e424b2
The
information in this preliminary prospectus supplement and the
accompanying prospectus is not complete and may be changed. This
preliminary prospectus supplement and the accompanying
prospectus are not an offer to sell these securities and are not
soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
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Filed Pursuant to Rule 424(b)(2)
Registration Statement
No. 333-145947
Subject
to Completion
Preliminary Prospectus Supplement Dated March 8,
2010
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 10, 2007)
$
Hasbro, Inc.
% Notes
due
We are offering $ million
aggregate principal amount of %
notes
due .
We will pay interest on the notes
on
and
of each year,
beginning ,
2010. The notes will mature
on , .
We may redeem the notes in whole or in part at any time at the
applicable redemption prices set forth under Description
of the Notes Optional Redemption. If we
experience a change of control repurchase event, we may be
required to offer to purchase the notes from holders.
The notes will be senior unsecured obligations of our company
and will rank equally in right of payment with all of our other
senior unsecured indebtedness from time to time outstanding.
There is no sinking fund for the notes. The notes will be issued
only in registered form in denominations of $2,000 and integral
multiples of $1,000.
Investing in the notes involves risks that are described
under Risk Factors beginning on
page S-7
of this prospectus supplement.
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Per Note
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Total
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Public offering price(1)
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%
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$
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Underwriting discount
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Proceeds, before expenses, to us(1)
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(1) Plus accrued interest, if any, from
March , 2010.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the notes
or passed upon the adequacy or accuracy of this prospectus
supplement or the accompanying prospectus. Any representation to
the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only
through The Depository Trust Company for the accounts of
its participants, including Euroclear Bank S.A./N.V. as operator
of the Euroclear System, and Clearstream Banking,
société anonyme, on or about
March , 2010.
Joint Book-Running Managers
The date of this prospectus supplement is
March , 2010.
No person has been authorized by us to provide any
information or to make any representations other than those
contained in this prospectus supplement, the accompanying
prospectus or incorporated by reference in this prospectus
supplement or the accompanying prospectus. You should carefully
evaluate the information provided by us in light of the total
mix of information available to you, recognizing that we can
provide no assurance as to the reliability of any information
not contained in this prospectus supplement, the accompanying
prospectus or incorporated by reference in this prospectus
supplement or the accompanying prospectus. We are not making an
offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. Unless otherwise indicated, you
should assume that the information contained or incorporated by
reference in this prospectus supplement and the accompanying
prospectus is accurate as of the date on the front of this
prospectus supplement only. Our business, financial condition,
results of operations and prospects may have changed since that
date.
TABLE OF
CONTENTS
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Prospectus Supplement
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S-ii
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S-1
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S-7
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S-19
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S-19
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S-20
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S-21
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S-29
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S-34
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S-36
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Prospectus
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ABOUT THIS
PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which contains the terms of this offering of notes.
The second part is the prospectus dated September 10, 2007,
which is part of our Registration Statement on
Form S-3.
This prospectus supplement may add to, update or change the
information in the accompanying prospectus. If information in
this prospectus supplement is inconsistent with information in
the accompanying prospectus, this prospectus supplement will
apply and will supersede that information in the accompanying
prospectus.
It is important for you to read and consider all information
contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus in making your
investment decision. You should also read and consider the
information in the documents to which we have referred you in
Where You Can Find More Information in the
accompanying prospectus.
No person is authorized to give any information or to make any
representations other than those contained or incorporated by
reference in this prospectus supplement or the accompanying
prospectus and, if given or made, such information or
representations must not be relied upon as having been
authorized. This prospectus supplement and the accompanying
prospectus do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the
securities described in this prospectus supplement or an offer
to sell or the solicitation of an offer to buy such securities
in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this prospectus supplement and
the accompanying prospectus, nor any sale made hereunder, shall
under any circumstances create any implication that there has
been no change in our affairs since the date of this prospectus
supplement, or that the information contained or incorporated by
reference in this prospectus supplement or the accompanying
prospectus is correct as of any time subsequent to the date of
such information.
The distribution of this prospectus supplement and the
accompanying prospectus and the offering of the notes in certain
jurisdictions may be restricted by law. This prospectus
supplement and the accompanying prospectus do not constitute an
offer, or an invitation on our behalf or the underwriters or any
of them, to subscribe to or purchase any of the notes, and may
not be used for or in connection with an offer or solicitation
by anyone, in any jurisdiction in which such an offer or
solicitation is not authorized or to any person to whom it is
unlawful to make such an offer or solicitation. See
Underwriting.
In this prospectus supplement and the accompanying prospectus,
unless otherwise stated, references to we,
us and our refer to Hasbro, Inc. and its
subsidiaries.
In this prospectus supplement, unless otherwise stated or the
context otherwise requires, references to the
indenture refer to the indenture dated as of
March 15, 2000, between us and The Bank of Nova Scotia
Trust Company of New York, as trustee, as supplemented by
the third supplemental indenture between us and the trustee.
Capitalized names of brands and products are service marks,
trademarks or trade names of Hasbro, Inc. or other persons.
S-i
FORWARD-LOOKING
STATEMENTS
This prospectus supplement, the accompanying prospectus and the
documents incorporated herein by reference contain
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements may relate to such
matters as our anticipated financial performance or business
prospects in future periods, expected technological and product
developments, the expected timing of new product introductions
or our expectations concerning the future acceptance of products
by customers, the timing of entertainment releases, marketing
and promotional efforts, research and development activities,
liquidity, potential acquisitions or investments we may make,
and similar matters. Forward-looking statements are inherently
subject to risks and uncertainties. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. These statements may be identified
by the use of forward-looking words or phrases such as
anticipate, believe, could,
expect, intend, looking
forward, may, planned,
potential, should, will and
would or any variations of words with similar
meanings. We note that a variety of factors could cause our
actual results and experience to differ materially from the
anticipated results or other expectations expressed or
anticipated in our forward-looking statements. The factors
listed in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference, as well
as in our other filings with the Securities and Exchange
Commission, or the SEC, such as on
Forms 8-K,
10-Q and
10-K, are
illustrative and other risks and uncertainties may arise as are
or may be detailed from time to time in our public announcements
and in our filings with the SEC. Our forward-looking statements
speak only as of the dates on which they are made and we do not
undertake any obligation to update any forward-looking statement
to reflect events or circumstances after the date of the
statement. If we do update or correct one or more of these
statements, investors and others should not conclude that we
will make additional updates or corrections. For a further
description of the risks of an investment in the notes offered
hereby and our business, see Risk Factors below.
S-ii
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights selected information about us and
this offering. It may not contain all of the information that is
important to you in deciding whether to purchase the notes. We
encourage you to read the entire prospectus supplement, the
accompanying prospectus and the documents that we have filed
with the SEC that are incorporated by reference prior to
deciding whether to purchase the notes.
Hasbro,
Inc.
We are a worldwide leader in childrens and family leisure
time products and services with a broad portfolio of brands and
entertainment properties. As a brand-driven, consumer-focused
global company, Hasbro brings to market a wide range of toys,
games and licensed products, from traditional to high-tech and
digital, under well-known brand names such as TRANSFORMERS,
PLAYSKOOL, NERF, LITTLEST PET SHOP, MY LITTLE PONY, G.I. JOE,
TONKA, MILTON BRADLEY, PARKER BROTHERS, CRANIUM and WIZARDS OF
THE COAST. Our offerings encompass a broad variety of games,
including traditional board, card, hand-held electronic, trading
card, role-playing and DVD games, as well as electronic learning
aids and puzzles. Toy offerings include boys action
figures, vehicles and playsets, girls toys, electronic
toys, plush products, preschool toys and infant products,
electronic interactive products, creative play and toy related
specialty products. In addition, we license certain of our
trademarks, characters and other property rights to third
parties for use in connection with digital gaming, consumer
promotions, and for the sale of non-competing toys and games and
non-toy products. We also seek to expand awareness of our brands
through immersive entertainment experiences, including
television and movies. In 2009, we purchased a 50% interest in a
joint venture with Discovery Communications, Inc, or Discovery.
This joint venture operates a television network in the United
States dedicated to high-quality childrens and family
entertainment and educational programming.
Product
Categories
We market our brands under the following primary product
categories: (1) boys toys; (2) games and
puzzles; (3) girls toys; and (4) preschool toys.
Descriptions of these product categories are as follows:
Our boys toys category includes a wide range of core brand
offerings such as TRANSFORMERS and G.I. JOE action figures and
accessories, NERF sports and action products, as well as
entertainment-based licensed products based on popular movie,
television and comic book characters, such as STAR WARS and
MARVEL toys and accessories. In the action figure area, a key
part of our strategy focuses on the importance of reinforcing
the storyline associated with these products through the use of
media-based entertainment. In 2009, sales in our boys toys
category also benefited from major motion picture releases of
TRANSFORMERS: REVENGE OF THE FALLEN and G.I. JOE: THE RISE OF
COBRA. In addition, STAR WARS, SPIDER-MAN and TRANSFORMERS
products were each supported by animated television series. In
2010, the major motion picture IRON MAN 2 is expected to be
released based on the MARVEL character. In addition to marketing
and developing action figures and accessories for traditional
play, we also develop and market products designed for
collectors, which has been a key component of the success of the
STAR WARS brand. Other key boys brands include TONKA and
SUPERSOAKER.
Our games and puzzles category includes several well known
brands, including MILTON BRADLEY, PARKER BROTHERS, TRIVIAL
PURSUIT, CRANIUM, AVALON HILL and WIZARDS OF THE COAST. These
brand portfolios consist of a broad assortment of games for
children, tweens, families and adults. Core game brands include
MONOPOLY, BATTLESHIP, GAME OF LIFE, SCRABBLE, CHUTES AND
LADDERS, CANDY LAND, TROUBLE, MOUSETRAP, OPERATION, HUNGRY
HUNGRY HIPPOS, CONNECT FOUR, TWISTER, YAHTZEE, CRANIUM, JENGA,
SIMON, CLUE, SORRY!, RISK, BOGGLE, TRIVIAL PURSUIT, GUESS WHO?
and BOP IT!, as well as a line of puzzles for children and
adults, including the BIG BEN and CROXLEY lines of puzzles.
WIZARDS OF THE COAST offers trading card and role-playing games,
including MAGIC: THE GATHERING, DUEL MASTERS and
DUNGEONS & DRAGONS. We seek to keep our game brands
relevant through sustained marketing programs, such as FAMILY
GAME NIGHT, as well as by offering consumers new ways to
experience these brands.
S-1
In our girls toys category, we seek to provide a
traditional and wholesome play experience. Girls toy
brands include LITTLEST PET SHOP, MY LITTLE PONY, FURREAL
FRIENDS, BABY ALIVE and STRAWBERRY SHORTCAKE. In 2010, we will
seek to expand the MY LITTLE PONY brand through television
programming.
Our preschool toys category encompasses a range of products for
infants and preschoolers in the various stages of development.
Our preschool products include a portfolio of core brands
marketed primarily under the PLAYSKOOL trademark. The PLAYSKOOL
line includes such well-known products as MR. POTATO HEAD,
WEEBLES, SIT N SPIN and GLOWORM, along with a successful
line of infant toys including STEP START WALK N RIDE,
2-IN-1 TUMMY TIME GYM and BUSY BALL POPPER. Through our
preschool marketing programs, we seek to provide consumer
friendly information that assists parents in understanding the
developmental milestones their children will encounter as well
as the role each PLAYSKOOL product can play in helping children
to achieve these developmental milestones. In addition, our
preschool category also includes certain TONKA lines of trucks
and interactive toys and the PLAY-DOH brand. We recently entered
into a ten-year agreement with Sesame Workshop that provides us
with the licensed rights to produce products based upon the
SESAME STREET portfolio of characters, including ELMO, BIG BIRD,
and COOKIE MONSTER, among others, commencing in 2011.
Segments
Organizationally, our three principal segments are U.S. and
Canada, International, and Entertainment and Licensing. The
U.S. and Canada and International segments engage in the
marketing and selling of various toy and game products as listed
above. Our toy, game and puzzle products are developed by a
global development group. We also have a global marketing
function which establishes brand direction and assists the
segments in establishing certain local marketing programs. The
costs of these groups are allocated to the principal segments.
Our U.S. and Canada segment covers the United States and
Canada while the International segment primarily includes
Europe, the Asia Pacific region and Latin and South America. The
Entertainment and Licensing segment engages in the out-licensing
of our trademarks, characters and other brand and intellectual
property rights to third parties for non-competing products and
also conducts our movie, television and online entertainment
operations. In addition, our Global Operations segment is
responsible for arranging product manufacturing and sourcing for
the U.S. and Canada and International segments.
Our strategy is focused around re-imagining, re-inventing, and
re-igniting our brands globally through the development and
marketing of innovative toy and game products, providing
immersive entertainment experiences for our consumers, and
expansion of our brands into other consumer products. The
following is a discussion of each segment.
U.S. and
Canada
This segment engages in the marketing and sale of our product
categories in the United States and Canada. The U.S. and
Canada segments strategy is based on promoting our brands
through innovation and reinvention of toys and games. This is
accomplished through introducing new initiatives driven by
consumer and marketplace insights and leveraging opportunistic
toy and game lines and licenses. This strategy leverages off of
efforts to increase consumer awareness of our core brands
through entertainment experiences such as motion pictures,
television and publishing. Major 2009 brands and products
included TRANSFORMERS, LITTLEST PET SHOP, STAR WARS, NERF,
MONOPOLY, PLAYSKOOL, PLAY-DOH, MARVEL products, MAGIC: THE
GATHERING, G.I. JOE, MY LITTLE PONY and FURREAL FRIENDS.
International
The International segment engages in the marketing and sale of
our product categories to retailers and wholesalers in most
countries in Europe, Asia Pacific and Latin and South America
and through distributors in those countries where we have no
direct presence. In addition to growing core brands and
leveraging opportunistic toy lines and licenses, we seek to grow
our international business by continuing to expand into Eastern
Europe and emerging markets in Asia and Latin and South America.
In recent years, we expanded our
S-2
operations in Brazil, China, Russia, the Czech Republic, Romania
and Korea. We will continue to expand operations in emerging
markets in future years through the establishment of
subsidiaries or increased involvement with our existing
distributors. Key international brands for 2009 included
TRANSFORMERS, LITTLEST PET SHOP, MONOPOLY, TRIVIAL PURSUIT, STAR
WARS, PLAYSKOOL and MY LITTLE PONY.
Entertainment
and Licensing
Our Entertainment and Licensing segment includes our lifestyle
licensing, digital licensing, movie, television and online
entertainment operations. Our lifestyle licensing category seeks
to promote our brands through the out-licensing of our
intellectual properties to third parties for promotional and
merchandising uses in businesses which do not compete directly
with our own product offerings, such as apparel, publishing,
home goods and electronics.
Our digital licensing category seeks to promote our brands
through the out-licensing of our intellectual properties in the
digital area, such as for applications on mobile phones,
personal computers, and video game consoles. This is primarily
done through our long-term strategic alliance with Electronic
Arts Inc., or EA, which provides EA with the exclusive worldwide
rights to create digital games for all of these major platforms
based on most of our toy and game intellectual properties.
As noted above, in 2009, we purchased a 50% interest in a joint
venture with Discovery that operates a television network in the
United States. This network is dedicated to providing
high-quality childrens and family entertainment and
educational programming. The network is expected to have
approximately 60 million subscribers at relaunch. The
rebranded network, THE HUB, is expected to launch in the fall of
2010. To support this venture, we established a virtual
television studio that will produce programming for the network
as well as distribute this programming internationally. The
programming will primarily be based on our brands, but will also
include third-party branded content. The studio will have a
coordinated development process that aligns with the network.
In addition to the above, we also seek to promote and leverage
our brands through major motion pictures. In 2009, TRANSFORMERS:
REVENGE OF THE FALLEN and G.I. JOE: THE RISE OF COBRA were
released based on our brands. We also have a long-term strategic
relationship with Universal Pictures to produce at least three
motion pictures based on certain of our core brands, which gives
Universal Pictures an option to produce two additional movies.
The first movie under this relationship is expected to be
released in 2012.
Promotion of our brands through major motion pictures and
television programming provides our consumers with the ability
to experience our brands in a different format which we believe
can result in increased product sales, royalty revenues, and
overall brand awareness. To a lesser extent, we can also earn
revenue from our participation in the financial results of
motion pictures and related DVD releases and through the
distribution of television programming. Revenue from product
sales is a component of the U.S. and Canada and
International segments, while royalty revenues, including
revenues earned from movies and television programming, is
included in the Entertainment and Licensing segment.
Global
Operations
In our Global Operations segment, we manufacture and source
production of substantially all of our toy and game products. We
own and operate manufacturing facilities in East Longmeadow,
Massachusetts and Waterford, Ireland. Sourcing of our other
production is done through unrelated manufacturers in various
Far East countries, principally China, using a Hong Kong based
wholly-owned subsidiary operation for quality control and order
coordination purposes.
Corporate
Information
Hasbro, Inc. is a Rhode Island corporation organized on
January 8, 1926. Our principal executive offices are
located at 1027 Newport Avenue, Pawtucket, Rhode Island 02862
and our telephone number is
(401) 431-8697.
S-3
The
Offering
The following summary contains summary information about the
notes and is not intended to be complete. It does not contain
all of the information that may be important to you. For a more
detailed description of the notes, please refer to the section
entitled Description of the Notes in this prospectus
supplement and the section entitled Description of the
Debt Securities in the accompanying prospectus.
