 

276,494

 

265,117

 

 

 

------------

 

--------------

 

Cash flows from investing activities

         
 

Additions to property, plant and equipment

 

(22,396

)

(20,783

)

 

Other

 

(2,037

)

(332

)

 

 

------------

 

--------------

 
 

         Net cash utilized by investing activities

 

(24,433

)

(21,115

)

 

 

------------

 

--------------

 

Cash flows from financing activities

         
 

Net proceeds from borrowings with original maturities of

         
 

 more than three months

 

-

 

492,528

 
 

Net proceeds (repayments) from short-term borrowings

 

23,622

 

(1,948

)

 

Purchases of common stock

 

(58,320

)

(95,597

)

 

Stock option transactions

 

9,732

 

11,860

 
 

Excess tax benefits from stock-based compensation

 

1,868

 

2,592

 
 

Dividends paid

 

(34,297

)

(27,292

)

 

 

------------

 

--------------

 
 

         Net cash (utilized) provided by financing activities

 

(57,395

)

382,143

 

 

 

------------

 

--------------

 

Effect of exchange rate changes on cash

 

4,960

 

(2,391

)

 

 

------------

 

--------------

 
 

         Increase in cash and cash equivalents

 

199,626

 

623,754

 

Cash and cash equivalents at beginning of year

 

727,796

 

636,045

 

 

 

------------

 

--------------

 

Cash and cash equivalents at end of period

$

927,422

 

1,259,799

 

 

 

======

 

=======

 
           
 




HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (continued)

(Thousands of Dollars)

(Unaudited)

         
 

Quarter Ended

 

------------------------------------

 

March 27, 2011

March 28, 2010

 

-------------------

-------------------

Supplemental information

       

  Cash paid during the period for:

       

    Interest

$ 31,223 

 

14,771

 

    Income taxes

$   3,921 

 

23,395

 
 

See accompanying condensed notes to consolidated financial statements.

 
 
  

HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Earnings

(Thousands of Dollars)

(Unaudited)

   
   

 

Quarter Ended

 

-----------------------------------

 

March 27, 2011

March 28, 2010

 

-------------------

--------------------

Net earnings

$ 17,196 

58,943 

Other comprehensive loss

(9,912)

(2,588)

 

----------- 

------------ 

Total comprehensive earnings

$   7,284 

56,355 

 

====== 

======= 

 

See accompanying condensed notes to consolidated financial statements.



 



 




HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

 
(1)    Basis of Presentation


In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of Hasbro, Inc. and all majority-owned subsidiaries (“Hasbro” or the “Company”) as of March 27, 2011 and March 28, 2010, and the results of its operations and cash flows for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Actual results could differ from those estimates.


The quarters ended March 27, 2011 and March 28, 2010 are both 13-week periods.


The results of operations for the quarter ended March 27, 2011 are not necessarily indicative of results to be expected for the full year, nor were those of the comparable 2010 period representative of those actually experienced for the full year 2010.


These condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.  The Company filed audited consolidated financial statements for the year ended December 26, 2010 in its Annual Report on Form 10-K, which includes all such information and disclosures and, accordingly, should be read in conjunction with the financial information included herein.  


The Company's accounting policies are the same as those described in Note 1 to the Company's consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended December 26, 2010.


Certain amounts in the Company’s 2010 consolidated financial statements have been reclassified to conform to the 2011 presentation.


Substantially all of the Company's inventories consist of finished goods.



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


(2)     Earnings Per Share


Net earnings per share data for the fiscal quarters ended March 27, 2011 and March 28, 2010 were computed as follows:

 

2011

2010

 

-----------------

-----------------

 

Basic
-------

Diluted
--------

Basic
-------

Diluted
--------

Net earnings

$  17,196

17,196

58,943

58,943

Effect of dilutive securities:

       

   Interest expense on contingent convertible

       

      debentures due 2021, net of tax

-

-

-

1,017

 

------------

------------

------------

------------

Adjusted net earnings

$  17,196

17,196

58,943

59,960

 

=======

=======

=======

=======

         

Average shares outstanding

137,645

137,645

137,320

137,320

Effect of dilutive securities:

       

   Contingent convertible debentures

       

      due 2021

-

-

-

10,989

   Options and other share-based awards

-

3,308

-

2,973

 

------------

------------

------------

------------

Equivalent shares

137,645

140,953

137,320

151,282

 

=======

=======

=======

=======

         

Net earnings per common share

$      0.12

0.12

0.43

0.40

 

=======

=======

=======

=======


For the quarter ended March 28, 2010, the effect of the Company’s contingent convertible debt was dilutive and, accordingly, for the diluted earnings per share calculation, the numerator includes an adjustment to earnings to exclude the interest expense incurred for these debentures and the denominator includes an adjustment to include the shares issuable upon conversion.  During the first and second quarter of 2010, all of these debentures were either converted into shares of common stock or redeemed and, accordingly, no adjustment is necessary for these debentures in the first quarter of 2011.


Options to acquire shares totaling 1,173 at March 27, 2011 and 2,327 at March 28, 2010 were excluded from the calculation of diluted earnings per share because to include them would have been antidilutive.





HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


(3) Other Comprehensive Earnings


Other comprehensive losses for the quarters ended March 27, 2011 and March 28, 2010 consist of the following:


 

2011    

2010    

 

------    

------    

Foreign currency translation adjustments

$  28,669 

(26,009)

(Loss) gain on cash flow hedging activities, net of tax

(37,008)

24,995 

Reclassifications to earnings, net of tax:

 

 

   Net gains on cash flow hedging activities

(1,573)

(1,574)

 

---------- 

---------- 

 Other comprehensive loss

$   (9,912)

(2,588)

 

====== 

====== 


At March 27, 2011, the Company had remaining deferred losses on hedging instruments, net of tax, of $23,149, in accumulated other comprehensive earnings (“AOCE”). These instruments hedge certain anticipated inventory purchases and other cross-border transactions through 2012. These amounts will be reclassified into the consolidated statement of operations upon the sale of the related inventory or receipt or payment of the related royalties and expenses. Of the net deferred losses included in AOCE at March 27, 2011, the Company expects approximately $4,800 to be reclassified to earnings within the next twelve months. However, the amount ultimately realized in earnings is dependent on the fair value of the contracts on the settlement dates.




HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


(4) Financial Instruments


Hasbro’s financial instruments include cash and cash equivalents, accounts receivable, marketable securities, short-term borrowings, accounts payable and certain accrued liabilities. At March 27, 2011, the carrying cost of these instruments approximated their fair value. The Company’s financial instruments at March 27, 2011 also include certain assets and liabilities measured at fair value (see Notes 6 and 8) as well as long-term borrowings. The carrying costs and fair values of the Company’s long-term borrowings as of March 27, 2011, March 28, 2010, and December 26, 2010 are as follows:


 

March 27, 2011

March 28, 2010

Dec. 26, 2010

 

--------------------

--------------------

----------------------------

 

Carrying

Cost

Fair

Value

Carrying

Cost

Fair

Value

Carrying

Cost

Fair

Value

 

-------

------

-------

------

-------

------

6.125% Notes Due 2014

$   436,800

465,545

  430,589

466,735

  437,786

462,698

6.30% Notes Due 2017

350,000

386,295

350,000

380,590

350,000

382,830

2.75% Convertible Debentures Due 2021


-


-


138,651


242,122


-


-

6.60% Debentures

   Due 2028


109,895


113,115


109,895


111,543


109,895


110,038

6.35% Notes Due 2040

500,000

498,800

500,000

491,900

500,000

499,900

 

-------------

-----------

-------------

-----------

-------------

-----------

Total long-term debt

$1,396,695

1,463,755

1,529,135

1,692,890

1,397,681

1,455,466

 

=======

=======

=======

=======

=======

=======

             


The carrying cost of the 6.125% Notes Due 2014 includes principal amounts of $425,000 as well as fair value adjustments of $11,800, $5,589, and $12,786 at March 27, 2011, March 28, 2010, and December 26, 2010, respectively, related to interest rate swaps.  All other carrying costs represent principal amounts.  Total principal amounts of long-term debt at March 27, 2011, March 28, 2011, and December 26, 2010 were each $1,384,895, $1,523,546, and $1,384,895, respectively.


The fair value of the convertible debt was based on an average of the prices of trades occurring around the balance sheet date.  The fair value of the Company’s other long-term borrowings is measured using a combination of broker quotations when available and discounted future cash flows. The fair value of the interest rate swaps are measured based on the present value of future cash flows using the swap curve as of the date of valuation.


In March 2010 the Company issued $500,000 of Notes that are due in 2040 (the "Notes"). The Notes bear interest at a rate of 6.35%. 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.



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


The Company is party to a series of interest rate swap agreements which effectively adjust the interest rates on a portion of the Company’s long-term debt from fixed to variable. The interest rate swaps are matched with a portion of 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 which match the maturity date of the related notes. 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 March 27, 2011, March 28, 2010 and December 26, 2010, the fair values of these contracts were $11,800, $5,589, and $12,786, respectively, which are recorded in other assets with a corresponding fair value adjustment to increase long-term debt. The Company recorded a loss of $(986) and a gain of $8,314 on these instruments in other (income) expense, net for the quarters ended March 27, 2011 and March 28, 2010, respectively, relating to the change in fair value of such derivatives, wholly offsetting losses from the change in fair value of the associated long-term debt, also included in other (income) expense.


At March 28, 2010, the Company had $138,651 outstanding in principal amount of contingent convertible debentures due 2021. If the closing price of the Company's common stock exceeded $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 had 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. During the first quarter of 2010, holders of these debentures converted $111,177 of these debentures which resulted in the issuance of 5,147 shares of common stock. In addition, if the closing price of the Company's common stock exceeded $27.00 for at least 20 trading days in any thirty day period, the Company had the right to call the debentures by giving notice to the holders of the debentures. During a prescribed notice period following a call by the Company, the holders of the debentures had the right to convert their debentures in accordance with the conversion terms described above. On March 29, 2010, the Company gave notice of its election to redeem all of the outstanding debentures on April 29, 2010 at a redemption price to be paid in cash of $1,011.31 per $1,000 principal amount, which was equal to the par value thereof plus accrued and unpaid cash interest through April 29, 2010. During the notice period, $138,467 of the debentures were converted by the holders, resulting in the issuance of 6,410 shares of common stock. The remaining debentures were redeemed at a total cost of $186, which included accrued interest through the redemption date.


(5) Income Taxes


The Company and its subsidiaries file income tax returns in the United States and various state and international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal, state and local and international tax authorities in various tax jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years before 2006. With few exceptions, the Company is no longer subject to U.S. state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions for years before 2004.



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


The U.S. Internal Revenue Service has commenced an examination related to the 2006 and 2007 U.S. federal income tax returns. The Company is also under income tax examination in several U.S. state and local and non-U.S. jurisdictions.  


In connection with the Mexican tax examinations for the years 2000 to 2005, the Company has received tax assessments totaling approximately $191,900 (at March 27, 2011 exchange rates), which include interest, penalties and inflation updates, related to transfer pricing which the Company is vigorously defending. In order to continue the process of defending its position, the Company was required to guarantee the amount of the assessments for the years 2000 to 2003, as is usual and customary in Mexico with respect to these matters. Accordingly, as of March 27, 2011, bonds totaling approximately $127,390 (at March 27, 2011 exchange rates) have been provided to the Mexican government related to the 2000 to 2003 assessments, allowing the Company to defend its positions. The Company currently does not expect to be required to guarantee the amount of the 2004 or 2005 assessment. The Company expects to be successful in sustaining its position with respect to these assessments as well as similar positions that may be taken by the Mexican tax authorities for periods subsequent to 2005.


The Company believes that it is reasonably possible that certain tax examinations may be concluded and statutes of limitations will expire within the next twelve months, and that liabilities for unrecognized tax benefits, inclusive of penalties and interest, may decrease by up to approximately $24,000. This may result in the recognition of an income tax benefit of up to $22,000 and the reversal of approximately $2,000 of deferred tax assets, dependent on the ultimate outcome of the tax examinations and expiration of statutes of limitations. The unrecognized tax benefits primarily relate to both the timing and the nature of the deductibility of certain expenses, as well as the tax treatment of certain subsidiary and other transactions.


(6) Fair Value of Financial Instruments


The Company measures certain financial instruments at fair value. The fair value hierarchy consists of three levels: Level 1 fair values are based on quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access; Level 2 fair values are those based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 fair values are based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.


Accounting standards permit entities to measure many financial instruments and certain other items at fair value and establish presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar assets and liabilities. The Company has elected the fair value option for certain available-for-sale investments. At March 27, 2011, March 28, 2010, and December 26, 2010, these investments totaled $21,359, $20,850, and $21,767, respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheet. The Company recorded net gains of $157 and $295 on these investments in other (income)



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


expense, net for the quarters ended March 27, 2011 and March 28, 2010, respectively, related to the change in fair value of such investments.


At March 27, 2011, March 28, 2010 and December 26, 2010, the Company had the following assets measured at fair value in its consolidated balance sheets:


   

Fair Value Measurements Using:

 







Fair

Value

Quoted

Prices in

Active

Markets

for

Identical

Assets

(Level 1)




Significant

Other

Observable

Inputs

(Level 2)





Significant

Unobservable

Inputs

(Level 3)

 

--------

--------

--------

--------

March 27, 2011

       

---------------------

       

Available-for-sale securities

$ 21,387 

28

21,359 

-

Derivatives

(10,727)

-

(19,341)

8,614

 

-------- 

-------

--------- 

-------

Total

$ 10,660 

28

2,018 

8,614

 

===== 

====

====== 

====

March 28, 2010

       

---------------------

       

Available-for-sale securities

$ 20,889 

39

20,850 

-

Derivatives

63,148 

-

55,536 

7,612

 

-------- 

-------

--------- 

-------

Total

$ 84,037 

39

76,386 

7,612

 

===== 

====

====== 

====

December 26, 2010

       

---------------------

       

Available-for-sale securities

$ 21,791 

24

21,767 

-

Derivatives

38,092 

-

28,937 

9,155

 

-------- 

-------

--------- 

-------

Total

$ 59,883 

24

50,704 

9,155

 

===== 

====

====== 

====


For a portion of the Company’s available-for-sale securities, the Company is able to obtain quoted prices from stock exchanges to measure the fair value of these securities. Certain other available-for-sale securities held by the Company are valued at the net asset value which is quoted on a private market that is not active; however, the unit price is predominantly based on underlying investments which are traded on an active market. The Company’s derivatives consist primarily of foreign currency forward contracts. The Company uses current forward rates of the respective foreign currencies to measure the fair value of these contracts. The Company’s derivatives also include interest rate swaps used to effectively adjust the interest rates on a



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


portion of the Company’s long-term debt from fixed to variable. The fair values of the interest rate swaps are measured based on the present value of future cash flows using the swap curve as of the valuation date. The remaining derivative instruments consist of warrants to purchase common stock of two unrelated companies. The Company uses the Black-Scholes model to value these warrants. One of the inputs used in the Black-Scholes model, historical volatility, 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. There were no changes in these valuation techniques during 2011.


The following is a reconciliation of the beginning and ending balances of the fair value measurements of the Company’s warrants to purchase common stock that use significant unobservable inputs (Level 3):


 

2011

2010

 

-----------

-----------

Balance at beginning of year

$9,155 

6,808 

Gain (loss) from change in fair value

(541)

804 

 

-------- 

-------- 

Balance at end of first quarter

$8,614 

7,612 

 

===== 

===== 


(7) Pension, Postretirement and Postemployment Benefits


The Company, except for certain international subsidiaries, has pension plans covering substantially all of its full-time employees. Substantially all United States employees are covered under at least one of several non-contributory defined benefit pension plans maintained by the Company. Benefits under the two major plans which principally cover non-union employees are based primarily on salary and years of service. One of these major plans is funded. Benefits under the remaining plans are based primarily on fixed amounts for specified years of service. Of these remaining plans, the plan covering union employees is also funded. Effective at the end of December 2007, the Company froze pension benefits being accrued for its non-union employees in the United States. Pension coverage for employees of Hasbro's international subsidiaries is provided, to the extent deemed appropriate, through separate defined benefit and defined contribution plans.




HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


The components of the net periodic cost of the Company's defined benefit pension and other postretirement plans for the quarters ended March 27, 2011 and March 28, 2010 are as follows:


 

Pension

 

Postretirement

 

------------------

 

------------------

 

2011

 

2010

 

2011

2010

 

-------

 

-------

 

-------

-------

Service cost

$ 1,079

 

1,082

 

171

153

Interest cost

5,223

 

5,236

 

440

450

Expected return on assets

(6,249

)

(6,144

)

-     

-

Net amortization and deferrals

1,295

 

1,095

 

18

-

 

--------

 

--------

 

--------

--------

Net periodic benefit cost

$ 1,348

 

1,269

 

629

603

 

=====

 

=====

 

=====

=====


In the first quarter of fiscal 2011, the Company made cash contributions to its defined benefit pension plans of approximately $1,800 in the aggregate. The Company expects to contribute approximately $5,400 during the remainder of fiscal 2011.


(8) Derivative Financial Instruments


Hasbro uses foreign currency forward contracts to mitigate the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. These over-the-counter contracts, which hedge future currency requirements related to purchases of inventory and other cross-border transactions not denominated in the functional currency of the business unit, are primarily denominated in United States and Hong Kong dollars and Euros and are entered into with a number of counterparties, all of which are major financial institutions. The Company believes that a default by a single counterparty would not have a material adverse effect on the financial condition of the Company. Hasbro does not enter into derivative financial instruments for speculative purposes.


The Company also has warrants to purchase common stock of two unrelated companies that constitute and are accounted for as derivatives. For additional information related to these warrants see Note 6. In addition the Company is party to several interest rate swap agreements to effectively adjust the interest rates on a portion of the Company’s long-term debt from fixed to variable. For additional information related to these interest rate swaps see Note 4.


Cash Flow Hedges

----------------------------------

Hasbro uses foreign currency forward contracts to reduce the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. All of the Company’s designated foreign currency forward contracts are considered to be cash flow hedges. These instruments hedge a portion of the Company’s currency requirements



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


associated with anticipated inventory purchases and other cross-border transactions in 2011 and 2012.


At March 27, 2011, March 28, 2010 and December 26, 2010, the notional amounts and fair values of the Company’s foreign currency forward contracts designated as cash flow hedging instruments were as follows:


 

March 27, 2011

 

March 28, 2010

 

Dec. 26, 2010

 

---------------

 

---------------

---------------


Hedged transaction

Notional  

Amount  

Fair

Value

 

Notional  

Amount  

Fair

Value

 

Notional

 Amount

Fair

Value

----------------------------

--------------

----------

 

-------------

-----------

 

-----------

----------

Inventory purchases

$ 598,637

(25,697)

 

 333,838

37,366 

 

593,953

  11,074

Intercompany royalty

   transactions


173,760


(6,144)

 


124,405


13,283 

 


179,308


5,344

Other

11,123

711 

 

21,848

(701)

 

17,047

533

 

------------

---------- 

 

------------

----------

 

-----------

----------

Total

$ 783,520

(31,130)

 

480,091

  49,948

 

790,308

16,951

 

=======

====== 

 

=======

======

 

======

======




HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


The Company has a master agreement with each of its counterparties that allows for the netting of outstanding forward contracts. The fair values of the Company’s foreign currency forward contracts designated as cash flow hedges are recorded in the consolidated balance sheets at March 27, 2011, March 28, 2010, and December 26, 2010 as follows:


 

Mar. 27, 2011

Mar. 28, 2010

Dec. 26, 2010

 

-------------------

-------------------

-------------------

Prepaid expenses and other current assets

     

-----------------------------------------------------------

     

Unrealized gains

$    3,977 

26,666 

24,710 

Unrealized losses

(1,519)

(2,881)

(9,229)

 

------------ 

------------ 

------------ 

Net unrealized gain

2,458 

23,785 

15,481 

 

------------ 

------------ 

------------ 

Other assets

     

---------------------

     

Unrealized gains

26,163 

4,403 

Unrealized losses

-  

 (2,933)

 

------------ 

------------ 

------------ 

Net unrealized gain

26,163 

1,470 

 

------------ 

------------ 

------------ 

Total asset derivatives

$    2,458 

49,948 

  16,951 

 

======= 

======= 

======= 

Accrued expenses and other liabilities

     

-----------------------------------------------------------

     

Unrealized gains

$    7,981 

-  

-  

Unrealized losses

(19,992)

-  

-  

 

------------ 

------------ 

------------ 

Net unrealized loss

(12,011)

-  

-  

 

------------ 

------------ 

------------ 

Other long-term liabilities

     

-------------------------------------

     

Unrealized gains

17 

-  

-  

Unrealized losses

(21,594)

-  

-  

 

------------ 

------------ 

------------ 

Net unrealized loss

(21,577)

-  

-  

 

------------ 

------------ 

------------ 

Total liability derivatives

 $ (33,588)

-  

  -  

 

======= 

======= 

======= 


During the quarters ended March 27, 2011 and March 28, 2010, the Company reclassified net gains from other comprehensive earnings to net earnings of $1,846 and $1,919, respectively. Of the amount reclassified during the quarter ended March 27, 2011, $1,024 was reclassified to cost of sales and $822 was reclassified to royalty expense. Of the amount reclassified during the quarter ended March 28, 2010, $1,112 and $807 were reclassified to cost of sales and royalty expense, respectively. In the first quarters of 2011 and 2010 there were no



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


reclassifications to earnings as a result of hedge ineffectiveness.  In the first quarter of 2011, the Company recognized a loss of approximately $3,700 in other (income) expense related to certain derivatives which no longer qualified for hedge accounting.


Undesignated Hedges

----------------------------------

The Company also enters into foreign currency forward contracts to minimize the impact of changes in the fair value of intercompany loans due to foreign currency changes. Due to the short-term nature of the derivative contracts involved, the Company does not use hedge accounting for these contracts.  At March 27, 2011, March 28, 2010 and December 26, 2010, the total notional amounts of the Company’s undesignated derivative instruments were $24,573, $27,193 and $89,191, respectively.


At March 27, 2011, March 28, 2010, and December 26, 2010, the fair values of the Company’s undesignated derivative financial instruments were recorded in accrued liabilities in the consolidated balance sheets as follows:


 

Mar. 27, 2011

Mar. 28, 2010

Dec. 26, 2010

 

---------

---------

---------

Unrealized gains

$   80 

292 

27 

Unrealized losses

(91)

(293)

(827)

 

-------- 

--------- 

--------- 

Net unrealized (loss) gain

$ (11) 

(1)

(800)

 

=====

===== 

 ===== 


The Company recorded net gains of $1,698 and $120 on these instruments to other (income) expense, net for the quarters ended March 27, 2011 and March 28, 2010, respectively, relating to the change in fair value of such derivatives, substantially offsetting gains and losses from the change in fair value of intercompany loans to which the contracts relate.


For additional information related to the Company’s derivative financial instruments see Notes 4 and 6.


(9) Segment Reporting


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. The Company’s segments 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



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


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 Company’s Entertainment and Licensing segment includes the Company’s lifestyle licensing, digital gaming, movie, television and online entertainment operations. The Global Operations segment is responsible for manufacturing and sourcing finished product for the Company’s U.S. and Canada and International segments.


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 than one segment. Intersegment sales and transfers are reflected in management reports at amounts approximating cost. Certain shared costs, including global product development and marketing expenses, are allocated to segments based upon foreign exchange rates fixed at the beginning of the year, with adjustments to actual foreign exchange rates included in Corporate and eliminations. The accounting policies of the segments are the same as those referenced in Note 1.


Results shown for the quarter are not necessarily representative of those which may be expected for the full year 2011, nor were those of the comparable 2010 periods representative of those actually experienced for the full year 2010. Similarly, such results are not necessarily those which would be achieved were each segment an unaffiliated business enterprise.



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)


Information by segment and a reconciliation to reported amounts for the quarters ended March 27, 2011 and March 28, 2010 are as follows.  


 

2011

2010

 

-----------------

-----------------

   

External

Affiliate

External

Affiliate

Net revenues

 

-----------

----------

-----------

---------

       U.S. and Canada

$

391,152

3,525

 

424,710

2,724

 

       International

 

254,332

83

 

221,719

24

 

       Entertainment and Licensing

 

24,641

429

 

25,109

-

 

       Global Operations (a)

 

1,861

251,855

 

833

246,060

 

       Corporate and Eliminations

 

-

(255,892

)

-

(248,808

)

 

 

------------

------------

 

------------

------------

 

 

$

671,986

-

 

672,371

-

 

 

 

=======

=======

 

=======

=======

 



     
 

2011

2010

 

---------------------

---------------------

    Operating profit (loss)

   

        U.S. and Canada

$ 41,012 

61,131 

        International

(1,733)

 (2,430)

        Entertainment and Licensing

5,431 

 9,366 

        Global Operations (a)

(7,209)

(2,728)

        Corporate and Eliminations (b)

11,422 

3,988 

 

---------- 

---------- 

 

$ 48,923 

69,327 

 

====== 

====== 

     



HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)




Total assets

    March 27,

2011
     -------------

March 28,

2010
-------------

Dec. 26,

2010
-------------

       U.S. and Canada

$

4,579,394 

3,656,436 

4,571,597 

       International

 

1,539,115 

1,316,450 

1,672,326 

       Entertainment and Licensing

 

905,640 

740,867 

861,971 

       Global Operations

 

1,573,368 

1,006,218 

1,542,896 

       Corporate and Eliminations (b)

 

(4,657,176)

(2,641,948)

(4,555,564)

 

 

-------------- 

-------------- 

-------------- 

 

$

3,940,341 

4,078,023 

4,093,226 

 

 

======== 

======== 

======== 


(a) The Global Operations segment derives substantially all of its revenues, and thus its operating results, from intersegment activities.


(b) Certain intangible assets, primarily goodwill, which benefit multiple operating segments are reflected as Corporate assets for segment reporting purposes. In accordance with accounting standards related to impairment testing, these amounts have been allocated to the reporting unit which benefits from their use. In addition, allocations of certain expenses related to these assets to the individual operating segments are done at the beginning of the year based on budgeted amounts. Any difference between actual and budgeted amounts is reflected in Corporate and Eliminations.


The following table presents consolidated net revenues by class of principal products for the quarters ended March 27, 2011 and March 28, 2010. Effective at the beginning of fiscal 2011, the Company has reclassified certain of its products from the Boys category to the Preschool category. The table below presents the 2010 net revenues reclassified to reflect the 2011 product category classifications.


 

2011    

2010    

 

----------  

---------  

Boys

$  290,232

232,122

Games and puzzles

200,352

227,024

Girls

113,156

129,385

Preschool

68,236

83,644

Other

10

196

 

------------

------------

Net revenues

$  671,986

672,371

 

=======

=======


.



Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations.


HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations

 (Thousands of Dollars and Shares Except Per Share Data)


This Quarterly Report on Form 10-Q, including the following section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements expressing management's current expectations, goals, objectives and similar matters. These forward-looking statements may include statements concerning the Company’s product and entertainment plans, anticipated product and entertainment performance, business opportunities and strategies, financial goals and expectations for achieving the Company’s financial goals and other objectives. See Item 1A, in Part II of this report, for a discussion of factors which may cause the Company's actual results or experience to differ materially from that anticipated in these forward-looking statements. The Company undertakes no obligation to revise the forward-looking statements in this report after the date of the filing.


EXECUTIVE SUMMARY

----------------------------------

Hasbro, Inc. (“Hasbro” or the “Company”) is a worldwide leader in children’s and family leisure time products and services with a broad portfolio of brands and entertainment properties.  As a branded play, consumer-focused global company, Hasbro applies its brand blueprint to all of its operations.  The brand blueprint revolves around the objective of continuously re-imagining, re-inventing, and re-igniting the Company’s brands through a wide range of innovative toys and games, entertainment offerings, including television programming and motion pictures, and licensed products, under well-known brands such as TRANSFORMERS, PLAYSKOOL, NERF, LITTLEST PET SHOP, MY LITTLE PONY, G.I. JOE, TONKA, MILTON BRADLEY, PARKER BROTHERS, CRANIUM, and WIZARDS OF THE COAST. This is the first year in a multi-year strategic plan in which the Company expects to have significant initiatives across all elements of its brand blueprint, including television and movies, digital gaming, licensing and its broad portfolio of toys and games.


The Company earns revenue and generates cash primarily through the sale of a variety of toy and game products, as well as through the out-licensing of rights for use of its properties in connection with non-competing products, including digital games, offered by third-parties. The Company’s product offerings encompass a broad variety of toys including boys’ action figures, vehicles and playsets, girls’ toys, electronic toys, plush products, preschool toys and infant products, electronic interactive products, creative play and toy related specialty products.  Games offerings include traditional board, card, hand-held electronic, trading card, role-playing and DVD games, as well as electronic learning aids and puzzles. While many of the Company's products are based on brands the Company owns or controls, the Company also offers products which are licensed from outside inventors. In addition, the Company licenses rights to produce products based on movie, television, music and other entertainment properties owned by third parties, such as the MARVEL, SESAME STREET and STAR WARS properties. The Company sells its products both within the United States and in a number of international markets. The Company's business is highly seasonal with a significant amount of revenues occurring in the second half of the year. In 2010, 2009 and 2008, the second half of the year accounted for 65%, 65% and 63% of the Company’s net revenues, respectively.



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


The Company seeks to make its brands relevant in all areas important to its consumers. Brand awareness is amplified through immersive traditional play, digital applications, publishing and lifestyle licensing and entertainment experiences, including television programming and motion pictures, presented for consumers’ enjoyment. The Company’s focus remains on growing core owned and controlled brands, developing new and innovative products which respond to market insights, offering immersive entertainment experiences which allow consumers to experience the Company’s brands across multiple forms and formats, and optimizing efficiencies within the Company to reduce costs, increase operating profits and maintain a strong balance sheet.


The Company’s core brands represent Company-owned or Company-controlled brands, such as TRANSFORMERS, MY LITTLE PONY, LITTLEST PET SHOP, MONOPOLY, MAGIC: THE GATHERING, PLAYSKOOL, G.I. JOE and NERF, which have been successful over the long term. The Company has a large portfolio of owned and controlled brands, which can be introduced in new formats and platforms over time. These brands may also be further extended by pairing a licensed concept with a core brand. By focusing on core brands, the Company is working to build a more consistent revenue stream and basis for future growth, and to leverage profitability. During the first quarter of 2011 the Company had strong revenues from core brands, namely NERF, TRANSFORMERS, MAGIC: THE GATHERING, LITTLEST PET SHOP, FURREAL FRIENDS, SUPERSOAKER and PLAY-DOH. The Company’s strategy of re-imagining, re-inventing and re-igniting its brands has been instrumental in achieving its overall long-term growth objectives.


The Company also seeks to drive product-related revenues by increasing the visibility of its core brands through entertainment. Since 2007, the Company has had two major motion pictures based on its TRANSFORMERS brand and one major motion picture based on its G.I JOE brand released by major motion picture studios.  In July of 2011, the third major motion picture movie based on the TRANSFORMERS brand, TRANSFORMERS: DARK OF THE MOON , is expected to  be released by Paramount  Pictures Corporation. The Company has developed and marketed product lines based on these motion pictures. In addition, the Company has entered into a strategic relationship with Universal Pictures to produce at least three motion pictures based on certain of Hasbro’s core brands, with the potential for production of two additional pictures. The first movie under this relationship is expected to be released in 2012. In addition to using theatrical entertainment, the Company continues to seek opportunities to use other entertainment outlets and forms of entertainment as a way to build awareness of its brands, which has proved instrumental to achieving its overall long-term growth objectives.


