Hasbro, Inc.
HASBRO INC (Form: 10-Q, Received: 05/10/2012 17:31:34)


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 April 1, 2012

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 20, 2012 was 129,673,478.






PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.


HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Thousands of Dollars Except Share Data)

(Unaudited)


         

 

 

April 1,

 

March 27,

 

Dec. 25,

Assets

 

2012

 

2011

 

2011

 

 

---------

 

---------

 

---------

Current assets

           

  Cash and cash equivalents

$

883,824

 

927,422

 

641,688

  Accounts receivable, less allowance

           

    for doubtful accounts of $24,800, $33,300,

           

    and $23,700

 

456,580

 

558,980

 

1,034,580

  Inventories

 

396,981

 

401,309

 

333,993

  Prepaid expenses and other current assets

 

281,517

 

173,070

 

243,431

   

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

 

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

 

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

       Total current assets

 

2,018,902

 

2,060,781

 

2,253,692

             

Property, plant and equipment, less accumulated

           

  depreciation of $466,200, $437,900, and

           

  $453,700

 

222,821

 

238,403

 

218,021

   

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

 

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

 

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

             

Other assets

           

  Goodwill

 

474,992

 

475,343

 

474,792

  Other intangibles, less accumulated amortization

           

    of $626,800, $586,700 and $622,500

 

456,639

 

489,910

 

467,293

  Other

 

723,783

 

675,904

 

716,976

   

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

 

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

 

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

       Total other assets

 

1,655,414

 

1,641,157

 

1,659,061

 

 

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

 

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

 

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

             

       Total assets

$

3,897,137

 

3,940,341

 

4,130,774

 

 

========

 

========

 

========




HASBRO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

(Thousands of Dollars Except Share Data)

(Unaudited)


           

                                           

 

April 1,

 

March 27,

 

Dec. 25,

 

Liabilities and Shareholders' Equity

 

2012

 

2011

 

2011

 
   

---------

 

---------

 

---------

 

Current liabilities

             

  Short-term borrowings

$

171,177

 

37,923

 

180,430

 

  Accounts payable

 

129,518

 

142,876

 

134,864

 

  Accrued liabilities

 

425,182

 

445,733

 

627,050

 

 

 

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

 

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

 

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

 

     Total current liabilities

 

725,877

 

626,532

 

942,344

 
               

Long-term debt

 

1,400,942

 

1,396,695

 

1,400,872

 

Other liabilities

 

372,925

 

386,126

 

370,043

 

 

 

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

 

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

 

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

 

     Total liabilities

 

2,499,744

 

2,409,353

 

2,713,259

 

 

 

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

 

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

 

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

 

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

 

630,062

 

624,666

 

630,044

 

  Retained earnings

 

3,156,152

 

2,954,517

 

3,205,420

 

  Accumulated other comprehensive loss

 

(24,230

)

(1,763

)

(35,943

)

  Treasury stock, at cost; 80,016,477 shares at

             

    April 1, 2012; 72,890,160 shares at

             

    March 27, 2011 and 81,061,373 at

             

    December 25, 2011

 

(2,469,438

)

(2,151,279

)

(2,486,853

)

 

 

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

 

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

 

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

 
 

Total shareholders' equity

 

1,397,393

 

1,530,988

 

1,417,515

 

 

 

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

 

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

 

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

 
               

 

Total liabilities and shareholders' equity

$

3,897,137

 

3,940,341

 

4,130,774

 

 

 

========

 

========

 

========

 


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

 

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

 

April 1, 2012

March 27, 2011

 

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

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

Net revenues

$  648,850 

671,986 

Costs and expenses

   

    Cost of sales

257,036 

267,246 

    Royalties

52,434 

43,226 

    Product development

44,926 

45,818 

    Advertising

65,045 

66,537 

    Amortization of intangibles

10,655 

10,696 

    Program production cost amortization

3,138 

3,117 

    Selling, distribution and administration

199,890 

186,423 

 

------------ 

------------ 

 

  Total costs and expenses

633,124 

623,063 

   

------------ 

------------ 

Operating profit

15,726 

48,923 

   

------------ 

------------ 

Nonoperating (income) expense

   

    Interest expense

23,112 

21,375 

    Interest income

(2,475)

(1,412)

    Other (income) expense, net

(45)

6,122 

   

------------ 

------------ 

 

  Total nonoperating expense, net

20,592 

26,085 

 

------------ 

------------ 

Earnings (loss) before income taxes

(4,866)

22,838 

     

Income tax (benefit) expense

(2,287)

5,642 

 

------------ 

------------ 

Net earnings (loss)

$    (2,579)

  17,196 

 

 ======= 

 ======= 

     

Net earnings (loss) per common share

   
 

 Basic

$      (0.02)

0.12 

   

======= 

======= 

 

 Diluted

$      (0.02)

0.12 

   

======= 

======= 

Cash dividends declared per common share

$       0.36 

0.30 

 

======= 

======= 

 

See accompanying condensed notes to consolidated financial statements.




HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Earnings

(Thousands of Dollars)

(Unaudited)

   
 

Quarter Ended

 

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

 

April 1,

 2012

March 27, 2011

 

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

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

Net earnings (loss)

$     (2,579)

17,196 

 

------------- 

------------- 

Other comprehensive earnings (loss):

   

  Foreign currency translation adjustments

22,266 

28,669 

  Net losses on cash flow hedging activities, net of tax

(9,289)

(37,008)

  Reclassifications to earnings (loss), net of tax:

   

    Net gains on cash flow hedging activities

(1,264)

(1,573)

 

------------- 

------------- 

Total other comprehensive earnings (loss), net of tax

11,713 

(9,912)

 

------------- 

------------- 

Total comprehensive earnings

$      9,134 

7,284 

 

======== 

======== 


See accompanying condensed notes to consolidated financial statements.




HASBRO, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Thousands of Dollars)

(Unaudited)

 

Quarter Ended

 

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

 

April 1, 2012

March 27, 2011

 

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

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

Cash flows from operating activities

       
 

Net earnings (loss)

$        (2,579

)

17,196

 
 

Adjustments to reconcile net earnings (loss) to net cash

       
 

provided by operating activities:

       

 

  Depreciation of plant and equipment

19,308

 

20,322

 

 

  Amortization of intangibles

10,655

 

10,696

 
 

  Program production cost amortization

3,138

 

3,117

 

 

  Deferred income taxes

1,411

 

(584

)

 

  Stock-based compensation

5,089

 

7,384

 
 

 Change in operating assets and liabilities:

       
 

  Decrease in accounts receivable

594,963

 

419,622

 
 

  Increase in inventories

(57,954

 )

(28,022

)

 

  Increase in prepaid expenses and other current assets

(45,766

 )

(11,024

)

 

  Program production costs

(13,973

 )

(16,613

)

 

  Decrease in accounts payable and accrued liabilities

(231,554

 )

(152,626

)

 

  Other operating activities

2,000

 

7,026

 

 

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

 

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

 
 

         Net cash provided by operating activities

284,738

 

276,494

 

 

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

 

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

 

Cash flows from investing activities

       
 

Additions to property, plant and equipment

(23,034

)

(22,396

)

 

Other investing activities

6,673

 

(2,037

)

 

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

 

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

 
 

         Net cash utilized by investing activities

(16,361

)

(24,433

)

 

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

 

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

 

Cash flows from financing activities

       
 

Net (repayments) proceeds from short-term borrowings

(10,137

)

23,622

 
 

Purchases of common stock

(4,644

 )

(58,320

)

 

Stock option transactions

16,575

 

9,732

 
 

Excess tax benefits from stock-based compensation

6,354

 

1,868

 
 

Dividends paid

(38,593

)

(34,297

)

 

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

 

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

 
 

         Net cash utilized by financing activities

(30,445

)

(57,395

)

 

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

 

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

 

Effect of exchange rate changes on cash

4,204

 

4,960

 

 

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

 

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

 
 

         Increase in cash and cash equivalents

242,136

 

199,626

 

Cash and cash equivalents at beginning of year

641,688

 

727,796

 

 

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

 

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

 

Cash and cash equivalents at end of period

$     883,824

 

927,422

 

 

======

 

=======

 
         
 






Supplemental information

       

  Cash paid during the period for:

       

    Interest

$      32,569

 

31,223

 

    Income taxes

$      29,899

 

3,921

 
 

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 April 1, 2012 and March 27, 2011, 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 quarter ended April 1, 2012 is a 14-week period while the quarter ended March 27, 2011 is a 13-week period.