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Issuer |
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Hasbro, Inc. |
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Securities Offered |
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$ aggregate principal amount
of % Notes due |
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Maturity |
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The notes will mature
on , . |
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Interest |
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Interest on the notes will accrue from March ,
2010. Interest on the notes will be payable semi-annually in
arrears at the rates set forth on the cover page of this
prospectus supplement
on
and
of each year,
commencing ,
2010. |
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Optional Redemption |
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We may redeem the notes at our option, at any time in whole or
from time to time in part, at a redemption price equal to the
greater of: |
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100% of the principal amount of the notes being
redeemed; and
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the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not
including any portion of such payments of interest accrued as of
the date of redemption), discounted to the date of redemption on
a semi-annual basis (assuming a
360-day year
consisting of twelve
30-day
months) at the Treasury Rate (as defined in Description of
the Notes Optional Redemption),
plus basis points.
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We will also pay the accrued and unpaid interest on the notes to
the redemption date. |
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Repurchase at the Option of Holders Upon a Change of Control
Repurchase Event |
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If we experience a Change of Control Repurchase
Event (as defined in Description of the
Notes Repurchase upon Change of Control Repurchase
Event), we will be required, unless we have exercised our
right to redeem the notes, to offer to purchase the notes at a
purchase price equal to 101% of their principal amount, plus
accrued and unpaid interest. |
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Ranking |
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The notes will be our senior unsecured obligations and will rank
equal in right of payment to our other senior unsecured debt
from time to time outstanding. At December 27, 2009, we had
approximately $1.135 billion in principal amount of
indebtedness outstanding on a consolidated basis, all of which
would rank equal in right of payment to the notes, as well as
approximately $14.1 million of subsidiary indebtedness that
would be structurally senior to the notes. We did not have any
secured indebtedness at December 27, 2009. |
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Use of Proceeds |
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As part of our overall debt management strategy and in
furtherance of our targeted capital structure, we intend,
subject to market and other conditions, to effectively replace
our outstanding 2.75% convertible debentures due 2021 with the
notes issued hereby by using the net proceeds from this offering
to repurchase and retire into |
S-4
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treasury the number of shares resulting from the potential
conversion of these debentures in order to offset the dilutive
impact of such conversion. Any such share repurchase would be
made in the open market pursuant to our share buyback program,
the size of which we may choose to increase from previously
announced levels. As of December 27, 2009, we had
approximately $249.8 million in principal amount of these
debentures outstanding. For further information relating to
these debentures and our other outstanding indebtedness, see
Capitalization and Risk Factors We
rely on external financing, including our credit facilities and
accounts receivable securitization facility, to help fund our
operations. If we were unable to obtain or service such
financing, or if the restrictions imposed by such financing were
too burdensome, our business would be harmed. To the
extent the net proceeds are not fully utilized by the foregoing,
we plan to use the remaining net proceeds for general corporate
and working capital purposes, which may include (but are not
limited to) repayment of our indebtedness (including redemption
of our convertible debentures to the extent they are not
converted into our common stock), capital expenditures,
acquisitions and additional repurchases of shares of our common
stock. |
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Additional Issues |
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We may from time to time, without notice to or the consent of
the holders of the notes, create and issue additional debt
securities having the same terms (except for the issue date, the
public offering price and the first interest payment date) and
ranking equally and ratably with the notes offered hereby in all
respects. |
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Denomination and Form |
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We will issue the notes in the form of one or more fully
registered global notes registered in the name of the nominee of
The Depository Trust Company, or DTC. Beneficial interests
in the notes will be represented through book-entry accounts of
financial institutions acting on behalf of beneficial owners as
direct and indirect participants in DTC. Clearstream Banking,
société anonyme and Euroclear Bank S.A./N.V., as
operator of the Euroclear System, will hold interests on behalf
of their participants through their respective U.S.
depositaries, which in turn will hold such interests in accounts
as participants of DTC. Except in the limited circumstances
described in this prospectus supplement, owners of beneficial
interests in the notes will not be entitled to have notes
registered in their names, will not receive or be entitled to
receive notes in definitive form and will not be considered
holders of notes under the indenture. The notes will be issued
only in denominations of $2,000 and integral multiples of $1,000
in excess thereof. |
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Risk Factors |
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Investing in the notes involves risks. See Risk
Factors for a description of certain risks you should
particularly consider before investing in the notes. |
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Trustee |
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The Bank of Nova Scotia Trust Company of New York. |
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Governing Law |
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The notes will be governed by the laws of the State of New York. |
S-5
Summary
Financial Information
The following table sets forth our summary consolidated
financial information at and for the periods presented. Our
fiscal year ends on the last Sunday in December. The fiscal year
ended December 31, 2006 was a fifty-three week period while
the other fiscal years presented below were fifty-two week
periods. The fiscal year-end financial information has been
derived from our audited financial statements. You should read
the following information in conjunction with our consolidated
financial statements and related notes and the other financial
and statistical information that we include or incorporate by
reference in this prospectus supplement and the accompanying
prospectus.
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Fiscal Year Ended in December
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2009
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2008
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2007
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2006
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2005
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(in thousands)
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Statement of Operations Data:
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Net revenues
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$
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4,067,947
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$
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4,021,520
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$
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3,837,557
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$
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3,151,481
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$
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3,087,627
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Cost of sales
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1,676,336
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1,692,728
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1,576,621
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1,303,885
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1,286,271
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Gross profit
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2,391,611
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2,328,792
|
|
|
|
2,260,936
|
|
|
|
1,847,596
|
|
|
|
1,801,356
|
|
Total operating expenses
|
|
|
1,803,013
|
|
|
|
1,834,496
|
|
|
|
1,741,586
|
|
|
|
1,471,233
|
|
|
|
1,490,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
588,598
|
|
|
|
494,296
|
|
|
|
519,350
|
|
|
|
376,363
|
|
|
|
310,521
|
|
Total non-operating expense (income), net
|
|
|
58,901
|
|
|
|
53,241
|
|
|
|
56,968
|
|
|
|
34,889
|
|
|
|
(392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
|
529,697
|
|
|
|
441,055
|
|
|
|
462,382
|
|
|
|
341,474
|
|
|
|
310,913
|
|
Income taxes
|
|
|
154,767
|
|
|
|
134,289
|
|
|
|
129,379
|
|
|
|
111,419
|
|
|
|
98,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
374,930
|
|
|
$
|
306,766
|
|
|
$
|
333,003
|
|
|
$
|
230,055
|
|
|
$
|
212,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
220,706
|
|
|
$
|
211,707
|
|
|
$
|
187,960
|
|
|
$
|
181,726
|
|
|
$
|
164,045
|
|
Total assets
|
|
|
3,896,892
|
|
|
|
3,168,797
|
|
|
|
3,237,063
|
|
|
|
3,096,905
|
|
|
|
3,301,143
|
|
Total long-term debt
|
|
|
1,131,998
|
|
|
|
709,723
|
|
|
|
845,071
|
|
|
|
494,917
|
|
|
|
528,389
|
|
Total shareholders equity
|
|
|
1,594,772
|
|
|
|
1,390,786
|
|
|
|
1,385,092
|
|
|
|
1,537,890
|
|
|
|
1,723,476
|
|
S-6
RISK
FACTORS
You should carefully consider the following risk factors as well
as the information included or incorporated by reference into
this prospectus supplement and the accompanying prospectus
before making an investment decision. The following is not
intended as, and should not be construed as, an exhaustive list
of relevant risk factors. There may be other risks that a
prospective investor should consider that are relevant to its
own particular circumstances or generally.
Risks
Related to Our Business
The
volatility of ever-evolving consumer preferences, combined with
the high level of competition and low barriers to entry in the
family entertainment industry, make it difficult to maintain and
build upon the success of existing products and product lines or
introduce successful new products. In addition, an inability to
develop and introduce planned new products and product lines in
a timely and cost-effective manner may damage our
business.
The family entertainment business is a fashion industry and
evolves quickly. Our success is critically dependent upon the
consumer appeal of our products. Our failure to successfully
anticipate, identify and react to childrens interests and
the current preferences in family entertainment could
significantly lower sales of our products and harm our business
and profitability.
A decline in the popularity of our existing products and product
lines, or the failure of our new products and product lines to
achieve and sustain interest from retailers and consumers, could
significantly lower our revenues and operating margins, which
would in turn harm our profitability, business and financial
condition. In our industry, it is critical to identify and offer
what are considered to be the next hot toys and
games on childrens wish lists and to
effectively anticipate childrens evolving entertainment
interests. Our continued success will depend on our ability to
develop, market and sell popular toys, games and other
entertainment offerings, and license our brands for products
which are sought after by both children and their parents. We
seek to achieve and maintain market popularity for our products
through the continued re-imagination, re-invigoration and
extension of our existing family entertainment properties in
ways we believe will capture evolving consumer interest and
imagination, offer immersive brand experience and remain
relevant in todays world, and by developing, introducing
and gaining customer interest for new family entertainment
products. This process involves anticipating and extending
successful play patterns, offering continual product innovation
and identifying entertainment concepts and properties that
appeal to childrens imaginations. However, consumer
preferences with respect to family entertainment are
continuously changing and are difficult to anticipate. Evolving
consumer tastes, coupled with an ever changing pipeline of
entertainment properties and products which compete for consumer
interest and acceptance, create an environment in which some
products can fail to achieve consumer acceptance, and other
products can be extremely popular during a certain period in
time but then rapidly be replaced in consumers minds with
other properties. As a result, individual family entertainment
products and properties often have short consumer life cycles.
Not only must we address rapidly changing consumer tastes and
interests but we face competitors who are also constantly
monitoring and attempting to anticipate consumer tastes, seeking
ideas which will appeal to consumers and introducing new
products that compete with our products for consumer purchasing.
In addition to existing competitors, the barriers to entry for
new participants in the family entertainment industry are low.
New participants with a popular product idea or entertainment
property can gain access to consumers and become a significant
source of competition for our products. In some cases our
competitors products may achieve greater market acceptance
than our products and potentially reduce demand for our products.
The challenge of developing and offering products that are
sought after by children is compounded by the trend of children
getting older younger. By this we mean that children
are expanding their interests beyond traditional toys and games
to a wider array of entertainment products at younger ages and,
as a result, at younger and younger ages, our products compete
with the offerings of video game suppliers, consumer electronics
companies and other businesses outside of the traditional toy
and game industry.
S-7
There is no guarantee that:
|
|
|
|
|
Any of our current products or product lines will continue to be
popular;
|
|
|
|
Any property for which we have a significant license will
achieve or sustain popularity;
|
|
|
|
Any new products or product lines we introduce will be
considered interesting to consumers and achieve an adequate
market acceptance;
|
|
|
|
Any new products life cycle will be sufficient to permit
us to profitably recover development, manufacturing, marketing,
royalties (including royalty advances and guarantees) and other
costs of producing, marketing and selling the product; or
|
|
|
|
We will be able to manufacture, source and ship new or
continuing products in a timely and cost-effective basis to meet
constantly changing consumer demands, a risk that is heightened
by our customers compressed shipping schedules and the
seasonality of our business.
|
In developing new products and product lines, we have
anticipated dates for the associated product introductions. When
we state that we will introduce, or anticipate introducing, a
particular product or product line at a certain time in the
future those expectations are based on completing the associated
development and implementation work in accordance with our
currently anticipated development schedule. Unforeseen delays or
difficulties in the development process, or significant
increases in the planned cost of development, may cause the
introduction date for products to be later than anticipated or,
in some situations, may cause a product introduction to be
discontinued.
Delays
or increased costs associated with the development and offering
of entertainment media based upon or related to our brands, or
lack of sufficient consumer interest in such entertainment
media, can harm our business.
As part of our strategy of offering immersive brand experiences,
we look to offer consumers the ability to enjoy our brands in as
many different forms and formats as possible. Entertainment
media, in forms such as motion pictures and television, can
provide popular platforms for consumers to experience our brands
and the success of such media efforts can significantly impact
demand for our products and our financial success.
The success of our products is often dependent on the timelines
and effectiveness of media efforts. Television programming,
movie and DVD releases, comic book releases, and other media
efforts are often critical in generating interest in our
products and brands. Not only our efforts, but the efforts of
third parties, heavily impact the launch dates and success of
these media efforts. When we say that products or brands will be
supported by certain media releases, those statements are based
on our current plans and expectations. Unforeseen factors may
delay these media releases or even lead to their cancellation.
Any delay or cancellation of planned product development work,
introductions, or media support may decrease the number of
products we sell and harm our business.
Similarly, if our and our partners media efforts fail to
garner sufficient consumer interest and acceptance, our revenues
and the financial return from such efforts will be harmed. In
2009 we entered into a joint venture with Discovery. Through
that joint venture, we are currently working with Discovery to
offer a childrens and family entertainment channel called
THE HUB, which is scheduled to debut in the fall of 2010. In
connection with this joint venture effort, we are also building
a virtual studio, called Hasbro Studios, which will develop and
produce entertainment media based on our brands. Lack of
consumer interest in and acceptance of THE HUB, programming
appearing on THE HUB, other programming developed by Hasbro
Studios, and products related to that programming could
significantly harm our business. Similarly, our business could
be harmed by greater than expected costs, or unexpected delays
or difficulties, associated with the introduction of the
rebranded joint venture network, the development of Hasbro
Studios and the creation of new content based on our brands to
appear on the joint venture network and elsewhere.
At December 27, 2009, $371.8 million, or 9.5%, of our
total assets represented our investment in the Discovery joint
venture. If the launch of the rebranded television channel is
not successful, or if there are
S-8
subsequent declines in the success or profitability of the
channel, then our investment may become impaired, which could
result in a write-down through net earnings.
Economic
downturns which negatively impact the retail and credit markets,
or which otherwise damage the financial health of our retail
customers and consumers, can harm our business and financial
performance.
The success of our family entertainment products and our
financial performance is dependent on consumer purchases of our
products. Consumers may not purchase our products because the
products do not capture consumer interest and imagination, or
because competitor family entertainment offerings are deemed
more attractive. But consumer spending on our products can also
be harmed by factors that negatively impact consumers
budgets generally, and which are not due to our product
offerings.
Recessions and other economic downturns, or disruptions in
credit markets, in the markets in which we operate can result in
lower levels of economic activity, lower employment levels, less
consumer disposable income, and lower consumer confidence. Any
of these factors can reduce the amount which consumers spend on
the purchase of our products. This in turn can reduce our
revenues and harm our financial performance.
In addition to experiencing potentially lower revenues from our
products during times of economic difficulty, in an effort to
maintain sales during such times we may need to reduce the price
of our products, increase our promotional spending, or take
other steps to encourage retailer and consumer purchase of our
products. Those steps may lower our net revenues, decrease our
operating margins, increase our costs
and/or lower
our profitability.
Other
economic and public health conditions in the markets in which we
operate, including rising commodity and fuel prices, higher
labor costs, increased transportation costs, outbreaks of public
health pandemics or other diseases, or third party conduct could
negatively impact our ability to produce and ship our products,
and lower our revenues, margins and profitability.
Various economic and public health conditions can impact our
ability to manufacture and deliver products in a timely and
cost-effective manner, or can otherwise have a significant
negative impact on our business.
Significant increases in the costs of other products which are
required by consumers, such as gasoline, home heating fuels, or
groceries, may reduce household spending on the discretionary
entertainment products we offer. As we discussed above, weakened
economic conditions, lowered employment levels or recessions in
any of our major markets may significantly reduce consumer
purchases of our products. Economic conditions may also be
negatively impacted by terrorist attacks, wars and other
conflicts, increases in critical commodity prices, or the
prospect of such events. Such a weakened economic and business
climate, as well as consumer uncertainty created by such a
climate, could harm our revenues and profitability.
Our success and profitability not only depend on consumer demand
for our products, but also on our ability to produce and sell
those products at costs which allow us to make a profit. Rising
fuel and raw material prices, for paperboard and other
components such as resin used in plastics, increased
transportation costs, and increased labor costs in the markets
in which our products are manufactured all may increase the
costs we incur to produce and transport our products, which in
turn may reduce our margins, reduce our profitability and harm
our business.
Other conditions, such as the unavailability of electrical
components, may impede our ability to manufacture, source and
ship new and continuing products on a timely basis. Additional
factors outside of our control could further delay our products
or increase the cost we pay to produce such products. For
example, work stoppages, slowdowns or strikes, an outbreak of a
severe public health pandemic, or the occurrence or threat of
wars or other conflicts, all could impact our ability to
manufacture or deliver product. Any of these factors could
result in product delays, increased costs
and/or lost
sales for our products.
S-9
We may
not realize the full benefit of our licenses if the licensed
material has less market appeal than expected or if revenue from
the licensed products is not sufficient to earn out the minimum
guaranteed royalties.
In addition to designing and developing products based on our
own brands, we seek to fulfill consumer preferences and
interests by producing products based on popular entertainment
properties developed by other parties and licensed to us. The
success of entertainment properties for which we have a license,
such as MARVEL or STAR WARS related products, can significantly
affect our revenues and profitability. If we produce a line of
products based on a movie or television series, the success of
the movie or series has a critical impact on the level of
consumer interest in the associated products we are offering. In
addition, competition in our industry for access to
entertainment properties can lessen our ability to secure,
maintain, and renew popular licenses to entertainment products
on beneficial terms, if at all, and to attract and retain the
talented employees necessary to design, develop and market
successful products based on these properties. The loss of
rights granted pursuant to any of our licensing agreements could
harm our business and competitive position.