As part of its strategy to use entertainment experiences to drive its brands, the Company is a partner in a joint venture with Discovery Communications, Inc. (“Discovery”) which runs THE HUB, a television network in the United States dedicated to high-quality children’s and family entertainment and educational programming. Programming on the network includes content based on Hasbro’s brands, Discovery’s library of children’s educational programming, as well as programming developed by third parties. In connection with its television initiative, the Company established Hasbro Studios, an internal wholly-owned production studio that is responsible for the creation and development of television programming based primarily on Hasbro’s brands. Hasbro Studios creates programming for distribution in the United States on THE HUB, and for distribution on other networks in international markets. The



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


Company incurred a certain level of investment spending leading up to the debut of THE HUB in October 2010.  In addition, the Company incurred costs in 2010 and the first quarter of 2011, and will incur costs in the future related to the production of television programming by Hasbro Studios. The Company believes that its television initiative, including developing programming based on its brands for distribution in the United States and in international markets, supports its strategy of growing its core brands well beyond traditional toys and games and providing entertainment experiences for consumers of all ages in any form or format.


While the Company believes it has built a more sustainable revenue base by developing and maintaining its core brands and avoiding reliance on licensed entertainment properties, it continues to opportunistically enter into or leverage existing strategic licenses which complement its brands and key strengths. The Company’s primary licenses include its agreements with Marvel Characters B.V. (“Marvel”) for characters in the Marvel universe, including IRON MAN and SPIDER-MAN; Lucas Licensing, Ltd. (“Lucas”), related to the STAR WARS brand; and Sesame Workshop, related to the SESAME STREET characters. The majority of product offerings under the Sesame Workshop license will commence in the second half of 2011. In 2010, the Company had significant sales of products related to the movie release of IRON MAN 2 in May 2010 as well as continued strong sales of STAR WARS products. In 2011 the Company expects significant sales of products related to the expected Marvel movie releases of THOR in May 2011 and CAPTAIN AMERICA: THE FIRST AVENGER in July 2011. In addition, in the second half of 2010 the Company re-introduced BEYBLADE products, a licensed property. The Company also expects significant sales of BEYBLADE products during 2011.  


The Company’s long-term strategy also focuses on extending its brands further into the digital world. As part of this strategy, the Company is party to a multi-year strategic agreement with Electronic Arts Inc. (“EA”). The agreement gives EA the exclusive worldwide rights, subject to existing limitations on the Company’s rights and certain other exclusions, to create digital games for all platforms, such as mobile phones, gaming consoles and personal computers, based on a broad spectrum of the Company’s intellectual properties, including MONOPOLY, SCRABBLE, YAHTZEE, NERF, TONKA, G.I. JOE and LITTLEST PET SHOP.


The Company's business is separated into three principal business segments, U.S. and Canada, International and Entertainment and Licensing. The U.S. and Canada segment develops, markets and sells both toy and game products in the U.S. and Canada. The International segment consists of the Company's European, Asia Pacific and Latin and South American marketing and sales operations. The Company’s Entertainment and Licensing segment includes the Company’s lifestyle licensing, digital gaming, movie, television and online entertainment operations. In addition to these three primary segments, the Company's world-wide manufacturing and product sourcing operations are managed through its Global Operations segment.


The Company is investing to grow its business in emerging international markets. During the past few years, the Company commenced or expanded its operations in China, Brazil, Russia, Korea, Romania, Czech Republic, and most recently Peru and Colombia. In addition, the Company is seeking to grow its business in entertainment and digital gaming, and will continue



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


to evaluate strategic alliances and acquisitions which may complement its current product offerings, allow it entry into an area which is adjacent to or complementary to the toy and game business, or allow it to further develop awareness of its brands and expand the ability of consumers to experience its brands in different forms of media.


The Company is committed to returning excess cash to its shareholders through share repurchases and dividends. As part of this initiative, from 2005 to 2010, the Company’s Board of Directors (the “Board”) adopted five successive share repurchase authorizations with a cumulative authorized repurchase amount of $2,325,000. The fifth authorization was approved in April 2010 for $625,000. At March 27, 2011, the Company had $86,409 remaining on this authorization. For the quarter ended March 27, 2011, the Company invested $63,687 in the repurchase of 1,400 shares of common stock in the open market. For the years ended 2010, 2009 and 2008, the Company spent $636,681, $90,994 and $357,589, respectively, to repurchase 15,763, 3,172 and 11,736 shares, respectively, in the open market. The Company intends to, at its discretion, opportunistically repurchase shares in the future subject to market conditions, the Company’s other potential uses of cash and the Company’s levels of cash generation. In addition to the share repurchase program, the Company also seeks to return excess cash through the payment of quarterly dividends. Effective for the dividend payable in May 2011, the Company’s Board of Directors increased the Company’s quarterly dividend rate 20% to $0.30 per share from $0.25 per share.




HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


 

SUMMARY OF FINANCIAL PERFORMANCE

---------------------------------------------------------------

The components of the results of operations, stated as a percent of net revenues, are illustrated below for the quarters ended March 27, 2011 and March 28, 2010.  


 

2011

 

2010

 

-------

 

-------

Net revenues

100.0 %

 

100.0 %

Costs and expenses:

     

  Cost of sales

  39.8

 

39.1

  Royalties  

    6.4

 

6.5

  Product development

    6.8

 

6.0

  Advertising

    9.9

 

10.6

  Amortization of intangibles

    1.6

 

1.7

  Program production cost amortization

    0.5

 

-

  Selling, distribution and administration

   27.7

 

25.8

 

--------   

 

--------

Operating profit

7.3

 

10.3

  Interest expense

3.2

 

2.5

  Interest income

(0.2)

 

(0.1)

  Other (income) expense, net

0.9

 

(0.2)

 

--------

 

--------

Earnings before income taxes

 3.4

 

8.1

  Income tax expense (benefit)

0.8

 

(0.7)

 

--------

 

--------

Net earnings

2.6 %

 

8.8 %

 

=====

 

=====




HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


RESULTS OF OPERATIONS
-----------------------------------------
The quarters ended March 27, 2011 and March 28, 2010 were both 13-week periods. Net earnings for the first quarter of 2011 were $17,196, compared to net earnings of $58,943 for the first quarter of 2010. Basic and diluted earnings per share for the first quarter of 2011 were each $0.12 compared to basic and diluted earnings per share in the first quarter of 2010 of $0.43 and $0.40, respectively. Net earnings for the quarter ended March 28, 2010 include a favorable tax adjustment of approximately $21,200, or $0.14 per diluted share, related to the recognition of certain previously unrecognized tax benefits and reversal of related accrued interest due to the completion of a tax audit.


Consolidated net revenues for the quarter ended March 27, 2011 remained flat at $671,986 compared to $672,371 for the quarter ended March 28, 2010. Consolidated net revenues were positively impacted by foreign currency translation in the amount of approximately $4,800, or 1%, for the quarter ended March 27, 2011 as the result of the weaker U.S. dollar in 2011. Operating profit for the quarter ended March 27, 2011 was $48,923 compared to $69,327 for the quarter ended March 28, 2010.


Most of the Company's revenues and operating profit are derived from its three principal business segments: the U.S. and Canada segment, the International segment and the Entertainment and Licensing segment, which are discussed in detail below. The following table presents net external revenues and operating profit data for the Company's three principal segments for the quarters ended March 27, 2011 and March 28, 2010.


 

2011

2010

% Change

 

-------------

------------

-------------

Net revenues

     

   U.S. and Canada segment

$ 391,152

424,710 

-8 %

   International segment

254,332

221,719 

15 %

   Entertainment and Licensing segment

24,641

25,109 

-2 %

         

Operating profit (loss)

     

   U.S. and Canada segment

$  41,012 

61,131 

-33 %

   International segment

(1,733)

(2,430)

29 %

   Entertainment and Licensing segment

5,431 

9,366 

-42 %




HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


U.S. AND CANADA SEGMENT

The U.S. and Canada segment’s net revenues for the quarter ended March 27, 2011 decreased 8% to $391,152 from $424,710 for the quarter ended March 28, 2010. The decrease in the quarter was driven by decreased sales in the games and puzzles, preschool and girls categories partially offset by increased sales in the boys category. The decrease in the games and puzzles category was driven by decreased sales of board games partially offset by increased sales of MAGIC: THE GATHERING products.  Decreases in the preschool category were primarily due to decreased sales of PLAY-DOH products and, to a lesser extent, decreased sales of TONKA and PLAYSKOOL products. The decrease in the girls category was primarily due to decreased sales of LITTLEST PET SHOP products partially offset by increased sales from the FURREAL FRIENDS line. These decreases were offset by increased sales in the boys category driven by sales of BEYBLADE products which was reintroduced in late 2010 as well as increased sales of TRANSFORMERS and SUPERSOAKER products. These increases in the boys category were partially offset by decreased sales from NERF products. Although the Company made some shipments of TRANSFORMERS products in the first quarter related to the expected motion picture release of TRANSFORMERS: DARK OF THE MOON in July 2011, these shipments are expected to significantly increase in the second quarter and the remainder of 2011.


U.S. and Canada segment operating profit decreased to $41,012 for the quarter ended March 27, 2011 compared to $61,131 for the quarter ended March 28, 2010. The decrease in operating profit for the quarter was primarily the result of the lower revenues discussed above and, to a lesser extent, higher product development, royalties, and selling, distribution and administrative expenses. These were partially offset by lower advertising expense in the first quarter of 2011.  


INTERNATIONAL SEGMENT

International segment net revenues increased by 15% to $254,332 for the quarter ended March 27, 2011 from $221,719 for the quarter ended March 28, 2010. For the quarter ended March 27, 2011, International segment net revenues were positively impacted by foreign currency translation of approximately $3,100, or 1%, as a result of the weaker U.S. dollar in the first quarter of 2011. The remaining increase in net revenues for the quarter was driven by increased sales in the boys’ toys category primarily as a result of increased sales of BEYBLADE and NERF products partially offset by decreased sales of MARVEL products. The increased revenues from the boys category were partially offset by decreased sales in the girls, games and puzzles and preschool categories. The decrease in the girls category was driven by decreased sales of LITTLEST PET SHOP product partially offset by increased sales of FURREAL FRIENDS products. Games and puzzles revenues decreased primarily as the result of reduced sales of board games. Sales in the preschool category primarily decreased as the result of lower revenues from the IN THE NIGHT GARDEN line.



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


International segment operating loss was $1,733 for the quarter ended March 27, 2011 compared to a loss of $2,430 for the quarter ended March 28, 2010. International segment operating loss was negatively impacted by currency translation of approximately $900. The impact of the higher sales discussed above was partially offset by higher selling, distribution and administration expenses. The increased expenses primarily reflect the Company’s investments in growing its business and operations in emerging markets.


ENTERTAINMENT AND LICENSING SEGMENT

Entertainment and Licensing segment net revenues for the quarter ended March 27, 2011 decreased 2% to $24,641 from $25,109 for the quarter ended March 28, 2010. The decrease was primarily due to the decreased licensing revenues related to the timing of revenues from the 2009 movie, TRANSFORMERS: REVENGE OF THE FALLEN , mostly offset by growth in licensing revenues from other brands as well as movie and television related revenues.  


Entertainment and Licensing segment operating profit decreased to $5,431 for the quarter ended March 27, 2011 compared to $9,366 for the quarter ended March 28, 2010. The decrease in operating profit reflects increased expense from the Company’s television operations, including program production cost amortization, as well as the impact of the decreased revenues mentioned above. While the Discovery joint venture is a component of the Company’s television operations, the Company’s 50% share in the earnings (loss) from the joint venture are included in other (income) expense and therefore are not a component of operating profit of the segment.



COSTS AND EXPENSES
-----------------------------------
The Company's costs and expenses, stated as percentages of net revenues, are illustrated below for the quarters ended March 27, 2011 and March 28, 2010.  


 

2011

 

2010

 

-------------

 

-----------

Cost of sales

39.8%

 

39.1%

Royalties

6.4   

 

6.5   

Product development

6.8   

 

6.0   

Advertising

9.9   

 

10.6   

Amortization of intangibles

1.6   

 

1.7   

Program production cost amortization

0.5   

 

   -   

Selling, distribution and administration

27.7   

 

25.8   


Cost of sales increased in dollars and as a percentage of revenues to $267,246 or 39.8% of net revenues for the quarter ended March 27, 2011 from $262,679 or 39.1% of net revenues for the quarter ended March 28, 2010. The increase is primarily due to the mix of products sold in the first quarter of 2011 compared to the first quarter of 2010 and unfavorable manufacturing variances due to decreased production in the Company’s U.S. games manufacturing facility during the first quarter of 2011 as a result of higher inventory levels at the end of fiscal year 2010.



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


Royalty expense for the quarter ended March 27, 2011 decreased slightly to $43,226 or 6.4% of net revenues from $43,782 or 6.5% of net revenues for the quarter ended March 28, 2010. Beginning in the second quarter of 2011, the Company expects higher royalty expense as a result of product sales related to the expected motion picture releases of TRANSFORMERS: DARK OF THE MOON, CAPTAIN AMERICA: THE FIRST AVENGER, and THOR. Royalty expense for the remainder of 2011 is also expected to continue to be impacted by sales related to BEYBLADE products.


Product development expenses for the quarter ended March 27, 2011 increased in dollars and as a percentage of revenues to $45,818 or 6.8% of net revenues from $40,324 or 6.0% of net revenues for the quarter ended March 28, 2010.  The increase is the result of higher spending to support new product initiatives planned for the second half of 2011 and beyond.


Advertising expense for the quarter ended March 27, 2011 decreased to $66,537, or 9.9% of net revenues compared to $71,174, or 10.6% of net revenues for the quarter ended March 28, 2010. In years in which the Company expects significant sales of products related to major motion picture releases and other entertainment media, such as in 2011, advertising expense as a percentage of revenue is generally lower, as such products do not require the same level of advertising that the Company spends on non-entertainment based products.


Amortization of intangibles decreased to $10,696 or 1.6% of net revenues in the first quarter of 2011 from $11,384 or 1.7% of net revenues in the first quarter of 2010.


Program production cost amortization for the quarter ended March 27, 2011 was $3,117 or 0.5% of net revenues.  Program production costs are capitalized as incurred and amortized using the individual-film-forecast method. The Company did not begin amortizing program production costs until the second half of 2010.


For the quarter ended March 27, 2011, the Company's selling, distribution and administration expenses increased to $186,423 or 27.7% of net revenues from $173,701 or 25.8% of net revenues for the quarter ended March 28, 2010. Selling, distribution and administration expenses for the quarter include higher costs related to Hasbro Studios, expenditures to support continued growth in emerging markets, and costs related to the implementation of an SAP upgrade and shared services in Europe. Additionally, selling, distribution, and administration expenses for the quarter were negatively impacted by higher shipping and warehousing costs due to increased levels of inventory in 2011. The Company expects selling, distribution and administration expenses to be below 20% of net revenues for the full year 2011.


NONOPERATING (INCOME) EXPENSE
-------------------------------------------------------

Interest expense for the first quarter of 2011 increased to $21,375 from $16,792 in the first quarter of 2010. The increase in interest expense in the quarter primarily reflects higher average effective interest rates as a result of the Company’s redemption of all of the outstanding 2.75% convertible debentures on April 29, 2010 and the March 2010 issuance of $500,000 of Notes Due in 2040 that bear interest at a rate of 6.35%.  The overall increase in interest expense was



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


partially offset by lower interest as a result of the Company’s fixed-for-floating interest rate swaps.


Interest income for the quarter ended March 27, 2011 was $1,412 compared to $830 for the quarter ended March 28, 2010. The increase in interest income for the quarter was primarily the result of higher returns on invested cash and cash equivalents.


Other (income) expense, net, was $6,122 for the first quarter of 2011, compared to $(865) for the first quarter of 2010. Other (income) expense, net in the quarter includes the Company’s 50% share in the (losses) earnings of THE HUB. In the first quarter of 2011, the Company recognized losses of $2,000 compared to earnings of $500 in the first quarter of 2010.  The remainder of the change in other (income) expense, net in the quarter ended March 27, 2011 as compared to the quarter ended March 28, 2010 primarily reflects the impact of foreign exchange losses incurred in the first quarter of 2011.