The results of operations for the quarter ended April 1, 2012 are not necessarily indicative of results to be expected for the full year, nor were those of the comparable 2011 period representative of those actually experienced for the full year 2011.


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 25, 2011 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 25, 2011.


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 (Loss) Per Share


Net earnings (loss) per share data for the fiscal quarters ended April 1, 2012 and March 27, 2011 were computed as follows:

 

2012

2011

 

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

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

 

Basic
-------

Diluted
--------

Basic
-------

Diluted
--------

Net earnings (loss)

$  (2,579)

(2,579)

17,196

17,196

 

=======

=======

=======

=======

         

Average shares outstanding

129,569 

129,569 

137,645

137,645

Effect of dilutive securities:

       

   Options and other share-based awards

-

3,308

 

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

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

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

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

Equivalent shares

129,569 

129,569 

137,645

140,953

 

=======

=======

=======

=======

         

Net earnings (loss) per common share

$   (0.02)

(0.02)

0.12

0.12

 

=======

=======

=======

=======


Restricted stock-based awards and options to acquire shares totaling 12,011 at April 1, 2012 were excluded from the calculation of diluted earnings per share because to include them would have been antidilutive. Of this amount, 8,469 would have been included in the calculation of diluted shares had the Company not had a net loss in the first quarter of 2012. Assuming that these awards and options were included, under the treasury stock method, they would have resulted in an additional 1,991 shares being included in the diluted earnings per share calculation for the quarter ended April 1, 2012.


At March 27, 2011, options to acquire shares totaling 1,173 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 (Loss)


Components of other comprehensive earnings are presented within the consolidated statements of comprehensive earnings. The related tax benefits of losses on cash flow hedging activities within other comprehensive earnings were $1,340 and $5,621 for the quarters ended April 1, 2012 and March 27, 2011, respectively.  The income tax benefits related to reclassification adjustments for net losses on cash flow hedging activities from other comprehensive earnings were $143 and $271 for the quarters ended April 1, 2012 and March 27, 2011, respectively.


At April 1, 2012, the Company had remaining deferred losses on hedging instruments, net of tax, of $472, in accumulated other comprehensive earnings (loss) (“AOCE”). These instruments hedge certain anticipated inventory purchases and other cross-border transactions through 2013. 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 sales, royalties and expenses. Of the net deferred losses included in AOCE at April 1, 2012, the Company expects approximately $57 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.


Changes in the components of accumulated other comprehensive earnings (loss) for the quarters ended April 1, 2012 and March 27, 2011 are as follows:


 

Pension and Postretirement Amounts

Gains (Losses) on Derivative Instruments

Foreign Currency Translation Adjustments

Total Accumulated Other Comprehensive Earnings (Loss)

2012

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

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

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

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

Balance at Dec. 25, 2011

$   (86,822)

10,081 

40,798 

(35,943)

Current period other comprehensive earnings (loss)



(10,553)


22,266 


11,713 

 

------------ 

------------ 

------------ 

------------ 

Balance at April 1, 2012

$   (86,822)

(472)

63,064 

(24,230)

 

======= 

======= 

=======

======= 

2011

       

Balance at Dec. 26, 2010

$   (69,925)

15,432 

62,642 

8,149 

Current period other comprehensive earnings (loss)



(38,581)


28,669 


(9,912)

 

------------ 

------------ 

------------ 

------------ 

Balance at March 27, 2011

$   (69,925)

(23,149)

91,311 

(1,763)

 

======= 

======= 

=======

======= 



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, short-term borrowings, accounts payable and certain accrued liabilities. At April 1, 2012, March 27, 2011 and December 25, 2011, the carrying cost of these instruments approximated their fair value. The Company’s financial instruments at April 1, 2012, March 27, 2011 and December 25, 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 April 1, 2012, March 27, 2011 and December 25, 2011 are as follows:


 

April 1, 2012

March 27, 2011

Dec. 25, 2011

 

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

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

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

 

Carrying

Cost

Fair

Value

Carrying

Cost

Fair

Value

Carrying

Cost

Fair

Value

 

-------

------

-------

------

-------

------

6.35% Notes Due 2040

$   500,000

535,950

500,000

498,800

500,000

540,850

6.125% Notes Due 2014

441,047

461,678

436,800

465,545

  440,977

462,868

6.30% Notes Due 2017

350,000

400,260

350,000

386,295

350,000

400,400

6.60% Debentures

   Due 2028


109,895


118,148


109,895


113,115


109,895


120,148

 

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

-----------

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

-----------

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

-----------

Total long-term debt

$1,400,942

1,516,036

1,396,695

1,463,755

1,400,872

1,524,266

 

=======

=======

=======

=======

=======

=======


The carrying cost of the 6.125% Notes Due 2014 includes principal amounts of $425,000 as well as fair value adjustments of $16,047, $11,800, and $15,977 at April 1, 2012, March 27, 2011 and December 25, 2011, respectively, related to interest rate swaps.  All other carrying costs represent principal amounts.  Total principal amount of long-term debt at April 1, 2012, March 27, 2011 and December 25, 2011 was $1,384,895.


The fair values of the Company’s long-term debt are considered Level 3 fair values (see footnote 6 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a similar debt security. This assumption 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.


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

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

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


change in the fair value of the associated debt. At April 1, 2012, March 27, 2011 and December 25, 2011, the fair values of these contracts were $16,047, $11,800, and $15,977, respectively, which are recorded in other assets with a corresponding fair value adjustment to increase long-term debt. The Company recorded a gain of $70 and a loss of $986 on these instruments in other (income) expense, net for the quarters ended April 1, 2012 and March 27, 2011, 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.


(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 2008. 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 2006. The U.S. Internal Revenue Service has commenced an examination related to the 2008 and 2009 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 $196,860 (at April 1, 2012 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 2004, as is usual and customary in Mexico with respect to these matters. Accordingly, as of April 1, 2012, bonds totaling approximately $166,190 (at April 1, 2012 exchange rates) have been provided to the Mexican government related to the 2000 to 2004 assessments, allowing the Company to defend its positions. The Company is not currently required to guarantee the amount of the 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.


(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.



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

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


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 April 1, 2012, March 27, 2011 and December 25, 2011, these investments totaled $20,190, $21,359, and $19,657, respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheet. The Company recorded net gains of $1,096 and $157 on these investments in other (income) expense, net for the quarters ended April 1, 2012 and March 27, 2011, respectively, related to the change in fair value of such investments.



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

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


At April 1, 2012, March 27, 2011 and December 25, 2011, 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)

 

--------

--------

--------

--------

April 1, 2012

       

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

       

Assets:

       

Available-for-sale securities

$ 20,202 

12

20,190 

-

Derivatives

22,345 

-

17,826 

4,519

 

-------- 

-------

--------- 

-------

Total assets

$ 42,547 

12

38,016 

4,519

 

===== 

====

====== 

====

         

Liabilities:

       

Derivatives

$   6,054 

-

6,054 

-

 

===== 

====

====== 

====

March 27, 2011

       

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

       

Assets:

       

Available-for-sale securities

$ 21,387 

28

21,359 

-

Derivatives

22,872 

-

14,258 

8,614

 

-------- 

-------

--------- 

-------

Total assets

$ 44,259 

28

35,617 

8,614

 

===== 

====

====== 

====

         

Liabilities:

       

Derivatives

$ 33,599 

-

33,599 

-

 

===== 

====

====== 

====

December 25, 2011

       

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

       

Assets:

       

Available-for-sale securities

$ 19,669 

12

19,657 

-

Derivatives

29,500 

-

25,776 

3,724

 

-------- 

-------

--------- 

-------

Total assets

$ 49,169 

12

45,433 

3,724

 

===== 

====

====== 

====

         

Liabilities:

       

Derivatives

$  1,908 

-

1,908 

-

 

===== 

====

====== 

====


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

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


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 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 an unrelated company. 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 2012.