The license agreements we enter to obtain these rights usually
require us to pay minimum royalty guarantees that may be
substantial, and in some cases may be greater than what we are
ultimately able to recoup from actual sales, which could result
in write-offs of significant amounts which in turn would harm
our results of operations. At December 27, 2009, we had
$120.1 million of prepaid royalties, $43.1 million of
which are included in prepaid expenses and other current assets
and $77.0 million of which are included in other assets.
Under the terms of existing contracts as of December 27,
2009, we may be required to pay future minimum guaranteed
royalties and other licensing fees totaling approximately
$331.5 million. Acquiring or renewing licenses may require
the payment of minimum guaranteed royalties that we consider to
be too high to be profitable, which may result in losing
licenses we currently hold when they become available for
renewal, or missing business opportunities for new licenses.
Additionally, as a licensee of entertainment based properties we
have no guaranty that a particular property or brand will
translate into successful toy or game products.
We anticipate that the shorter theatrical duration for movie
releases may make it increasingly difficult for us to profitably
sell licensed products based on entertainment properties and may
lead our customers to reduce their demand for these products in
order to minimize their inventory risk. Furthermore, there can
be no assurance that a successful brand will continue to be
successful or maintain a high level of sales in the future, as
new entertainment properties and competitive products are
continually being introduced to the market. In the event that we
are not able to acquire or maintain successful entertainment
licenses on advantageous terms, our revenues and profits may be
harmed.
Our
business is seasonal and therefore our annual operating results
will depend, in large part, on our sales during the relatively
brief holiday shopping season. This seasonality is exacerbated
by retailers quick response inventory management
techniques.
Sales of our family entertainment products at retail are
extremely seasonal, with a majority of retail sales occurring
during the period from September through December in
anticipation of the holiday season, including Christmas. This
seasonality has increased over time, as retailers become more
efficient in their control of inventory levels through quick
response inventory management techniques. Customers are timing
their orders so that they are being filled by suppliers, such as
us, closer to the time of purchase by consumers. For toys, games
and other family entertainment products which we produce, a
majority of retail sales for the entire year occur in the fourth
quarter, close to the holiday season. As a consequence, the
majority of our sales to our customers occur in the period from
September through December, as our customers do not want to
maintain large on-hand inventories throughout the year ahead of
consumer demand. While these techniques reduce a retailers
investment in inventory, they increase pressure on suppliers
like us to fill orders promptly and thereby shift a significant
portion of inventory risk and carrying costs to the supplier.
The limited inventory carried by retailers may also reduce or
delay retail sales, resulting in lower revenues for us. If we or
our customers determine that one of our products is more popular
at retail than was originally
S-10
anticipated, we may not have sufficient time to produce and ship
enough additional product to fully capture consumer interest in
the product. Additionally, the logistics of supplying more and
more product within shorter time periods increases the risk that
we will fail to achieve tight and compressed shipping schedules,
which also may reduce our sales and harm our financial
performance. This seasonal pattern requires significant use of
working capital, mainly to manufacture or acquire inventory
during the portion of the year prior to the holiday season, and
requires accurate forecasting of demand for products during the
holiday season in order to avoid losing potential sales of
popular products or producing excess inventory of products that
are less popular with consumers. Our failure to accurately
predict and respond to consumer demand, resulting in our
underproducing popular items
and/or
overproducing less popular items, would reduce our total sales
and harm our results of operations. In addition, as a result of
the seasonal nature of our business, we would be significantly
and adversely affected, in a manner disproportionate to the
impact on a company with sales spread more evenly throughout the
year, by unforeseen events, such as a terrorist attack or
economic shock, that harm the retail environment or consumer
buying patterns during our key selling season, or by events,
such as strikes or port delays, that interfere with the shipment
of goods, particularly from the Far East, during the critical
months leading up to the holiday purchasing season.
Our
substantial sales and manufacturing operations outside the
United States subject us to risks associated with international
operations. Among these risks is the fact that fluctuations in
foreign exchange rates can significantly impact our financial
performance.
We operate facilities and sell products in numerous countries
outside the United States. For the year ended December 27,
2009, our net revenues from international customers comprised
approximately 42% of our total consolidated net revenues. We
expect our sales to international customers to continue to
account for a significant portion of our revenues. In fact, over
time, we expect our international sales and operations to grow
both in absolute terms an as a percentage of our overall
business as one of our key business strategies is to increase
our presence in emerging and underserved markets. Additionally,
as we discuss below, we utilize third-party manufacturers
located principally in the Far East, to produce the majority of
our products, and we have a manufacturing facility in Ireland.
These sales and manufacturing operations, including operations
in emerging markets that we have entered, may enter, or may
increase our presence in, are subject to the risks associated
with international operations, including:
|
|
|
|
|
Currency conversion risks and currency fluctuations;
|
|
|
|
Limitations, including taxes, on the repatriation of earnings;
|
|
|
|
Political instability, civil unrest and economic instability;
|
|
|
|
Greater difficulty enforcing intellectual property rights and
weaker laws protecting such rights;
|
|
|
|
Complications in complying with different laws in varying
jurisdictions and changes in governmental policies;
|
|
|
|
Natural disasters and the greater difficulty and expense in
recovering therefrom;
|
|
|
|
Difficulties in moving materials and products from one country
to another, including port congestion, strikes and other
transportation delays and interruptions;
|
|
|
|
Changes in international labor costs and other costs of doing
business internationally; and
|
|
|
|
The imposition of tariffs.
|
Because of the importance of our international sales and
international sourcing of manufacturing to our business, our
financial condition and results of operations could be
significantly harmed if any of the risks described above were to
occur.
If the exchange rate between the United States dollar and a
local currency for an international market in which we have
significant sales or operations changes, our financial results,
reported in U.S. dollars, may be meaningfully impacted even
if our business in the local currency is not significantly
affected. As an example, if the dollar appreciates 10% relative
to a local currency for an international market in which we had
S-11
$200 million of net sales, the dollar value of those sales,
as they are translated into U.S. dollars, would decrease by
$20 million in our consolidated financial results. As such,
we would recognize a $20 million decrease in our net
revenues, even if the actual level of sales in the foreign
market had not changed. Similarly, our expenses in foreign
markets can be significantly impacted, in U.S. dollar
terms, by exchange rates, meaning the profitability of our
business in U.S. dollar terms can be significantly harmed
by exchange rate movements.
The
concentration of our retail customer base means that economic
difficulties or changes in the purchasing policies of our major
customers could have a significant impact on us.
We depend upon a relatively small retail customer base to sell
the majority of our products. For the fiscal year ended
December 27, 2009, Wal-Mart Stores, Inc., Target
Corporation, and Toys R Us, Inc., accounted for
approximately 25%, 13% and 11%, respectively, of our
consolidated net revenues and our five largest customers,
including Wal-Mart, Target and Toys R Us, in the
aggregate accounted for approximately 54% of our consolidated
net revenues. In the U.S. and Canada segment, approximately
74% of the net revenues of the segment were derived from our top
three customers. While the consolidation of our customer base
may provide certain benefits to us, such as potentially more
efficient product distribution and other decreased costs of
sales and distribution, this consolidation also means that if
one or more of our major customers were to experience
difficulties in fulfilling their obligations to us, cease doing
business with us, significantly reduce the amount of their
purchases from us or return substantial amounts of our products,
it could significantly harm our sales, profitability and
financial condition. Increased concentration among our customers
could also negatively impact our ability to negotiate higher
sales prices for our products and could result in lower gross
margins than would otherwise be obtained if there were less
consolidation among our customers. In addition, the bankruptcy
or other lack of success of one or more of our significant
retail customers could negatively impact our revenues and result
in higher bad debt expense.
Our
use of third-party manufacturers to produce the majority of our
toy products, as well as certain other products, presents risks
to our business.
We own and operate two game and puzzle manufacturing facilities,
one in East Longmeadow, Massachusetts and the other in
Waterford, Ireland. However, most of our toy products, in
addition to certain other products, are manufactured by
third-party manufacturers, most of whom are located in the
Peoples Republic of China. Although our external sources
of manufacturing can be shifted, over a period of time, to
alternative sources of supply, should such changes be necessary,
if we were prevented or delayed in obtaining products or
components for a material portion of our product line due to
political, labor or other factors beyond our control, including
natural disasters or pandemics, our operations would be
disrupted, potentially for a significant period of time, while
alternative sources of supply were secured. This delay could
significantly reduce our revenues and profitability, and harm
our business.
Given that the majority of our manufacturing is conducted by
third-party manufacturers located in the Peoples Republic
of China, health conditions and other factors affecting social
and economic activity in China and affecting the movement of
people and products into and from China to our major markets,
including North America and Europe, as well as increases in
the costs of labor and other costs of doing business in China,
could have a significant negative impact on our operations,
revenues and earnings. Factors that could negatively affect our
business include a potential significant revaluation of the
Chinese yuan, which may result in an increase in the cost of
producing products in China, increases in labor costs and
difficulties in moving products manufactured in China out of
Asia and through the ports on the western coast of North
America, whether due to port congestion, labor disputes, product
regulations
and/or
inspections or other factors, and natural disasters or health
pandemics impacting China. Also, the imposition of trade
sanctions or other regulations by the United States or the
European Union against products imported by us from, or the loss
of normal trade relations status with, the
Peoples Republic of China, could significantly increase
our cost of products imported into the United States or Europe
and harm our business. Additionally, the suspension of the
operations of a third party manufacturer by government
inspectors in China could result in delays to us in obtaining
product and may harm sales.
S-12
We require our third-party manufacturers to comply with our
Global Business Ethics Principles, which are designed to prevent
products manufactured by or for us from being produced under
inhumane or exploitive conditions. The Global Business Ethics
Principles address a number of issues, including working hours
and compensation, health and safety, and abuse and
discrimination. In addition, Hasbro requires that our products
supplied by third-party manufacturers be produced in compliance
with all applicable laws and regulations, including consumer and
product safety laws in the markets where those products are
sold. Hasbro has the right, both directly and through the use of
outside monitors, to monitor compliance by our third-party
manufacturers with our Global Business Ethics Principles and
other manufacturing requirements. In addition, we do quality
assurance testing on our products, including products
manufactured for us by third parties. Notwithstanding these
requirements and our monitoring and testing of compliance with
them, there is always a risk that one or more of our third-party
manufacturers will not comply with our requirements and that we
will not immediately discover such non-compliance. Any failure
of our third-party manufacturers to comply with labor, consumer,
product safety or other applicable requirements in manufacturing
products for us could result in damage to our reputation, harm
sales of our products and potentially create liability for us.
Part
of our strategy for remaining relevant to children is to offer
innovative childrens toy and game electronic products. The
margins on many of these products are lower than more
traditional toys and games and such products may have a shorter
lifespan than more traditional toys and games. As a result,
sales of childrens toy and game electronic products may
lower our overall operating margins and produce more volatility
in our business.
As children have grown older younger and have
otherwise become interested in more and more sophisticated and
adult products, such as videogames and consumer electronics, at
younger and younger ages, we have sought to keep our products
relevant for these consumers. One initiative we have pursued to
capture the interest of children is to offer innovative
childrens electronic toys and games. Examples of such
products in the last few years include our I-branded products
such as I-DOG and I-CAT, and our FURREAL FRIENDS line of
products, including BUTTERSCOTCH PONY, BISCUIT MY LOVIN
PUP and KOTA. These products, if successful, can be an effective
way for us to connect with consumers and increase sales.
However, childrens electronics, in addition to the risks
associated with our other family entertainment products, also
face certain additional risks.
Our costs for designing, developing and producing electronic
products tend to be higher than for many of our other more
traditional products, such as board games and action figures.
The ability to recoup these higher costs through sufficient
sales quantities and to reflect higher costs in higher prices is
constrained by heavy competition in consumer electronics and
entertainment products, and can be further constrained by
difficult economic conditions. As a consequence, our margins on
the sales of electronic products tend to be lower than for more
traditional products and we can face increased risk of not
achieving sales sufficient to recover our costs. In addition,
the pace of change in product offerings and consumer tastes in
the electronics area is potentially even greater than for our
other products. This pace of change means that the window in
which a product can achieve and maintain consumer interest may
be even shorter than traditional toys and games.
We
rely on external financing, including our credit facilities and
accounts receivable securitization facility, to help fund our
operations. If we were unable to obtain or service such
financing, or if the restrictions imposed by such financing were
too burdensome, our business would be harmed.
Due to the seasonal nature of our business, in order to meet our
working capital needs, particularly those in the third and
fourth quarters, we rely on our revolving credit facility and
our other credit facilities for working capital. We currently
have a revolving credit agreement that expires in 2011, which
provides for a $300 million committed revolving credit
facility which provides us the ability to request increases in
the committed facility in additional increments of
$50 million, subject to lender agreement, up to a total of
$500 million. The credit agreement contains certain
restrictive covenants setting forth leverage and coverage
requirements, and certain other limitations typical of an
investment grade facility. These restrictive covenants may limit
our future actions, and financial, operating and strategic
flexibility. In addition, our financial covenants were set at
the time we entered into our credit facility. Our performance
and financial condition
S-13
may not meet our original expectations, causing us to fail to
meet such financial covenants. Non-compliance with our debt
covenants could result in us being unable to utilize borrowings
under our revolving credit facility and other bank lines, a
circumstance which potentially could occur when operating
shortfalls would most require supplementary borrowings to enable
us to continue to fund our operations.
As an additional source of working capital and liquidity, we
currently have a $250 million accounts receivable
securitization program. Under this program, we sell on an
ongoing basis, substantially all of our domestic
U.S. dollar denominated trade accounts receivable to a
bankruptcy remote special purpose entity. Under this facility,
the special purpose entity is able to sell, on a revolving
basis, undivided ownership interests in the eligible receivables
to bank conduits. During the term of the facility, we must
maintain certain performance ratios. If we fail to maintain
these ratios, we could be prevented from accessing this
cost-effective source of working capital and short-term
financing. Additionally, changes in financial reporting,
regulatory or other requirements which went into effect in 2010
or may occur in the future may significantly increase the cost
of our accounts receivable securitization facility, which could
make use of such a facility uneconomical.
We believe that our cash flow from operations, together with our
cash on hand and access to existing credit facilities and our
accounts receivable securitization facility, are adequate for
current and planned needs in 2010. However, our actual
experience may differ from these expectations. Factors that may
lead to a difference include, but are not limited to, the
matters discussed herein, as well as future events that might
have the effect of reducing our available cash balance, such as
unexpected material operating losses or increased capital or
other expenditures, as well as increases in inventory or
accounts receivable that are ineligible for sale under our
securitization facility, regulatory or accounting changes which
make accounts receivable securitization facilities more
expensive or otherwise less desirable as a source of working
capital funding, or other future events that may reduce or
eliminate the availability of external financial resources.
Not only may our individual financial performance impact our
ability to access sources of external financing, but significant
disruptions to credit markets in general may also harm our
ability to obtain financing. Although we believe the risk of
nonperformance by the counterparties to our financial facilities
is not significant, in times of severe economic downturn
and/or
distress 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. In such a situation, it may be that we
would be unable to access funding under our existing credit
facilities, and it might not be possible to find alternative
sources of funding.
We also may choose to finance our capital needs, from time to
time, through the issuance of debt securities. Our ability to
issue such securities on satisfactory terms, if at all, will
depend on the state of our business and financial condition, any
ratings issued by major credit rating agencies, market interest
rates, and the overall condition of the financial and credit
markets at the time of the offering. The condition of the credit
markets and prevailing interest rates have fluctuated
significantly in the past and are likely to fluctuate in the
future. Variations in these factors could make it difficult for
us to sell debt securities or require us to offer higher
interest rates in order to sell new debt securities. The failure
to receive financing on desirable terms, or at all, could damage
our ability to support our future operations or capital needs or
engage in other business activities.
As of December 27, 2009, we had $1.135 billion in
principal amount of indebtedness outstanding on a consolidated
basis, all of which would rank equal in right of payment to the
notes offered hereby, as well as approximately
$14.1 million of subsidiary indebtedness that would be
structurally senior to the notes. If we are unable to generate
sufficient available cash flow to service our outstanding debt
we would need to refinance such debt or face default. There is
no guarantee that we would be able to refinance debt on
favorable terms, or at all. This total indebtedness includes
$249.8 million in aggregate principal amount of
2.75% senior convertible debentures due 2021 that we issued
in 2001. On December 1, 2011 and December 1, 2016, and
upon the occurrence of certain fundamental corporate changes,
holders of the 2.75% senior convertible debentures may
require us to purchase their debentures. At that time, the
purchase price may be paid in cash, shares of common stock or a
combination of the two, at our discretion, provided that we will
pay accrued and unpaid interest in cash. We may not have
sufficient cash at that time to make the required repurchases
and may be required to settle in shares of common stock. So long
as the closing price of our common stock
S-14
exceeds $23.76 for at least 20 of the last 30 consecutive
trading days of any calendar quarter, holders of the
2.75% senior convertible debentures have the right to
convert their debentures into common stock at any time during
the subsequent calendar quarter; existing holders currently have
this right. Additionally, so long as the closing price of our
common stock exceeds $27.00 for at least 20 trading days in any
30-day
period, we have the right to redeem the debentures by giving
notice to the holders thereof. This condition has been met as of
the date of this prospectus supplement and, accordingly, we
currently have such a right. We believe that our exercise of
this redemption right would result in a conversion of the
debentures into shares of our common stock by the holders,
thereby increasing the number of the shares of our common stock
outstanding. We are in the process of assessing the desirability
of exercising this redemption right based on current market
conditions and our business objectives, and may exercise this
right at any time when it is available to us, including in the
near future.