INCOME TAXES

-----------------------

Income tax expense for the quarter ended March 27, 2011 was $5,642 on pretax earnings of $22,838 compared to an income tax benefit of $4,713 on pretax earnings of $54,230 for the quarter ended March 28, 2010.  Both quarters, as well as the full year 2010, are impacted by certain discrete tax events including the accrual of potential interest and penalties on certain tax positions.  The income tax benefit for the quarter ended March 28, 2010 includes $21,243 as a result of the settlement of the 2004 and 2005 IRS examination, and other adjustments, primarily related to the recognition of previously unrecognized tax benefits and related reversal of accrued potential interest.  Absent these items, the adjusted tax rate for the first quarter of 2011 and 2010 was 28.0% and 29.0%, respectively.  The increase in the adjusted rate to 28.0% for the three months ended March 27, 2011 from the full year 2010 adjusted rate of 25.4% is primarily due to the tax impact of higher expected taxable earnings in jurisdictions with higher statutory tax rates.


OTHER INFORMATION

---------------------------------

Historically, the Company's revenue pattern has shown the second half of the year to be more significant to its overall business than the first half. Although the Company expects that this concentration will continue, particularly as more of its business has shifted to larger customers with order patterns concentrated in the second half of the year, this concentration may be less in years when the Company has products related to one or more major motion picture releases that occur in the first half of the year. In 2011 the Company expects significant sales of products related to the mid-year major motion picture releases of TRANSFORMERS: DARK OF THE MOON, THOR, and CAPTAIN AMERICA: THE FIRST AVENGER . In 2010 the Company had products related to the mid-year major motion picture release of IRON MAN 2 . The concentration of sales in the second half of the year increases the risk of (a) underproduction of popular items, (b) overproduction of less popular items, and (c) failure to achieve compressed shipping schedules.



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


The toy and game business is characterized by customer order patterns which vary from year to year largely because of differences each year in the degree of consumer acceptance of product lines, product availability, marketing strategies and inventory policies of retailers, the dates of theatrical releases of major motion pictures for which the Company has product licenses, and changes in overall economic conditions. As a result, comparisons of the Company’s unshipped orders on any date with those at the same date in a prior year are not necessarily indicative of the Company’s expected sales for that year. Moreover, quick response inventory management practices result in fewer orders being placed significantly in advance of shipment and more orders being placed for immediate delivery. Although the Company may receive orders from customers in advance, it is a general industry practice that these orders are subject to amendment or cancellation by customers prior to shipment and, as such, the Company does not believe that these unshipped orders, at any given date, are indicative of future sales.


 

LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------
The Company has historically generated a significant amount of cash from operations. In 2010 the Company funded its operations and liquidity needs primarily through cash flows from operations, and, when needed, using borrowings under its available lines of credit. In January 2011, the Company entered into an agreement with a group of banks to establish a commercial paper program. Under the program, at the Company’s request and subject to market conditions, the group of banks may either purchase or arrange for the sale by the Company of unsecured commercial paper notes from time to time up to an aggregate principal amount of outstanding at any given time of $500,000.


During the first quarter of 2011, the Company has continued to fund its working capital needs primarily through cash flows from operations and, when needed, using borrowings under its available lines of credit and sale of commercial paper. The Company believes that the funds available to it, including cash expected to be generated from operations and funds available through its available lines of credit and commercial paper program are adequate to meet its working capital needs for the remainder of 2011. However, unexpected events or circumstances such as material operating losses or increased capital or other expenditures may reduce or eliminate the availability of external financial resources. In addition, significant disruptions to credit markets may also reduce or eliminate the availability of external financial resources. Although management believes the risk of nonperformance by the counterparties to the Company’s financial facilities is not significant, in times of severe economic downturn in the credit markets it is possible that one or more sources of external financing may be unable or unwilling to provide funding to us.


Because of the seasonality in the Company's cash flow, management believes that on an interim basis, rather than discussing only its cash flows, a better understanding of its liquidity and capital resources can be obtained through a discussion of the various balance sheet categories as well. Also, as several of the major categories, including cash and cash equivalents, accounts receivable, inventories and short-term borrowings, fluctuate significantly from quarter to quarter, again due to the seasonality of its business, management believes that



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


a comparison to the comparable period in the prior year is generally more meaningful than a comparison to the prior quarter or prior year-end.


Net cash provided by operating activities in the first quarter of 2011 was $276,494 compared to net cash provided of $265,117 in the first quarter of 2010. Accounts receivable increased to $558,980 at March 27, 2011 from $526,031 at March 28, 2010. The accounts receivable balance at March 27, 2011 includes an increase of approximately $13,500 as a result of a weaker U.S. dollar at March 27, 2011 as compared to March 28, 2010. The remainder of the increase is primarily due to higher receivable balances in emerging markets which reflect the growth in those markets. These markets have longer payment terms than those in more mature markets. Days sales outstanding were 75 days at March 27, 2011 compared to 70 days at March 28, 2010.


Inventories increased to $401,309 at March 27, 2011 from $226,784 at March 28, 2010. The inventory balance at March 27, 2011 includes an increase of approximately $11,000 as a result of a weaker U.S. dollar at March 27, 2011 as compared to March 28, 2010.  During the quarter ended March 27, 2011, a portion of the increase relates to high inventory carryover from the year ended December 26, 2010.  During fiscal year 2010, inventory increased from $207,895 at December 27, 2009 to $364,194 at December 26, 2010.  Further, the increased inventory levels include higher amounts due to growth in emerging markets and new initiatives planned for release during 2011.  


Prepaid expenses and other current assets decreased to $173,070 at March 27, 2011 compared to $200,226 at March 28, 2010. The prepaid expenses and other current assets balance at March 27, 2011 includes an increase of approximately $5,200 as a result of a weaker U.S. dollar at March 27, 2011 as compared to March 28, 2010. Absent the impact of foreign exchange, prepaid expenses and other current assets decreased approximately $32,400. The decrease primarily relates to a decrease in the value of the Company’s outstanding foreign exchange contracts as well as a decrease in prepaid royalties. These decreases were partially offset by increased deferred taxes and higher other tax balances, primarily value added tax in international markets.


Accounts payable and accrued expenses increased to $588,609 at March 27, 2011 from $541,754 at March 28, 2010. The accounts payable and accrued expenses balance at March 27, 2011 includes an increase of approximately $8,800 as a result of a weaker U.S. dollar at March 27, 2011 as compared to March 28, 2010. The remaining increase primarily relates to increased accrued royalties principally due to sales of BEYBLADE and MARVEL products, unrealized losses on the Company’s foreign exchange contracts due to the weaker U.S. dollar at March 27, 2011 and higher accounts payable balances. To a lesser extent, the increase was also due to higher accrued dividends due to the increased dividend rate in 2011. These increases were partially offset by lower accrued income taxes primarily relating to lower earnings in the first quarter of 2011 compared to 2010.


Property, plant, and equipment, net increased to $238,403 at March 27, 2011 from $220,522 at March 28, 2010. The increase in property, plant, and equipment, net is primarily due to capital additions less depreciation. Goodwill and other intangible assets, net decreased to $965,253 at



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


March 27, 2011 from $1,017,343 at March 28, 2010. This decrease is entirely due to amortization of intangibles.


Other assets increased to $675,904 at March 27, 2011 from $627,318 at March 28, 2010. Other assets for the quarter ended March 27, 2011 included an increase of approximately $50,000 related to television programming. The Company incurs certain costs in connection with the production of television programming which are capitalized by the Company as they are incurred and amortized based on the proportion of revenues related to the program recognized for such period to the estimated remaining ultimate revenues relate to the program. In addition to television programming, royalty advances and deferred taxes contributed to the increase.  These increases were partially offset by a decrease in the Company’s equity investment in THE HUB which decreased to $352,581 at March 27, 2011 from $372,282 at March 28, 2010.  The decrease in THE HUB investment was due to the Company’s share of THE HUB’s losses during the past year as well as a cash distribution related to income taxes during the fourth quarter of 2010. The increases were also partially offset by a decrease due to the change in the value of the Company’s outstanding foreign exchange contracts due to the weaker U.S. dollar at March 27, 2011.


Net cash utilized by investing activities was $24,433 in the first quarter of 2011 compared to $21,115 in the first quarter of 2010. Additions to property, plant and equipment were $22,396 in 2011 compared to $20,783 in 2010.


Net cash utilized by financing activities was $57,395 in the first quarter of 2011 compared to net cash provided by financing activities of $382,143 in the first quarter of 2010. The 2010 cash provided reflects net proceeds of $492,528 from the issuance of long-term notes in March 2010.  Proceeds from short-term borrowings were $23,622 in the first quarter of 2011 compared to repayments of short-term borrowing of $1,948 in the first quarter of 2010. The 2011 net proceeds included proceeds from issuance of commercial paper under the Company’s commercial paper program.  Dividends paid were $34,297 in 2011 compared to $27,292 in 2010. Cash payments related to purchases of the Company's common stock were $58,320 in the first quarter of 2011 compared to $95,597 in the first quarter of 2010. At March 27, 2011, the Company had $86,409 remaining available under a $625,000 April 2010 Board of Directors share repurchase authorization.


In January 2011, the Company entered into an agreement with a group of banks to establish a commercial paper program (the “Program”). Under the Program, at the request of the Company and subject to market conditions, the banks may either purchase from the Company, or arrange for the sale by the Company, of unsecured commercial paper notes. Under the Program, the Company may issue notes from time to time up to an aggregate principal amount outstanding at any given time of $500,000. The maturities of the notes will vary but may not exceed 397 days. The notes will be sold under customary terms in the commercial paper market and will be issued at a discount to par, or alternatively, will be sold at par and will bear varying interest rates based on a fixed or floating rate basis. The interest rates will vary based on market conditions and the ratings assigned to the notes by the credit rating agencies at the time of issuance. Subject to market conditions, the Company intends to utilize the Program as its primary short-term borrowing facility and does not intend to sell unsecured commercial paper notes in excess of the



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


available amount under the revolving credit agreement, discussed below. If, for any reason, the Company is unable to access the commercial paper market, the revolving credit agreement would be utilized to meet the Company’s short-term liquidity needs. At March 27, 2011, the Company had $25,500 in borrowings outstanding related to the Program that matured on March 28, 2011.


The Company has a revolving credit agreement (the “Agreement”), which provides it with a $500,000 committed borrowing facility. The Agreement contains certain financial covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment grade facility, including with respect to liens, mergers and incurrence of indebtedness. The Company was in compliance with all covenants as of and for the quarter ended March 27, 2011. The Company had no borrowings outstanding under its committed revolving credit facility at March 27, 2011. However, the Company had letters of credit outstanding under this facility of approximately $1,200 at March 27, 2011. Amounts available

and unused under the committed line at March 27, 2011 were approximately $498,800. The Company intends to utilize the Agreement as a secondary funding facility and to support the Program noted above. Considering borrowings outstanding relative to the Program, the effective amounts available and unused under the committed line at March 27, 2011 were approximately $473,300. The Company also has other uncommitted lines from various banks, of which approximately $43,600 was utilized at March 27, 2011. Of the amount utilized under the uncommitted lines, approximately $12,400 and $31,200 represent outstanding borrowings and letters of credit, respectively.


 

The Company has principal amounts of long-term debt at March 27, 2011 of $1,384,895 due at varying times from 2014 through 2040. The Company also had letters of credit and other similar instruments of approximately $169,700 and purchase commitments of $356,158 outstanding at March 27, 2011. Letters of credit and similar instruments include $127,400 of bonds related to the defense of tax assessments in Mexico. These assessments relate to transfer pricing that the Company is defending and expects to be successful in sustaining its position.


Other contractual obligations and commercial commitments, as detailed in the Company’s Annual Report on Form 10-K for the year ended December 26, 2010, did not materially change outside of payments made in the normal course of business and as otherwise set forth in this report. The table of contractual obligations and commercial commitments, as detailed in the Company’s Annual Report on Form 10-K for the year ended December 26, 2010, does not include certain tax liabilities recorded related to uncertain tax positions because the Company does not know the ultimate resolution of these liabilities and as such, does not know the ultimate timing of payments, if required, related to these liabilities. These liabilities were $105,261 at March 27, 2011, and are included as a component of other liabilities in the accompanying consolidated balance sheets.  


The Company believes that cash from operations, and, if necessary, its committed line of credit and other borrowing facilities, will allow the Company to meet these and other obligations listed.




HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

-------------------------------------------------------------------------------------------------

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.  As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on the information available.  These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented.  The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating the Company's reported financial results include sales allowances, program production costs, recoverability of goodwill and intangible assets, recoverability of royalty advances and commitments, pension costs and obligations, and income taxes. These critical accounting policies are the same as those detailed in the Annual Report on Form 10-K for the year ended December 26, 2010.


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, Swiss franc, 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 for fiscal years 2011 through 2012 using foreign exchange forward contracts. 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-denominated revenues and expenses. 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.  Other than as set forth above, the Company does not hedge foreign currency exposures.


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 March 27, 2011, these contracts had net unrealized losses of $31,141, of which $2,458 are recorded in prepaid expenses and other current assets, $12,022 are recorded in accrued liabilities, and $21,577 are recorded in other liabilities. Included in accumulated other comprehensive (loss)



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


earnings at March 27, 2011 are deferred losses, net of tax, of $23,149, related to these derivatives.


At March 27, 2011, the Company had fixed rate long-term debt, excluding fair value adjustments, of $1,384,895. Also at March 27, 2011, the Company had fixed-for-floating interest rate swaps with notional amounts of $400,000. The interest rate swaps are designed to effectively adjust the interest rates on a portion of the Company’s long-term debt from fixed to variable. The interest rate swaps are matched with specific long-term debt issues and are designated and effective as hedges of the change in the fair value of the associated debt. Changes in fair value of these contracts are wholly offset in earnings by changes in the fair value of the related long-term debt. At March 27, 2011, these contracts had a fair value of $11,800, which was included in other assets, with a corresponding fair value adjustment to increase long-term debt.



HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)


Item 3. Quantitative and Qualitative Disclosures about Market Risk.


The information required by this item is included in Part I Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.


Item 4. Controls and Procedures.

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 27, 2011. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.


The Company is currently in the process of a multi-year global initiative to upgrade its existing SAP system and implement enhanced global practices. During the second quarter of 2010, the SAP upgrade was completed for the U.S. and Canada operations.  The next phase of the project consisted of the implementation of the SAP upgrade in Europe along with enhanced global business practices in the Company’s European business, including consolidation of various activities to improve efficiency. This phase was completed during the first quarter of 2011. There were no significant changes in the Company’s internal controls over financial reporting resulting from the completion of these phases of the project.


There were no changes in the Company's internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended March 27, 2011, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.




PART II.  OTHER INFORMATION


Item 1.   Legal Proceedings.


The Company has outstanding tax assessments from the Mexican tax authorities relating to the years 2000 through 2005. These tax assessments, which total approximately $192 million in aggregate (including interest, penalties, and inflation updates), are based on transfer pricing issues between the Company’s subsidiaries with respect to the Company’s operations in Mexico. The Company has filed suit in the Federal Tribunal of Fiscal and Administrative Justice in Mexico challenging the 2000 through 2003 assessments. The Company filed the suit related to the 2000 and 2001 assessments in May 2009; the 2002 assessment in June 2008; and the 2003 assessment in March 2009. The Company is challenging the 2004 and 2005 assessments through administrative appeals. The Company expects to be successful in sustaining its positions for all of these years. However, in order to challenge the outstanding tax assessments related to 2000 through 2003, as is usual and customary in Mexico in these matters, the Company was required to either make a deposit or post a bond in the full amount of the assessments. The Company elected to post bonds and accordingly, as of March 27, 2011, bonds totaling approximately $127 million (at March 27, 2011 exchange rates) have been posted related to the 2000, 2001, 2002 and 2003 assessments. These bonds guarantee the full amounts of the outstanding tax assessments in the event the Company is not successful in its challenge to them. The Company does not currently expect that it will be required to make a deposit or post bonds related to the 2004 and 2005 assessments.


 

The Company is currently party to certain other legal proceedings, none of which it believes to be material to its business or financial condition.


Item 1A.  Risk Factors.


This Quarterly Report on Form 10-Q contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, concerning management's expectations, goals, objectives, and similar matters. These statements may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend," "look forward," "may," "planned," "potential," "should," "will," and "would" or any variations of words with similar meanings. These forward-looking statements are inherently subject to known and unknown risks and uncertainties.