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 of an unrelated company that use significant unobservable inputs (Level 3):


 

2012

2011

 

-----------

-----------

Balance at beginning of year

$ 3,724 

9,155 

Gain (loss) from change in fair value

795 

(541)

 

-------- 

-------- 

Balance at end of first quarter

$ 4,519 

8,614 

 

===== 

===== 


(7) Pension and Postretirement Benefits


The components of the net periodic cost of the Company's defined benefit pension and other postretirement plans for the quarters ended April 1, 2012 and March 27, 2011 are as follows:


 

Pension

 

Postretirement

 

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

 

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

 

2012

 

2011

 

2012

2011

 

-------

 

-------

 

-------

-------

Service cost

$ 1,198

 

 1,079

 

184

171

Interest cost

5,494

 

5,223

 

440

440

Expected return on assets

(5,671

)

(6,249

)

-

-     

Net amortization and deferrals

1,908

 

1,295

 

20

18

 

--------

 

--------

 

--------

--------

Net periodic benefit cost

$ 2,929

 

 1,348

 

644

629

 

=====

 

=====

 

=====

=====

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

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


In the first quarter of fiscal 2012, the Company made cash contributions to its defined benefit pension plans of approximately $2,100 in the aggregate. The Company expects to contribute approximately $3,700 during the remainder of fiscal 2012.


(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 an unrelated company 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 associated with anticipated inventory purchases and other cross-border transactions in 2012 and 2013.



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

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


At April 1, 2012, March 27, 2011 and December 25, 2011, the notional amounts and fair values representing the unrealized gains (losses) of the Company’s foreign currency forward contracts designated as cash flow hedging instruments were as follows:


 

April 1, 2012

 

March 27, 2011

 

Dec. 25, 2011

 

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

 

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

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


Hedged transaction

Notional  

Amount  

Fair

Value

 

Notional  

Amount  

Fair

Value

 

Notional

 Amount

Fair

Value

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

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

----------

 

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

----------

 

-----------

----------

Inventory purchases

$ 425,153

(1,920)

 

598,637

(25,697)

 

379,688

  7,974 

Intercompany royalty

   transactions


137,065


(971)

 


173,760


(6,144)

 


117,192


2,126 

Sales

62,725

(229)

 

-

 

-

Other

25,267

75 

 

11,123

711 

 

29,517

(360)

 

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

---------- 

 

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

---------- 

 

-----------

----------

Total

$ 650,210

(3,045)

 

783,520

(31,130)

 

526,397

9,740 

 

=======

====== 

 

=======

====== 

 

======

======




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 April 1, 2012, March 27, 2011 and December 25, 2011 as follows:


 

April 1, 2012

Mar. 27, 2011

Dec. 25, 2011

 

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

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

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

Prepaid expenses and other current assets

     

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

     

Unrealized gains

$   2,720 

3,977 

11,965 

Unrealized losses

(948)

(1,519)

(4,187)

 

------------ 

------------ 

------------ 

Net unrealized gain

1,772 

2,458 

7,778 

 

------------ 

------------ 

------------ 

Other assets

     

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

     

Unrealized gains

2,113 

Unrealized losses

 (92)

 

------------ 

------------ 

------------ 

Net unrealized gain

2,021 

 

------------ 

------------ 

------------ 

Total asset derivatives

$    1,779 

2,458 

  9,799 

 

======= 

======= 

======= 

Accrued liabilities

     

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

     

Unrealized gains

$    2,981 

7,981 

12 

Unrealized losses

(6,956)

(19,992)

(50)

 

------------ 

------------ 

------------ 

Net unrealized loss

(3,975)

(12,011)

(38)

 

------------ 

------------ 

------------ 

Other liabilities

     

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

     

Unrealized gains

17 

Unrealized losses

(849)

(21,594)

(21)

 

------------ 

------------ 

------------ 

Net unrealized loss

(849)

(21,577)

(21)

 

------------ 

------------ 

------------ 

Total liability derivatives

$   (4,824)

 (33,588)

(59)

 

======= 

======= 

======= 


During the quarters ended April 1, 2012 and March 27, 2011, the Company reclassified net gains from other comprehensive earnings to net earnings of $1,407 and $1,846, respectively. Of the amount reclassified during the quarter ended April 1, 2012, $1,266 was reclassified to cost of sales, $142 was reclassified to royalty expense and $1 was reclassified to net revenues. Of the amount reclassified during the quarter ended March 27, 2011, $1,024 and $822 were reclassified to cost of sales and royalty expense, respectively. In addition, net losses of $(2)

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

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


were reclassified to earnings as a result of hedge ineffectiveness for the quarter ended April 1, 2012.  There was no hedge ineffectiveness for the first quarter of 2011.


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 April 1, 2012, March 27, 2011 and December 25, 2011, the total notional amounts of the Company’s undesignated derivative instruments were $39,299, $24,573 and $218,122, respectively.


At April 1, 2012, March 27, 2011 and December 25, 2011, the fair values of the Company’s undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:


 

Apr. 1, 2012

Mar. 27, 2011

Dec. 25, 2011

 

---------

---------

---------

Accrued liabilities

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

     

Unrealized gains

$       42 

80 

41 

Unrealized losses

(124)

(91)

(786)

 

-------- 

-------- 

--------- 

Net unrealized loss

(82)

(11) 

(745)

 

---------

---------

----------

Other liabilities

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

     

Unrealized gains

Unrealized losses

(1,148)

(1,104)

 

---------

---------

----------

Net unrealized loss

(1,148)

(1,104)

 

---------

---------

----------

Total unrealized loss, net

$ (1,230)

(11) 

(1,849)

 

=====

=====

 ===== 


The Company recorded a net loss (gain) of $2,114 and $(1,698) on these instruments to other (income) expense, net for the quarters ended April 1, 2012 and March 27, 2011, 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.


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

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


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 with a broad portfolio of brands and entertainment properties. The Company earns revenue and generates cash primarily through the sale of a broad variety of toy and game products, distribution of television programming based on the Company’s properties, and through the out-licensing of rights for use of its properties in connection with complementary products, including digital media and games and lifestyle products, offered by third-parties. 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 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 toy and game 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. 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 2012, nor were those of the comparable 2011 periods representative of those actually experienced for the full year 2011. 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 April 1, 2012 and March 27, 2011 are as follows.  


 

2012

2011

 

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

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

   

External

Affiliate

External

Affiliate

Net revenues

 

-----------

----------

-----------

---------

       U.S. and Canada

$

328,985

968

 

391,152

3,525

 

       International

 

289,729

149

 

254,332

83

 

       Entertainment and Licensing

 

29,336

1,317

 

24,641

429

 

       Global Operations (a)

 

800

257,699

 

1,861

251,855

 

       Corporate and Eliminations

 

-

(260,133

)

-

(255,892

)

 

 

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

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

 

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

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

 

 

$

648,850

-

 

671,986

-

 

 

 

=======

=======

 

=======

=======

 



     
 

2012

2011

 

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

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

    Operating profit (loss)

   

        U.S. and Canada

$ 14,411 

41,012 

        International

(5,084)

(1,733)

        Entertainment and Licensing

7,738 

5,431 

        Global Operations (a)

(12,733)

(7,209)

        Corporate and Eliminations (b)

11,394 

11,422 

 

---------- 

---------- 

 

$ 15,726 

48,923 

 

====== 

====== 

     




Total assets

April 1,

2012

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

March 27,

2011
-------------

Dec. 25,

2011
-------------

       U.S. and Canada

$

5,293,907 

4,579,394 

5,225,099 

       International

 

1,747,307 

1,539,115 

2,062,928 

       Entertainment and Licensing

 

1,069,369 

905,640 

1,022,008 

       Global Operations

 

2,065,881 

1,573,368 

1,974,951 

       Corporate and Eliminations (b)

 

(6,279,327)

(4,657,176)

(6,154,212)

 

 

-------------- 

-------------- 

-------------- 

 

$

3,897,137 

3,940,341 

4,130,774 

 

 

======== 

======== 

======== 


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


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

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


(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 represents consolidated International segment net revenues by major geographic region for the quarters ended April 1, 2012 and March 27, 2011.


 

2012

2011

 

-------

-------

Europe

$  208,113

184,898

Latin America

38,969

31,698

Asia Pacific

42,647

37,736

 

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

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

Net revenues

$  289,729

254,332

 

========

========


The following table presents consolidated net revenues by class of principal products for the quarters ended April 1, 2012 and March 27, 2011.


 

2012    

2011    

 

----------  

---------  

Boys

$  302,759

290,232

Games

181,916

200,352

Girls

93,236

113,156

Preschool

69,939

68,236

Other

1,000

10

 

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

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

Net revenues

$  648,850

671,986

 

=======

=======


.