As a
manufacturer of consumer products and a large multinational
corporation, we are subject to various government regulations
and may be subject to additional regulations in the future,
violation of which could subject us to sanctions or otherwise
harm our business. In addition, we could be the subject of
future product liability suits or product recalls, which could
harm our business.
As a manufacturer of consumer products, we are subject to
significant government regulations, including, in the United
States, under The Consumer Products Safety Act, The Federal
Hazardous Substances Act, and The Flammable Fabrics Act, as well
as under product safety and consumer protection statutes in our
international markets. In addition, certain of our products are
subject to regulation by the Food and Drug Administration or
similar international authorities. While we take all the steps
we believe are necessary to comply with these acts, there can be
no assurance that we will be in compliance in the future.
Failure to comply could result in sanctions which could have a
negative impact on our business, financial condition and results
of operations. We may also be subject to involuntary product
recalls or may voluntarily conduct a product recall. While costs
associated with product recalls have generally not been material
to our business, the costs associated with future product
recalls individually and in the aggregate in any given fiscal
year, could be significant. In addition, any product recall,
regardless of direct costs of the recall, may harm consumer
perceptions of our products and have a negative impact on our
future revenues and results of operations.
Governments and regulatory agencies in the markets where we
manufacture and sell products may enact additional regulations
relating to product safety and consumer protection in the
future, and may also increase the penalties for failure to
comply with product safety and consumer protection regulations.
In addition, one or more of our customers might require changes
in our products, such as the non-use of certain materials, in
the future. Complying with any such additional regulations or
requirements could impose increased costs on our business.
Similarly, increased penalties for non-compliance could subject
us to greater expense in the event any of our products were
found to not comply with such regulations. Such increased costs
or penalties could harm our business.
In addition to government regulation, products that have been or
may be developed by us may expose us to potential liability from
personal injury or property damage claims by the users of such
products. There can be no assurance that a claim will not be
brought against us in the future. Any successful claim could
significantly harm our business, financial condition and results
of operations.
As a large, multinational corporation, we are subject to a host
of governmental regulations throughout the world, including
antitrust, customs and tax requirements, anti-boycott
regulations, environmental regulations and the Foreign Corrupt
Practices Act. Complying with these regulations imposes costs on
us which can reduce our profitability and our failure to
successfully comply with any such legal requirements could
subject us to monetary liabilities and other sanctions that
could further harm our business and financial condition.
S-15
Our
business is dependent on intellectual property rights and we may
not be able to protect such rights successfully. In addition, we
have a material amount of acquired product rights which, if
impaired, would result in a reduction of our net
earnings.
Our intellectual property, including our license agreements and
other agreements that establish our ownership rights and
maintain the confidentiality of our intellectual property, are
of great value. We rely on a combination of trade secret,
copyright, trademark, patent and other proprietary rights laws
to protect our rights to valuable intellectual property related
to our brands. From time to time, third parties have challenged,
and may in the future try to challenge, our ownership of our
intellectual property. In addition, our business is subject to
the risk of third parties counterfeiting our products or
infringing on our intellectual property rights. We may need to
resort to litigation to protect our intellectual property
rights, which could result in substantial costs and diversion of
resources. Our failure to protect our intellectual property
rights could harm our business and competitive position. Much of
our intellectual property has been internally developed and has
no carrying value on our balance sheet. However, as of
December 27, 2009, we had $554.6 million of acquired
product and licensing rights included in other assets on our
balance sheet. Declines in the profitability of the acquired
brands or licensed products may impact our ability to recover
the carrying value of the related assets and could result in an
impairment charge. Reduction in our net earnings caused by
impairment charges could harm our financial results.
We may
not realize the anticipated benefits of acquisitions or
investments in joint ventures, or those benefits may be delayed
or reduced in their realization.
Acquisitions have been a significant part of our historical
growth and have enabled us to further broaden and diversify our
product offerings. In making acquisitions, we target companies
that we believe offer attractive family entertainment products
or the ability for us to leverage our entertainment offerings.
In the case of our joint venture with Discovery, we looked to
partner with a company that has shown the ability to establish
and operate compelling entertainment channels. However, we
cannot be certain that the products of companies we may acquire,
or acquire an interest in, in the future will achieve or
maintain popularity with consumers or that any such acquired
companies, or investments will allow us to more effectively
market our products. In some cases, we expect that the
integration of the companies that we acquire into our operations
will create production, marketing and other operating synergies
which will produce greater revenue growth and profitability and,
where applicable, cost savings, operating efficiencies and other
advantages. However, we cannot be certain that these synergies,
efficiencies and cost savings will be realized. Even if
achieved, these benefits may be delayed or reduced in their
realization. In other cases, we acquire companies that we
believe have strong and creative management, in which case we
plan to operate them more autonomously rather than fully
integrating them into our operations. We cannot be certain that
the key talented individuals at these companies will continue to
work for us after the acquisition or that they will develop
popular and profitable products or services in the future.
From
time to time, we are involved in litigation, arbitration or
regulatory matters where the outcome is uncertain and which
could entail significant expense.
As is the case with many large multinational corporations, we
are subject, from time to time, to regulatory investigations,
litigation and arbitration disputes. Because the outcome of
litigation, arbitration and regulatory investigations is
inherently difficult to predict, it is possible that the outcome
of any of these matters could entail significant expense for us
and harm our business. The fact that we operate in significant
numbers of international markets also increases the risk that we
may face legal and regulatory exposures as we attempt to comply
with a large number of varying legal and regulatory requirements.
We
have a material amount of goodwill which, if it becomes
impaired, would result in a reduction in our net
earnings.
Goodwill is the amount by which the cost of an acquisition
exceeds the fair value of the net assets we acquire. Goodwill is
not amortized and is required to be periodically evaluated for
impairment. At December 27, 2009, $475.9 million, or
12.2%, of our total assets represented goodwill. Declines in our
profitability may impact the fair
S-16
value of our reporting units, which could result in a write-down
of our goodwill. Reductions in our net earnings caused by the
write-down of goodwill or our investment in the joint venture
could harm our results of operations.
Risks
Related to the Notes
The
notes are effectively subordinated to our secured debt and the
existing and future liabilities of our
subsidiaries.
The notes are our senior unsecured obligations and will rank
equal in right of payment to our other senior unsecured debt
from time to time outstanding. At December 27, 2009, we had
approximately $1.135 billion in principal amount of
indebtedness outstanding on a consolidated basis, all of which
would rank equal in right of payment to the notes, as well as
approximately $14.1 million of subsidiary indebtedness that
would be structurally senior to the notes. The notes are not
secured by any of our assets. Any future claims of secured
lenders with respect to assets securing their loans will be
prior to any claim of the holders of the notes with respect to
those assets. At December 27, 2009, we did not have any
secured indebtedness.
Our subsidiaries are separate and distinct legal entities from
us. Our subsidiaries have no obligation to pay any amounts due
on the notes or to provide us with funds to meet our payment
obligations on the notes, whether in the form of dividends,
distributions, loans or other payments. In addition, any payment
of dividends, loans or advances by our subsidiaries could be
subject to statutory or contractual restrictions. Payments to us
by our subsidiaries will also be contingent upon the
subsidiaries earnings and business considerations. Our
right to receive any assets of any of our subsidiaries upon
their bankruptcy, liquidation or reorganization, and therefore
the right of the holders of the notes to participate in those
assets, will be effectively subordinated to the claims of that
subsidiarys creditors, including trade creditors. In
addition, even if we are a creditor of any of our subsidiaries,
our right as a creditor would be subordinate to any security
interest in the assets of our subsidiaries and any indebtedness
of our subsidiaries senior to that held by us.
The
indenture does not restrict the amount of additional debt that
we may incur.
The notes and indenture under which the notes will be issued do
not place any limitation on the amount of unsecured debt that
may be incurred by us. Our incurrence of additional debt may
have important consequences for you as a holder of the notes,
including making it more difficult for us to satisfy our
obligations with respect to the notes, a loss in the trading
value of your notes, if any, and a risk that the credit rating
of the notes is lowered or withdrawn.
The
terms of the indenture and the notes provide only limited
protection against significant corporate events that could
adversely impact your investment in the notes.
While the indenture and the notes contain terms intended to
provide protection to the holders of the notes upon the
occurrence of certain events involving significant corporate
transactions, such terms are limited and may not be sufficient
to protect your investment in the notes.
The definition of the term Change of Control Repurchase
Event as described under Description of the
Notes Repurchase upon Change of Control Repurchase
Event does not cover a variety of transactions (such as
acquisitions by us or recapitalizations) that could negatively
affect the value of your notes. If we were to enter into a
significant corporate transaction that would negatively affect
the value of the notes but would not constitute a Change of
Control Repurchase Event, we would not be required to offer to
repurchase your notes prior to their maturity.
Furthermore, the indenture for the notes does not:
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require us to maintain any financial ratios or specific levels
of net worth, revenues, income, cash flow or liquidity;
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limit our ability to incur indebtedness that is equal in right
of payment to the notes;
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restrict our subsidiaries ability to issue securities or
otherwise incur indebtedness that would be senior to our equity
interests in our subsidiaries and therefore rank effectively
senior to the notes;
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S-17
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limit the ability of our subsidiaries to service indebtedness;
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restrict our ability to repurchase or prepay any other of our
securities or other indebtedness; or
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restrict our ability to make investments or to repurchase or pay
dividends or make other payments in respect of our common stock
or other securities ranking junior to the notes.
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As a result of the foregoing, when evaluating the terms of the
notes, you should be aware that the terms of the indenture and
the notes do not restrict our ability to engage in, or to
otherwise be a party to, a variety of corporate transactions,
circumstances and events that could have an adverse impact on
your investment in the notes.
Our
credit ratings may not reflect all risks of your investments in
the notes.
Our credit ratings are an assessment by rating agencies of our
ability to pay our debts when due. Consequently, real or
anticipated changes in our credit ratings will generally affect
the market value of the notes. These credit ratings may not
reflect the potential impact of risks relating to the structure
or marketing of the notes. Agency ratings are not a
recommendation to buy, sell or hold any security, and may be
revised or withdrawn at any time by the issuing organization.
Each agencys rating should be evaluated independently of
any other agencys rating.
If an
active trading market does not develop for the notes, you may be
unable to sell your notes or to sell your notes at a price that
you deem sufficient.
The notes are new issues of securities for which there currently
is no established trading market. We do not intend to list the
notes on a national securities exchange. While the underwriters
of the notes have advised us that they intend to make a market
in the notes, the underwriters will not be obligated to do so
and may stop their market-making at any time. No assurance can
be given:
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that a market for the notes will develop or continue;
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as to the liquidity of any market that does develop; or
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as to your ability to sell any notes you may own or the price at
which you may be able to sell your notes.
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We may
not be able to repurchase the notes upon a change of
control.
Upon the occurrence of specific kinds of change of control
events, unless we have exercised our right to redeem the notes,
each holder of notes will have the right to require us to
repurchase all or any part of such holders notes at a
price equal to 101% of their principal amount, plus accrued and
unpaid interest, if any, to the date of purchase. If we
experience a Change of Control Repurchase Event, there can be no
assurance that we would have sufficient financial resources
available to satisfy our obligations to repurchase the notes.
Our failure to purchase the notes as required under the
indenture governing the notes would result in a default under
the indenture, which could have material adverse consequences
for us and the holders of the notes. See Description of
the Notes Repurchase Upon Change of Control
Repurchase Event.
S-18
USE OF
PROCEEDS
The net proceeds to us from the sale of the notes will be
approximately $ million,
after deducting underwriting discounts and our offering
expenses. As part of our overall debt management strategy and in
furtherance of our targeted capital structure, we intend,
subject to market and other conditions, to effectively replace
our outstanding 2.75% convertible debentures due 2021 with the
notes issued hereby by using the net proceeds from this offering
to repurchase and retire into treasury the number of shares
resulting from the potential conversion of these debentures in
order to offset the dilutive impact of such conversion. Any such
share repurchase would be made in the open market pursuant to
our share buyback program, the size of which we may choose to
increase from previously announced levels. As of
December 27, 2009, we had approximately $249.8 million
in principal amount of these debentures outstanding. For further
information relating to these debentures and our other
outstanding indebtedness, see Capitalization and
Risk Factors We rely on external financing,
including our credit facilities and accounts receivable
securitization facility, to help fund our operations. If we were
unable to obtain or service such financing, or if the
restrictions imposed by such financing were too burdensome, our
business would be harmed. To the extent the net proceeds
are not fully utilized by the foregoing, we plan to use the
remaining net proceeds for general corporate and working capital
purposes, which may include (but are not limited to) repayment
of our indebtedness (including redemption of our convertible
debentures to the extent they are not converted into our common
stock), capital expenditures, acquisitions and additional
repurchases of shares of our common stock. Pending any such
application of the net proceeds, such proceeds will be invested
temporarily in short-term investments.
RATIO OF EARNINGS
TO FIXED CHARGES
Our consolidated ratio of earnings to fixed charges for each of
the periods indicated are as follows:
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Fiscal Year Ended in December
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2009
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2008
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2007
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2006
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2005
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Ratio of Earnings to Fixed Charges(1)
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7.96x
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8.15x
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10.86x
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9.74x
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8.33x
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(1) |
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For purposes of calculating the ratio of earnings to fixed
charges, fixed charges include interest and one-third of rental
expense (which we estimate to be the interest factor of rental
expense); earnings available for fixed charges represent
earnings before fixed charges and income taxes. |
S-19
CAPITALIZATION
The following table sets forth, as of December 27, 2009,
our total capitalization (including short-term borrowings) on an
actual basis and as adjusted to give effect to the sale of the
notes. You should read this table in conjunction with our
consolidated financial statements and related notes thereto
which are incorporated by reference.
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At December 27, 2009
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As
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Actual
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Adjusted
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(in thousands)
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Short-term debt:
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Short-term borrowings
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$
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14,113
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Long-term debt:
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6.125% Notes due 2014
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425,000
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6.30% Notes due 2017
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350,000
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2.75% Convertible Debentures due 2021
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249,828
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6.60% Debentures due 2028
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109,895
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Notes offered hereby
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Fair value adjustment related to interest rate swaps
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(2,725
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)
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Total long-term debt
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1,131,998
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Shareholders equity:
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Common stock
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104,847
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Additional paid-in capital
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467,183
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Retained earnings
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2,720,549
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Accumulated other comprehensive earnings
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58,631
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Treasury stock, at cost
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(1,756,438
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Total shareholders equity
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1,594,772
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Total capitalization
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$
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2,740,883
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S-20
DESCRIPTION OF
THE NOTES
The following description of the particular terms of the notes
supplements the description of the general terms and provisions
of the debt securities set forth in the accompanying
prospectus, to which reference is made. References to
we, us and our in this
section are only to Hasbro, Inc. and not to its subsidiaries.
The notes will be issued under an indenture dated as of
March 15, 2000, between us and The Bank of Nova Scotia
Trust Company of New York, as trustee, as amended by the
third supplemental indenture between us and the trustee. In this
section, unless otherwise stated or the context otherwise
requires, references to the indenture refer to the
indenture, as supplemented by the third supplemental indenture.
General
The notes will be our senior unsecured obligations and will rank
equal in right of payment to our other senior unsecured debt
from time to time outstanding. At December 27, 2009, we had
approximately $1.135 billion in principal amount of
indebtedness outstanding on a consolidated basis. The notes will
be effectively subordinated to all liabilities of our
subsidiaries, including trade payables. Since we conduct many of
our operations through our subsidiaries, our right to
participate in any distribution of the assets of a subsidiary
when it winds up its business is subject to the prior claims of
the creditors of the subsidiary. This means that your right as a
holder of our notes will also be subject to the prior claims of
these creditors if a subsidiary liquidates or reorganizes or
otherwise winds up its business. Unless we are considered a
creditor of the subsidiary, your claims will be recognized
behind these creditors. See Risk Factors The
notes are effectively subordinated to our secured debt and the
existing and future liabilities of our subsidiaries.
The indenture does not limit the amount of notes, debentures or
other evidences of indebtedness that we may issue under the
indenture and provides that notes, debentures or other evidences
of indebtedness may be issued from time to time in one or more
series. We may from time to time, without giving notice to or
seeking the consent of the holders of the notes, issue notes
having the same terms (except for the issue date, the public
offering price and the first interest payment date) and ranking
equally and ratably with the notes offered hereby. Any
additional securities having such similar terms, together with
the applicable notes, will constitute a single series of
securities under the indenture.
The notes will be issued only in fully registered form without
coupons and in denominations of $2,000 or any whole multiple of
$1,000 above that amount.
Principal and interest will be payable, and the notes will be
transferable or exchangeable, at the office or offices or agency
maintained by us for these purposes. Payment of interest on the
notes may be made at our option by check mailed to the
registered holders.
No service charge will be made for any transfer or exchange of
the notes, but we may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection
with a transfer or exchange.
The notes will be represented by one or more global securities
registered in the name of a nominee of DTC. Except as described
under Book-Entry Delivery and
Settlement, the notes will not be issuable in certificated
form.
Principal
Amount; Maturity and Interest
The notes will initially be limited to
$ in aggregate principal amount
and will mature
on , .