The Company's actual results or experience may differ materially from those expected or anticipated in the forward-looking statements. The Company has included, under Item 1A. of its Annual Report on Form 10-K, for the year ended December 26, 2010 (the "Annual Report"), a discussion of factors which may impact these forward-looking statements. In furtherance, and not in limitation, of the more detailed discussion set forth in the Annual Report, specific factors that might cause such a difference include, but are not limited to:


·

the Company’s ability to successfully re-imagine, re-invent and re-ignite its existing products and product lines, including through the use of immersive entertainment experiences, to maintain and further their success and to successfully develop and introduce new brands, products and product lines which achieve and sustain interest from retailers and consumers;

·

the Company's ability to manufacture, source and ship new and continuing products in a timely and cost-effective basis and customers' and consumers' acceptance and purchase of those products in quantities and at prices that will be sufficient to profitably recover development, manufacturing, marketing, royalty and other costs;

·

recessions or other economic downturns which can negatively impact the retail and credit markets, and the financial health of the Company’s retail customers and consumers, and which can result in lower employment levels, less consumer disposable income, lower consumer confidence and, as a consequence, lower consumer spending, including lower spending on purchases of the Company’s products;

·

other economic and public health conditions in the various markets in which the Company and its customers and suppliers operate throughout the world, which impact the Company's ability and cost to manufacture and deliver products, such as higher fuel and other commodity prices, higher labor costs, higher transportation costs, outbreaks of diseases which affect public health and the movement of people and goods, and other factors, including government regulations,  which can create potential manufacturing and transportation delays or impact costs;

·

currency fluctuations, including movements in foreign exchange rates, which can lower the Company’s net revenues and earnings, and significantly impact the Company’s costs;

·

the concentration of the Company's customers;

·

the Company's ability to generate sales during the fourth quarter, particularly during the relatively brief holiday shopping season, which is the period in which the Company derives a substantial portion of its revenues and earnings;

·

the inventory policies of the Company's retail customers, including the concentration of the Company's revenues in the second half and fourth quarter of the year, together with the increased reliance by retailers on quick response inventory management techniques, which increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve compressed shipping schedules;

·

work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product in a timely and cost-effective manner;

·

concentration of manufacturing of the substantial majority of the Company's products by third party vendors in the People's Republic of China and the associated impact to the Company of health conditions and other factors affecting social and economic activity in China, affecting the movement of people and products into and out of China, impacting the cost of producing products in China and the cost of exporting them to the Company’s other markets or affecting the exchange rates for the Chinese Renminbi, including, without limitation, the impact of tariffs or other trade restrictions being imposed upon goods manufactured in China;

·

greater than expected costs, or unexpected delays or difficulties, associated with the Company’s investment in its television joint venture with Discovery Communications, LLC to run THE HUB network and the creation of new programming content to appear on the network and elsewhere, including greater than expected costs, or unexpected delays or difficulties, related to the development of Hasbro Studios LLC and Hasbro Studios’ efforts to produce programming, including programming to appear on the joint venture network;

·

consumer interest in and acceptance of the joint venture network, THE HUB, the programming appearing on THE HUB, products related to THE HUB’s programming, and other factors impacting the financial performance of THE HUB;

·

consumer interest in and acceptance of programming and entertainment created by Hasbro Studios, as well as products related to Hasbro Studios’ programming and entertainment;

·

the ability of the Company to hire and retain key officers and employees who are critical to the Company’s success;

·

the costs of complying with product safety and consumer protection requirements worldwide, including the risk that greater regulation in the future may increase such costs, may require changes in the Company’s products and/or may impact the Company’s ability to sell some products in particular markets in the absence of making changes to such products;

·

the risk that one of the Company’s third-party manufacturers will not comply with applicable labor, consumer protection, product safety or other laws or regulations, or with aspects of the Company’s Global Business Ethics Principles, and that such noncompliance will not be promptly detected, either of which could cause damage to the Company’s reputation, harm sales of its products and potentially create liability for the Company;

·

an adverse change in purchasing policies or promotional programs or the bankruptcy or other lack of success of one or more of the Company's significant retailers comprising its relatively concentrated retail customer base, which could negatively impact the Company's revenues or bad debt exposure;

·

the risk that the market appeal of the Company's licensed products will be less than expected or that sales revenue generated by these products will be insufficient to cover the minimum guaranteed royalties;

·

the risk that the Company may face product recalls or product liability suits relating to products it manufactures or distributes; which may have significant direct costs to the Company and which may also harm the reputation of the Company and its products, potentially harming future product sales;

·

the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to secure, maintain and renew popular licenses and the ability to attract and retain employees in a competitive environment;

·

the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization;

·

the Company's ability to obtain and enforce intellectual property rights both in the United States and other worldwide territories;

·

the risk that any litigation or arbitration disputes or regulatory investigations could entail significant expense and result in significant fines or other harm to the Company's business;

·

the Company's ability to maintain or obtain external financing on terms acceptable to it in order to meet working capital needs;

·

the risk that one or more of the counterparties to the Company’s financing arrangements may experience financial difficulties or otherwise be unable or unwilling to allow the Company to access financing under such arrangements;

·

the Company's ability to generate sufficient available cash flow to service its outstanding debt;

·

restrictions that the Company is subject to under its credit agreement;

·

unforeseen circumstances, such as severe softness in or collapse of the retail environment that may result in a significant decline in revenues and operating results of the Company, thereby causing the Company to be in non-compliance with its debt covenants and the Company being unable to utilize borrowings under its revolving credit facility, a circumstance likely to occur when operating shortfalls would result in the Company being in the greatest need of such supplementary borrowings;

·

market conditions, third party actions or approvals, the impact of competition and other factors that could delay or increase the cost of implementation of the Company's programs, or alter the Company's actions and reduce actual results;

·

the risk that the Company may be subject to governmental sanctions for failure to comply with applicable regulations

·

the risk that the Company's reported goodwill may become impaired, requiring the Company to take a charge against its income;

·

 other risks and uncertainties as are or may be detailed from time to time in the Company's public announcements and filings with the SEC, such as filings on Forms 8-K, 10-Q and 10-K.


The Company undertakes no obligation to revise the forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect events or circumstances occurring after the date of the filing of this report.





Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

   

 

Repurchases Made in the Quarter (in whole dollars and number of shares)





Period


(a) Total Number of Shares (or Units) Purchased


(b) Average Price Paid per Share (or Unit)


(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs

(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

January 2011
12/27/10 - 1/23/11


   169,556


$44.5080


   169,556


$142,521,521

February 2011
1/24/11 - 2/27/11


   450,200


$44.4748


   450,200


$122,498,977

March 2011
2/28/11 – 3/27/11


   780,000


$46.2690


   780,000


$  86,409,137

Total

1,399,756

$45.4786

1,399,756

$  86,409,137


In April 2010, the Company’s Board of Directors authorized the repurchase of an additional $625 million in common stock. Purchases of the Company's common stock may be made from time to time, subject to market conditions. These shares may be repurchased in the open market or through privately negotiated transactions. The Company has no obligation to repurchase shares under the authorization, and the timing, actual number, and value of the shares that are repurchased will depend on a number of factors, including the price of the Company's stock. The Company may suspend or discontinue the program at any time and there is no expiration date.


Item 3.   Defaults Upon Senior Securities.


None.


Item 4.   (Removed and Reserved.)


Item 5.   Other Information.


None.






 

Item 6.   Exhibits.

 
 

3.1

Restated Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)

     
 

3.2

Amendment to Articles of Incorporation, dated June 28, 2000. (Incorporated by reference to Exhibit 3.4 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)

     
 

3.3

Amendment to Articles of Incorporation, dated May 19, 2003.  (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the period ended June 29, 2003, File No. 1-6682.)

     
 

3.4

Amended and Restated Bylaws of the Company, as amended. (Incorporated by reference to Exhibit 3(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 1-6682.)

     
 

3.5

Certificate of Designations of Series C Junior Participating Preference Stock of Hasbro, Inc. dated June 29, 1999. (Incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)

     
 

3.6

Certificate of Vote(s) authorizing a decrease of class or series of any class of shares. (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No 1-6682.)

     
 

4.1

Indenture, dated as of July 17, 1998, by and between the Company and Citibank, N.A. as Trustee. (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 14, 1998, File No. 1-6682.)

     
 

4.2

Indenture, dated as of March 15, 2000, by and between the Company and the Bank of Nova Scotia Trust Company of New York. (Incorporated by reference to Exhibit 4(b)(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 1999, File No. 1-6682.)

     
 

4.3

First Supplemental Indenture, dated as of September 17, 2007, between the Company and the Bank of Nova Scotia Trust Company of New York. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed September 17, 2007, File No. 1-6682.)




Item 6.   Exhibits (continued)

 

4.4

Second Supplemental Indenture, dated as of May 13, 2009, between the Company and the Bank of Nova Scotia Trust Company of New York. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 13, 2009, File No. 1-6682.)

     
 

4.5

Third Supplemental Indenture, dated as of March 11, 2010, between the Company and the Bank of Nova Scotia Trust Company of New York.  (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 11, 2010, File No. 1-6682.)

     
 

10.1

Form of Fair Market Value Stock Option Agreement under the Hasbro, Inc. Restated 2003 Stock Incentive Performance Plan.

     
 

10.2

Form of Contingent Stock Performance Award under the Hasbro, Inc. Restated 2003 Stock Incentive Performance Plan.

     
 

10.3

Hasbro, Inc. 2011 Performance Rewards Program.

     
 

10.4

Form of Non-Competition, Non-Solicitation and Confidentiality Agreement. (Applicable to Duncan Billing, John Frascotti, and Deborah Thomas and certain other employees of the Company.)

     
 

12

Computation of Ratio of Earnings to Fixed Charges

   

Quarter Ended March 27, 2011.

     
 

31.1

Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

     
 

31.2

Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

     
 

32.1*

Certification of the Chief Executive Officer Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

     
 

32.2*

Certification of the Chief Financial Officer Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

     
 

101.INS*

XBRL Instance Document

     
 

101.SCH*

XBRL Taxonomy Extension Schema Document

     
 

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

     
 

101.LAB*

XBRL Taxonomy Extension Labels Linkbase Document

     
 

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document


* Furnished herewith.



SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


 

 HASBRO, INC.
---------------------  
   (Registrant)

 
 
 

Date:  May 4, 2011

By:  /s/ Deborah Thomas

 

------------------------------------------

 

Deborah Thomas

   
 

Senior Vice President and

 

 Chief Financial Officer

 

(Duly Authorized Officer and

 

 Principal Financial Officer)






HASBRO, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q

For the Period Ended March 27, 2011


Exhibit Index


Exhibit

 

No.

Exhibits

-------

-----------

   

3.1

Restated Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)

     

3.2

Amendment to Articles of Incorporation, dated June 28, 2000. (Incorporated by reference to Exhibit 3.4 to the Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)

     

3.3

Amendment to Articles of Incorporation, dated May 19, 2003.  (Incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the period ended June 29, 2003, File No. 1-6682.)

     

3.4

Amended and Restated Bylaws of the Company, as amended. (Incorporated by reference to Exhibit 3(d) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 1-6682.)

     

3.5

Certificate of Designations of Series C Junior Participating Preference Stock of Hasbro, Inc. dated June 29, 1999. (Incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No. 1-6682.)

     

3.6

Certificate of Vote(s) authorizing a decrease of class or series of any class of shares. (Incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2000, File No 1-6682.)

     

4.1

Indenture, dated as of July 17, 1998, by and between the Company and Citibank, N.A. as Trustee. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated July 14, 1998, File No. 1-6682.)

     

4.2

Indenture, dated as of March 15, 2000, by and between the Company and the Bank of Nova Scotia Trust Company of New York. (Incorporated by reference to Exhibit 4(b) (i) to the Company’s Annual Report on Form 10-K for the year ended December 26, 1999, File No. 1-6682.)

     

4.3

First Supplemental Indenture, dated as of September 17, 2007, between the Company and the Bank of Nova Scotia Trust Company of New York. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed September 17, 2007, File No. 1-6682.)

 

4.4

Second Supplemental Indenture, dated as of May 13, 2009, between the Company and the Bank of Nova Scotia Trust Company of New York. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 13, 2009, File No. 1-6682.)

     

4.5

Third Supplemental Indenture, dated as of March 11, 2010, between the Company and the Bank of Nova Scotia Trust Company of New York.  (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 11, 2010, File No. 1-6682.)

   

10.1

Form of Fair Market Value Stock Option Agreement under the Hasbro, Inc. Restated 2003 Stock Incentive Performance Plan.

   

10.2

Form of Contingent Stock Performance Award under the Hasbro, Inc. Restated 2003 Stock Incentive Performance Plan.

   

10.3

Hasbro, Inc. 2011 Performance Rewards Program.

   

10.4

Form of Non-Competition, Non-Solicitation and Confidentiality Agreement. (Applicable to Duncan Billing, John Frascotti and Deborah Thomas and certain other employees of the Company.)

   

12

Computation of Ratio of Earnings to Fixed Charges -

 

Quarter Ended March 27, 2011.

   

31.1

Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

   

31.2

Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

   

32.1*

Certification of the Chief Executive Officer Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

   

32.2*

Certification of the Chief Financial Officer Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

   

101.INS*

XBRL Instance Document

   

101.SCH*

XBRL Taxonomy Extension Schema Document

   

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

   

101.LAB*

XBRL Taxonomy Extension Labels Linkbase Document

   

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

   


* Furnished herewith.



Exhibit 10.1

HASBRO, INC.

RESTATED 2003 STOCK INCENTIVE PERFORMANCE PLAN

STOCK OPTION AGREEMENT FOR EMPLOYEES

[                        ], 2011 GRANT


AGREEMENT, made effective as of [                ], 2011, by and between HASBRO, INC., a Rhode Island corporation (the "Company") and the designated option grant recipient (the "Optionee").

WHEREAS, Optionee is an employee of the Company or of a direct or indirect subsidiary of the Company and is eligible to participate in the Company's Restated 2003 Stock Incentive Performance Plan, as amended (the "Plan"), and

WHEREAS, the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board") acting in accordance with the provisions of the Plan granted to Optionee a non-qualified stock option to purchase the specified number of shares of Common Stock of the Company, par value $.50 per share (the "Common Stock"), at a price determined by said Committee to be not less than the fair market value of such Common Stock on the date of said grant, subject to and upon the terms and conditions set forth in the Plan and as hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto agree as follows:

W I T N E S S E T H :

1.

The Company confirms the grant by the Committee to the Optionee on [                ], 2011, pursuant to the Plan, a copy of which is attached hereto as Appendix A and the provisions of which are incorporated herein as if set forth in full, of a stock option to purchase all or any part of the number of shares of Common Stock (the "Shares"), described in Paragraph 2 below (the "Option"), subject to and upon the terms and conditions set forth in the Plan and the additional terms and conditions hereinafter set forth.  The Option is evidenced by this Agreement.  In the event of any inconsistency between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan shall govern. Terms used herein and not otherwise defined shall have the meaning set forth in the Plan.



2.

This Agreement relates to an Option to purchase the specified number of shares which have been communicated to the Optionee at an exercise price of $[          ] per share (the "Exercise Price Per Share").  (Hereinafter, the term "Exercise Price" shall mean the Exercise Price Per Share multiplied by the number of shares being exercised.)  Subject to the provisions of the Plan and of this Agreement, the Optionee shall be entitled to exercise the Option on a cumulative basis until the day preceding the seventh anniversary of the date of the grant in accordance with the following schedule:

Cumulative

Percent of Option

Period

Exercisable   


[

] to [

]

0%

[

] to [

]

33 1/3%

[

] to [

]

66 2/3%

[

] to [

]

100%


In determining the number of shares exercisable in accordance with the above table, fractional shares shall be disregarded.

3.