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 branded entertainment and play for children and families. With a consumer focus, Hasbro applies its brand blueprint to its broad portfolio of properties. The brand blueprint revolves around objectives of continuously re-imagining, re-inventing, and re-igniting the Company’s existing brands, imagining, inventing and igniting new brands and offering consumers with the ability to experience the Company’s brands in all areas of their lives.


To accomplish these objectives, the Company offers consumers the ability to experience its branded play through innovative toys and games, digital media, lifestyle licensing and publishing and entertainment, including television programming and motion pictures. The Company’s focus remains on growing core owned and controlled brands, developing new and innovative products which respond to market insights, offering entertainment experiences which allow consumers to experience the Company’s brands across multiple forms and formats and optimizing efficiencies within the Company to increase operating margins and maintain a strong balance sheet.


The Company earns revenue and generates cash primarily through the sale of a broad variety of toy and game products, distribution of television programming based on the Company’s properties and through the out-licensing of rights for use of its properties in connection with complementary products, including digital media and games and lifestyle products, offered by third-parties. The Company’s core brands represent Company-owned brands or brands which if not entirely owned, are broadly controlled by the Company, and which have been successful over the long term. The Company’s core brands include TRANSFORMERS, NERF, MY LITTLE PONY, LITTLEST PET SHOP, MONOPOLY, FURREAL FRIENDS, MAGIC: THE GATHERING, PLAY-DOH, PLAYSKOOL, MILTON BRADLEY, PARKER BROTHERS and G.I. JOE. The Company has a large portfolio of owned and controlled brands, which can be introduced in new forms and formats 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 2012 the Company had strong revenues from many core brands, namely MAGIC:

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 GATHERING, NERF, TRANSFORMERS, LITTLEST PET SHOP, SUPER SOAKER, PLAY-DOH and FURREAL FRIENDS.


The Company’s innovative product offerings encompass a broad variety of toys including boy’s action figures, vehicles and play sets, girls’ toys, electronic toys, plush products, preschool toys and infant products, electronic interactive products, creative play and toy-related specialty products. Games offerings include board, card, electronic, trading card and role-playing games.


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 and allow the Company to offer innovative products based on movie, television, music and other entertainment properties owned by third parties. The Company’s primary licenses include its agreements with Marvel Characters B.V. (“Marvel”) for characters in the Marvel universe, including SPIDER-MAN and IRON MAN; Lucas Licensing, Ltd. (“Lucas”), related to the STAR WARS brand; and Sesame Workshop, related to the SESAME STREET characters. The third quarter of 2011 commenced the first period of significant sales under the Company’s license with Sesame Workshop. In 2011, the Company had sales of MARVEL products, including sales of products related to the Marvel movie releases of THOR and CAPTAIN AMERICA: THE FIRST AVENGER. During 2012 the Company’s offerings include products related to two expected theatrical motion picture releases based on MARVEL properties, THE AMAZING SPIDER-MAN and THE AVENGERS, as well as the 3D theatrical re-release of the STAR WARS-branded STAR WARS: EPISODE 1 – THE PHANTOM MENACE. The Company also had significant sales of BEYBLADE products in 2011 and although these sales are expected to decline in 2012, BEYBLADE products are anticipated to continue to provide a high level of sales in 2012. In addition to offering products based on licensed entertainment properties, the Company offers products which are licensed from outside inventors.


The Company seeks to build brand experiences and drive product-related revenues by increasing the visibility of its core brands through entertainment such as motion pictures and television programming. Since 2007, the Company has had three 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. This included the release of the third TRANSFORMERS motion picture, TRANSFORMERS: DARK OF THE MOON, in 2011. The next scheduled motion pictures based on the Company’s properties are BATTLESHIP, which was released in a variety of international markets in April 2012 and scheduled for release in the United States in May 2012, by Universal Pictures and G.I. JOE: RETALIATION, which is expected to be released in June 2012, by Paramount Pictures. The Company has motion picture projects based on other brands in development for potential release in future years.


In addition to using motion pictures to provide entertainment experiences for its brands, the Company has an internal wholly-owned production studio responsible for the creation and development of television programming based primarily on Hasbro’s brands. This programming is currently aired throughout the world. The Company is also a 50% partner in a joint venture with Discovery Communications, Inc.

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)


which runs THE HUB, a cable television network in the United States dedicated to high-quality children’s and family entertainment and educational programming. Programming on THE HUB includes content based on Hasbro’s brands as well as programming developed by third parties. Hasbro-branded television programming is distributed in the U.S. exclusively to THE HUB and is distributed internationally to leading children’s networks around the world. The Company’s television initiatives support 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.


The Company’s strategic brand blueprint also focuses on extending its brands further into digital media and gaming, including through the licensing of the Company’s properties to a number of partners who develop and offer digital games based on those brands. An example of these digital gaming relationships is the Company’s agreement with Electronic Arts Inc. (“EA”), which provides EA the exclusive worldwide rights, subject to existing limitations on the Company’s rights and certain other exclusions, to create digital games based on a number of the Company’s intellectual properties, including MONOPOLY, SCRABBLE, YAHTZEE and TONKA. Similarly, the Company has an agreement with Activision under which Activision offers digital games based on the TRANSFORMERS brand. The Company continues to seek and develop additional relationships and outlets for its brands in digital gaming, including casual, social mobile and online gaming.


In recent years the Company has expanded its lifestyle business and this remains a key focal area for future development and growth. Under its lifestyle licensing programs, the Company enters into relationships with a broad spectrum of apparel, food, bedding and other lifestyle products companies for the global marketing and distribution of licensed products based on the Company’s brands. These relationships further broaden and amplify the consumer’s ability to experience the Company’s brands.


As the Company seeks to grow its business in entertainment, licensing and digital gaming, the Company will continue 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 and formats.


During 2011, the Company established Hasbro’s Gaming Center of Excellence in Rhode Island to centralize games marketing and development while building on Hasbro’s strategy of re-imaging, re-inventing and re-igniting core brands as well as inventing new brands.


During the first quarter of 2012 the Company took certain measures to strengthen its organization and right size certain businesses and functions, resulting in employee termination and recognition of severance costs of approximately $11,100.


The Company’s business is highly seasonal with a significant amount of revenues occurring in the second half of the year. In 2011, 2010 and 2009, the second half of the year accounted for 63%, 65% and 65% of the Company’s net revenues, respectively. However, the Company expects net revenues in the second half of 2012 as a percentage of full year 2012 net revenues

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 be a greater percentage than the 2011 percentage based on the Company’s strategy to more closely align its U.S and Canada business with consumer demand as well as the increased significance of the International business.


The Company sells its products both within the United States and in a number of international markets. In recent years, the Company’s international net revenues have experienced growth as the Company has sought to increase its international presence. One of the ways the Company has driven international growth is by opportunistically opening offices in certain markets to develop a greater presence. Since 2006, the Company has opened operations in eight new markets around the world namely China, Brazil, Russia, Korea, Romania, Czech Republic, Peru and Colombia. These represent emerging markets where the Company believes that it can achieve higher revenue growth rates than it could achieve in more mature markets. Net revenues of the Company’s International segment represented 43%, 39% and 36% of total net revenues in 2011, 2010 and 2009, respectively.


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 toy and game 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 committed to returning excess cash to its shareholders through share repurchases and dividends. As part of this initiative, from 2005 to 2011, the Company’s Board of Directors (the “Board”) adopted six successive share repurchase authorizations with a cumulative authorized repurchase amount of $2,825,000. The sixth authorization was approved in May 2011 for $500,000. At April 1, 2012, the Company had $222,269 remaining on this authorization. For the quarter ended April 1, 2012, the Company repurchased approximately 140 shares of common stock in the open market at a total cost of $5,003. During the three years ended 2011, the Company spent $1,150,683 to repurchase 29,395 shares 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 2012, the Company’s Board of Directors increased the Company’s quarterly dividend rate 20% to $0.36 per share from $0.30 per share. This was the sixth dividend increase since 2005. Since then the Company has increased its quarterly cash dividend 300%, from $0.09 to $0.36 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 April 1, 2012 and March 27, 2011.  