The notes will bear interest at the rate
of % per annum from the date of
original issuance, or from the most recent interest payment date
to which interest has been paid or provided for.
We will make interest payments on the notes semi-annually in
arrears
on
and
of each year,
commencing ,
2010, to the holders of record at the close of business on the
preceding
and ,
respectively. Interest on the notes will be computed on the
basis of a
360-day year
consisting of twelve
30-day
months.
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If an interest payment date or the maturity date with respect to
the fixed rate falls on a day that is not a business day, the
payment will be made on the next business day as if it were made
on the date the payment was due, and no interest will accrue on
the amount so payable for the period from and after that
interest payment date or the maturity date, as the case may be,
to the date the payment is made.
Optional
Redemption
The notes will be redeemable, in whole at any time or in part
from time to time, at our option at a redemption price equal to
the greater of:
(i) 100% of the principal amount of the notes to be
redeemed; and
(ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not
including any portion of such payments of interest accrued as of
the date of redemption), discounted to the date of redemption on
a semi-annual basis (assuming a
360-day year
consisting of twelve
30-day
months) at the Treasury Rate (as defined below),
plus basis points, plus, in each
case, accrued and unpaid interest thereon to the date of
redemption. Notwithstanding the foregoing, installments of
interest on notes that are due and payable on interest payment
dates falling on or prior to a redemption date will be payable
on the interest payment date to the registered holders as of the
close of business on the relevant record date according to the
notes and the indenture.
Comparable Treasury Issue means the United
States Treasury security selected by the Quotation Agent as
having a maturity comparable to the remaining term (as measured
from the date of redemption) of the series of the notes to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to
the remaining term of such notes.
Comparable Treasury Price means, with respect
to any redemption date, (i) the average of four Reference
Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such Reference Treasury
Dealer Quotations, or (ii) if the trustee obtains fewer
than four of such Reference Treasury Dealer Quotations, the
average of all such quotations, or (iii) if only one
Reference Treasury Dealer Quotation is received, such quotation.
Quotation Agent means any Reference Treasury
Dealer appointed by us.
Reference Treasury Dealer means (i) each
of Banc of America Securities LLC and Citigroup Global Markets
Inc. (or their respective affiliates that are Primary Treasury
Dealers) and their respective successors; provided, however,
that if any of the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a
Primary Treasury Dealer), we will substitute
therefor another Primary Treasury Dealer, and (ii) any
other Primary Treasury Dealer selected by us.
Reference Treasury Dealer Quotations means,
with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the trustee, of
the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount)
quoted in writing to the trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
Treasury Rate means, with respect to any
redemption date, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
Notice of any redemption will be mailed at least 30 days
but not more than 60 days before the redemption date to
each holder of the notes to be redeemed by us or by the trustee
on our behalf; provided that notice of redemption may be
mailed more than 60 days prior to a redemption date if the
notice is issued in connection with a defeasance of the notes or
a satisfaction and discharge of the notes. Unless we default in
payment of the redemption price, on and after the redemption
date, interest will cease to accrue on the notes or portions
thereof called for redemption. If less than all of the notes are
to be redeemed, the notes to be redeemed shall
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be selected by lot by DTC, in the case of notes represented by a
global security, or by the trustee by a method the trustee deems
to be fair and appropriate, in the case of notes that are not
represented by a global security.
Sinking
Fund
The notes will not be entitled to any sinking fund.
Repurchase
upon Change of Control Repurchase Event
If a Change of Control Repurchase Event (as defined below)
occurs, unless we have exercised our right to redeem the notes
as described above, we will make an offer to each holder of
notes to repurchase all or any part (in integral multiples of
$1,000) of that holders notes at a repurchase price in
cash equal to 101% of the aggregate principal amount of notes
repurchased plus any accrued and unpaid interest on the notes
repurchased to the date of purchase. Within 30 days
following any Change of Control Repurchase Event or, at our
option, prior to any Change of Control (as defined below), but
after the public announcement of an impending Change of Control,
we will mail a notice to each holder, with a copy to the
trustee, describing the transaction or transactions that
constitute or may constitute the Change of Control Repurchase
Event and offering to repurchase notes on the payment date
specified in the notice, which date will be no earlier than
30 days and no later than 60 days from the date such
notice is mailed. The notice shall, if mailed prior to the date
of consummation of the Change of Control, state that the offer
to purchase is conditioned on the Change of Control Repurchase
Event occurring on or prior to the payment date specified in the
notice.
We will comply with the requirements of
Rule 14e-1
under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and any other securities laws and regulations
thereunder, to the extent those laws and regulations are
applicable in connection with the repurchase of the notes as a
result of a Change of Control Repurchase Event. To the extent
that the provisions of any securities laws or regulations
conflict with the Change of Control Repurchase Event provisions
of the notes, we will comply with the applicable securities laws
and regulations and will not be deemed to have breached our
obligations under the Change of Control Repurchase Event
provisions of the notes by virtue of such conflict.
On the Change of Control Repurchase Event payment date, we will,
to the extent lawful:
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accept for payment all notes or portions of notes (in integral
multiples of $1,000) properly tendered pursuant to our offer;
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deposit with the paying agent an amount equal to the aggregate
purchase price in respect of all notes or portions of notes
properly tendered; and
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deliver or cause to be delivered to the trustee the notes
properly accepted, together with an officers certificate
stating the aggregate principal amount of notes being purchased
by us.
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The paying agent will promptly mail to each holder of notes
properly tendered the purchase price for the notes, and the
trustee will promptly authenticate and mail (or cause to be
transferred by book-entry) to each holder a new note equal in
principal amount to any unpurchased portion of any notes
surrendered; provided, that each new note will be in a principal
amount of $2,000 or an integral multiple of $1,000 above that
amount.
We will not be required to make an offer to repurchase the notes
upon a Change of Control Repurchase Event if a third party makes
such an offer in the manner, at the times and otherwise in
compliance with the requirements for an offer made by us and
such third party purchases all notes properly tendered and not
withdrawn under its offer.
We have no present intention to engage in a transaction
involving a Change of Control, although it is possible that we
would decide to do so in the future. We could, in the future,
enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not
constitute a Change of Control, but that could increase the
amount of debt outstanding at such time or otherwise affect our
capital structure or credit ratings.
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Definitions
Below Investment Grade Rating Event means the
notes are rated below Investment Grade by all the Rating
Agencies on any date from the date of the public notice of an
arrangement that could result in a Change of Control until the
end of the
60-day
period following public notice of the occurrence of a Change of
Control (which period shall be extended so long as the rating of
the notes is under publicly announced consideration for possible
downgrade by any of the Rating Agencies); provided that a
Below Investment Grade Rating Event otherwise arising by virtue
of a particular reduction in rating shall not be deemed to have
occurred in respect of a particular Change of Control (and thus
shall not be deemed a Below Investment Grade Rating Event for
purposes of the definition of Change of Control Repurchase Event
hereunder) if any of the Rating Agencies making the reduction in
rating to which this definition would otherwise apply does not
announce or publicly confirm or inform the trustee in writing at
its request that the reduction was the result, in whole or in
part, of any event or circumstance comprised of or arising as a
result of, or in respect of, the applicable Change of Control
(whether or not the applicable Change of Control shall have
occurred at the time of the Below Investment Grade Rating Event).
Change of Control means the occurrence of any
of the following:
(1) the direct or indirect sale, transfer, conveyance or
other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of our properties or assets and those
of our subsidiaries taken as a whole to any person
or group (as that term is used in
Section 13(d)(3) of the Exchange Act), other than us or one
of our subsidiaries;
(2) the adoption of a plan relating to our liquidation or
dissolution;
(3) the first day on which a majority of the members of our
Board of Directors are not Continuing Directors; or
(4) the consummation of any transaction or series of
related transactions (including, without limitation, any merger
or consolidation) the result of which is that any
person or group (as that term is used in
Section 13(d)(3) of the Exchange Act), other than us or one
of our wholly-owned subsidiaries, becomes the beneficial owner,
directly or indirectly, of more than 50% of the then outstanding
number of shares of our Voting Stock, measured by voting power
rather than number of shares; provided that a merger
shall not constitute a change of control under this
definition if (i) the sole purpose of the merger is our
reincorporation in another state and (ii) our shareholders
and the number of shares of our Voting Stock, measured by voting
power and number of shares, owned by each of them immediately
before and immediately following such merger are identical.
Change of Control Repurchase Event means the
occurrence of both a Change of Control and a Below Investment
Grade Rating Event.
Continuing Directors means, as of any date of
determination, any member of our Board of Directors who
(1) was a member of such Board of Directors on the date of
the issuance of the notes; or (2) was nominated for
election or elected to such Board of Directors with the approval
of a majority of the Continuing Directors who were members of
such Board of Directors at the time of such nomination or
election (either by a specific vote or by approval of our proxy
statement in which such member was named as a nominee for
election as a director).
Fitch means Fitch Ratings.
Investment Grade means a rating of BBB- or
better by Fitch (or its equivalent under any successor rating
categories of Fitch), Baa3 or better by Moodys (or its
equivalent under any successor rating categories of
Moodys) and a rating of BBB- or better by S&P (or its
equivalent under any successor rating categories of S&P) or
the equivalent investment grade credit rating from any
additional Rating Agency or Rating Agencies selected by us.
Moodys means Moodys Investors
Service, Inc.
S-24
Rating Agency means (1) any of Fitch,
Moodys and S&P; and (2) if any of Fitch,
Moodys or S&P ceases to rate the notes or fails to
make a rating of the notes publicly available for reasons
outside of our control, a nationally recognized
statistical rating organization within the meaning of
Rule 15c3-1(c)(2)(vi)(F)
under the Exchange Act, selected by us as a replacement agency
for Fitch, Moodys or S&P, as the case may be.
S&P means Standard &
Poors Ratings Services, a division of The McGraw-Hill
Companies, Inc.
Voting Stock means, with respect to any
person, capital stock of any class or kind the holders of which
are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing
similar functions) of such person, even if the right so to vote
has been suspended by the happening of such a contingency.
Book-Entry
Delivery and Settlement
Global
Notes
We will issue the notes in the form of one or more global notes
in definitive, fully registered, book-entry form. The global
notes will be deposited with or on behalf of DTC and registered
in the name of Cede & Co., as nominee of DTC.
DTC,
Clearstream and Euroclear
Beneficial interests in the global notes will be represented
through book-entry accounts of financial institutions acting on
behalf of beneficial owners as direct and indirect participants
in DTC. Investors may hold interests in the global notes through
DTC (in the United States), Clearstream Banking,
société anonyme, Luxembourg, which we refer to as
Clearstream, or Euroclear Bank S.A./N.V., as operator of the
Euroclear System, which we refer to as Euroclear, in Europe,
either directly if they are participants in such systems or
indirectly through organizations that are participants in such
systems. Clearstream and Euroclear will hold interests on behalf
of their participants through customers securities
accounts in Clearstreams and Euroclears names on the
books of their U.S. depositaries, which in turn will hold
such interests in customers securities accounts in the
U.S. depositaries names on the books of DTC.
DTC has advised us as follows:
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DTC is a limited-purpose trust company organized under the New
York Banking Law, a banking organization within the
meaning of the New York Banking Law, a member of the Federal
Reserve System, a clearing corporation within the
meaning of the New York Uniform Commercial Code and a
clearing agency registered under Section 17A of
the Exchange Act.
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DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
participants accounts, hereby eliminating the need for
physical movement of securities certificates.
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Direct participants include securities brokers and dealers,
banks, trust companies, clearing corporations and other
organizations.
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DTC is owned by a number of its direct participants and by The
New York Stock Exchange, Inc., the American Stock Exchange LLC
and the National Association of Securities Dealers, Inc.
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Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly.
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The rules applicable to DTC and its direct and indirect
participants are on file with the SEC.
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Clearstream has advised us that it is incorporated under the
laws of Luxembourg as a professional depositary. Clearstream
holds securities for its customers and facilitates the clearance
and settlement of
S-25
securities transactions between its customers through electronic
book-entry changes in accounts of its customers, thereby
eliminating the need for physical movement of certificates.
Clearstream provides to its customers, among other things,
services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities
lending and borrowing. Clearstream interfaces with domestic
markets in several countries. As a professional depositary,
Clearstream is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Section.
Clearstream customers are recognized financial institutions
around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and other
organizations and may include the underwriters. Indirect access
to Clearstream is also available to others, such as banks,
brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Clearstream customer
either directly or indirectly.
Euroclear has advised us that it was created in 1968 to hold
securities for participants of Euroclear and to clear and settle
transactions between Euroclear participants through simultaneous
electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and
cash. Euroclear provides various other services, including
securities lending and borrowing and interfaces with domestic
markets in several countries. Euroclear is operated by Euroclear
Bank S.A./ N.V., which we refer to as the Euroclear Operator,
under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation, which we refer to as the Cooperative.
All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on
behalf of Euroclear participants. Euroclear participants include
banks (including central banks), securities brokers and dealers,
and other professional financial intermediaries and may include
the underwriters. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or
indirectly.
The Euroclear Operator has advised us that it is licensed by the
Belgian Banking and Finance Commission to carry out banking
activities on a global basis. As a Belgian bank, it is regulated
and examined by the Belgian Banking and Finance Commission.
We have provided the descriptions of the operations and
procedures of DTC, Clearstream and Euroclear in this prospectus
supplement solely as a matter of convenience. These operations
and procedures are solely within the control of those
organizations and are subject to change by them from time to
time. None of us, the underwriters nor the trustee takes any
responsibility for these operations or procedures, and you are
urged to contact DTC, Clearstream and Euroclear or their
participants directly to discuss these matters.
We expect that under procedures established by DTC:
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upon deposit of the global notes with DTC or its custodian, DTC
will credit on its internal system the accounts of direct
participants designated by the underwriters with portions of the
principal amounts of the global notes; and
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ownership of the notes will be shown on, and the transfer of
ownership thereof will be effected only through, records
maintained by DTC or its nominee, with respect to interests of
direct participants, and the records of direct and indirect
participants, with respect to interests of persons other than
participants.
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The laws of some jurisdictions may require that purchasers of
securities take physical delivery of those securities in
definitive form. Accordingly, the ability to transfer interests
in the notes represented by a global note to those persons may
be limited. In addition, because DTC can act only on behalf of
its participants, who in turn act on behalf of persons who hold
interests through participants, the ability of a person having
an interest in notes represented by a global note to pledge or
transfer those interests to persons or entities that do not
participate in DTCs system, or otherwise to take actions
in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a
global note, DTC or that nominee will be considered the sole
owner or holder of the notes represented by that global note for
all purposes under the indenture and under the notes. Except as
provided below, owners of beneficial interests in a global note
will
S-26
not be entitled to have notes represented by that global note
registered in their names, will not receive or be entitled to
receive physical delivery of certificated notes and will not be
considered the owners or holders thereof under the indenture or
under the notes for any purpose, including with respect to the
giving of any direction, instruction or approval to the trustee.
Accordingly, each holder owning a beneficial interest in a
global note must rely on the procedures of DTC and, if that
holder is not a direct or indirect participant, on the
procedures of the participant through which that holder owns its
interest, to exercise any rights of a holder of notes under the
indenture or a global note.
Neither we nor the trustee will have any responsibility or
liability for any aspect of the records relating to or payments
made on account of notes by DTC, Clearstream or Euroclear, or
for maintaining, supervising or reviewing any records of those
organizations relating to the notes.
Payments on the notes represented by the global notes will be
made to DTC or its nominee, as the case may be, as the
registered owner thereof. We expect that DTC or its nominee,
upon receipt of any payment on the notes represented by a global
note, will credit participants accounts with payments in
amounts proportionate to their respective beneficial interests
in the global note as shown in the records of DTC or its
nominee. We also expect that payments by participants to owners
of beneficial interests in the global note held through such
participants will be governed by standing instructions and
customary practice as is now the case with securities held for
the accounts of customers registered in the names of nominees
for such customers. The participants will be responsible for
those payments.
Distributions on the notes held beneficially through Clearstream
will be credited to cash accounts of its customers in accordance
with its rules and procedures, to the extent received by the
U.S. depositary for Clearstream.
Securities clearance accounts and cash accounts with the
Euroclear Operator are governed by the Terms and Conditions
Governing Use of Euroclear and the related Operating Procedures
of the Euroclear System, and applicable Belgian law
(collectively, the Terms and Conditions). The Terms
and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear,
and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under
the Terms and Conditions only on behalf of Euroclear
participants and has no record of or relationship with persons
holding through Euroclear participants.
Distributions on the notes held beneficially through Euroclear
will be credited to the cash accounts of its participants in
accordance with the Terms and Conditions, to the extent received
by the U.S. depositary for Euroclear.
Clearance
and Settlement Procedures
Initial settlement for the notes will be made in immediately
available funds. Secondary market trading between DTC
participants will occur in the ordinary way in accordance with
DTC rules and will be settled in immediately available funds.
Secondary market trading between Clearstream customers
and/or
Euroclear participants will occur in the ordinary way in
accordance with the applicable rules and operating procedures of
Clearstream and Euroclear, as applicable, and will be settled
using the procedures applicable to conventional eurobonds in
immediately available funds.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or
indirectly through Clearstream customers or Euroclear
participants, on the other, will be effected through DTC in
accordance with DTC rules on behalf of the relevant European
international clearing system by the U.S. depositary;
however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines
(European time). The relevant European international clearing
system will, if the transaction meets its settlement
requirements, deliver instructions to the U.S. depositary
to take action to effect final settlement on its behalf by
delivering or receiving the notes in DTC, and making or
receiving payment in accordance with normal procedures for
same-day
funds settlement applicable
S-27
to DTC. Clearstream customers and Euroclear participants may not
deliver instructions directly to their U.S. depositaries.