 In the event that Optionee wishes to purchase any of the shares then purchasable under the Option as provided in Paragraph 2 hereof, Optionee shall deliver or shall transmit  to the Company or to the Company’s designee, in the manner designated by or on behalf of the Company, a notice in the form and/or in the manner designated by or on behalf of the Company or its designee, as the same may be amended or supplemented from time to time by or on behalf the Company, together with a check payable to Hasbro, Inc. or its designee, if applicable, (or accompanied by wire transfer to such account of the Company or its designee as the Company may designate) in United States dollars, in the aggregate amount of the Exercise Price, or shares of Common Stock held by the Optionee for at least six (6) months (duly endorsed to the Company or its designee, if applicable, or accompanied by an executed stock power, in each case with signatures guaranteed by a bank or broker if required by the Company or its designee) having a Fair Market Value (as defined in the Plan) equal to the Exercise Price, or a combination of such shares having a Fair Market Value less than the Exercise Price and a check in United States dollars for the balance of the Exercise Price.

Unless an Optionee shall have made advance alternative arrangements satisfactory to the Company, or to the Company’s designee, each Optionee shall deliver to the Company or its designee, together with the required notice of exercise and payment of the Exercise Price as aforesaid, a check payable to Hasbro, Inc. or its designee, if applicable, or a wire transfer to such account of the Company or its designee, if applicable, as the Company may designate, in United States dollars, in the amount of any withholding required by law for any and all federal, state, local or foreign taxes payable as a result of such exercise.  Each Optionee shall consult with the Company or the Company’s designee in advance of the exercise so as to determine the amount of withholding taxes due.  An Optionee may also elect to satisfy any withholding taxes payable as a result of such exercise (the "Taxes"), in whole or in part, either (i) by having the Company or its designee withhold from the shares of Common Stock to be issued upon exercise of the Option or (ii) delivering to the Company or its designee shares of Common Stock already owned by the Optionee and held by the Optionee for at least six (6) months (represented by stock certificates duly endorsed to the Company or accompanied by an executed stock power in each case with signatures guaranteed by a bank or broker to the extent required by the Company or its designee), in each case in an amount whose Fair Market Value on the date of exercise is either equal to the Taxes or less than the Taxes, provided that a check payable to Hasbro, Inc. or its designee, if applicable, or a wire transfer to such account of the Company or its designee as the Company may designate, in United States dollars for the balance of the Taxes is also delivered to the Company, or its designee, at the time of exercise.  

In addition, the Optionee shall comply with such other requirements and provide such additional information and documentation as is reasonably required by the Company, or the Company’s designee, to process any exercise of this option and resulting delivery of shares.  As soon as practicable after receipt of the notice of exercise, Exercise Price, Taxes, and such other information and documentation as the Company or its designee shall require, the Company or its designee shall deliver or cause to be delivered to Optionee the shares in respect of which the Option was so exercised (less any shares deducted to pay Taxes in accordance with Optionee's election).

4.

(a)   If an Optionee who is an employee of the Company or of a direct or indirect subsidiary of the Company retires at his Normal Retirement Date (as defined below), or an Optionee with at least one year of Credited Service of the Company suffers a permanent physical or mental disability (as defined below) or dies, in each case without the Optionee having fully exercised any Option granted to the Optionee, then the Optionee, the executor, administrator or trustee of the Optionee’s estate, or the Optionee’s legal representative, as the case may be, shall have the right to exercise any Option under the Plan, for a period of not more than one (1) year after such retirement, such disability, or in the case of death, the appointment and qualification of such executor, administrator or trustee (except that in no event other than death may such Option be exercised  later than the day preceding the seventh anniversary of the date of the grant of such Option).  In each such case, the Option will be exercisable with respect to all or any part of the number of shares to which the Option relates, whether or not said Option was fully exercisable in accordance with the schedule set forth in Section 2 of this Agreement as of the date of such retirement, disability or death.  Thereafter, such Option, to the extent not so exercised during such one-year period shall be deemed to have expired regardless of the expiration date otherwise specified in Section 2 hereof.  

(b)

If an Optionee who is an employee of the Company or of a direct or indirect subsidiary of the Company retires at an Early Retirement Date (as defined below), without the Optionee having fully exercised any Option granted to him, the Optionee shall have the right to exercise the unexercised portion of any Option theretofore granted, but only to the extent said Option was then exercisable in accordance with the schedule set forth in Section 2 of this Agreement, for a period of not more than three (3) months after the date of early retirement (but in no event shall the exercise period extend beyond the day preceding the seventh anniversary of the date of grant of the Option). Thereafter, the Option, to the extent not exercised during such three-month period shall be deemed to have expired, regardless of the expiration date otherwise specified in Section 2 hereof.

(c)

If an Optionee ceases to be employed by the Company or by a direct or indirect subsidiary of the Company for any reason other than the reasons set forth in subsections (a) and (b) of this Section 4, he shall have the right to exercise the unexercised portion of any Option theretofore granted to Optionee, but only to the extent said Option was then exercisable in accordance with the schedule set forth in Section 2 of this Agreement as of the date of termination, for a period of not more than three (3) months after any such termination, but not, in any event, later than the day preceding the seventh anniversary date of the grant of such Option.  Thereafter, such Option, to the extent not so exercised during such three-month period, shall be deemed to have expired, regardless of the expiration date otherwise specified in Section 2 hereof.

For purposes of subsections (a) and (b) above:

*

"Credited Service" shall mean:  the period of an Optionee's employment considered in determining whether the Optionee is eligible to receive benefits upon termination of employment.

*

"Early Retirement Date" shall mean:  the day on which an Optionee who has attained age fifty-five (55), but has not reached age sixty-five (65), with ten (l0) or more years of Credited Service, retires.  An Optionee is eligible for early retirement on the first day of the calendar month coincidental with or immediately following the attainment of age fifty-five (55) and the completion of ten (l0) years of Credited Service, and "early retirement" shall mean retirement by an eligible Optionee at the Early Retirement Date.

*

"Normal Retirement Date" shall mean:  the day on which an Optionee who has attained age sixty-five (65) with five (5) or more years of Credited Service, retires. An Optionee is eligible for normal retirement on the first day of the calendar month coincident with or immediately following the Optionee's attainment of age sixty-five (65) and completion of five (5) or more years of Credited Service, and "normal retirement" shall mean the retirement by an eligible Optionee at the Normal Retirement Date.

*

"permanent physical or mental disability" shall mean:  an Optionee's inability to perform his or her job or any position which the Optionee can reasonably perform with his or her background and training by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration.

5.

The adjustment provisions set forth in Section 8 of the Plan shall apply to this Option.

6.

This Option shall not be transferable by the Optionee, in whole or in part, except in accordance with Section 7 of the Plan, and shall be exercisable only as hereinbefore provided.  Any purported assignment, transfer, pledge, hypothecation or other disposition of the Option or any interest therein contrary to the provisions of the Plan, and the levy of any execution to, or the attachment or similar process upon, the Option or any interest therein, shall be null and void and without effect.

7.

Subject to the applicable provisions of the Plan, and particularly to Section 7 of the Plan, this Agreement shall be binding upon and shall inure to the benefit of Optionee, Optionee's successors and permitted assigns, and the Company and its successors and assigns.

8.

This Agreement shall be construed and enforced in accordance with the internal laws of the State of Rhode Island and Providence Plantations and applicable Federal law.


IN WITNESS WHEREOF, the Company and the Optionee have entered into this Agreement effective as of the day and year first above written.  By accepting the terms of the award represented by this Agreement through an electronic form offered by the Company, or the Company’s designee, the Optionee hereby agrees to the terms of this Agreement with the same effect as if the Optionee had signed this Agreement.  



HASBRO, INC.


By: /s/ Brian Goldner

           Brian Goldner

           President and Chief Executive Officer



By: _________________________

Optionee




2



Exhibit 10.2

HASBRO, INC.

RESTATED 2003 STOCK INCENTIVE PERFORMANCE PLAN

CONTINGENT STOCK PERFORMANCE AWARD

[                 ], 2011 GRANT


AGREEMENT, made effective as of [                ], 2011, by and between HASBRO, INC., a Rhode Island corporation (the "Company") and the designated contingent stock performance award recipient (the "Participant").

WHEREAS, the Participant is eligible to participate in the Company's Restated 2003 Stock Incentive Performance Plan, as amended (the "Plan"), and

WHEREAS, the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"), acting in accordance with the provisions of the Plan, granted to Participant a contingent stock performance award dated [                ], 2011 designed to reward the Participant for the Participant’s efforts in contributing to the Company’s achievement of certain stated financial goals, and

WHEREAS, the stock performance award provides the Participant with the ability to earn shares of the Company’s common stock, par value $.50 per share (the "Common Stock"), contingent on the Company’s performance in achieving pre-established cumulative diluted earnings per share (“EPS”) and cumulative net revenue (“Revenues”) performance targets over the period beginning on December 27, 2010 and ending on December 29, 2013 (the “Performance Period”), subject to and upon the terms and conditions set forth in the Plan and as hereinafter set forth.

NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the parties hereto agree as follows:

W I T N E S S E T H :

1.

The Company confirms the grant by the Committee to the Participant on [                ], 2011, and pursuant to the Plan, a copy of which is attached hereto as Appendix A and the provisions of which are incorporated herein as if set forth in full, of a contingent stock performance award (the “Award”) subject to and upon the terms and conditions set forth in the Plan and the additional terms and conditions hereinafter set forth.  The Award is evidenced by this Agreement.  In the event of any inconsistency between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan shall govern. Terms used herein and not otherwise defined shall have the meaning set forth in the Plan.

2.

This Agreement relates to an Award providing the Participant with the potential ability to earn shares of the Company’s common stock, par value $.50 per share (the "Common Stock"), contingent on the Company’s performance in achieving its pre-established cumulative EPS and Revenues targets over the Performance Period.  The EPS and Revenues targets for the Performance Period are set forth below:

EPS

$[

]

Revenues

$[

]

Except as is otherwise set forth in this Agreement, the Participant shall not have any ability to receive any shares of Common Stock pursuant to this Award until the Performance Period is completed.  Following the end of the Performance Period, the Committee will determine the Company’s cumulative EPS and Revenues over the Performance Period.  The Committee will certify the Company’s cumulative EPS and Revenues over the Performance Period as promptly as is reasonably possible following the completion of the Performance Period, but in no event later than 75 days following the completion of the Performance Period.

3.

For purposes of this Award, the Company’s cumulative EPS and Revenues over the Performance Period will be computed on a consolidated basis in the same manner used by the Company in computing its consolidated financial performance under generally accepted accounting principles (“GAAP”), except for the following deviations from GAAP: (i) EPS and Revenues will be computed excluding the impact of any changes in accounting rules that are effective after the date of this Agreement and which impact the Company’s reported net earnings or Revenues results by $10,000,000 or more, individually or in the aggregate, in any fiscal year during the Performance Period, (ii) EPS and Revenues will exclude the impact of any acquisitions or dispositions consummated by the Company during the Performance Period which have, individually or in the aggregate, either a total acquisition price, or total sale price, respectively, of $100 million or more, as such acquisition price or sales price is determined in good faith by the Committee, (iii) EPS and Revenues will be calculated excluding the impact of any major discrete restructuring activities undertaken by the Company after the date of this Agreement which result in costs or charges to the Company of $10,000,000 or more, individually, in any fiscal year during the Performance Period,  and (iv) EPS and Revenues will be calculated based on actual results translated at exchange rates established at the beginning of  the Performance Period.

4.

The target number of shares of Common Stock which may be issuable under this Award in the event of 100% achievement of the pre-established cumulative EPS and Revenues measures over the Performance Period is the specified number of shares communicated to the Participant (the “Target Shares”).  The following table sets forth the contingent number of shares of Common Stock which the Participant may actually earn under this Award, as a percentage of the Target Shares, based upon certain performances by the Company in achieving the EPS and Revenues targets.  It is understood and agreed by the Participant, however, that the Committee retains sole and absolute discretion in all cases to reduce the number of shares of Common Stock, if any, to actually be delivered to the Participant to any number, below the number of shares otherwise called for under this Award, as the Committee may deem appropriate.  To compute the actual number of shares of Common Stock, if any, which may be earned by the Participant (prior to any reduction in such number by the Committee) the respective cumulative EPS and Revenues performances of the Company, as certified by the Committee following completion of the Performance Period, are applied to the following table.   The appropriate box in the table corresponding with the actual cumulative EPS and Revenues performance, as so certified by the Committee, sets forth the number of shares of Common Stock, if any, as a percentage of the Target Shares, which may be earned by the Participant over the Performance Period (prior to any reduction in such number by the Committee).  

Revenues Measure






EPS Measure

Revenues

25% or more

over Target

Revenues of at least 10% over, but not 25% or more over, Target

Revenues of at least Target but not 10% or more over Target

Revenues of at least 95% of Target but less than Target

Revenues of at least 90% of Target but less than 95% of Target

Revenues of under 90% of Target


EPS of 25% or more over Target


200%


163%


150%


138%



125%


0%


EPS at least 10% over, but not 25% or more over, Target


163%


125%


113%


100%




88%


0%


EPS of at least Target but not 10% or more over Target

150%

113%

100%

88%

75%

0%


EPS of at least 95% of Target but less than Target

138%

100%

88%

75%

63%

0%


EPS of at least 90% of Target but less than 95% of Target

125%

88%

75%

63%

50%

0%


EPS under 90% of Target

0%

0%

0%

0%

0%

0%



By way of illustration, if the percentage of the Revenues target achieved is 120% and the percentage of the EPS target achieved is 95%, the Participant would earn 100% of the  Target Shares of Common Stock, subject to a reduction in such number at the sole discretion of the Committee.

5.  Once the Company has determined the number of shares of Common Stock, if any, which may be earned by the Participant based on the cumulative EPS and Revenues performance of the Company, and taking into account the exercise of any discretion of the part of the Committee to reduce such number by any amount which the Committee deems appropriate, the Company or its designee will as promptly as possible thereafter, but in all events not later than the 15 th day of the third month following the end of the calendar year in which the Performance Period ends, issue any such shares of Common Stock which have been deemed earned to the Participant.  

6.   The Participant shall consult with the Company or its designee in advance of the issuance of any shares pursuant to this Award so as to designate the manner in which the Participant wishes to pay any withholding taxes due, and any such Participant’s designation must be made to the Company, in the manner specified by the Company, and on or before the date selected by the Company and communicated to the Participant.  Each Participant who elects to pay withholding taxes in cash shall deliver to the Company or its designee, a check payable to Hasbro, Inc. or its designee, or a wire transfer to such account of the Company or its designee, as the Company may designate, in United States dollars, in the amount of any withholding required by law for any and all federal, state, local or foreign taxes payable as a result of the Participant earning any shares under this Award or being issued any shares pursuant to the provisions below based on certain other events.  Alternatively, a Participant may elect to satisfy the minimum withholding taxes required by law payable as a result of the issuance of any shares pursuant to this Award (the "Taxes"), in whole or in part, either (i) by having the Company withhold from the shares of Common Stock to be issued pursuant to this Award or (ii) delivering to the Company or its designee shares of Common Stock already owned by the Participant and held by the Participant for at least six (6) months (represented by stock certificates duly endorsed to the Company or its designee or accompanied by an executed stock power in each case with signatures guaranteed by a bank or broker to the extent required by the Company or its designee), in each case in an amount whose Fair Market Value on the date the Participant has become entitled to such shares pursuant to this Award is either equal to the Taxes or less than the Taxes, provided that a check payable to Hasbro, Inc. or its designee, or a wire transfer to such account of the Company or its designee as the Company may designate, in United States dollars for the balance of the Taxes is also delivered to the Company, or its designee, at the time of issuance.  If the Participant fails to make a timely election to pay the withholding taxes in some other manner pursuant to the preceding provisions, or otherwise does not timely remit payment of the required withholding taxes, then the Participant’s tax withholding requirements will be satisfied through the withholding of shares of Common Stock and to the extent a fractional share needs to be withheld, the Company or its designee will withhold the next highest number of full shares and will remit the value of the fraction of a share which exceeds the required withholding to the Participant. As soon as practicable after receipt of the withholding taxes and any other materials or information reasonably required by the Company or its designee, the Company or its designee shall deliver or cause to be delivered to the Participant, using the method of delivery determined by the Company or its designee, the shares payable pursuant to the Award (less any shares deducted to pay Taxes).

7.