 

2012

 

2011

 

-------

 

-------

Net revenues

100.0 %

 

100.0 %

Costs and expenses:

     

  Cost of sales

  39.6

 

  39.8

  Royalties  

    8.1

 

    6.4

  Product development

    6.9

 

    6.8

  Advertising

    10.0

 

    9.9

  Amortization of intangibles

    1.7

 

    1.6

  Program production cost amortization

    0.5

 

    0.5

  Selling, distribution and administration

   30.8

 

   27.7

 

--------   

 

--------   

Operating profit

2.4

 

7.3

  Interest expense

3.6

 

3.2

  Interest income

(0.4)

 

(0.2)

  Other (income) expense, net

0.0

 

0.9

 

--------

 

--------

Earnings (loss) before income taxes

 (0.8)

 

 3.4

  Income tax expense (benefit)

(0.4)

 

0.8

 

--------

 

--------

Net earnings

(0.4) %

 

2.6 %

 

=====

 

=====


RESULTS OF OPERATIONS
-----------------------------------------
The quarter ended April 1, 2012 was a 14-week period while the quarter ended March 27, 2011 was a 13-week period. The net loss for the first quarter of 2012 was $(2,579) compared to net earnings of $17,196 for the first quarter of 2011. Basic and diluted loss per share for the first quarter of 2012 were each $(0.02) compared to basic and diluted earnings per share in the first quarter of 2011 which were each $0.12. Net earnings for the quarter ended April 1, 2012 includes severance costs, net of tax, of $7,675, or $0.06 per share related to a restructuring of certain business units and functions.









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)


Consolidated net revenues for the quarter ended April 1, 2012 decreased approximately 3% to $648,850 compared to $671,986 for the quarter ended March 27, 2011. Consolidated net revenues were negatively impacted by foreign currency translation of approximately $8,500 for the quarter ended April 1, 2012 as the result of the stronger U.S. dollar in 2012 as compared to the first quarter of 2011. The following table presents net revenues by product category for the quarters ended April 1, 2012 and March 27, 2011.


 

2012

2011

% Change

 

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

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

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

Net revenues

     

    Boys

$  302,759

290,232

4%

    Games

181,916

200,352

-9%

    Girls

93,236

113,156

-18%

    Preschool

69,939

68,236

2%

    Other

1,000

10

-%

 

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

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

 
 

$  648,850

671,986

 
 

========

========

 



Increased net revenues in the boys and preschool categories were offset by declines in the games and girls categories. Net revenues in the boys category increased 4% as a result of higher sales of MARVEL and STAR WARS products, as well as KRE-O, which was introduced during the second quarter of 2011, which offset lower sales of NERF and TRANSFORMERS. BEYBLADE net revenues were flat in 2012 compared to 2011. Although TRANSFORMERS revenues declined in the boys category in 2012 compared to 2011, overall TRANSFORMERS brand revenues were flat in 2012 compared to 2011 due to increased TRANSFORMERS revenues in the preschool and games categories. The preschool category grew 2% as the first quarter of 2012 includes sales of SESAME STREET. PLAYSKOOL RESCUE HEROS also contributed to the growth in this category in 2012 compared to 2011. The games category decreased by 9% as growth in MAGIC: THE GATHERING, DUEL MASTERS, STAR WARS and BATTLESHIP was more than offset by declines in other board games. The girls category decreased by 18% primarily due to lower sales of FURREAL FRIENDS and LITTLEST PET SHOP, partially offset by growth in MY LITTLE PONY.


Operating profit for the quarter ended April 1, 2012 was $15,726 compared to $48,923 for the quarter ended March 27, 2011. The decrease in operating profit in 2012 is primarily due to the lower net revenues in 2012 compared to 2011, severance costs of $11,100, and an increase in certain expenses as a result of the extra week in the first quarter of 2012 compared to 2011.







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)


Most of the Company's revenues and operating profit are derived from its three principal business segments which are discussed below: the U.S. and Canada segment, the International segment and the Entertainment and Licensing segment. The following table presents net external revenues and operating profit (loss) data for the Company's three principal segments for the quarters ended April 1, 2012 and March 27, 2011.


 

2012

2011

% Change

 

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

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

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

Net revenues

     

   U.S. and Canada segment

$ 328,985 

391,152

-16%

   International segment

289,729 

254,332

14%

   Entertainment and Licensing segment

29,336 

24,641

19%

         

Operating profit (loss)

     

   U.S. and Canada segment

$  14,411 

41,012 

-65%

   International segment

(5,084)

(1,733)

-193%

   Entertainment and Licensing segment

7,738 

5,431 

42%



U.S. AND CANADA SEGMENT

The U.S. and Canada segment’s net revenues for the quarter ended April 1, 2012 decreased 16% to $328,985 from $391,152 for the quarter ended March 27, 2011. A portion of the decrease in net revenues in 2012 compared to 2011 is due to the Company’ s plan to better align shipments with the timing of consumer demand, which is expected to shift a higher percentage of shipments to the second half of 2012 as compared to previous years. The decrease in 2012 was also due in part to lower sales in the boys, girls and games categories partially offset by increased sales in the preschool category. The decrease in the boys category was primarily due to lower sales of TRANSFORMERS and NERF products. The decrease in TRANSFORMERS sales was primarily due to shipments of TRANSFORMERS products in the first quarter of 2011 related to the motion picture release of TRANSFORMERS: DARK OF THE MOON . Lower sales of BEYBLADE products also contributed to the category’s decline. These decreases were partially offset by increased sales of MARVEL products as a result of products shipped related to the motion picture, THE AVENGERS, which is expected to be released in May 2012. The decrease in the girls category is primarily due to lower sales of FURREAL FRIENDS products. The decrease in the games category was primarily due to lower sales of board games partially offset by higher sales of MAGIC: THE GATHERING and DUEL MASTERS products. Increased net revenues in the preschool category were primarily due to sales of SESAME STREET products, for which there were no sales in the first quarter of 2011.


U.S. and Canada segment operating profit decreased to $14,411, or 4.4% of net revenues, for the quarter ended April 1, 2012 compared to $41,012, or 10.5% of net revenues, for the quarter ended March 27, 2011. The decrease in operating profit for the quarter was primarily the result of the lower revenues discussed above, as well as severance costs in connection with the reorganization and right sizing of the organization and an extra week of certain expenses as 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)


first quarter of 2012 had fourteen weeks compared to thirteen weeks in 2011. In addition to the revenue decline, severance costs and higher expense level due to the extra week in 2012 compared to 2011, operating profit margin for the quarter was further negatively impacted by a change in product mix and increased marketing and advertising as a percentage of net revenues.


INTERNATIONAL SEGMENT

International segment net revenues increased by 14% to $289,729 for the quarter ended April 1, 2012 from $254,332 for the quarter ended March 27, 2011. International segment net revenues were negatively impacted by foreign currency translation of approximately $8,200 as a result of the stronger U.S. dollar in the first quarter of 2012 as compared to the first quarter of 2011. Net revenues increased in each of the major geographic regions in the first quarter 2012 compared to 2011. Net revenues in Latin America grew 23%, and Europe and Asia Pacific each increased 13% in 2012 compared to 2011. The increase in net revenues for the quarter resulted from higher sales in the boys and games categories, which more than offset flat sales in the preschool category and a decline in the girls category. The increase in the boys category was primarily the result of higher sales of STAR WARS, MARVEL, BEYBLADE and KRE-O products partially offset by lower sales of NERF products. Increased sales of STAR WARS and MARVEL products are attributable to the 3D motion picture re-release of STAR WARS: EPISODE 1 – THE PHANTOM MENACE in February 2012 and the expected motion picture release of THE AVENGERS in May 2012, respectively. The games category was primarily driven by increased sales of MAGIC: THE GATHERING and STAR WARS products. The decline in the girls category was primarily due to lower sales of LITTLEST PET SHOP products, partially offset by higher sales of MY LITTLE PONY products, which benefited from global television programming.


International segment operating loss was $5,084, or 1.8% of net revenues, for the quarter ended April 1, 2012 compared to an operating loss of $1,733, or 0.7% of net revenues, for the quarter ended March 27, 2011. Foreign currency translation did not have a material impact on the operating loss for the first quarter of 2012. The impact of the higher sales discussed above was partially offset by higher selling, distribution and administration expenses, including further investments in emerging markets, primarily Russia, severance costs and certain other one-time costs.


ENTERTAINMENT AND LICENSING SEGMENT

Entertainment and Licensing segment net revenues for the quarter ended April 1, 2012 increased 19% to $29,336 from $24,641 for the quarter ended March 27, 2011. The increase was primarily due to higher revenues from the global distribution of television programming compared to the first quarter of 2011 as well as increased licensing revenues related to TRANSFORMERS.