Because of time-zone differences, credits of the notes received
in Clearstream or Euroclear as a result of a transaction with a
DTC participant will be made during subsequent securities
settlement processing and dated the business day following the
DTC settlement date. Such credits or any transactions in the
notes settled during such processing will be reported to the
relevant Clearstream customers or Euroclear participants on such
business day. Cash received in Clearstream or Euroclear as a
result of sales of the notes by or through a Clearstream
customer or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account
only as of the business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the
foregoing procedures to facilitate transfers of the notes among
participants of DTC, Clearstream and Euroclear, they are under
no obligation to perform or continue to perform such procedures
and such procedures may be changed or discontinued at any time.
Certificated
Notes
We will issue certificated notes to each person that DTC
identifies as the beneficial owner of the notes of a series
represented by a global note upon surrender by DTC of the global
note if:
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DTC notifies us that it is no longer willing or able to act as a
depositary for such global note or ceases to be a clearing
agency registered under the Exchange Act, and we have not
appointed a successor depositary within 90 days of that
notice or becoming aware that DTC is no longer so registered;
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an event of default has occurred and is continuing and DTC
requests the issuance of certificated notes; or
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we determine not to have the notes of such series represented by
a global note.
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Neither we nor the trustee will be liable for any delay by DTC,
its nominee or any direct or indirect participant in identifying
the beneficial owners of the notes. We and the trustee may
conclusively rely on, and will be protected in relying on,
instructions from DTC or its nominee for all purposes, including
with respect to the registration and delivery, and the
respective principal amounts, of the certificated notes to be
issued.
S-28
MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain of the United States
federal income tax consequences of the purchase, ownership and
disposition of the notes. This summary:
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is based on the Internal Revenue Code of 1986, as amended, or
the Code, United States Treasury regulations issued under the
Code, judicial decisions and administrative pronouncements, all
of which are subject to different interpretation or to change.
Any such change may be applied retroactively and may adversely
affect the United States federal income tax consequences
described in this prospectus supplement;
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addresses only tax consequences to investors that purchase the
notes upon their original issuance for cash at their initial
offering price and hold the notes as capital assets within the
meaning of Section 1221 of the Code (that is, for
investment purposes);
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does not discuss all of the tax consequences that may be
relevant to particular investors in light of their particular
circumstances (such as the application of the alternative
minimum tax);
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does not discuss all of the tax consequences that may be
relevant to investors that are subject to special treatment
under the United States federal income tax laws (such as
insurance companies, financial institutions, tax-exempt
organizations, retirement plans, regulated investment companies,
dealers in securities or currencies, U.S. Holders (as
defined below) whose functional currency for United States
federal income tax purposes is not the United States dollar,
persons holding the notes as part of a hedge, straddle,
constructive sale, conversion or other integrated transaction,
former United States citizens or long-term residents subject to
taxation as expatriates under Section 877 of the Code, or
traders in securities that have elected to use a
mark-to-market
method of accounting for their securities holdings);
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does not discuss the effect of other United States federal tax
laws (such as estate and gift tax laws) and does not discuss any
state, local or foreign tax laws; and
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does not discuss the tax consequences to a person holding notes
through a partnership (or other entity or arrangement classified
as a partnership for United States federal income tax purposes),
except to the limited extent specifically indicated below.
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We have not sought and will not seek a ruling from the Internal
Revenue Service, or the IRS, with respect to any matters
discussed in this section, and we cannot assure you that the IRS
will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the
notes, or that any such position would not be sustained.
If a partnership (or other entity or arrangement classified as a
partnership for United States federal income tax purposes) holds
the notes, the tax treatment of a partner in the partnership
generally will depend on the status of the partner and the
activities of the partnership. If you are a partnership or a
partner in a partnership holding notes, you should consult your
tax advisor regarding the tax consequences of the purchase,
ownership or disposition of the notes.
Prospective investors should consult their own tax advisors
with regard to the application of the tax consequences discussed
below to their particular situation and the application of any
other United States federal as well as state, local or foreign
tax laws, including gift and estate tax laws, and tax
treaties.
Certain
United States Federal Income Tax Consequences To U.S.
Holders
The following is a summary of certain United States federal
income tax consequences of the purchase, ownership and
disposition of the notes by a holder that is a
U.S. Holder. For purposes of this summary,
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U.S. Holder means a beneficial owner of a note
or notes that is for United States federal income tax purposes:
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an individual who is a citizen or resident of the United States,
including an alien individual who is a lawful permanent resident
of the United States or who meets the substantial
presence test under Section 7701(b) of the Code;
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a corporation (or other entity taxable as a corporation for
United States federal income tax purposes) created or organized
in or under the laws of the United States (or any state thereof
or the District of Columbia);
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an estate whose income is subject to United States federal
income taxation regardless of its source; or
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a trust if (i) a court within the United States is able to
exercise primary supervision over its administration and one or
more United States persons (within the meaning of the Code) have
the authority to control all of its substantial decisions, or
(ii) such trust has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States person.
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Under the substantial presence test referred to
above, an individual may, subject to certain exceptions, be
deemed to be a resident of the United States by reason of being
present in the United States for at least 31 days in the
calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year
(counting for such purposes all of the days present in the
current year, one-third of the days present in the immediately
preceding year and one-sixth of the days present in the second
preceding year).
Treatment
of Interest
Stated interest on the notes will be taxable to a
U.S. Holder as ordinary income as the interest is paid or
accrues in accordance with the U.S. Holders method of
tax accounting.
Treatment
of Dispositions of Notes
Upon the sale, exchange, retirement or other taxable disposition
(collectively, a disposition) of a note, a
U.S. Holder generally will recognize gain or loss equal to
the difference between the amount received on such disposition
(other than amounts received in respect of accrued and unpaid
interest, which will generally be taxable to that
U.S. Holder as ordinary interest income at that time if not
previously included in the U.S. Holders income) and
the U.S. Holders adjusted tax basis in the note. A
U.S. Holders adjusted tax basis in a note will be, in
general, the cost of the note to the U.S. Holder. Gain or
loss realized on the sale, exchange or retirement of a note
generally will be capital gain or loss, and will be long-term
capital gain or loss if, at the time of such sale, exchange or
retirement, the note has been held for more than one year.
Otherwise, such gain or loss generally will be short-term
capital gain or loss. Net long-term capital gain recognized by a
non-corporate U.S. Holder generally is eligible for reduced
rates of United States federal income taxation. The
deductibility of capital losses is subject to limitations.
If a U.S. Holder disposes of a note between interest
payment dates, a portion of the amount received by the
U.S. Holder will reflect interest that has accrued on the
note but has not been paid as of the disposition date. That
portion is treated as ordinary interest income and not as sale
proceeds.
Certain
United States Federal Tax Consequences to
Non-U.S.
Holders
The following is a summary of the United States federal income
and estate tax consequences of the purchase, ownership and
disposition of the notes by a holder that is a
Non-U.S. Holder.
For purposes of this summary,
Non-U.S. Holder
means a beneficial owner of a note or notes, other than a
partnership (or an entity or arrangement classified as a
partnership for United States federal income tax purposes), who
is not a U.S. Holder.
S-30
Special rules may apply to
Non-U.S. Holders
that are subject to special treatment under the Code, including
controlled foreign corporations and passive
foreign investment companies. Such
Non-U.S. Holders
should consult their own tax advisors to determine the United
States federal, state, local and other tax consequences that may
be relevant to them.
Treatment
of Interest
Subject to the discussion below concerning backup withholding, a
Non-U.S. Holder
will not be subject to United States federal income or
withholding tax in respect of interest income on the notes if
the interest income qualifies for the portfolio interest
exception. Interest income on the notes will qualify for
the portfolio interest exception if each of the
following requirements is satisfied:
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The interest is not effectively connected with the conduct of a
trade or business in the United States;
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The
Non-U.S. Holder
appropriately certifies its status as a
non-United
States person (as described below);
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The
Non-U.S. Holder
does not actually or constructively own 10% or more of the total
combined voting power of our stock entitled to vote;
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The
Non-U.S. Holder
is not a controlled foreign corporation that is
actually or constructively related to us through stock
ownership; and
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The
Non-U.S. Holder
is not a bank that acquired the notes in consideration for an
extension of credit made pursuant to a loan agreement entered
into in the ordinary course of business.
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The certification requirement referred to above generally will
be satisfied if the
Non-U.S. Holder
provides us or our paying agent with a statement on IRS
Form W-8BEN
(or suitable substitute or successor form), together with all
appropriate attachments, signed under penalties of perjury,
identifying the
Non-U.S. Holder
and stating, among other things, that the
Non-U.S. Holder
is not a United States person (within the meaning of the Code).
If the
Non-U.S. Holder
holds its notes through a financial institution or other agent
acting on the holders behalf, the
Non-U.S. Holder
will be required to provide appropriate documentation to that
agent, and that agent will then be required to provide
appropriate documentation to us or our paying agent (either
directly or through other intermediaries). For payments made to
foreign partnerships and certain other pass-through entities,
the certification requirement will generally apply to the
partners or other interest holders rather than the partnership
or other pass-through entity. We may be required to report
annually to the IRS and to each
Non-U.S. Holder
the amount of interest paid to, and the tax withheld, if any,
with respect to each
Non-U.S. Holder.
Prospective
Non-U.S. Holders
should consult their tax advisors regarding this certification
requirement and alternative methods for satisfying the
certification requirement.
If the requirements of the portfolio interest
exception are not satisfied with respect to a
Non-U.S. Holder,
payments of interest to that
Non-U.S. Holder
will be subject to a 30% United States withholding tax, unless
another exemption or a reduced withholding rate applies. For
example, an applicable income tax treaty may reduce or eliminate
such tax, in which event a
Non-U.S. Holder
claiming the benefit of such treaty must provide the withholding
agent with a properly executed IRS
Form W-8BEN
(or suitable substitute or successor form) claiming the benefit
of the applicable tax treaty. Alternatively, the 30% United
States withholding tax does not apply if the interest is
effectively connected with the
Non-U.S. Holders
conduct of a trade or business in the United States and the
Non-U.S. Holder
provides an appropriate statement to that effect on a properly
executed IRS
Form W-8ECI
(or suitable substitute or successor form). In the latter case,
such
Non-U.S. Holder
generally will be subject to United States federal income tax
with respect to all income from the notes in the same manner as
U.S. Holders, as described above, unless an applicable
income tax treaty provides otherwise. In addition, such a
Non-U.S. Holder
that is a corporation may be subject to a branch profits tax
with respect to any such effectively connected income at a rate
of 30% (or at a reduced rate under an applicable income tax
treaty).
S-31
Treatment
of Dispositions of Notes
Subject to the discussion below concerning backup withholding, a
Non-U.S. Holder
generally will not be subject to United States federal income
tax on gain realized upon the disposition of a note unless:
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the
Non-U.S. Holder
is an individual present in the United States for 183 days
or more in the taxable year of the disposition and certain other
conditions are met; or
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the gain is effectively connected with the
Non-U.S. Holders
conduct of a trade or business in the United States (and,
if an income tax treaty applies, is attributable to a permanent
establishment maintained by the
Non-U.S. Holder
within the United States).
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If the first exception applies, the
Non-U.S. Holder
generally will be subject to United States federal income tax at
a rate of 30% (or at a reduced rate under an applicable income
tax treaty) on the amount by which capital gains allocable to
United States sources (including gains from the sale, exchange,
retirement or other disposition of the notes) exceed capital
losses allocable to United States sources. If the second
exception applies, the
Non-U.S. Holder
generally will be subject to United States federal income tax
with respect to such gain in the same manner as
U.S. Holders, as described above, unless an applicable
income tax treaty provides otherwise. Additionally,
Non-U.S. Holders
that are corporations could be subject to a branch profits tax
with respect to such effectively connected gain at a rate of 30%
(or at a reduced rate under an applicable income tax treaty).
United
States Information Reporting Requirements and Backup
Withholding
U.S.
Holders
We, or if a U.S. Holder holds notes through a broker or
other securities intermediary, the intermediary, may be required
to file information returns with respect to payments of interest
made to the U.S. Holder, and, in some cases, disposition
proceeds on the notes.
In addition, U.S. Holders may be subject to backup
withholding on those payments if they do not provide their
taxpayer identification numbers in the manner required, fail to
certify that they are not subject to backup withholding, fail to
properly report in full their dividend and interest income, or
otherwise fail to comply with the applicable requirements of the
backup withholding rules. Backup withholding is not an
additional tax. Any amounts withheld under the backup
withholding rules will be allowed as a credit against the
U.S. Holders United States federal income tax
liability (or be refunded) provided the required information is
timely furnished to the IRS. Prospective U.S. Holders
should consult their tax advisors concerning the application of
information reporting and backup withholding rules.
Non-U.S.
Holders
United States rules concerning information reporting and backup
withholding applicable to
Non-U.S. Holders
are as follows:
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Interest payments received by a
Non-U.S. Holder
will be automatically exempt from the usual backup withholding
rules if such payments are subject to the 30% withholding tax on
interest or if they are exempt from that tax by application of a
tax treaty or the portfolio interest exception where
the
non-U.S. Holder
satisfies the certification requirements described under
Certain United States Federal Tax
Consequences to
Non-U.S. Holders
Treatment of Interest above. The exemption does not apply
if the withholding agent or an intermediary knows or has reason
to know that the
Non-U.S. Holder
should be subject to the usual information reporting or backup
withholding rules. In addition, information reporting (on
Form 1042-S)
may still apply to payments of interest even if certification is
provided and the interest is exempt from the 30% withholding
tax; and
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Sale proceeds received by a
Non-U.S. Holder
on a sale of notes through a broker may be subject to
information reporting
and/or
backup withholding if the
Non-U.S. Holder
is not eligible for an exemption or does not provide the
certification described under Certain United
States Federal Tax Consequences to
Non-U.S. Holders
Treatment of Interest above. In particular, information
reporting and
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backup withholding may apply if the
Non-U.S. Holder
uses the United States office of a broker, and information
reporting (but generally not backup withholding) may apply if a
Non-U.S. Holder
uses the foreign office of a broker that has certain connections
to the United States.
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Prospective
Non-U.S. Holders
should consult their tax advisors concerning the application of
information reporting and backup withholding rules.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE
IS INCLUDED FOR GENERAL INFORMATION ONLY, IS NOT TAX ADVICE AND
MAY NOT BE APPLICABLE DEPENDING UPON A HOLDERS PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER
UNITED STATES FEDERAL NON-INCOME, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS (AND ANY PROPOSED CHANGES IN APPLICABLE LAW).
S-33
UNDERWRITING
Banc of America Securities LLC and Citigroup Global Markets Inc.
are acting as joint book-running managers of the offering and as
representatives of the underwriters named below.
Subject to the terms and conditions stated in the underwriting
agreement dated the date of this prospectus supplement, each
underwriter named below has agreed to purchase, and we have
agreed to sell to that underwriter, the principal amount of
notes set forth opposite the underwriters name.
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Principal Amount
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Underwriter
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of Notes
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Banc of America Securities LLC
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$
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Citigroup Global Markets Inc. .
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Total
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$
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The underwriting agreement provides that the obligations of the
underwriters to purchase the notes included in this offering are
subject to approval of legal matters by counsel and to other
conditions. The underwriters are obligated to purchase all the
notes if they purchase any of the notes.
The underwriters propose to offer some of the notes directly to
the public at the public offering prices set forth on the cover
page of this prospectus supplement and some of the notes to
dealers at the public offering price less a concession not to
exceed % of the principal amount of
the notes. The underwriters may allow, and dealers may reallow,
a concession not to exceed % of the
principal amount of the notes on sales to other dealers. After
the initial offering of the notes to the public, the
representatives may change the public offering prices and
concessions.
The following table shows the underwriting discounts and
commissions that we are to pay to the underwriters in connection
with this offering (expressed as a percentage of the principal
amount of the notes).
In connection with the offering, the representatives, on behalf
of the underwriters, may purchase and sell notes in the open
market. These transactions may include over-allotment, syndicate
covering transactions and stabilizing transactions.
Over-allotment involves syndicate sales of notes in excess of
the principal amount of notes to be purchased by the
underwriters in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchases of
the notes in the open market after the distribution has been
completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of
notes made for the purpose of preventing or retarding a decline
in the market prices of the notes while the offering is in
progress.
The underwriters also may impose a penalty bid. Penalty bids
permit the underwriters to reclaim a selling concession from a
syndicate member when the representatives, in covering syndicate
short positions or making stabilizing purchases, repurchases
notes originally sold by that syndicate member.
Any of these activities may have the effect of preventing or
retarding a decline in the market prices of the notes. They may
also cause the prices of the notes to be higher than the prices
that otherwise would exist in the open market in the absence of
these transactions. The underwriters may conduct these
transactions in the
over-the-counter
market or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.
We estimate that our total expenses for this offering will be
$ million, excluding
underwriters discounts and commissions.
The underwriters and their affiliates have provided various
investment and commercial banking services for us from time to
time for which they have received customary fees and expenses,
including participating as lenders under our revolving credit
facilities and our receivables facility. The underwriters and
their affiliates may, from time to time, engage in transactions
with and perform services for us, such as other commercial
banking
S-34
services, investment banking and financial advisory services,
fairness opinions and other similar services, including those
that may be provided in connection with any acquisitions or
investments we may make.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute to payments the underwriters
may be required to make because of any of those liabilities.