Until such time, if any, that actual shares of Common Stock become due and are issued to the Participant in accordance with the terms of this Agreement, the Participant will not have any dividend or voting rights with respect to any shares which may be issuable in the future pursuant to this Award.  The Participant’s rights under this Award shall be no greater than those of an unsecured general creditor of the Company, and nothing herein shall be construed as requiring the Company or any other person to establish a trust or to set aside assets to meet the Company’s obligations hereunder.

8.

(a)   If a Participant who is an employee of the Company or of a direct or indirect subsidiary of the Company dies before the Performance Period is completed, then the Company will issue the number of shares of Common Stock to the executor, administrator or trustee of the Participant’s estate, or the Participant’s legal representative, as the case may be, that is computed by multiplying: (i) the number of shares of Common Stock which would have been issuable to the Participant pursuant to the Award assuming completion of the Performance Period and the Company’s achievement over the Performance Period of cumulative EPS and Revenues equal to target in each case by (ii) a fraction, the numerator of which is the number of days from the start of the Performance Period to the date that the Participant died and the denominator of which is the total number of days in the Performance Period.  This pro-rated target award, as it may be reduced by the Committee in the Committee’s sole and absolute discretion, will be payable as soon following the Participant’s death as is reasonably practicable.  If a Participant dies after the end of the Performance Period, but prior to the delivery of any shares of Common Stock issuable pursuant to this award, then the Company or its designee will issue to the Participant’s estate, or the Participant’s legal representative, as the case may be, the number of shares of Common Stock, if any, which would have otherwise been issuable to the Participant if the Participant had not died.

(b)  If  a Participant with at least one year of Credited Service of the Company suffers a permanent physical or mental disability (as defined below), before the Performance Period is completed, then the Participant’s Award will remain outstanding during the remaining portion of the Performance Period.  At the end of the Performance Period the Committee will compute how many, if any, shares of Common Stock would be issuable pursuant to the Award based on the Company’s performance against its cumulative EPS and Revenues targets.  That actual number of shares of Common Stock which would have been earned under the Award over the entire Performance Period will then be multiplied by a fraction the numerator of which is the number of days from the start of the Performance Period to the date that the Participant became disabled and the denominator of which is the total number of days in the Performance Period.  This pro-rated number of shares, as it may be reduced by the Committee in the Committee’s sole and absolute discretion, will then be issuable to the Participant in the same manner as shares are issued to other Participants.  

(c)   If a Participant who is an employee of the Company or of a direct or indirect subsidiary of the Company retires at either an Early Retirement Date or a Normal Retirement Date (each as defined below), before the Performance Period is completed, provided that the Participant executes, or has previously executed, a non-compete agreement in the form established by the Company, then the Participant’s Award will remain outstanding during the remaining portion of the Performance Period.  At the end of the Performance Period the Committee will compute how many, if any, shares of Common Stock would be issuable pursuant to the Award based on the Company’s performance against its cumulative EPS and Revenues targets.  That actual number of shares of Common Stock which would have been earned under the Award over the entire Performance Period will then be multiplied by a fraction the numerator of which is the number of days from the start of the Performance Period to the date that the Participant retired and the denominator of which is the total number of days in the Performance Period.  This pro-rated number of shares, as it may be reduced by the Committee in the Committee’s sole and absolute discretion, will then be issuable to the Participant in the same manner as shares are issued to other Participants.  

(d)

If a Participant ceases to be employed by the Company or by a direct or indirect subsidiary of the Company before the end of the Performance Period for any reason other than the reasons set forth in subsections (a), (b) and (c) of this Section 8, the Award will be forfeited and the Participant will not have any further rights under the Award, including, without limitation, any rights to receive shares of Common Stock.


For purposes of subsections (a), (b) and (c) above:

*

"Credited Service" shall mean:  the period of a Participant's employment considered in determining whether the Participant is eligible to receive benefits upon termination of employment under the Company’s applicable retirement plan.

*

"Early Retirement Date" shall mean:  the day on which a Participant who has attained age fifty-five (55), but has not reached age sixty-five (65), with ten (l0) or more years of Credited Service, retires.  A Participant is eligible for early retirement on the first day of the calendar month coincidental with or immediately following the attainment of age fifty-five (55) and the completion of ten (l0) years of Credited Service, and "early retirement" shall mean retirement by an eligible Participant at the Early Retirement Date.

*

"Normal Retirement Date" shall mean:  the day on which a Participant who has attained age sixty-five (65) with five (5) or more years of Credited Service, retires. A Participant is eligible for normal retirement on the first day of the calendar month coincident with or immediately following the Participant's attainment of age sixty-five (65) and completion of five (5) or more years of Credited Service, and "normal retirement" shall mean the retirement by an eligible Participant at the Normal Retirement Date.

*

"permanent physical or mental disability" shall mean:  a Participant's inability to perform his or her job or any position which the Participant can reasonably perform with his or her background and training by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration, all as determined by the Committee in its discretion.


9.

In the event of a Change in Control (as defined in the Plan) prior to the end of the Performance Period, this Award will be treated in accordance with the provisions of the Plan applicable to a Change in Control, provided, however, that for purposes of computing the payment due to the Participant as a result of the Change in Control, (i) the full number of Target Shares will be used (as opposed to the actual number of shares, if any, that may be issuable based on performance through the date of the Change in Control) and (ii) no pro-ration of the Award will be applied to account for less than the full Performance Period having had elapsed as of the date of the Change in Control.

10.

The adjustment provisions set forth in Section 8 of the Plan shall apply to this Award.

11.

This Award shall not be transferable by the Participant, in whole or in part, except in accordance with Section 7 of the Plan.  Any purported assignment, transfer, pledge, hypothecation or other disposition of the Award or any interest therein contrary to the provisions of the Plan, and the levy of any execution to, or the attachment or similar process upon, the Award or any interest therein, shall be null and void and without effect.

12.

Subject to the applicable provisions of the Plan, and particularly to Section 7 of the Plan, this Agreement shall be binding upon and shall inure to the benefit of Participant, Participant 's successors and permitted assigns, and the Company and its successors and assigns.

13.

This Agreement shall be construed and enforced in accordance with the internal laws of the State of Rhode Island and Providence Plantations and applicable Federal law.



IN WITNESS WHEREOF, the Company and the Participant have entered this Agreement effective as of the day and year first above written.  By accepting the terms of the award represented by this Agreement through an electronic form offered by the Company, or the Company’s designee, the Participant hereby agrees to the terms of this Agreement with the same effect as if the Participant had signed this Agreement.  


HASBRO, INC.


By: /s/ Brian Goldner

          Brian Goldner

          President and Chief Executive Officer



By: _________________________

Participant













2



Exhibit 10.3



Hasbro, Inc .


Performance Rewards Program

Bands 30 and Above

January 1, 2011


















Hasbro, Inc.

Performance Rewards Program


1.0

Background

1.1

Performance Rewards Program (PRP)

 

§

Establishes standard criteria to determine plan eligibility, and overall company, business area or region, and individual performance objectives.

   
 

§

Establishes target awards as a percent of annual earned salary based on worldwide band level.  

   
 

§

Plan pay-out is based on a combination of company, business area or region, and individual performance.

   
 

§

Performance objectives and goals are established to measure performance achievement and may be based on one or a combination of the following: sales (net revenues), operating margin and returns (free cash flow) for company and business area or region performance, as well as an individual component.


1.2

Purpose

Hasbro, Inc., herein referred to as “the Company”, has established this plan for the purpose of providing incentive compensation to those officers, managers, and key employees who contribute significantly to the growth and success of the Company’s business; to attract and retain, in the employ of the Company, individuals of outstanding ability; and to align the interests of those who hold positions of major responsibility in the Company with the interest of the Company’s shareholders.


1.2.1

General Guideline

No individual officer or employee of the Company has any legal entitlement to participate in the PRP or to receive an award under the PRP.


1.3        Scope

The Plan is applicable to all subsidiaries and divisions of the Company, including the Corporate group, on a worldwide basis.


1.3.1

Eligibility

Officers, managers, and key employees, as determined by Management, whose duties and responsibilities contribute significantly to the growth and success of the Company’s business, are eligible to participate in the Plan.  Eligibility will be determined by an employee’s broad band in accordance with the Company’s method of job evaluation as appropriate.  Worldwide employees in positions classified in broad bands 30 and above generally will be eligible to participate.


Eligibility to participate in the Plan does not guarantee the receipt of an award under the Plan.  


1.3.2

Exclusion of Senior Management Performance Plan Participants
Notwithstanding any of the above, those executive officers of Hasbro, Inc. who are identified as participants under the Company’s 2009 Senior Management Annual Performance Plan (or any successor shareholder approved bonus plan) are not eligible to participate in the PRP.  However, executive officers who are not identified as participants in the 2009 Senior Management Annual Performance Plan (or a successor plan) are eligible to participate in the Plan.  



2.0

Incentive Award Levels


2.1

Target Incentive Award

Target awards are expressed as a percentage of earned salary for the plan year.  For purposes of this Plan, earned salary means all base compensation for the participant for the year in question, which base compensation shall include all base compensation amounts deferred into the Company’s retirement savings plan, the Company’s Non-Qualified Deferred Compensation Plan, and/or any similar successor plans for the fiscal year and excludes any bonus or other benefits, other than base compensation, for the plan year.  By design, these are the award levels that plan participants can expect to earn when they and their applicable business units perform as expected (i.e., achieve their goals and objectives).


2.2

Maximum Incentive Award

Under this incentive plan the maximum award for employees below band WW80 is 200% of the target award. As is provided in Section 3.3.3 of the Plan, the maximum award for employees in band WW80 or above is 300% of the target award.


2.3

The following table outlines the various incentive award targets defined above.  All percentages refer to percentages of base salary earned for the incentive award period.





WW Band

Target

80

60%

70

50%

60

45%

50

40%

40*

25%

30

15%


*Includes broad band 45 in European markets.


3.0

Measures of Performance for 2011


3.1

Establishing Company and Business Area or Region Performance Targets

In the first quarter of 2011 the Company’s senior management established the level of target performance for 2011 associated with each of the Company and business area or region performance metrics.  Those target levels were reviewed and approved by the Company’s President and Chief Executive Officer and by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”).


3.2

Overall Company Performance

Each PRP formula award contains a performance component related to overall Hasbro performance.  For 2011, this component is measured by Sales, Operating Margin, and Returns.  Overall performance is determined by individually assessing performance against goal for each metric and applying the scale, weighting each metric and then summing the total.  The weighting and definition of the overall company measures are:


Measure

Definition

% of Company Measure

Sales (net revenues)

Third Party Gross Sales (after returns) less Sales Allowances plus Third Party Royalty Income

40%

Operating Margin

Operating Profit divided by Net Revenues

40%

Returns (Free Cash Flow)

Net cash provided by operating activities – Capital Expenditures

20%












For example:

If sales and operating margin are achieved at target but returns does not reach threshold the aggregate weighted payout is:


(100% x 40%) + (100% x 40%) + (0% x 20%) = 80%

Corporate payout would be 80%.

3.3

Individual Performance

Individual performance will be determined by the participant’s supervisor and approved by the Division/Subsidiary senior executive or Corporate functional head, where appropriate.  It will be based upon actual job performance consistent with goals/objectives outlined during performance reviews for the plan year.


3.4

Business Area or Region Performance

Each business area or region, as determined under this program, will assess performance based on Sales and Operating Margin specific to the business area or region.  The weighted performance of the two metrics must be equivalent to threshold performance (80% or more) or no award is payable for the business area or region component. The weighting and definition of the overall company measures are:


Measure

Definition

% of Company Measure

S ales (net revenues) Growth

Third Party Gross Sales (after returns) less Sales Allowances plus Third Party Royalty income

50%

O perating Margin

Operating Profit divided by Net Revenues

50%

  



Those jobs, which are corporate in nature, will comprise the “Corporate” business area or region and their performance will be based on overall company performance as described in section 3.1.  



3.4.1

Bonus formula metrics for employees in WW30 to WW70 are used to assess performance at the overall Company level, business area or region level (where applicable), and individual level.  


A portion of all PRP formulas will have metrics tied to Corporate performance and individual performance.  The weighting of the Corporate component may be 1/3 or 2/3 (in the case of “Corporate” roles) of the formula metric and the individual component will be weighted 1/3 of the formula metric. Similarly, the business area or region component will be 1/3 of the formula metric and used in formulas where appropriate.  


Bonus formula metrics are subject to review annually by the CEO.  


3.4.2

Bonus formula metrics for WW 80 employees are based on the employee’s role and will be comprised of either 100% overall company performance with a personal performance modifier (see note below) or be based on 40% overall company performance and 60% business area or region performance with a personal performance modifier (see note below).  


* Definition of the personal performance modifier: Individual Management Business Objectives (MBOs) are set before the end of Q1 of the plan year. These are established between the employee and the CEO and/or COO.  Performance is reviewed annually - if MBO's are exceeded, pay out can be up to 150% of formula bonus; if MBO's are met, pay out can be up to 100% of formula bonus; if MBO's are not met, pay out can be reduced to 0% of formula. Maximum bonus may not exceed 300% of the target.



4.0

Development of Formula Incentive Award


At the end of the fiscal year, the overall Company and each business area or region’s actual performance for each financial component of the formula portion of the bonus awards will be calculated (based on the Company’s and each business area or region’s performance as of year end) and approved by the Chief Financial Officer, ("CFO").  An acceleration or deceleration scale will be applied to the component’s payout performance as shown below to develop the formula bonus*.  For corporate performance the portion attributable to each metric will be weighted and added to arrive at the overall formula payout.  For business area or region metrics, a blended performance will be determined as set forth below:


Performance %

Payout %*


< 80%

0%

Minimum performance 80%

80%

60%

For every 1% below target, 2% decrease in award

100%

100%

Target performance = 100% payout

105%

115%

For every 1% above 100%, 3% increase in awards

111%

134%

For every 1% above 110%, 4% increase in award

127%+

200%

Maximum payout



If the aggregate weighted payout for both metrics for a business area or region is less than 80%, the business unit payout percentage is equal to 0%.  


For example:

If business area or region revenue is achieved at 90% of target (which results in an 80% payout) and operating margin does not meet threshold of 80% (which results in a 0% payout) the aggregate weighted payout is:

(80% x 50%) + (0% x 50%) = 40%


As 40% is less than 80% threshold, business area or region payout percentage is equal is 0%.


Once all of the business areas or regions have calculated the formula incentive awards, the award pools by business areas or regions are developed.  These business area/region award pools, combined with the formula incentive award at the corporate level, will equal the aggregate of the formula incentive awards for all eligible employees in the Company, including the budgeted individual performance component for all eligible employees.  


4.1

Formula Award


The formula incentive award is a calculation of an award based on the actual performance achieved by the overall Company, and each of its applicable business area or region, as well as the budgeted individual performance percentage to be applied across the Company as a whole.  


Business area or region incentive pool dollars are derived from the aggregate of the formula awards within the business area or region.


4.2

Formula Pool


The Company calculates, based on the Company’s performance through the end of the year, the performance at the corporate level, and for each business area or region at the business area or region level, against the applicable performance targets.  The Company also calculates, based on the Company’s and its business area or region’s performance, the targeted total pool to be used for the year for rewarding individual performances across the Company as a whole.  Those pools as established (composed of the pools for the Company’s performance, the performance of each of the Company’s business area or region, and for the total individual performances across the Company) are aggregated.  Collectively these amounts constitute one aggregate formula pool (referred to hereafter as the “Formula Pool”), based on performance as of the end of the year, which the Company will pay out to all participants in the PRP collectively for performance during the year.


Although the Chief Executive Officer of the Company and the Compensation Committee reserve the right to alter the Formula Pool after year end, but prior to the actual payment of awards to participants in the PRP, it is expected that such discretion will only be exercised in rare or extreme circumstances, and that generally the entire Formula Pool, as it has been computed, will be paid (absent any affirmative exercise of this discretion) out to the participants in the PRP collectively following the closing of the year in question.