Entertainment and Licensing segment operating profit increased to $7,738 for the quarter ended April 1, 2012 compared to $5,431 for the quarter ended March 27, 2011, primarily due to the increase in net revenues. While THE HUB is a component of the Company’s television operations, the Company’s 50% share in the earnings (loss) from the joint venture is included


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)


in other (income) expense and therefore is 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 April 1, 2012 and March 27, 2011.  


 

2012

 

2011

 

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

 

-----------

Cost of sales

39.6%

 

39.8%

Royalties

8.1   

 

6.4   

Product development

6.9   

 

6.8   

Advertising

10.0   

 

9.9   

Amortization of intangibles

1.7   

 

1.6   

Program production cost amortization

0.5   

 

0.5   

Selling, distribution and administration

30.8   

 

27.7   



Cost of sales decreased to $257,036, or 39.6% of net revenues, for the quarter ended April 1, 2012 from $267,246, or 39.8% of net revenues, for the quarter ended March 27, 2011. The decrease in cost of sales as a percentage of net revenues is primarily due to the mix of products sold in the first quarter of 2012 compared to the first quarter of 2011 partially offset by the timing of sales of closeout inventory in 2012 compared to 2011. Cost of sales in the first quarter of 2012 was also negatively impacted by severance costs of approximately $2,800.


Royalty expense for the quarter ended April 1, 2012 increased to $52,434, or 8.1% of net revenues, from $43,226, or 6.4% of net revenues, for the quarter ended March 27, 2011. Higher royalty expense was the result of increased sales of royalty-bearing entertainment-based products, particularly sales of STAR WARS and MARVEL products, as well as continued strong revenues from BEYBLADE and TRANSFORMERS.


Product development expenses for the quarter ended April 1, 2012 totaled $44,926, or 6.9% of net revenues, compared to $45,818, or 6.8% of net revenues, for the quarter ended March 27, 2011. Product development expenses in 2012 included approximately $2,400 of severance costs and higher employee costs due to the extra week in the first quarter of 2012 compared to 2011.


Advertising expense for the quarter ended April 1, 2012 totaled $65,045, or 10.0% of net revenues, compared to $66,537, or 9.9% of net revenues, for the quarter ended March 27, 2011. For the full year 2011, advertising expense as a percentage of net revenues totaled 9.7%. The increase in advertising as a percentage of net revenues in 2012 reflects the Company’s strategy of increasing its spending in consumer-facing marketing and advertising.  



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)


Amortization of intangibles remained flat at $10,655 or 1.7% of net revenues in the first quarter of 2012 compared to $10,696 or 1.6% of net revenues in the first quarter of 2011.


Program production cost amortization for the quarter ended April 1, 2012 remained flat at $3,138, or 0.5% of net revenues compared to $3,117, or 0.5% of net revenues, in the first quarter of 2011.  Program production costs are capitalized as incurred and amortized using the individual-film-forecast method.


Selling, distribution and administration expenses increased to $199,890, or 30.8% of net revenues for the quarter ended April 1, 2012, from $186,423, or 27.7% of net revenues, for the quarter ended March 27, 2011. The increase in selling, distribution and administration expenses for the quarter includes approximately $5,900 of severance cost, as well as higher costs in certain emerging markets, including Russia. Further, certain fixed expenses were higher due to the inclusion of an extra week in the first quarter of 2012 compared to 2011.


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

Interest expense for the first quarter of 2012 increased to $23,112 from $21,375 in the first quarter of 2011. The increase in interest expense reflects higher average short-term borrowings as well as the impact of the extra week of interest expense on long-term debt in the first quarter of 2012 compared to 2011.


Interest income for the quarter ended April 1, 2012 was $2,475 compared to $1,412 for the quarter ended March 27, 2011. The increase in interest income for the quarter was primarily the result of higher average effective interest rates and, to a lesser extent, higher volumes of interest-bearing cash and cash equivalents and the impact of the extra week in the first quarter of 2012 compared to 2011.


Other (income) expense, net, was $(45) for the first quarter of 2012, compared to $6,122 for the first quarter of 2011, and was favorably impacted by foreign exchange gains in 2012 compared to losses in 2011, as well as higher investment earnings. Foreign currency exchange gains of $(1,704) for the quarter ended April 1, 2012 compared to foreign currency exchange losses of $3,564 for the quarter ended March 27, 2011. 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 2012, the Company recognized a loss of $1,786 compared to a loss of $2,031 in the first quarter of 2011.


INCOME TAXES

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

Income tax benefit for the quarter ended April 1, 2012 was $2,287 on pretax loss of $4,866 compared to income tax expense of $5,642 on pretax earnings of $22,838 for the quarter ended March 27, 2011.  Both quarters, as well as the full year 2011, are impacted by certain discrete tax events including the accrual of potential interest and penalties on certain tax positions.  Absent these items, the adjusted tax rate for the first quarter of 2012 and 2011 was 26.0% and 28.0%, respectively.  The adjusted rate of 26.0% for the three months ended April 1, 2012 is comparable to the full year 2011 adjusted rate of 26.2%.



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)


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. 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. 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.


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 2011 the Company funded its operations and liquidity needs primarily through cash flows from operations, and, when needed, using borrowings under its commercial paper program and available lines of credit.


During the first quarter of 2012, the Company continued to fund its working capital needs primarily through cash flows from operations and, when needed, 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 2012. 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.


As of April 1, 2012 the Company’s cash and cash equivalents totaled $883,824, substantially all of which is held outside of the United States. Deferred income taxes have not been provided on the majority of undistributed earnings of international subsidiaries as the majority of such


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 are indefinitely reinvested by the Company. Such international cash balances are not available to fund U.S. cash requirements unless the Company decided to repatriate such funds. The Company currently has sufficient sources of cash in the U.S. to fund U.S. cash requirements without the need to repatriate any funds. If the Company’s assessment of indefinite reinvestment of international earnings changes, it would be required to accrue for any additional income taxes representing the difference between the tax rates in the U.S. and the applicable tax jurisdiction of the international subsidiaries. If the Company repatriated the funds from its international subsidiaries, it would then be required to pay the additional U.S. income tax. The majority of the Company’s cash and cash equivalents held outside of the U.S. as of April 1, 2012 is denominated in the U.S. dollar.


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 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 2012 was $284,738 compared to net cash provided of $276,494 in the first quarter of 2011. Accounts receivable decreased 18% to $456,580 at April 1, 2012 from $558,980 at March 27, 2011. The accounts receivable balance at April 1, 2012 includes a decrease of approximately $13,700 as a result of a stronger U.S. dollar at April 1, 2012 as compared to March 27, 2011. Absent the impact of foreign exchange, accounts receivable decreased 16% from the first quarter of 2011 to the first quarter of 2012. The decrease was primarily due to lower net revenues in 2012 compared to 2011, as well as increased collections. Days sales outstanding decreased to 63 days at April 1, 2012 compared to 75 days at March 27, 2011 reflecting the timing of shipments in 2012 compared to 2011, as well as the impact of the extra week in 2012 compared to 2011, both of which resulted in increased collections.  


Inventories decreased to $396,981 at April 1, 2012 from $401,309 at March 27, 2011. The inventory balance at April 1, 2012 includes a decrease of approximately $9,200 as a result of a stronger U.S. dollar at April 1, 2012 compared to March 27, 2011. Excluding the impact of foreign exchange, the increase in inventory is primarily due to growth in emerging markets.


Prepaid expenses and other current assets increased to $281,517 at April 1, 2012 compared to $173,070 at March 27, 2011. The prepaid expenses and other current assets balance at April 1, 2012 includes a decrease of approximately $4,800 as a result of a stronger U.S. dollar at April 1, 2012 as compared to March 27, 2011. Absent the impact of foreign exchange, prepaid expenses and other current assets increased approximately $113,200, primarily due to higher non-income based tax receivables. These tax receivables are primarily related to value added taxes in Europe that are due to the Company, primarily in France and Spain, which are expected to be collected during the remainder of 2012. The increase is primarily due to changes


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)


in the legal structure of the Company’s European business, which have resulted in larger outstanding balances and longer period for reimbursement.


Accounts payable and accrued expenses decreased to $554,700 at April 1, 2012 from $588,609 at March 27, 2011. The accounts payable and accrued expenses balance at April 1, 2012 includes a decrease of approximately $4,400 as a result of a stronger U.S. dollar at April 1, 2012 compared to March 27, 2011. The decrease primarily relates to lower accrued payroll as a result of the timing of the end of the quarter, decreased unrealized losses on the Company’s foreign exchange contracts due to the stronger U.S. dollar at April 1, 2012 and lower accounts payable balances. These decreases were partially offset by higher accrued dividends due to the increased dividend rate in 2012 as well as higher accrued severance costs.