Selling
Restrictions
Each of the underwriters, severally and not jointly, has
represented and agreed that it has not and will not offer, sell,
or deliver any of the notes, directly or indirectly, or
distribute this prospectus supplement or the attached prospectus
or any other offering material relating to the notes, in any
jurisdiction except under circumstances that will result in
compliance with applicable laws and regulations and that will
not impose any obligations on us except as set forth in the
underwriting agreement.
European
Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), each underwriter has
represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that
Relevant Member State (the Relevant Implementation
Date), it has not made and will not make an offer of notes
to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the notes which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive,
except that it may, with effect from and including the Relevant
Implementation Date, make an offer of notes to the public in
that Relevant Member State at any time:
(a) to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
(b) to any legal entity which has two or more of
(1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than
43,000,000; and (3) an annual net turnover of more
than 50,000,000, as shown in its last annual or
consolidated accounts;
(c) to fewer than 100 natural or legal persons (other than
qualified investors as defined in the Prospectus Directive)
subject to obtaining the prior consent of the
Representatives; or
(d) in any other circumstances falling within
Article 2 of the Prospectus Directive, provided that no
such offer of notes shall require us or any underwriter to
publish a prospectus pursuant to Article 3 of the
Prospectus Directive or supplement a prospectus pursuant to
Article 16 of the Prospectus Directive.
For purposes of this provision, the expression an offer of
notes to the public in relation to any notes in any
Relevant Member State means the communication in any form and by
any means of sufficient information on the terms of the offer
and the notes to be offered so as to enable you to decide to
purchase or subscribe for the notes, as the same may be varied
in that Member State by any measure implementing the Prospectus
Directive in that Member State, and the expression
Prospectus Directive means Directive 2003/71/EC and
includes any relevant implementing measure in each Relevant
Member State.
United
Kingdom
Each underwriter has represented and agreed that:
(a) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of section 21 (financial promotion) of
the Financial Service and Markets Act 2000 (the
FSMA)) received by it in connection with the issue
or sale of the notes in circumstances in which
section 21(1) of the FSMA does not apply to us; and
(b) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the notes in, from, or otherwise involving the
United Kingdom.
S-35
Hong
Kong
The notes may not be offered or sold by means of any document
other than (a) in circumstances that do not constitute an
offer to the public within the meaning of the Companies
Ordinance (Cap.32, Laws of Hong Kong), (b) to
professional investors within the meaning of the
Securities and Futures Ordinance (Cap.571, Laws of Hong Kong)
and any rules made thereunder or (c) in other circumstances
that do not result in the document being a
prospectus within the meaning of the Companies
Ordinance (Cap.32, Laws of Hong Kong), and no advertisement,
invitation or document relating to the notes may be issued or
may be in the possession of any person for the purpose of issue
(in each case whether in Hong Kong or elsewhere), which is
directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong (except if permitted to do
so under the laws of Hong Kong) other than with respect to notes
that are or are intended to be disposed of only to persons
outside Hong Kong or only to professional investors
within the meaning of the Securities and Futures Ordinance (Cap.
571, Laws of Hong Kong) and any rules made thereunder.
Japan
The notes have not been and will not be registered under the
Securities and Exchange Law of Japan and each underwriter has
agreed that it will not offer or sell any notes, directly or
indirectly, in Japan or to, or for the benefit of, any resident
of Japan (which term as used herein means any person resident in
Japan, including any corporation or other entity organized under
the laws of Japan), or to others for re-offering or resale,
directly or indirectly, in Japan or to a resident of Japan,
except pursuant to an exemption from the registration
requirements of, and otherwise in compliance with, the
Securities and Exchange Law of Japan and any other applicable
laws, regulations and ministerial guidelines of Japan.
Singapore
Neither this prospectus supplement nor the accompanying
prospectus has been registered as a prospectus with the Monetary
Authority of Singapore. Accordingly, this prospectus supplement
and the accompanying prospectus and any other document or
material in connection with the offer or sale, or invitation for
subscription or purchase, of the notes may not be circulated or
distributed, nor may the notes be offered or sold, or be made
the subject of an invitation for subscription or purchase,
whether directly or indirectly, to persons in Singapore other
than (a) to an institutional investor under
Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore, or the SFA, (b) to a
relevant person, or any person pursuant to Section 275(1A),
and in accordance with the conditions, specified in
Section 275 of the SFA or (c) otherwise pursuant to,
and in accordance with the conditions of, any other applicable
provision of the SFA.
Where the notes are subscribed or purchased under
Section 275 by a relevant person that is (a) a
corporation (which is not an accredited investor) the sole
business of which is to hold investments and the entire share
capital of which is owned by one or more individuals, each of
whom is an accredited investor or (b) a trust (where the
trustee is not an accredited investor) whose sole purpose is to
hold investments and each beneficiary is an accredited investor,
shares, debentures and units of shares and debentures of that
corporation or the beneficiaries rights and interest in
that trust shall not be transferable for six months after that
corporation or that trust has acquired the notes under
Section 275 except (1) to an institutional investor
under
Section 274 of the SFA or to a relevant person, or any
person pursuant to Section 275(1A), and in accordance with
the conditions, specified in Section 275 of the SFA,
(2) where no consideration is given for the transfer or
(3) by operation of law.
LEGAL
MATTERS
Certain legal matters relating to the notes will be passed upon
for us by Ropes & Gray LLP and for the underwriters by
Mayer Brown LLP.
S-36
Prospectus
Debt Securities
Hasbro, Inc. may offer debt securities from time to time, in one
or more offerings. The terms of the debt securities will be
described in a prospectus supplement, together with other terms
and matters related to the offering. You should read carefully
both this prospectus and any prospectus supplement before making
your investment decision.
We may offer and sell the debt securities on an immediate,
continuous or delayed basis directly to investors or through
underwriters, dealers or agents, or through a combination of
these methods.
Investing in these securities involves certain
risks. See
Item 1A-Risk
Factors in our most recent Annual Report on
Form 10-K
incorporated by reference in this prospectus, and any other risk
factors described in any Quarterly Report on
Form 10-Q
or in the applicable prospectus supplement, for a discussion of
the factors you should carefully consider before deciding to
purchase these securities.
The address of our principal executive offices is 1027 Newport
Avenue, Pawtucket, Rhode Island 02862 and our telephone number
at our principal executive offices is
(401) 431-8697.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is September 10, 2007.
ABOUT
THIS PROSPECTUS
Each time we offer debt securities using this prospectus, we
will provide the specific terms and offering prices in a
supplement to this prospectus. The prospectus supplements also
may add, update or change the information in this prospectus and
also will describe the specific manner in which we will offer
these securities.
The applicable prospectus supplement also may contain important
information about U.S. federal income tax consequences and,
in certain circumstances, consequences under other
countries tax laws to which you may become subject if you
acquire the debt securities being offered by that prospectus
supplement. The applicable prospectus supplement also may update
or change information contained or incorporated by reference in
this prospectus. You should read carefully both this prospectus
and any prospectus supplement together with the additional
information described under the heading Where You Can Find
More Information.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange
Commission, or the SEC. You may read and copy any materials that
we file with the SEC at its Public Reference Room,
100 F Street, N.E., Washington, D.C. 20549. You
may obtain information on the operation of the Public Reference
Room by calling the SEC at
(800) 732-0330.
Our filings are also available to the public from the website
maintained by the SEC at
http://www.sec.gov.
The SECs rules allow us to incorporate by
reference the information we file with the SEC, which
means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is an important part of this prospectus, and
information that we file subsequently with the SEC will
automatically update and supersede the information included
and/or
incorporated by reference in this prospectus. We incorporate by
reference into this prospectus the documents listed below and
any future filings made by us with the SEC under
Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended, after the initial filing of
the registration statement that contains this prospectus and
prior to the time that we sell all of the securities offered by
this prospectus:
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our Annual Report on
Form 10-K
for the year ended December 31, 2006;
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our Quarterly Report on
Form 10-Q
for the quarter ended April 1, 2007;
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our Quarterly Report on
Form 10-Q
for the quarter ended July 1, 2007; and
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our Current Reports on
Form 8-K,
filed on March 15, 2007, May 10, 2007, May 25,
2007 and August 2, 2007.
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You may obtain documents incorporated by reference into this
prospectus at no cost by requesting them in writing or
telephoning us at the following address:
Hasbro, Inc.
Attn: Investor Relations
1027 Newport Avenue
P.O. Box 1059
Pawtucket, Rhode Island 02862
(401) 431-8697
Copies of these filings are also available, without charge, on
our website at
http://www.hasbro.com.
The contents of our website have not been, and shall not be
deemed to be, incorporated by reference into this prospectus.
This prospectus constitutes a part of a registration statement
on
Form S-3,
referred to herein, including all amendments and exhibits, as
the Registration Statement, that we have filed with the SEC
under the Securities Act of 1933, as amended, or the Securities
Act. This prospectus does not contain all of the information
2
contained in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the
SEC. We refer you to the Registration Statement and related
exhibits for further information regarding us and our debt
securities. The Registration Statement may be inspected at the
public reference facilities maintained by the SEC at the address
set forth above or from the SECs website at
http://www.sec.gov.
Statements contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference herein
concerning the provisions of any document filed as an exhibit to
the Registration Statement are not necessarily complete and, in
each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise
filed with the SEC. Each such statement is qualified in its
entirety by such reference.
HASBRO,
INC.
We are a worldwide leader in childrens and family leisure
time entertainment products and services, including the design,
manufacture and marketing of games and toys ranging from
traditional to high-tech. Both internationally and in the U.S.,
our PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, TIGER,
and WIZARDS OF THE COAST brands and products provide what we
believe are the highest quality and most recognizable play
experiences in the world.
USE OF
PROCEEDS
Unless otherwise indicated in the applicable prospectus
supplement, we will use the net proceeds from the sale of our
debt securities offered by this prospectus for general corporate
and working capital purposes. General corporate and working
capital purposes may include repayment of debt, repurchase of
shares of our common stock, capital expenditures, possible
acquisitions and any other purposes that may be stated in any
prospectus supplement. The net proceeds may be invested
temporarily or applied to repay short-term or revolving debt
until they are used for their stated purpose.
RATIO OF
EARNINGS TO FIXED CHARGES
Our consolidated ratio of earnings to fixed charges for each of
the periods indicated are as follows:
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Six Months
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Ended
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Years Ended in December
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July 1, 2007
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2006
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2005
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2004
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2003
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2002
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Ratio of Earnings to Fixed Charges(1)
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4.85
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x
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9.74
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x
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8.33
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x
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6.93
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x
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4.56
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2.05x
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(1) |
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For purposes of calculating the ratio of earnings to fixed
charges, fixed charges include interest and one-third of rental
expense (which we estimate to be the interest factor of rental
expense); earnings available for fixed charges represent
earnings before fixed charges and income taxes. |
DESCRIPTION
OF THE DEBT SECURITIES
The following description of the debt securities sets forth the
material terms and provisions of the debt securities. The debt
securities will be issued under an indenture, dated as of
March 15, 2000, between us and The Bank of Nova Scotia
Trust Company of New York, a copy of which is incorporated
by reference as an exhibit to the registration statement of
which this prospectus forms a part. The specific terms
applicable to a particular issuance of debt securities and any
variations from the terms set forth below will be set forth in
the applicable prospectus supplement.
The following is a summary of the material terms and provisions
of the indenture and the debt securities. You should refer to
the indenture and the applicable prospectus supplement for
complete information regarding the terms and provisions of the
indenture and the debt securities.
3
General
The debt securities will be our unsecured senior obligations and
will rank equally with all of our other unsecured senior
indebtedness from time to time outstanding.
We currently conduct significant operations through our
subsidiaries and, as a result, our cash flows depend in part
upon the cash flows of these subsidiaries and the availability
of those cash flows to us. In addition, the payment of
dividends, distributions and certain loans and advances to us by
our subsidiaries may be subject to statutory or contractual
restrictions, depend upon the earnings of the subsidiaries and
are subject to various business considerations. Any right to
receive the assets of any of our subsidiaries upon their
liquidation, reorganization or recapitalization will be
structurally subordinated to the claims of the creditors and any
preferred shareholders of the respective subsidiaries. These
creditors would include trade creditors and in the future may
include lenders of additional debt for borrowed money. As a
result of this subordination, the rights of the holders of the
debt securities to participate in any distribution of assets in
the situations referred to above will be similarly subordinated.
Even if we are recognized as a creditor of the subsidiary, our
claims would still be subordinated to the claims of any creditor
having any security interests in the assets of the subsidiary
(to the extent of these assets) and any indebtedness of the
subsidiary senior in right of payment to that held by us.
A prospectus supplement relating to any series of debt
securities being offered will include specific terms relating to
the offering. Under the indenture, the specific terms of a
particular series of debt securities will include the following:
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the title of the debt securities;
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any limit on the amount(s) that may be issued;
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the maturity date(s) or the method by which this date or these
dates will be determined;
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the interest rate, if any, or the method of computing the
interest rate;
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the date or dates from which interest will accrue, or how this
date or these dates will be determined, and the interest payment
date or dates, if any, and any related record dates;
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any mandatory or optional sinking fund or similar provisions;
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if other than the principal amount, the portion of the principal
amount, or the method by which the portion will be determined,
of the debt securities that will be payable upon declaration of
acceleration of the maturity of the debt securities;
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the terms and conditions on which we may redeem the debt
securities;
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the terms and conditions on which we may be required to redeem
the debt securities;
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the place(s) where payments, if any, will be made on the debt
securities and the place(s) where debt securities may be
presented for transfer;
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if other than denominations of $1,000 and any integral multiple
of $1,000, the denominations in which any debt securities to be
issued in registered form will be issuable;
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whether the debt securities are issuable as registered
securities, bearer securities or both, and the terms upon which
bearer securities may be exchanged for registered securities;
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special provisions relating to the issuance of any bearer
securities of any series;
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whether the debt securities are to be issued in the form of one
or more global securities and, if so, the identity of the
depositary for the global security or securities;
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the currency in which payments may be payable;
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any changes to or additional events of default or covenants;
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the form of debt securities and coupons, if any; and
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any other terms of the debt securities.
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4
We will have the ability under the indentures to
reopen a previously issued series of debt securities
and issue additional debt securities of that series or establish
additional terms of that series.
Unless otherwise indicated in the applicable prospectus
supplement, the covenants contained in the indenture may not
protect holders of the debt securities in the event of a highly
leveraged or other transaction involving us or our subsidiaries
that may adversely affect the holders of the debt securities.
Debt securities may be issued under the indentures as original
issue discount securities. An original issue discount security
is a security, including any zero-coupon security, which:
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is issued at a price lower than the amount payable upon its
stated maturity and
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provides that upon redemption or acceleration of the maturity,
an amount less than the amount payable upon the stated maturity
shall become due and payable.
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If a series of debt securities is issued as original issue
discount securities, the special U.S. federal income tax,
accounting and other considerations applicable to original issue
discount securities will be discussed in the applicable
prospectus supplement.
Form,
Exchange and Transfer
The debt securities will be issuable as registered securities,
as bearer securities or both. Ownership and transfer of debt
securities which are issued as bearer securities will be based
upon possession or delivery of the actual certificate; that is,
the owner of a debt security issued as a bearer security will
presumptively be the bearer of the security. By
contrast, the ownership or transfer of debt securities issued as
registered securities will be listed in the security register
described in the indenture. If the debt securities are issued in
bearer form, any restrictions and considerations, including
offering restrictions and U.S. federal income tax
considerations applicable to these debt securities, and to
payment on and transfer and exchange of, these debt securities,
will be described in the applicable prospectus supplement.
The indenture provides that debt securities may be issuable in
global form which will be deposited with, or on behalf of, a
depositary, identified in an applicable prospectus supplement.
If debt securities are issued in global form, one certificate
will represent a large number of outstanding debt securities
which may be held by separate persons, rather than each debt
security being represented by a separate certificate.
If the purchase price, or the principal of, or any premium or
interest on any debt securities is payable in, or if any debt
securities are denominated in, one or more foreign currencies,
the restrictions, elections, U.S. federal income tax
considerations, specific terms and other information will be set
forth in the applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus
supplement, registered securities denominated in
U.S. dollars will be issued only in denominations of $1,000
and whole multiples of $1,000 and bearer securities denominated
in U.S. dollars will be issued only in denominations of
$5,000 and whole multiples of $5,000.
Debt securities may be presented for exchange, and registered
securities other than book-entry securities, may be presented
for registration of transfer with the applicable form of
transfer duly executed, at the office of any transfer agent or
at the office of the Security Registrar, as defined in the
indenture, without service charge and upon payments of any taxes
and other governmental charges as described in the indenture.
This registration of transfer or exchange will be effected upon
the transfer agent or the Security Registrar, as the case may
be, being satisfied with the documents of title and identity of
the person making the request. Bearer securities will be
transferable by delivery.
5
A debt security in global form may not be transferred except as
a whole by or between the depositary for the debt security and
any of its nominees or successors. If any debt security of a
series is issuable in global form, the applicable prospectus
supplement will describe:
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any circumstances under which beneficial owners of interests in
that global debt security may exchange their interests for
definitive debt securities of that series of like tenor and
principal amount in any authorized form and denomination,
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the manner of payment of principal, premium and interest, if
any, on that global debt security and
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the specific terms of the depositary arrangement with respect to
that global debt security.