4.3

Additional Individual Performance Awards in Excess of the Formula Award


Following the end of the year, but prior to the payment of all awards under the PRP with respect to the completed fiscal year, management of the Company may determine to add additional funding to the plan to cover individual performance awards for some employees or officers in excess of the amounts used to compute the Formula Pool.  To the extent such determinations are made they are subject to the approval of the appropriate management of the Company.  Collectively any amounts set aside to reward individual performances and personal performance multipliers across the Company beyond the aggregate amount reflected in the Formula Pool will hereafter be referred to as the “Additional Individual Performance Pool”.  The aggregate amount of the Additional Individual Performance Pool is subject to the approval of both the Chief Executive Officer and the Compensation Committee.  


4.4

Total Awards under the PRP


The aggregate of all payouts under the PRP shall consist of the sum of the Formula Pool and the Additional Individual Performance Pool.  In addition to the procedures set forth above, any performance awards recommended under the PRP which exceed one times a participant’s base salary must be reviewed and approved by the Company’s Chief Executive Officer.


5.0

Removals, Transfers, Terminations, Promotions and Hiring Eligibility


Except to the extent applicable legal requirements mandate a different result for a Plan participant, the following scenarios will be dealt with under the Plan in the manner set forth below.


5.1

Participants whose employment with the Company is terminated because of retirement or disability:

 

§

After the close of the plan year, but prior to the actual distribution of awards for such year, may be awarded an incentive award for the plan year at the discretion of the CEO and/or SVP Global Human Resources.  For any such participant who is not given an incentive award, the portion of such person’s potential award that might have been reflected in the Formula Pool will remain in the Formula Pool and be allocated to other plan participants in the manner determined by management.

   
 

§

After the beginning, but prior to the close of the plan year, no award shall be granted unless authorized at the discretion of the CEO and/or SVP Global Human Resources.


5.2

Participants whose employment with the Company is terminated because

of death:

 

§

After the close of the plan year, but prior to the actual distribution of awards for such year, shall be awarded an incentive award for the plan year.  Such payment will be made to the deceased employee’s estate or designated beneficiary.

 


 

§

After the beginning, but prior to the close of the plan year, no award shall be granted unless authorized at the discretion of the CEO and/or SVP Global Human Resources.  Any such payments will be made to the deceased employee’s estate or designated beneficiary.


5.3

Participants who resign for any reason after the close of the plan year but prior to the distribution of awards for such year will not receive an incentive award.  For any such participant, the portion of such person’s potential award that might have been reflected in the Formula Pool will remain in the Formula Pool and be allocated to other plan participants in the manner determined by management.


5.4

Participants who are discharged from the employ of the Company or any of its subsidiaries for cause or for any offense involving moral turpitude or an offense involving breach of the fiduciary duty owed by the individual to the Company will not be entitled to an award for any plan year.  For any such participant, the portion of such person’s potential award that might have been reflected in the Formula Pool will remain in the Formula Pool and be allocated to other plan participants in the manner determined by management.


5.5

Participants who are discharged from the employ of the Company or any of its subsidiaries due to any reason other than the ones enumerated above, including, without limitation, participants who are discharged due to job elimination:


 

§

After the close of the plan year, but prior to the actual distribution of awards for such year, may be awarded an incentive award for the plan year.  No award shall be granted unless authorized at the discretion of the CEO and/or SVP Global Human Resources.  For any such participant who is not given an incentive award, the portion of such person’s potential award that might have been reflected in the Formula Pool will remain in the Formula Pool and be allocated to other plan participants in the manner determined by management.

 


 

§

After the beginning, but prior to the close of the plan year, the participant is no longer eligible for that year.  However, a discretionary award may be granted by the CEO and/or SVP Global Human Resources.  

   

5.6

Participants under statutory or contractual notices as may be required by applicable law:

 

§

On December 31 st of the plan year, may be awarded an incentive award for the plan year.  Except as may be required by applicable laws, no award shall be granted unless authorized at the discretion of the CEO and/or SVP Global Human Resources.  For any such participant who is not given an incentive award, the portion of such person’s potential award that might have been reflected in the Formula Pool will remain in the Formula Pool and be allocated to other plan participants in the manner determined by management.

   
 

§

Which ends prior to the close of the plan year shall not be eligible for an incentive award for that plan year.  However, a discretionary award may be granted by the CEO and/or SVP Global Human Resources.


5.7

Participants transferred during the plan year from one division of the Company to another will be eligible to receive an award (subject to achievement of the requisite organizational and individual performance) through the division in which he or she is employed at the end of the plan year, but the award amount may be based on the performance made in each division in which the individual was employed during the year.


5.8

Employees hired during the plan year must be actively employed on or before October 1 st of the plan year to participate in the bonus for that plan year.  Awards will be made based upon the employee's earned salary during the period of their employment with the Company during the plan year.


5.9

The eligibility for an award and plan status of employees who remain employed with the Company during the plan year but whose change in employment status through promotion or reclassification affects their level of participation:


 

§

Prior to October 1 st of the plan year, will participate at the level consistent with the promotion or reclassification.

 

§

After October 1 st but prior to the close of the plan year, will participate at the level consistent with their classification prior to the promotion or reclassification.


5.10

The eligibility for an award and plan status of employees who remain employed with the Company during the plan year but whose change in employment status through demotion affects their level of participation will be determined by the CEO and/or SVP Global Human Resources.


6.0

Employees on Performance Plans


6.1

Payment of any award to an active employee (not on leave) who is on a performance plan and received a DO rating is subject to manager discretion.


7.0

Administration of the Plan


7.1

Amendments to the Plan (Contingency Clause)

The Chief Executive Officer and the Compensation Committee of the Board of Directors reserve the right to interpret, amend, modify, or terminate the Plan in accordance with changing conditions at any time in their sole discretion.


7.2

Incentive Award Distribution

Incentive awards, when payable, shall be paid as near to the close of the company’s fiscal year as may be feasible.  In furtherance of the preceding sentence, any incentive awards under the Plan will be paid no later than the date allowable to insure tax deductibility in the year of accrual, which in the case of the United States is March 15, 2012.  Participants in the Plan must be employed at the time of award distribution in order to receive bonus payments, except as provided in Section 5.0.


No individual has the rights to receive an award until it has been approved and distributed in accordance with the provisions of this plan.


7.3

Non-Assignment of Awards

Participants eligible to receive incentive awards shall not have any right to pledge, assign, or otherwise dispose of any unpaid or projected awards.


7.4

Deferral of Awards

Participants eligible to defer incentive awards through the Deferred Compensation Program (DCP) may elect to do so during the annual DCP enrollment.  



Exhibit 10.4

Non-Competition, Non-Solicitation and Confidentiality Agreement

You have been granted a Contingent Stock Performance Award and a Non-Qualified Stock Option Grant, (collectively, the “Award”) subject to the terms of the Company’s Restated 2003 Stock Incentive Performance Plan (the “Plan”) and Contingent Stock Performance Award Agreement and Stock Option Agreement for Employees between you and the Company.  As the Award states, to be entitled to any payment under the Award, you must accept the Award and agree to comply with the terms and conditions of this Agreement.

1.

Confidentiality.

You acknowledge that you have access to Confidential Information (as defined below) and that such Confidential Information is the property of Hasbro, Inc. (the “Company” or “Hasbro”), its Subsidiaries, and/or its or their licensors, suppliers or customers.  You agree specifically as follows, whether during your employment or following the termination thereof:

(a)

You will always preserve as confidential all Confidential Information, and will never use it for your own benefit or for the benefit of others.

(b)

You will not disclose, divulge, or communicate Confidential Information to any unauthorized person, business or corporation during or after the termination of your employment with the Company.  You will use your best efforts and exercise due diligence to protect, to not disclose and to keep as confidential all Confidential Information.

(c)

You will abide by all applicable Company written policies and procedures regarding data or information security.

(d)

Upon the earlier of request or termination of employment, you agree to return to the Company, or if so directed by the Company, destroy any and all copies of materials in your possession containing Confidential Information.

Confidential Information includes any information you learn in connection with your work at Hasbro which is not generally known to the general public.  Confidential Information shall not include any information which is previously known to you without an obligation of confidence or is publicly disclosed either prior to or subsequent to your receipt of such information without breach of this Agreement, or is rightfully received by you from a third-party without obligation of confidence and other than in relation to your employment with the Company.

2.

Non-Competition/Non-Solicitation.

(a)

In consideration of the Award, you agree that while employed by Hasbro (including any of its affiliates) and for a period of one (1) year after your Date of Termination (as defined below) (including any of its affiliates), you will not, in the geographical area in which Hasbro or any of its affiliates does business or has done business, engage in any business or enterprise that would be competitive with any business of Hasbro in existence as of the Date of Termination.  This obligation shall preclude any such involvement, whether on a direct or indirect basis, and whether as an owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly held company.  

(b)

The geographic area to which the restrictions of Section 2 (a) shall apply shall be limited to the geographic area in which the Company does business, has done business, or plans to do business as of your Date of Termination.

(c)

You agree that while employed by the Company and for a period of one (1) year after your Date of Termination, you shall not directly or indirectly solicit, induce or attempt to induce (other than a general solicitation not directed at the employees of the Company) either alone or in association with others, any employee or independent contractor of the Company to terminate his or her employment or his, her or its relationship with the Company or in any way assist or enable another person or entity, directly or indirectly, to solicit, induce or attempt to induce any individual, employee or independent contractor of the Company to terminate his/her employment or his, her or its relationship with the Company.

(d)

You agree that while employed by the Company and for a period of one (1) year after your Date of Termination, you shall not, directly or indirectly, acting alone or in association with others, solicit, divert or take away or attempt to solicit, divert or take away, the business of any current or prospective customers, accounts or business partners that were contacted, solicited or served by the Company while you were employed by the Company.

(e)

You acknowledge that the restrictions set forth in this Section 2 are necessary for the protection of the business and goodwill of the Company and its Subsidiaries and are material and integral to the Award.  You further acknowledge that the restrictions contained herein are reasonable for the protection of the business and good will of the Company and its Subsidiaries.  You agree that any breach, or threatened breach, of this Agreement is likely to cause the Company substantial and irrevocable harm.  In the event of any breach or threatened breach, you agree that the Company, in addition to such other remedies which may be available, shall be entitled to specific performance and other injunctive relief without posting a bond or other security.  You also waive the adequacy of a remedy at law as a defense to such relief.

(f)

You agree that if you violate any of the provisions of this Section 2, you shall continue to be bound by the restrictions set forth herein until a period of one (1) year has expired without any violation of this Section 2.  You further agree that in the event you violate any of the provisions of this Section 2, and you are receiving any severance pay or benefits from the Company, the Company shall have no obligation to continue paying or providing to you any such severance pay or benefits and may recover from you the severance pay and benefits you previously received.  

(g)

If any restriction set forth in this Section 2 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

3.

Date of Termination.

Your “Date of Termination” shall be the first day after you are not employed by the Company or any entities directly or indirectly controlled by the Company (a “Subsidiary” or “Subsidiaries”), regardless of the reason for the termination of your employment; provided that your employment shall not be considered terminated by reason of your transfer between the Company and a Subsidiary or between two Subsidiaries; and further provided that your employment shall not be considered terminated while you are on an approved leave of absence from the Company or a Subsidiary.

4.

Disclosure of this Agreement.  

You hereby authorize the Company to notify others, including but not limited to customers of the Company and any of your future employers or prospective business associates, of the terms and existence of this Agreement and your continuing obligations to the Company hereunder.

5.

Not Employment Contract.  

You acknowledge that this Agreement does not constitute a contract of employment for any period of time and does not modify the at-will nature of your employment with the Company, pursuant to which both the Company and you may terminate the employment relationship at any time, for any or no reason, with or without notice.

6.

Entire Agreement.

This Agreement contains the entire Agreement and understanding of the parties hereto with respect to your obligations undertaken in consideration of the Award and does not supersede, but is in addition to, any obligations arising under any other agreements between you and the Company.  You agree that any change or changes in your duties, salary or compensation after the signing of this Agreement shall not affect the validity or scope of this Agreement.

7.

Amendment.

This Agreement may be amended only by written agreement of you and the Company.

8.

Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or by which it may be acquired or which may succeed to the Company’s assets or business, provided, however, that your obligations are personal and shall not be assigned by you.  You expressly consent to be bound by the provisions of this Agreement for the benefit of the Company and/or its Subsidiaries to which you may be transferred without the necessity that this Agreement be re-signed at the time of such transfer.  

9.

Severabilitv.

The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the full extent permitted by law.  Any court determining the unenforceability of any provision shall have the power to reduce the scope or duration of such provision to render such provision enforceable.

10.

Waivers.  

No delay or omission by the Company in exercising any right under this Agreement will operate as a waiver of that or any other right.  A waiver or consent given by the Company on any one occasion is effective only in that instance and will not be construed as a bar to the enforcement of or waiver of any right on any other occasion.

11.

Choice of Law and Jurisdiction.

This Agreement shall be construed in accordance with the laws of the State of Rhode Island (without reference to the conflicts of laws provisions thereof).  Any action, suit, or other legal proceeding which is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the State of Rhode Island (or, if appropriate, a federal court located within the State of Rhode Island), and the Company and you each consent to the jurisdiction of such a court.  The Company and you each hereby irrevocably waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.

12.

Captions.

The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.






THE EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.

 

HASBRO, INC.

Date: ______________________

By:____________________________

 

EMPLOYEE

Date:_______________________

_______________________________

Print Name


_______________________________

  Signature




- 2 -





 

Exhibit 12

 

HASBRO, INC. AND SUBSIDIARIES

Computation of Ratio of Earnings to Fixed Charges

Quarter Ended March 27, 2011

 

(Thousands of Dollars)

 
 
 
           

 

         

 

         
           

Earnings available for fixed charges:

         

  Net earnings

   

$

17,196

 

  Add:

         

    Fixed charges

     

24,883

 

    Income tax expense

     

5,642

 
       

----------

 

     Total

   

$

47,721

 
       

======

 

 

         
           
           

Fixed charges:

         

  Interest expense

   

$

21,375

 

  Rental expense representative

         

   of interest factor

     

3,508

 

 

     

----------

 

      Total

   

$

24,883

 
       

======

 
           

Ratio of earnings to fixed charges

     

1.918

 

 

     

======

 






Exhibit 31.1

 

CERTIFICATION



I, Brian Goldner, certify that:

   

1.

I have reviewed this quarterly report on Form 10-Q of Hasbro, Inc.;

   

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

   

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

   

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

   

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

     

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

     

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

   
   
   

Date:  May 4, 2011

 
   
 

/s/ Brian Goldner

 

-----------------------------------------------------------

 

Brian Goldner

 

President and Chief

 

Executive Officer






Exhibit 31.2

 

CERTIFICATION



I, Deborah Thomas, certify that:

   

1.

I have reviewed this quarterly report on Form 10-Q of Hasbro, Inc.;

   

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

   

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

   

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

   

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

     

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

     

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

   
   

Date: May 4 , 2011

 
   
 

/s/ Deborah Thomas

 

-----------------------------------------------------------

 

Deborah Thomas

 

Senior Vice President and

 

Chief Financial Officer




Exhibit 32.1



CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002




Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Executive Officer of Hasbro, Inc., a Rhode Island corporation (the “Company”), does hereby certify that to the best of the undersigned’s knowledge:


1)

the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2011, as filed with the Securities and Exchange Commission (the “10-Q Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2)

the information contained in the Company’s 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



_/s/ Brian Goldner                           _

Brian Goldner

President and Chief Executive Officer of Hasbro, Inc.



Dated: May 4, 2011



A signed original of this written statement required by Section 906 has been provided to Hasbro, Inc. and will be retained by Hasbro, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.




Exhibit 32.2



CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002




Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Financial Officer of Hasbro, Inc., a Rhode Island corporation (the “Company”), does hereby certify that to the best of the undersigned’s knowledge:


1)

the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2011, as filed with the Securities and Exchange Commission (the “10-Q Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2)

the information contained in the Company’s 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



_/s/ Deborah Thomas________________

Deborah Thomas

Senior Vice President and Chief Financial Officer of Hasbro, Inc.



Dated: May 4, 2011



A signed original of this written statement required by Section 906 has been provided to Hasbro, Inc. and will be retained by Hasbro, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.