Property, plant, and equipment, net decreased to $222,821 at April 1, 2012 from $238,403 at March 27, 2011. The decrease in property, plant, and equipment, net is primarily due to depreciation. Goodwill and other intangible assets, net decreased to $931,631 at April 1, 2012 from $965,253 at March 27, 2011. This decrease is primarily due to amortization of intangibles.


Other assets increased to $723,783 at April 1, 2012 from $675,904 at March 27, 2011. Other assets at April 1, 2012 included an increase of approximately $32,000 related to television programming from March 27, 2011. 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 related to the program. In addition to television programming, long-term royalty advances, primarily related to the agreement with THE HUB, contributed to the increase.  These increases were partially offset by a decrease in the Company’s equity investment in THE HUB which declined to $334,976 at April 1, 2012 from $352,581 at March 27, 2011. The decrease was due to the Company’s share of THE HUB’s losses during the past twelve months, as well as cash distributions related to income taxes during the second quarter of 2011 and the first quarter of 2012 totaling approximately $11,000.


Net cash utilized by investing activities was $16,361 in the first quarter of 2012 compared to $24,433 in the first quarter of 2011. Additions to property, plant and equipment were $23,034 in 2012 compared to $22,396 in 2011. Other investing activities for the quarter ended April 1, 2012 also includes a cash distribution from THE HUB of approximately $7,100 related to income taxes.


Net cash utilized by financing activities was $30,445 in the first quarter of 2012 compared to $57,395 in the first quarter of 2011. Cash payments related to purchases of the Company’s common stock were $4,644 compared to $58,320 in the first quarter of 2011. At April 1, 2012, the Company had $222,269 remaining available under a $500,000 May 2011 Board of Directors share repurchase authorization. Dividends paid were $38,593 for the quarter ended April 1, 2012 compared to $34,297 for the quarter ended March 27, 2011. Dividends paid reflect dividends declared during the fourth quarters of 2011 and 2010 at rates of $0.30 per share and $0.25 per share, respectively. Repayments of short-term borrowings were $10,137 in the first quarter of 2012 compared to proceeds from short-term borrowings of $23,622 in the first quarter of 2011.

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)


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 available amount under the revolving credit agreement, discussed below. If, for any reason, the Company is unable to access the commercial paper market, the Company would expect to utilize the revolving credit agreement to meet the Company’s short-term liquidity needs. At April 1, 2012 and March 27, 2011, the Company had $160,100 and $25,500, respectively, in borrowings outstanding related to the Program.


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 April 1, 2012. The Company had no borrowings outstanding under its committed revolving credit facility at April 1, 2012. However, the Company had letters of credit outstanding under this facility of approximately $1,100 at April 1, 2012. Amounts available

and unused under the committed line at April 1, 2012 were approximately $498,900. 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 April 1, 2012 were approximately $338,800. The Company also has other uncommitted lines from various banks, of which approximately $32,700 was utilized at April 1, 2012. Of the amount utilized under the uncommitted lines, approximately $11,000 and $21,800 represent outstanding borrowings and letters of credit, respectively.


 

The Company has principal amounts of long-term debt at April 1, 2012 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 $189,100 and purchase commitments of $312,615 outstanding at April 1, 2012. Letters of credit and similar instruments include $166,200 of bonds related to the defense of tax assessments in Mexico. These assessments relate to transfer pricing assessments 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 25, 2011, did not materially change outside of payments made in the normal course of business and as otherwise set forth in this

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)


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 25, 2011, 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 $96,896 at April 1, 2012, 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.


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 25, 2011.


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, other currencies in Europe, 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 2012 through 2013 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

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)


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 April 1, 2012, these contracts had net unrealized losses of $4,275, of which $1,772 are recorded in prepaid expenses and other current assets, $7 are recorded in other assets, $4,059 are recorded in accrued liabilities and $1,995 are recorded in other liabilities. Included in accumulated other comprehensive (loss) earnings at April 1, 2012 are deferred losses, net of tax, of $472, related to these derivatives.


At April 1, 2012, the Company had fixed rate long-term debt, excluding fair value adjustments, of $1,384,895. Also at April 1, 2012, 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 April 1, 2012, these contracts had a fair value of $16,047, 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 April 1, 2012. 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.


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 April 1, 2012, 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 $197 million in aggregate (including interest, penalties, and inflation updates), relate to 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 2004 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; and the 2004 assessment in July 2011. The Company is challenging the 2005 assessment 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 2004, 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 April 1, 2012, bonds totaling approximately $166 million (at April 1, 2012 exchange rates) have been posted related to the 2000 through 2004 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 2005 assessment as the Company is challenging it through administrative appeals.


 

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 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, expectations for achieving the Company’s financial goals and other objectives and anticipated uses of cash and 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 25, 2011 (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 affecting the U.S., Europe, or any of the Company’s other major markets 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;

·

unexpected costs, difficulties or delays associated with the creation of Hasbro’s Gaming Center of Excellence in Rhode Island and our plans to reinvent our gaming business;

·

delays, increased costs or difficulties associated with the development and release of our planned entertainment-based brands for which we offer products;

·

the concentration of the Company's customers, potentially increasing the negative impact to the Company of difficulties experienced by any of the Company’s customers or changes by the Company’s customers in their purchasing or selling patterns;

·

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 retailers’ potential decisions to lower the inventories they are willing to carry, even if it results in lost sales, as well as the concentration of the Company's revenues in the second half and fourth quarter of the year, which coupled with reliance by retailers on quick response inventory management techniques, 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;

·

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;

·

failure to operate our information systems and implement new technology effectively, as well as maintain the systems and processes designed to protect our electronic data;

·

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

·

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 2012
12/26/11 – 1/29/12


-


-


-


$227,269,086

February 2012
1/30/12 – 3/4/12


    13,000


$35.35


    13,000


$226,809,595

March 2012
3/5/12 – 4/1/12


   126,656


$35.85


   126,656


$222,269,154

Total

   139,656

$35.80

   139,656

$222,269,154


On May 19, 2011, the Company announced that its Board of Directors authorized the repurchase of $500 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.   Mine Safety Disclosures.


Not applicable.


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. (Applicable to Duncan Billing, David D.R. Hargreaves, John Frascotti and Deborah Thomas and certain other employees of the Company.)

     
 

10.2

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

     
 

10.3

Form of Contingent Stock Performance Award under the Hasbro, Inc. Restated 2003 Stock Incentive Performance Plan. (Applicable to Duncan Billing, David D.R. Hargreaves, John Frascotti and Deborah Thomas and certain other employees of the Company.)

     
 

10.4

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

     
 

10.5

Hasbro, Inc. 2012 Performance Rewards Program.

     
 

10.6

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

     
 

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

     
 

101.DEF

XBRL Taxonomy Extension Definition 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 10, 2012

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 April 1, 2012


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. (Applicable to Duncan Billing, David D.R. Hargreaves, John Frascotti and Deborah Thomas and certain other employees of the Company.)

   

10.2

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

   

10.3

Form of Contingent Stock Performance Award under the Hasbro, Inc. Restated 2003 Stock Incentive Performance Plan. (Applicable to Duncan Billing, David D.R. Hargreaves, John Frascotti and Deborah Thomas and certain other employees of the Company.)

   

10.4

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

   

10.5

Hasbro, Inc. 2012 Performance Rewards Program.

   

10.6

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

   

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

   

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

   


* Furnished herewith.



Exhibit 10.1

HASBRO, INC.

RESTATED 2003 STOCK INCENTIVE PERFORMANCE PLAN

STOCK OPTION AGREEMENT FOR EMPLOYEES

[               ], 2012 GRANT


AGREEMENT, made effective as of [               ], 2012, 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, contingent upon and in consideration for the Optionee having executed and delivered to the Company’s designated contact no later than [               ], 2012 a Non-Competition, Non-Solicitation and Confidentiality Agreement between the Optionee and the Company in the form provided to the Optionee by the Company, the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board") acting in accordance with the provisions of the Plan is granting 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.