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Payment
and Paying Agents
Unless otherwise specified in an applicable prospectus
supplement, we will pay principal, any premium and interest on
registered securities at the office of the paying agents we have
designated, except that we may pay interest by check mailed to,
or wire transfer to the account of, the holder. Unless otherwise
specified in any applicable prospectus supplement, payment of
any installment of interest on registered securities will be
made to the person in whose name the registered security is
registered at the close of business on the record date for this
interest payment.
We will pay principal, any premium and interest on bearer
securities in the currency and in the manner specified in the
applicable prospectus supplement, subject to any applicable laws
and regulations, at the paying agencies outside the United
States we have designated. The paying agents outside the United
States initially appointed by us for a series of debt securities
will be named in the applicable prospectus supplement. In
addition:
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if debt securities of a series are issuable as registered
securities, we will be required to maintain at least one paying
agent in each place of payment for the series;
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if debt securities of a series are issuable as bearer
securities, we will be required to maintain a paying agent in a
place of payment outside the United States where debt securities
of the series and any coupons appertaining thereto may be
presented and surrendered for payment; and
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if the debt securities of a series are listed on any stock
exchange located outside the United States and any such stock
exchange requires us to maintain a paying agent in a city
located outside the United States, we will comply with these
requirements.
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Covenants
Certain
Definitions
For purposes of the following discussion, the following
definitions are applicable.
Attributable Debt in respect of a Sale and
Leaseback Transaction means, as of any particular time, the
present value of the obligation of the lessee for rental
payments during the remaining term of the lease (including any
period for which such lease has been extended or may, at the
option of the lessor, be extended). The present value will be
discounted at the rate of interest implicit in the terms of the
lease involved in this Sale and Leaseback Transaction, as
determined in good faith by us.
Consolidated Net Tangible Assets means, as
determined at any time, the aggregate amount of assets included
on our consolidated balance sheet, less applicable reserves,
after deducting therefrom:
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all current liabilities of us and our Subsidiaries, which
includes current maturities of long-term indebtedness and
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the total of the net book values of all assets of us and our
Subsidiaries properly classified as intangible assets under
U.S. generally accepted accounting principles,
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in each case as of the end of the last fiscal quarter for which
financial information is available at the time of this
calculation.
6
Funded Debt means all indebtedness which by
its terms matures more than 12 months after the time of the
computation of this amount or which is extendible or renewable
at the option of the obligor on this indebtedness to a time more
than 12 months after the time of the computation of this
amount or which is classified, in accordance with generally
accepted accounting principles, on our balance sheet as
long-term debt.
Principal Property means any real property,
manufacturing plant, warehouse, office building or other
physical facility or other like depreciable physical assets of
us or of any Subsidiary, whether owned at or acquired after the
date of the senior indenture, having a net book value at the
time of the determination in excess of the greater of 5% of
Consolidated Net Tangible Assets or $50 million. This
definition excludes, in each case, any of the above which in the
good faith opinion of our Board of Directors is not of material
importance to the total business conducted by us and our
Subsidiaries as a whole. As of the date of this Prospectus none
of our assets constitute Principal Property as defined above.
Sale and Leaseback Transaction means any
arrangement with any person providing for the leasing or use by
us or any Subsidiary of any Principal Property, whether owned at
the date of the indenture or thereafter acquired, excluding
temporary leases of a term, including any renewal period, of not
more than three years, which Principal Property has been or is
to be sold or transferred by us or a Subsidiary to a person with
an intention of taking back a lease of this property.
Secured Debt means indebtedness, other than
indebtedness among us and our Subsidiaries, for money borrowed
by us or a Subsidiary which is secured by:
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a mortgage or other lien on any Principal Property, or
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a pledge, lien or other security interest on any shares of stock
or evidences of indebtedness of a Subsidiary.
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If any amount of indebtedness among us and our Subsidiaries that
is secured by any of these assets is transferred in any manner
to any person other than us or a Subsidiary, this amount shall
be deemed to be Secured Debt issued on the date of transfer.
Subsidiary means any corporation of which we,
or we and one or more Subsidiaries, or any one or more
Subsidiaries, directly or indirectly own a majority of the
outstanding voting securities having voting power, under
ordinary circumstances, to elect the directors of the
corporation.
Restrictions
on Secured Debt
If we or our Subsidiaries incur, assume or guarantee any Secured
Debt, we must secure the debt securities equally and ratably
with or, at our option, prior to the incurrence, assumption or
guarantee of that Secured Debt. The foregoing restrictions are
not applicable to:
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any security interest on any property acquired by us or a
Subsidiary and created within 180 days after the
acquisition to secure or provide for the payment of all or any
part of the purchase price of the property;
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any security interest on any property improved or constructed by
us or a Subsidiary and created within 180 days after the
completion and commencement of commercial operation of the
property to secure or provide for the payment of all or any part
of the construction price of the property;
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any security interest existing on property at the time of
acquisition by us or a Subsidiary;
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any security interest existing on the property or on the
outstanding shares or indebtedness of a corporation at the time
it becomes a Subsidiary, but not created in anticipation of the
transaction in which the corporation becomes a Subsidiary;
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any security interest on the property, shares or indebtedness of
a corporation existing at the time the corporation is merged or
consolidated with us or a Subsidiary or at the time of a sale,
lease or other
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disposition of all or substantially all of the properties of a
corporation or firm to us or a Subsidiary, but not created in
anticipation of any such transaction;
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any security interest in favor of governmental bodies to secure
payments of any amounts owed under contract or statute; or
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any extensions, renewals or replacements of any of the security
interests referred to above.
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Notwithstanding the above restriction, we and any one or more
Subsidiaries may create, incur, assume or guarantee Secured
Debt, including, for purposes of this paragraph, pursuant to a
transaction to which the covenants described in the last item
under the covenants described in Consolidation, Merger,
Sale or Conveyance applies, without equally and ratably
securing the debt securities to the extent that the sum of:
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the amount of all Secured Debt then outstanding, other than
Secured Debt referred to in the bullet points in the immediately
preceding paragraph and Secured Debt deemed outstanding under
the last item under the covenants described in
Consolidation, Merger, Sale or Conveyance in
connection with which we secure obligations on the debt
securities then outstanding in accordance with the provisions of
that item, plus
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the amount of Attributable Debt in respect of Sale and Leaseback
Transactions, other than Sale and Leaseback Transactions
described in the bullet points in the immediately succeeding
paragraph,
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does not at the time exceed the greater of 10% of our
Consolidated Net Tangible Assets or $100 million.
Restrictions
on Sale and Leaseback Transactions
Sale and Leaseback Transactions by us or any Subsidiary of any
Principal Property are prohibited unless at the effective time
of the Sale and Leaseback Transaction:
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we or the Subsidiary would be entitled, without equally and
ratably securing the senior debt securities, to incur Secured
Debt secured by a mortgage or security interest on the Principal
Property to be leased pursuant to the covenant described in
Restrictions on Secured Debt above, or
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we or the Subsidiary would be entitled, without equally and
ratably securing the senior debt securities, to incur Secured
Debt in an amount at least equal to the Attributable
Debt, or
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we shall apply an amount equal to the Attributable Debt, within
180 days after the effective date of the Sale and Leaseback
Transaction, to the prepayment or retirement of senior debt
securities or other indebtedness for borrowed money which was
recorded as Funded Debt of us and our Subsidiaries, including
the prepayment or retirement of any mortgage, lien or other
security interest in the Principal Property existing prior to
the Sale and Leaseback Transaction. The aggregate principal
amount of the senior debt securities or other indebtedness
required to be so retired will be reduced by the aggregate
principal amount of
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any senior debt securities delivered within 180 days after
the effective date of any the Sale and Leaseback Transaction to
the trustee for retirement, and
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other indebtedness retired by us or a Subsidiary within
180 days after the effective date of the Sale and Leaseback
Transaction.
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Consolidation,
Merger, Sale or Conveyance
We have the ability to merge or consolidate with, or sell,
convey, or lease all or substantially all of our property, to
another corporation, provided that:
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it is a corporation incorporated in the United States;
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the corporation assumes all of our obligations under the
indentures and the debt securities;
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no event of default would occur; and
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prior to any transaction or any acquisition by us of the
properties of any other person, which would result in any
Principal Property or any shares of capital stock or
indebtedness of any Subsidiary owned by us or any Subsidiary
becoming subject to any lien or other security interest not
permitted by the covenant described under Restrictions on
Secured Debt, we, by supplemental indenture, secure the
payment of the principal and any premium and interest, on the
debt securities then outstanding, equally and ratably with any
other indebtedness also entitled to security immediately
following the transaction.
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Events of
Default
The following are events of default with respect to any series
of debt securities issued:
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we fail to pay the principal or any premium when due;
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we fail to deposit any sinking fund payment when due;
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we fail to pay interest when due and our failure continues for
30 days;
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we fail to observe or perform any other covenant, other than a
covenant specifically relating to another series of debt
securities and our failure continues for 90 days after
receipt of written notice as provided in the indenture;
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events of bankruptcy, insolvency or reorganization involving us
or a Significant Subsidiary;
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acceleration of indebtedness of us or a Significant Subsidiary
aggregating more than $50 million;
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final and non-appealable judgments or orders to pay against us
or a Significant Subsidiary, in the aggregate at any one time,
of more than $50 million, rendered by a court of competent
jurisdiction, continued for 90 days during which execution
shall not be effectively stayed or bonded, without discharge or
reduction to $50 million or less; and
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any other events of default provided with respect to debt
securities of that series.
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As used above, the term Significant Subsidiary has
the meaning ascribed to it in
Regulation S-X
under the Securities Act. Generally, a Significant Subsidiary is
a subsidiary, together with its subsidiaries, that satisfies any
of the following conditions:
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we and our other subsidiaries investments in and advances
to the subsidiary exceed 10% of our total consolidated assets;
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we and our other subsidiaries proportionate share of the
total assets of the subsidiary exceeds 10% of our total
consolidated assets; or
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we and other subsidiaries equity in the income from
continuing operations before income taxes, extraordinary items
and cumulative effect of a change in accounting principle of the
subsidiary exceeds 10% of our consolidated income.
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If an event of default occurs and is continuing, the trustee or
the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series may declare each debt
security of that series due and payable immediately by a notice
in writing to us, and to the applicable trustee if given by
holders. No notice is required in the event of a bankruptcy,
insolvency or reorganization involving us or a Significant
Subsidiary.
A holder of the debt securities of any series will only have the
right to institute a proceeding under the indenture or to seek
other remedies if:
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the holder has given written notice to the trustee of a
continuing event of default;
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the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made written
request;
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these holders have offered reasonable indemnity to the trustee
to institute proceedings as trustee;
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the trustee does not institute a proceeding within
60 days; and
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the trustee has not received written directions inconsistent
with the request from the holders of a majority of the principal
amount of the outstanding debt securities of that series during
that 60-day
period.
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We will annually file statements with the trustee regarding our
compliance with the covenants in the indenture. The trustee will
generally give the holders of debt securities notice within
90 days of the occurrence of an event of default known to
the trustee.
Waiver,
Modifications and Amendment
The holders of a majority of the principal amount of the
outstanding debt securities of any particular series may waive
past defaults with respect to that particular series, except for:
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defaults on any required payments; or
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defaults relating to any covenants of the indenture which cannot
be changed without the consent of each holder of a debt security
affected by the change.
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The holders, voting as a single class and not by individual
series, of a majority in aggregate principal amount of the
outstanding senior debt securities of each series affected may
waive our compliance with some of the restrictive provisions of
the indenture.
We and the trustee may amend the indenture with the consent of
the holders of a majority in aggregate principal amount of the
debt securities outstanding thereunder. In addition, the rights
of holders of a series of debt securities may be changed by us
and the trustee with the written consent of the holders of a
majority of the principal amount of the outstanding debt
securities of each series that is affected. However, the
following changes may only be made with the consent of each
affected holder:
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changing the stated maturity of principal or of any installment
of principal or interest;
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reducing the principal amount or any premium;
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reducing the rate of interest;
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reducing any premium payable upon redemption;
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reducing the principal amount of an original issue discount
security due and payable upon an acceleration of maturity;
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changing the currency of payment of, or deleting any country
from places of payment on, the debt securities or changing the
obligation to maintain paying agencies;
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impairing the right to sue for any payment on a debt security;
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reducing the percentage of debt securities referred to above,
the holders of which are required to consent to any waiver or
amendment; or
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modifying any of the above requirements.
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For purposes of computing the required consents referred to
above, and for all other purposes under the indenture, the
aggregate principal amount of any outstanding debt securities
not payable in U.S. dollars is the amount of
U.S. dollars that could be obtained for this principal
amount based on the spot rate of exchange for the applicable
foreign currency or currency unit as determined by us or by an
authorized exchange rate agent.
10
Defeasance
and Covenant Defeasance
Unless otherwise specified in the applicable prospectus
supplement, subject to certain conditions, we may elect either:
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defeasance, whereby we are discharged from any and all
obligations with respect to the debt securities, except as may
be otherwise provided in the indenture; or
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covenant defeasance, whereby we are released from our
obligations with respect to any of the debt securities described
above under Covenants Restrictions on Secured
Debt and Covenants Restrictions on Sale
and Leaseback Transactions.
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We may do so by depositing with the trustee money,
and/or
certain government securities which through the payment of
principal and interest in accordance with their terms will
provide money in an amount sufficient to pay the principal and
any premium and interest on the debt securities, and any
mandatory sinking fund or analogous payments on their scheduled
due dates. This type of a trust may only be established if,
among other things, we have delivered to the trustee an opinion
of counsel meeting the requirements set forth in the indenture.
The applicable prospectus supplement may further describe the
provisions, if any, permitting this type of defeasance or
covenant defeasance with respect to debt securities of a
particular series.
Governing
Law
The indenture and the debt securities will be governed by, and
construed in accordance with, the laws of the State of New York.
Information
Concerning the Trustee
The Bank of Nova Scotia Trust Company of New York is the
trustee under the indenture. We may, from time to time, borrow
from or maintain deposit accounts and conduct other banking
transactions with The Bank of Nova Scotia or its affiliates in
the ordinary course of business.
PLAN OF
DISTRIBUTION
General
The debt securities may be sold:
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to or through underwriting syndicates represented by managing
underwriters;
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to or through one or more underwriters without a syndicate;
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through dealers or agents; or
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to investors directly in negotiated sales or in competitively
bid transactions.
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The prospectus supplement for each series of debt securities we
sell will describe, to the extent required, information with
respect to that offering, including:
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the name or names of any underwriters and the respective amounts
underwritten;
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the purchase price and the proceeds to us from that sale;
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any underwriting discounts and other items constituting
underwriters compensation;
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any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers;
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any securities exchanges on which the securities may be
listed; and
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any material relationships with the underwriters.
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Underwriters
If underwriters are used in the sale, we will execute an
underwriting agreement with those underwriters relating to the
debt securities that we will offer. Unless otherwise set forth
in the applicable prospectus supplement, the obligations of the
underwriters to purchase these debt securities will be subject
to conditions and the underwriters will be obligated to purchase
all of these debt securities if any are purchased.
The debt securities subject to the underwriting agreement will
be acquired by the underwriters for their own account and may be
resold by them from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale.
Underwriters may be deemed to have received compensation from us
in the form of underwriting discounts or commissions and may
also receive commissions from the purchasers of these debt
securities for whom they may act as agent. Underwriters may sell
these debt securities to or through dealers. These dealers may
receive compensation in the form of discounts, concessions or
commissions from the underwriters
and/or
commissions from the purchasers for whom they may act as agent.
Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Agents
We may also sell any of the debt securities through agents
designated by us from time to time. We will name any agent
involved in the offer or sale of these debt securities and will
list commissions payable by us to these agents in the applicable
prospectus supplement. These agents will be acting on a best
efforts basis to solicit purchases for the period of its
appointment, unless we state otherwise in the applicable
prospectus supplement.
Direct
sales
We may sell any of the debt securities directly to purchasers.
In this case, we will not engage underwriters or agents in the
offer and sale of the applicable securities.
Indemnification
We may indemnify underwriters, dealers or agents who participate
in the distribution of debt securities against certain
liabilities, including liabilities under the Securities Act, and
agree to contribute to payments which these underwriters,
dealers or agents may be required to make.
No
assurance of liquidity
The debt securities registered hereby may be a new issue of debt
securities with no established trading market. Any underwriters
that purchase debt securities from us may make a market in these
debt securities. The underwriters will not be obligated,
however, to make a market and may discontinue market-making at
any time without notice to holders of the debt securities. We
cannot assure you that there will be liquidity in the trading
market for any debt securities of any series.
VALIDITY
OF DEBT SECURITIES
The validity of the debt securities offered by this prospectus
and any prospectus supplement will be passed upon for us by
Ropes & Gray LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements and schedule of Hasbro,
Inc. and subsidiaries as of December 31, 2006 and
December 25, 2005, and for each of the fiscal years in the
three-year period ended December 31, 2006, and
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2006
have been incorporated by reference herein in reliance upon the
reports of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing. KPMG
LLPs report covering the December 31, 2006
consolidated financial statements refers to a change in the
accounting for pensions and other postretirement benefits other
than pensions and a change in the accounting for share-based
payments.
12
$
Hasbro, Inc.
% Notes
due
PROSPECTUS SUPPLEMENT
Joint Book-Running Managers
BofA Merrill Lynch
Citi
March , 2010