Contingent upon and in consideration for the Optionee having executed and delivered to the Company’s designated contact no later than [               ], 2012 a Non-Competition, Non-Solicitation and Confidentiality Agreement (the “Non-Compete Agreement”) between the Optionee and the Company in the form provided to the Optionee by the Company, the Company hereby grants to the Optionee effective on [               ], 2012, 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 Non-Compete Agreement 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.  For the avoidance of doubt, if the Optionee has not executed and delivered to the Company’s designated contact the Non-Compete Agreement on or before [               ], 2012, the Option represented by this Agreement will never take effect and will be null and void.

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:

*

A year of "Credited Service" shall mean a calendar year in which the Optionee is paid for at least 1,000 hours of service (as defined in the frozen Hasbro Pension Plan) as an employee of the Company or of a subsidiary of the Company.  A Optionee does not need to be, or have been, a participant in the Hasbro Pension Plan.

*

"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




Exhibit 10.2

HASBRO, INC.

RESTATED 2003 STOCK INCENTIVE PERFORMANCE PLAN

STOCK OPTION AGREEMENT FOR EMPLOYEES

[               ], 2012 GRANT


AGREEMENT, made effective as of [               ], 2012, 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 [               ], 2012, 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:

*

A year of "Credited Service" shall mean a calendar year in which the Participant is paid for at least 1,000 hours of service (as defined in the frozen Hasbro Pension Plan) as an employee of the Company or of a subsidiary of the Company.  A Participant does not need to be, or have been, a participant in the Hasbro Pension Plan.

*

"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 10.3

HASBRO, INC.

RESTATED 2003 STOCK INCENTIVE PERFORMANCE PLAN

CONTINGENT STOCK PERFORMANCE AWARD

[                ], 2012 GRANT


AGREEMENT, made effective as of [               ], 2012, 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, contingent upon and in consideration for the Participant having executed and delivered to the Company’s designated contact no later than [               ], 2012 a Non-Competition, Non-Solicitation and Confidentiality Agreement between the Participant  and the Company in the form provided to the Participant by the Company, the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"), acting in accordance with the provisions of the Plan, is granting to Participant a contingent stock performance award dated [               ], 2012 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 26, 2011 and ending on December 28, 2014 (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.

Contingent upon and in consideration for the Participant having executed and delivered to the Company’s designated contact no later than [               ], 2012 a Non-Competition, Non-Solicitation and Confidentiality Agreement (the “Non-Compete Agreement”) between the Participant and the Company in the form provided to the Participant by the Company, the Company hereby grants to the Participant effective on [               ], 2012, 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 in the Non-Compete Agreement 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.  For the avoidance of doubt, if the Participant has not executed and delivered to the Company’s designated contact the Non-Compete Agreement on or before [               ], 2012, the Award represented by this Agreement will never take effect and will be null and void.

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 (whether paid for in cash, shares of the Company’s stock, other property, or any combination thereof) 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 and the Committee retains this discretion notwithstanding Participant’s execution and delivery of the Non-Compete Agreement.  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, 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:

*

A year of "Credited Service" shall mean a calendar year in which the Participant is paid for at least 1,000 hours of service (as defined in the frozen Hasbro Pension Plan) as an employee of the Company or of a subsidiary of the Company.  A Participant does not need to be, or have been, a participant in the Hasbro Pension 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













Exhibit 10.4

HASBRO, INC.

RESTATED 2003 STOCK INCENTIVE PERFORMANCE PLAN

CONTINGENT STOCK PERFORMANCE AWARD

[                   ] , 2012 GRANT


AGREEMENT, made effective as of [

], 2012, 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 [                    ], 2012 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 26, 2011 and ending on December 28, 2014 (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 [

], 2012, 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 (whether paid for in cash, shares of the Company’s stock, other property, or any combination thereof) 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:

*

A year of "Credited Service" shall mean a calendar year in which the Participant is paid for at least 1,000 hours of service (as defined in the frozen Hasbro Pension Plan) as an employee of the Company or of a subsidiary of the Company.  A Participant does not need to be, or have been, a participant in the Hasbro Pension 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 10.5



Hasbro, Inc .


Performance Rewards Program

 

January 1, 2012




















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.

   
 

§

Provides the guidelines for the establishment of 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 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 employees with the interest of the Company’s shareholders.


1.2.1

General Guideline

No 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

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.  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 are eligible to earn when they and their applicable business units perform as expected (i.e., achieve their goals and objectives).  Incentive target awards are determined by salary band and vary by country.  On an annual basis, the Company will communicate target incentive award information to each eligible plan participant.


2.2

Maximum Incentive Award

Under this incentive plan the maximum award for employees below band WW80 is 200% of the target award.  The maximum award for employees in band WW80 or above is 300% of the target award.



3.0

Measures of Performance for 2012


3.1

Establishing Company and Business Area or Region Performance Targets

In the first quarter of the plan year, the Company’s senior management establishes the level of target performance for the year associated with each of the Company and business area or region performance metrics.  Those target levels are 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 company performance.  For 2012,  the Company component is measured by Sales, Operating Margin, and Returns.  Overall Company performance is determined by individually assessing performance against goal for each metric, applying the acceleration/deceleration scale, weighting each metric and 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%

Operation Margin

Operating Profit divided by Net Revenues

40%

Returns (Free Cash Flow)

Net cash provided by operating activities – Capital Expenditures

20%


Each metric, before the acceleration/deceleration scale is applied, must achieve a threshold performance of 80% or no award is payable under the metric that did not achieve threshold performance.


For example:

If sales is achieved at 100% of target (which results in 100% payout based on the acceleration/deceleration scale) and operating margin is achieved at 85% of target (which results in at 70% payout) but returns does not reach threshold performance, then overall Company performance will only pay out on sales and operating margin.  The aggregate weighted payout would be:


(100% x 40%) + (70% x 40%) + (0% x 20%) = 68%

Corporate payout would be 68%.



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.  Unlike the Company component where an individual metric’s failure to reach the threshold performance of 80% does not impact another individual metric’s ability to reach the threshold performance and payout, for the business area or region component, the individual performance of each metric must meet a minimum threshold performance of 80%, before the acceleration/deceleration scale is applied, or no award is payable for the business area or region component. The weighting and definition of the business area or region component are:


Measure

Definition

% of Company Measure

Sales (net revenues) Growth

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

50%

Operation Margin

Operating Profit divided by Net Revenues

50%


Those jobs, which are corporate in nature will comprise the “Corporate” business area or region and the performance for this component will be based on overall Company performance as described in section 3.2, rather than the business area or region measures outlined above in this Section 3.4.  


3.4.1

Bonus formula metrics for employees in bands WW70 and below 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 employees in the “Corporate” business area or region) 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 WW80 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 WW80 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").  Each metric of the business area or region (net revenue and operating margin) must individually achieve a minimum performance of 80% against target to qualify for business area or region component payout.  If one metric achieves 80% or higher, and the other metric does not, the business area or region component payout will be 0%.  An acceleration/deceleration scale will then be applied to each individual metric as follows to develop the payout for each metric:


Performance %

Payout Scale %


< 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 award

111%

134%

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

127%+

200%

Maximum payout


In contrast, for the Company component, the 80% threshold is applied to each metric before the acceleration/deceleration scale is applied.  Each metric must then achieve a threshold performance of 80% or no award is payable under the metric that did not achieve the threshold performance.


The payout attributable to each metric will then be weighted and added to arrive at the overall formula payout.


Illustrative examples of the development of a formula payout for a business area or region component are as follows:


If business area or region revenue is achieved at 90% of target (which results in an 80% payout based on the acceleration/deceleration scale) and operating margin is at 65% (which is below 80% threshold), the business unit will not pay out.   


or


If business area or region revenue is achieved at 90% target (which results in an 80% payout), and operating margin is achieved at 85% target (which results in a 70% payout) the aggregate weighted payout is:

                        (80% x 50%) + (70% x 50%) = 75% business unit payout


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.


4.5

Management Review


Payment of any award to an employee is subject to management’s review.


§

For purposes of the PRP, management has the ability to review the proposed payout of any award under the PRP to an eligible plan participant and to determine whether such proposed payout should be adjusted.   In completing this review, management has the option of providing a zero value payout to the employee regardless of Company, business area, regional or individual performance.  For participants that do not receive an award or that receive a reduced 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.



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

Administration of the Plan


6.1

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.


6.2

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, 2013.  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.


6.3

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.


6.4

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 10.6

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 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 10, 2012

 
   
 

/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 10, 2012

 
   
 

/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 April 1, 2012, 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 10, 2012



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 April 1, 2012, 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 10, 2012



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.